WARNING: Market Shock Imminent

Join us on September 29 at 4 p.m. ET at the Market Shock 2022 event to find out what’s coming and how to profit.

Thu, September 29 at 4:00PM ET
 
 
 
 

7 Moonshot Investments Upending a $10 Trillion Industry

7 Moonshot Investments Upending a $10 Trillion Industry

Source: Natali_ Mis/ShutterStock.com

This article is excerpted from Tom Yeung’s Profit & Protection newsletter. To make sure you don’t miss any of Tom’s picks, subscribe to his mailing list here.

Gene Editing Prescriptions By 2023?

“The first CRISPR gene-editing drug is coming—possibly as soon as next year,” an article in Fast Company announced last week. “Soon we could see regulators approve the very first treatment using this gene-editing technology in an effort to combat rare inherited blood disorders that affect millions across the globe.”

Biotech industry watchers have known for years that it was only a matter of time before gene editing drugs hit the market. MIT’s NEWDIGS drug development program predicts that more than 60 gene and cell therapies could be available to consumers by 2030.

But news that Vertex Pharmaceuticals (NASDAQ:VRTX) could have the first gene-editing drug on the market as early as next Christmas still surprises many. Vertex shares have added $10 billion to its market capitalization since mid-June.

And it’s a game-changing technology. Rather than rely on small molecules or biologics, gene-editing drugs change the literal genome of bacteria, cancer cells, or their human hosts. Genetic disorders may soon be literally “edited out” of a person.

As companies finally secure approval for their gene therapy drugs, headlines like this will continue to snowball. Those investors willing to jump in early are those who stand to gain the most as CRISPR-led firms upend the $10 trillion healthcare market.

An illustration of people wearing lab coats working next to a giant beaker representing biotech and gene editing.

Source: Ico Maker / Shutterstock.com

The 7 Gene-Editing Companies Upending the $10 Trillion Healthcare Market

Nearly three decades ago, a retiring investment professional gave me some advice.

“Tom — there are going to be three tech revolutions in your lifetime,” he said. “First it’s info tech… then biotech… then nanotech. Be sure to remember that.”

Not only was that my first brush with long-term thematic investing…

… his words were surprisingly prescient.

In the decade that followed, the development of the internet and faster processors unleashed untold power from the first wave: info tech.

Seemingly sentient chatbots… supercomputers the size of kit-kat bars… even an AI that can draw pictures of the Kool-Aid Man in ancient hieroglyphics.

A screenshot of a tweet showing images generated by Dall-E Mini based on the prompt "Kool aid man ancient hieroglyphics."

How to confuse future archaeologists. | Source: Twitter.com

Investors have also profited handsomely. $10,000 invested in Apple three decades ago would now be worth more than $5 million today. And venture capitalists have made outsized wagers to find the next Amazon/Netflix/Tesla ever since.

The Rise of Biotech

Over the past decade, another industry has also quietly taken off:

Biotech.

The invention of gene-editing CRISPR technologies has created an entirely new class of drugs curing patients by using gene “scissors” to cut out certain genes.

In other words, once incurable cell disorders, from cancer to sickle-cell anemia, could soon be “edited out” of your genome. It’s a healthcare revolution waiting to happen.

But investors have a problem. Much like the early years of internet competition, CRISPR drug dominance is still anyone’s game to win.

For the drugmakers themselves, early leaders like Vertex Pharmaceuticals can quickly fall behind if other platforms prove more effective. Investors would be wise to remember it was Ebay (NASDAQ:EBAY), not Amazon (NASDAQ:AMZN) that once led the world in ecommerce profits.

And “picks-and-shovels” plays aren’t necessarily winners either, as tech giant Cisco (NASDAQ:CSCO) learned the hard way when upstart Palo Alto Networks (NASDAQ:PANW) took the No. 1 spot in the lucrative firewall market.

Today, biotech support firms like Veeva Systems (NYSE:VEEV) are routinely panned online as “a mess,” as one employee put it.

“Product got you here, but current practices won’t keep you on top,” grumbled another.

But as the first round of CRISPR drugs progress toward FDA approval, there are some clues on which companies will emerge on top.

