3 Top DNA Stocks to Consider Buying Now

Accessing the secrets hidden within our DNA would have seemed like science fiction just a few decades ago. Today, scientists are turning that dream into reality. Thanks to tremendous advancements in genomic sequencing and the development of gene editing techniques like zinc-finger nuclease and CRISPR (clustered regularly interspaced short palindromic repeats), scientists now have the tools and know-how to make changes to our genetic code like never before.

So how can investors cash in on the genomic revolution? To start, here are 12 publicly traded companies that have a hand in this growing market:

Data source: Finviz.com.

But which of these stocks should investors favor today? Here's why Illumina, Spark Therapeutics, and Editas Medicine are my three favorites.

Image source: Getty Images.

Illumina

In 2001, it cost about $100 million to sequence the human genome. That price point was far too high to ever hold practical appeal. However, genomic testing giant Illumina has been on a mission for years to bring the costs low enough to make this technology more accessible.

Thankfully, Illumina has been remarkably successful in executing its mission. Every few years the company has introduced a new system that has dramatically dropped the cost of sequencing a single genome. Just last year, the company launched a new product that promises to usher in the age of the $100 genetic test within the next few years. That literally represents cutting the cost to one-millionth of what it was in the span of just 16 years, a mind-boggling achievement. Perhaps it is no wonder that this company has been able to boast a market share of about 90% for years.

But with prices falling so fast, how can Illumina's investors benefit? The answer lies in the company's razor-and-blades business model. See, Illumina doesn't just sell the machines that run the tests -- it also sells proprietary consumables that are used up during each run. This allows the company to profit from volume gains even as the price per test drops through the floor.

With prices falling so quickly, it won't be long before having your genome sequenced becomes as commonplace as checking your cholesterol or blood pressure.

Image source: Getty Images.

Spark Therapeutics

While having the ability to view and analyze your DNA is exciting, the potential to fix troublesome diseases at their root is a whole other ballgame.

This is the promise of gene therapy. At its core, gene therapy is the process of deleting or replacing faulty DNA that is the root cause of a disease. This technique could be used to treat thousands of diseases.

One company at the head of the gene therapy pack is Spark Therapeutics, which has developed a process that uses viral vectors to encapsulate faulty genetic material.

While there are several companies that are working on gene therapy products, what's so exciting about Spark's technology is that the company has already proved that its gene therapy technology works. In late 2017, Spark received FDA approval for a gene-therapy product called Luxturna.

Luxturna was approved to treat vision loss caused by a genetic disorder called biallelic RPE65 mutation-associated retinal dystrophy. In clinical trials, Luxturna was shown to restore functional vision in more than 90% of patients.

While this is an extremely rare genetic disorder -- it is estimated that less than 2,000 Americans suffer from it -- the big win for investors was that Spark showed that its therapy is safe and effective. What's more, it should allow the company to bring in a decent amount of revenue in the years ahead. 

Looking further down the road, Spark has three other compounds in the clinical stage. The first is SPK-7001, a potential treatment for choroideremia, another inherited retinal disease that can lead to blindness. The other two are SPK-8011 and SPK-9001, which are hopeful treatments for hemophilia A and B, respectively. 

Although success in those other indications is never guaranteed, I think that investors can be comforted by the fact that Luxturna sailed through the FDA approval process without a problem. That suggests that Spark's gene therapy platform is the real deal and makes this a great stock for investors to consider.

Image Source: Getty Images.

Editas Medicine

If you're an investor who likes to swing for the fences, then you should study up on the most recent -- and perhaps most exciting -- discovery in gene therapy: CRISPR-Cas9. This breakthrough technology promises to one day make it easy (and cheap!) for scientists to edit DNA any way they see fit.

One of the early pioneers in CRISPR development is Editas Medicine. While Editas is still in the pre-clinical stage -- and is thus an extremely speculative stock -- the company has announced a number of programs that are targeting a range of genetic diseases such as cystic fibrosis, Duchenne muscular dystrophy, sickle-cell disease, and the blood disease beta-thalassemia.

So why is Editas a good choice for investors who want to invest in CRISPR? First, the U.S. Patent and Trademark Office recently upheld several CRISPR-Cas9 patents in favor of Editas. While the details are complicated, the net result is that Editas retains a lot of the key intellectual property related to the use of CRISPR in humans.

Second, the company has already struck up partnerships with Juno Therapeutics -- which is in the process of being acquired by biotech giant Celgene -- and pharma giant Allergan. These deals netted Editas $22 million and $90 million, respectively, in upfront payments and could bring in more than $1 billion in milestone payments (plus royalties on any product sales) if things work out. Given that the company still owns the commercial rights to the majority of its pipeline, I think that investors can expect even more lucrative deals in the years ahead.

Of course, Editas is so early in the development process that there are still a ton of risk factors for investors to consider. Still, the potential of CRISPR-Cas9 could be so huge that a small investment right now might prove to be a smart move in time.

The road ahead

The recent advancements in genomic sequencing and gene therapy hold tremendous promise to forever alter the world of healthcare for the better. While most of the companies in this space are early-stage and volatile, investors who have an iron stomach could reap substantial rewards in the years ahead if they buy early and brace themselves for a wild ride.