On Wednesday, the FDA finally lifted their hold on CRISPR Therapeutics (NASDAQ:CRSP) and Vertex Pharmaceuticals' (NASDAQ:VRTX) CRISPR-Cas9 US clinical trial for their drug CTX001. The treatment aims to implement gene editing to treat sickle cell disease and if the trial does commence by end of the year as scheduled, it will be the first ever US CRISPR-Cas9 clinical trial.
CRISPR and Vertex had previously obtained approvals for clinical trials to use CTX001 for both sickle cell disease and another blood disorder, Beta thalassemia, in countries outside the US.
Though this news is prolific for the scientific community and the advancement of using genome editing technology to treat disease, it doesn’t necessarily say anything about the efficacy and future success of CTX001 itself. CRSP opened up today over 13% Thursday, before returning back to near its pre-spike price by the end of the day.
CRISPR-Cas9 is a very exciting biotechnology and I have full faith that one day we will be editing human genomes to improve health, but until tangible results are provided, it’s good to approach pre-clinical healthcare companies with caution.
Editing the Code of Life
After working in technology for a few years, I began seeing some non-technical parts of life in terms of software code. Whether it was from too many hours QA testing for bugs or because as a business analyst, my mind tends to work in if/then statements, the biological functioning of living matter started looking a lot more binary than before. Turn an organism’s gene off, and X will likely happen; turn it on, and Y likely occurs.
There’s obviously more to it than that, but as I continued learning about health, I kept drawing parallels between the genetic code in the human body and the computer code in an application.
When I learned about scientists’ ability to use biotech tools such as CRISPR-Cas9 as a means of editing genetic coding in an organism to make system wide changes, it made perfect sense to me. DNA is literally the code of life, and genome editing is making changes to that code to correct or create something. An unintentional gene mutation is like a bug that when ignored, could result in errors and dysfunction - disease. And editing the gene’s code to fix the bug can then result in amelioration of the disease.
Investing in Gene Biotechnology
I find biotech investing so exciting because I love learning about new technologies and research that will improve human health and reduce suffering. I believe that each sentient being has the right to spend their time on earth disease free and in excellent health. There are enough challenges in life as is, so I don’t see disease as serving any productive purpose. Overpopulation is sometimes brought up as a purpose, but it isn’t a good one as disease would be a sloppy/cruel way of alleviating a symptom and not a cause.
I believe that through science and technology, it is possible to live in a world where everyone has complete control over their health and has the right to live out their years robustly and vivaciously. Health should be a given, and at the rate we’re going, one day it will be.
Regarding disease and degeneration, I don’t believe in “it’s natural, it has to happen, that’s just the way it is, it’s nature,” etc. Humans are far too smart for that. It’s not that scientists have outwitted or outsmarted nature; we’ve just worked with it and used it to our advantage to better our lives and the lives of others.
I have the same views on the market. I don’t believe in “beating” it; I believe in working with it and using it to your advantage. It has nothing against you and neither does nature. But also like the market, nature doesn’t care about you; that’s your job.
And since money and health are two of the biggest parts of you taking care of you, I’ll continue carrying out the purpose of this blog and provide education on both.
I just finished Jennifer Doudna’s, scientist and co-discoverer of genome editing technology CRISPR-Cas9, book A Crack in Creation. It was really good and worth a read. But for anyone not into learning every detail of how CRISPR-Cas9 works, I’ll explain enough of the key concepts from it below and in my next posts to get a handle on the genome editing space.
Gene Therapy vs. Genome Editing
Just a quick primer to help clarify the types of biotech companies currently working with genes to treat disease:
Companies Using Gene Therapy
Gene therapy is an older approach that has been in use since the 1990s. It does not remove or modify defective DNA, but rather, transfers a new gene into cells to make changes or augment a defect. It can also deactivate, or “knock out,” a mutated gene.
Gene therapy is used medically today and there are FDA approved treatments on the market and publicly traded companies that provide gene therapy products.