Speed to Market. Early movers still enjoy a significant advantage, even if it can’t guarantee dominance. Today, no fewer than seven firms have CRISPR therapies for sickle cell anemia in their pipeline; the approval of Vertex Pharmaceutical’s CTX001 therapy could give the firm a meaningful market share years before rivals get out the door.

CRISPR Platform. Not all gene-editing techniques are created equally. CRISPR-Cas9 has emerged as the favored technology, with leading firms like Crispr Therapeutics (NASDAQ:CRSP) at the forefront. Meanwhile, upstarts Beam Therapeutics (NASDAQ:BEAM) and Editas Medicine (NASDAQ:EDIT) are testing alternate techniques known as base editors and SLEEK — advanced techniques that could eventually prove superior to CRISPR-Cas9.

Drug Market Size. The U.S. operates without regulatory oversight on drug pricing, meaning that prices are set by what insurers and the Centers for Medicare & Medicaid Services (CMS) are willing to pay. Drugs targeting “expensive” chronic ailments like Alzheimer’s are more likely to become billion-dollar blockbusters than those treating rare diseases or those that cost less. Companies like Intellia Therapeutics (NASDAQ:NTLA) and Regeneron Pharmaceuticals (NASDAQ:REGN) are currently exploring candidates that could potentially solve protein-folding disorders such as Alzheimer’s, Parkinson’s and Huntington’s.

Funding. And finally, the top biotech companies all need money. Lots of it. The average gene therapy drug will cost $5 billion, according to the Innovative Genomics Institute, roughly five times more than the cost of developing traditional drugs. Well-funded firms like Biogen (NASDAQ:BIIB) are far more likely to weather the Fed-induced belt-tightening that threatens smaller firms.

How Gene-Editing Companies Score

Unsurprisingly, many biotech companies score poorly on traditional quantitative scores. Their lack of profits — plus weak cash flow generation and strained finances — make them look more like failing companies than high-potential startups.

But the quantitative Profit & Protection doesn’t necessarily select for quality. Instead, the system considers what’s worked in the past. And as big investment winners have shown, sometimes buying “ugly” companies is the best path to success.

  • Vertex Pharmaceuticals (VRTX). A+
  • Editas Medicine (EDIT). A
  • Beam Therapeutics (BEAM). A
  • Regeneron Pharmaceuticals. A-
  • Intellia Therapeutics (NTLA). A-
  • Crispr Therapeutics (CRSP). A-
  • Biogen (BIIB). B-

And don’t forget to join me on Thursday, when we take a closer look at which gene-editing companies investors absolutely must buy from this top-tier list.

The Downsides to Gene Editing Companies

If you’re wary about biotech firms, I don’t blame you.

In November, I recommended investors buy shares of Longeveron (NASDAQ:LGVN), a company I named “my top small-cap biotech Moonshot.”

“With insiders buying in between the $3.30 and $3.80 range, regular investors might want to scoop up a couple of shares too before official phase-1 results are announced; LGVN executives are acting as if they know something that we don’t.”

Shares have doubled since then… But not before embarking on a wild 1,400% rise to $45 before making a round trip back to $6.

Stable investments, these are not.

Moralists could also take issue with many biotech practices.

In 2021, Nature Magazine dryly noted that “gene therapy products for sickle cell disease will probably cost US$1 million for a one-time dose.” And much like Tylenol and other common drugs, CRISPR-Cas9 can use embryonic stem cells to develop and test therapies. And in-vivo treatments that change genetic code is arguably the closest that medicine has come to “playing God.”

But biotech and gene editing can also change lives for the better. Experts estimate that 300,000 babies are born every year with sickle cell anemia. A cure for the inherited disease could lengthen their lives by a quarter-century. Imagine a world where cancers are a thing of the past.

Much like the IT revolution, biotech will have bumps along the way. But in the grand scheme of investing, my old family friend was right. Biotech will become a driving force of innovation in our lifetimes.

P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at feedback@investorplace.com or connect with me on LinkedIn and let me know what you’d like to see.

On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.

He is also the editor of Profit & Protection, a free e-letter about investing to profit in good times and protecting gains during the bad. To join Profit & Protection — and claim a free copy of Tom’s latest report — go here to sign up for free!


Article printed from InvestorPlace Media, https://investorplace.com/2022/07/7-moonshot-investments-upending-a-10-trillion-industry/.

©2022 InvestorPlace Media, LLC