Welcome to my blooper of the week and a possible Rule Breaker industry and company!
I reported last week on the Amgen (Nasdaq: AMGN)-Transkaryotic Therapies (Nasdaq: TKTX) trial decision involving the component of Amgen's blockbuster drug, Epogen, and made a Class A, Big Kahuna, Top Gun blooper. Oh sure, I did manage to correctly identify the winner of the trial -- Rule Breaker Port's holding Amgen. But I also single-handedly took Transkaryotic's gene activation technology, bypassed years of research and testing, and rushed it to the front of the class to make it effectively the first successful gene therapy product. And their PR department didn't even call to thank me.
You see, Transkaryotic's biotechnology activates human cell genes outside the body to create erythropoietin (Amgen's Epogen) for injection into the body. Amgen does that too, but uses Chinese hamster ovary cells. Transkaryotic's gig is undoubtedly cool, but it's not a Rule Breaking industry, not gene therapy, which is delivering genes into the body's cells to cause them to behave differently.
Several Foolish community members pointed this out -- very nicely, too. This column owes them all a big Foolish thanks, and the prior column's activation-therapy confusion is corrected. As if anyone needed a reminder, we Foolish writers are investors writing for investors, not experts.
The real skinny on gene therapy
Gene therapy is definitely worth a Rule Breaker investor's attention. One good place to start is Cynthia Robbins-Roth's book From Alchemy to IPO, with a gene therapy chapter geared to investors. For more depth, try Fool community member Arlo Miller's helpful report, "Gene Therapy Companies: Targeting Disease at the Genetic Level," available for purchase from Soapbox.com. I used both for this column.
Robbins-Roth explains: "[T]he drug is... an entire gene encased in the paraphernalia needed to carry that gene through the body into the right cells and allow the gene to be read and expressed [turned on] by the cell. Gene therapy in essence converts the treated cells into little factories, churning out the therapeutic protein." Think delivering a molecular M&M with a genetically engineered candy-coating that makes it bind to the genetic sweet spot. If you could deliver the right M&Ms to a diabetic's pancreas, you might be able to have cells that would produce the hormone insulin, a protein.
Genes express themselves -- are turned on in a cell -- when DNA produces messenger RNA that leaves the cell nucleus and leads to protein creation. Proteins are key to everything that happens in the body. It's like James Carville running the gene's presidential campaign, spouting in ragin' Cajun, "It's the proteins, stupid!" The centrality of proteins -- the primacy, pinnacality, preeminence, paramount importance of proteins -- is one jolly good reason we're so darned fired up about Human Genome Sciences' (Nasdaq: HGSI) expertise with therapeutic protein drug candidates.
Our genetic knowledge has advanced so rapidly in the last decades that we know, for example, that single gene mutations lead to loss of protein function in cystic fibrosis and Gaucher's disease, with devastating results. In an ideal world, gene therapy could insert genetic material into cells so that they produce the necessary proteins -- become what Robbins-Roth calls "factories" -- or so they turn off the production of proteins where we don't want them, as in various cancers. The medical, societal, and, yes, investing benefits are obvious.
If gene therapy's so great, why isn't everyone doing it?
Robbins-Roth lists the obstacles:
- Delivering enough of the gene therapy
- Getting to enough cells in the patient's body
- Making enough of the therapeutic protein over a long enough period of time to help the patient
These are just three of the pesky little reasons that 11 years after the first gene therapy experiments, delivery is still the problem.
A possible gene genie
Companies are testing delivery technology using viral and non-viral methods, or vectors, to make gene therapy work. Each technology has advantages and disadvantages: Sometimes you want the cells to reproduce with the genetic material delivered, sometimes you don't so it will do its job and get out of the way. For example, in cancer therapy, you might want cells that contain cancer-cell-killing qualities to reproduce, but cells that promote unlimited cell growth not to reproduce. And it might depend on which kind of cancer you have, since there are many. So one delivery vector technology alone won't win the prize.
One company testing both viral and non-viral vectors is Targeted Genetics (Nasdaq: TGEN). The company's gene therapy treatments are in preclinical and Phase 1 and 2 trials -- none in Phase 3 -- for diseases with small markets, such as cystic fibrosis, and with much larger ones, such as head, neck, and ovarian cancer. In the last six months, two drug makers, Biogen (Nasdaq: BGEN) and American Home Products (NYSE: AHP), have formed gene therapy drug development deals with Targeted Genetics worth up to $125 million and $80 million, respectively. For Targeted Genetics, a company with $6.8 million in 1999 revenues, these are enormous votes of confidence.
Putting aside Transkaryotic, which is pretty early in the gene therapy game, there are a number of other companies besides Targeted Genetics -- and Arlo Miller's report analyzes them: Cell Genesys (Nasdaq: CEGE), Collateral Therapeutics (Nasdaq: CLTX), Introgen (Nasdaq: INGN), Vical (Nasdaq: VICL) and Ribozyme (Nasdaq: RZYM). It'll take much more research before a Rule Breaking gene therapy company can be identified -- if there is one -- but the early money suggests that Targeted Genetics' more diversified delivery approach deserves the closest look.
Gene therapy joins a list of possible Rule Breaker biotechnology industries, including biochips, biomaterials/tissue engineering, and drug discovery platforms, with possible candidates to join the RB Portfolio's investments in Amgen, Human Genome Sciences, and Celera Genomics (NYSE: CRA). Enjoy!
Tom Jacobs (TMF Tom9) is in search of a decent haircut to go with the one his portfolio took in 2000. At press time, he owned shares of two companies mentioned in the column: Celera Genomics and Human Genome Sciences. To see his complete stock holdings, view his profile. The Motley Fool is investors writing for investors.