Companies Using Genome Editing
Gene editing is a newer approach that is still being studied, which saw its first two successful human applications to treat disease in 2014 (HIV) and 2015 (Cancer). Unlike gene therapy, genome editing cuts and alters the actual existing DNA within the cell to make changes to it.
Though it has been seriously studied since the late 1980’s, gene editing traction began really gaining momentum in 2012 with the discovery of CRISPR-Cas9 by scientists and professors Jennifer Doudna and Emmanuelle Charpentier.
CRISPR-Cas9 can be used to edit the DNA of any species, including humans. Using a guide that matches the target DNA sequence, the RNA unwinds the double helix, while an enzyme called Cas9 cuts it. This system allows for the native gene, and thus the organism’s genome, to be disrupted, or a portion deleted or replaced.
Numerous genome editing clinical trials are currently underway and there are not yet any FDA approved treatments available on any market, but China is currently making the most progress due to less regulation. In recent post-CRISPR years, the first cohort of biotech companies vying to get the technology on the market have began cropping up.
The three primary types of genome editing technologies are, in order of discovery:
Zinc Finger Nuclease (ZFN)
Transcription activator-like effector nucleases (TALEN)
Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR)
CRISPR-Cas9 (Cas9 is the cutting enzyme that makes up part of the CRISPR-Cas9 system) has thus far proven to be the simplest, most accurate, and most cost effective technology of the three.
Because gene editing is the next generation of genetic medicine, it’s exciting to analyze and track the progress of existing companies that are actively developing those treatments. I have listed below four publicly traded companies, all currently working on delivering genome editing treatments, as well as some of their most recent progress and numbers from their SEC Form 10-Q filings. All financial numbers from their filings are for Q2 ending June 30, 2018, so their new Q3 numbers will likely be out very soon and I'll provide updated numbers then.
The information I chose to include demonstrates some of the many similarities between the three competing CRISPR-Cas9 companies. Since all three are not yet bringing in revenue from commercial product sales, I focused on their current liquidity, liabilities, and deficits, as well as earnings per share just to have a comparable number for each.
I listed cash and cash equivalents and accumulated deficit as that can be used to help forecast burn rate and company lifespan (i.e. if they can get a product to market before running out of runway). Having previously been part of one early staged Boston startup that did run out of funding, these numbers are important because, though it never seems possible at the time, it does happen.
All of the companies below are using CRISPR-Cas9 as their editing tool of choice, aside from Sangamo, which is using ZFN. Sangamo is much older than the CRISPR-Cas9 companies by about 18 years, but I wanted to include it as a reference point as they’re the most advanced. I am not recommending investing in any of these companies; I am simply listing them out for ideas and education.
Sangamo Therapeutics (NASDAQ:SGMO)
IPO: 2000, raised $52.5 mm in initial offering
Cash and cash equivalents: $59.4 mm*
Total current assets: $550 mm*
Total current liabilities: $75.9 mm*
Accumulated deficit: -$531.2 mm*
Market cap: $1.446B
Most recent: Though they’re still clinical stage, they’re most advanced in terms of progress having been first to edit endogenous human genes in 2005 with ZFN and the first US company to perform clinical in vivo human genome editing trials. Currently, it’s a waiting game for the last 1/3 of their first ZFN clinical trial results, which they’ve alluded to coming out later this year.
ZFN patent license: They hold key intellectual property themselves
Founded: November 2013, started with $43 mm in VC funding
Founders: Jennifer Doudna (left in May of 2014), Feng Zhang, George Church, Keith Joung, David Liu
IPO: February 2016, raised $94.4 mm in offering
Most recent: Aside from the recent addition of two new senior scientists to their staff, the only news to come out of Editas in the past few months was regarding their technology licensing. They’d licensed from the MIT Broad Institute, and the Broad won the patent ruling for rights to CRISPR-Cas9. Editas has been granted some exclusive and non-exclusive royalty-bearing Cas9-II sub-licensing patent rights. They will also have to pay upfront a low seven digit license fee upfront; annual license maintenance fees; and a potential aggregate $3.7 million clinical and regulatory milestone payments per licensed product approved in the United States, European Union and Japan.* (there was no mention of license fees in CRSP’s filings so not sure if they’re subject to similar).
