ARK Invest CEO Cathie Wood stated in December that "the biggest upside surprises are going to come from the genomic space." She even has an exchange-traded fund (ETF) focused heavily on trying to capitalize on those potential upside surprises with the ARK Genomic Revolution ETF (ARKG -0.17%).
1. Beam Therapeutics
Wood's ARK Innovation ETF has scooped up shares of Beam Therapeutics (BEAM -2.00%) on six different days so far this month. The company isn't the well-known investor's favorite biotech just yet, but it's definitely one that she really likes.
Beam Therapeutics is pioneering a type of gene editing called base editing. This approach enables changes to a single DNA base, which is the most finely targeted way possible to modify a gene. The company uses the analogy of scissors and pencils to describe what it does. It compares existing gene-editing methods to scissors that cut the genome, while base editing is like using pencils to erase and rewrite one "letter" (or base) in the genome at a time.
To be sure, Beam Therapeutics isn't very far along with its technology yet. The biotech doesn't have any programs in clinical testing. Its most advanced preclinical candidate, BEAM-101, targets the treatment of rare blood diseases beta-thalassemia and sickle cell disease. Beam hopes to file for U.S. Food and Drug Administration (FDA) approval later this year to advance BEAM-101 into early-stage clinical testing.
Wood isn't the only investor who likes Beam Therapeutics. The company has a market cap of around $4.6 billion despite being years away from the possibility of having an approved product. This shows just how much enthusiasm Beam's base editing approach has created. It's definitely a risky stock, but one that could pay off big-time if base editing delivers on its potential.
2. Fate Therapeutics
Fate Therapeutics (FATE -1.62%) already ranks among the top 10 holdings of the ARK Genomic Revolution ETF. It could also be moving up the list for Wood's ARK Innovation ETF, which has bought shares of the biotech three times so far in April.
The company focuses on developing cellular immunotherapies targeting cancer and immune disorders. Fate's approach is to use renewable master induced pluripotent stem cells (iPSCs). Pluripotent stem cells are unique in that they can develop into any kind of cell. The biotech's technology enables producing "off-the-shelf" immunotherapies based on these induced pluripotent stem cells.
Fate's pipeline currently includes four iPSC programs in early-stage clinical testing for treating seven different cancer indications. Its most advanced candidate, though, is ProTmune -- an experimental therapy derived from donor cells in phase 2 testing for hematopoietic stem cell transplantation (HSCT) grafts.
The biotech reported promising early results from phase 1 studies of two of its iPSC candidates in December 2020. Its share price has nearly tripled over the last 12 months thanks primarily to those updates.
3. 10x Genomics
10x Genomics (TXG -0.82%) sits only a couple of spots outside of the top 10 holdings of the ARK Genomic Revolution ETF. The ARK Innovation ETF has also bought the stock on five days so far this month. 10x Genomics currently ranks as the 16th largest holding for that ETF.
The company's Chromium technology is turbocharging genetic research by enabling scientists to explore single cells in ways that haven't been possible in the past. Its Visium platform enables researchers to see how different cells interact with each other in tissue.
10x's systems are used by 98 of the top 100 global research institutions. They're also used by 19 of the top 20 biggest pharmaceutical companies in the world. The company's technology has helped make important discoveries in multiple diseases, including COVID-19 and cystic fibrosis.
Wood is probably especially attracted to 10x Genomics because of its huge market opportunity. The company estimates its addressable market in life sciences research is around $15 billion, with another $10 billion potential in downstream applications for in situ analysis (the sequencing of molecules in their native tissue). With a market cap of close to $21 billion, 10x Genomics should still have plenty of room to grow.