Cash and cash equivalents: $131.9 mm*
Total Current Assets: $348.2 mm*
Total Current liabilities: -$24 mm*
Accumulated deficit: -$376 mm*
Market cap: $1.319B
CRISPR-Cas9 patent license: MIT Broad Institute
Founded: November 2013, started with $25 mm in financing
Founders: Emmanuelle Charpentier, Rodger Novak, and Shaun Foy
IPO: October 2016, raised $56 mm in offering
Most recent: Partnered with Vertex Pharmaceuticals in October 2015 and listed their first ever-human clinical trial using CRISPR-Cas9 that a US company would be involved in this year. On October 10, 2018, the FDA lifted their multi-month hold on CRSPR and Vertex’s US clinical trial to use CTX001 to treat red blood cell disorder sickle cell disease.
Cash and cash equivalents: $319.7 mm*
Total current assets: $330.5*
Total current liabilities: -$18.5 mm*
Accumulated deficit: $193.3 mm*
Market cap: $1.885B
CRISPR-Cas9 patent license: Regents of the University of California, the University of Vienna and Dr. Emmanuelle Charpentier (collectively “UC”)
Intellia Therapeutics (NASDAQ:NTLA)
Founded: November 2014, started with $15 mm in series A funding (later went on to a series B)
Founders: Jennifer A. Doudna, Andy May, Derrick Rossi, Erik Sontheimer, Luciano Marraffini, Nessan Bermingham, Rachel E. Haurwitz, Rodolphe Barrangou
IPO: 2016 (raised $108 mm in offering)
Most recent: Of the three CRISPR companies, this one had the least early funding and currently has the smallest market cap. Regarding their Q2 earnings, they released this statement, “the Company expects that the cash and cash equivalents as of June 30, 2018, as well as technology access and research funding from Novartis and Regeneron, will enable Intellia to fund operating expenses and capital expenditures through mid-2020, excluding any potential milestone payments or extension fees.” That is about a year and a half which is a tight schedule to commercialize a CRISPR treatment.
Cash and cash equivalents: $305.5 mm*
Total current assets: $317.6 mm*
Total current liabilities: $25.2 mm*
Accumulated deficit: $159.3 mm*
Market cap: $1.045B
CRISPR-Cas9 patent license: UC (licensed directly from private company Caribou Biosciences, also founded by Jennifer Doudna in 2011)
*As of 6/30/18, SEC filing Form 10-Q
By the end of 2015, the three CRISPR-Cas9 companies would raise well over half a billion more in private funding.
It’s interesting to note CRSPR Therapeutics’ and Editas’ financial and date similarities, such as having the same founding and IPO year. They also reported the exact same Net loss per share attributable to common shareholders—basic and diluted, or earnings per share (EPS) number down to the cent. Since their spring 2018 peaks, Editas is down around 35% and CRISPR Therapeutics about 45%.
The founding members of the three also have a lot in common, with either Doudna or Charpentier being involved with all in some way. Doudna founded Caribou Biosciences in 2011, and was a founding member of Editas, but left after seven months. She then joined Intellias as a founding member (who licenses their CRISPR-Cas9 from Caribou). Her CRISPR-Cas9 co-discoverer Charpentier co-founded CRISPR Therapeutics.
I’m very excited to keep watching the progress of genome editing companies, as this phase of scientific advancement will have a profound impact on human health.
For the foreseeable future until trials begin, it’s likely their moves will be similar to yesterday’s; based on speculative, partnership, and industry news since it will be awhile until they get clinical trials underway (CRISPR Therapeutics with Vertex will likely be first). At the moment, the three CRISPR-Cas9 companies seem to be moving in tandem, with all of them opening up around ~5% today.
Sangamo will likely have results the soonest as they’re currently underway with the last part of their ZFN MPS II clinical trial. Good or bad is TBD, so I’ll be looking out for those.