Although many think that DNA wasn't discovered until the 1950s, that was only when its three-dimensional double-helix structure was first recognized. The genetic molecule itself was first identified back in 1869. And today, some of the most exciting publicly traded biotech companies are capitalizing on our ever-growing ability to map and manipulate genes.
Intellia Therapeutics (NTLA -1.30%), Beam Therapeutics (BEAM -2.00%), and Twist Bioscience (TWST -3.36%) are all carving niches for themselves in that industry, adding to what we know about the human genome and using that knowledge in an attempt to fight some of the most stubborn diseases. And investors are paying attention -- all three stocks are up by more than 300% in the past year.
Genetic medicine is a broad field, but ultimately it comes down to a relatively simple premise. The instructions for building all life on Earth are encoded in long chains of DNA, using just four nucleotides, or bases. The instructions in those chains are translated by our cells into RNA, which in turn tells our cells how to create proteins. Ultimately, it's these proteins that end up becoming the antibodies, enzymes, hormones, and other functional components that drive our biological processes. But along the way, a lot of things can go wrong. Due to mutations, errors in the code can creep in, causing some of those protein building blocks to be constructed incorrectly, or not at all.
Image source: Getty Images.
1. Intellia Therapeutics
Prior to the pandemic, CRISPR/Cas9 was perhaps the most widely known technique associated with genetic medicine. The technique, which facilitates the cutting of DNA at precise locations, was discovered when bacteria were observed to cut snippets of genetic material from viruses and file them away, allowing those bacteria to "remember" the invaders the next time they came around. This bacterial defense mechanism is being commandeered to fight human diseases by knocking out unwelcome genes, repairing mutations, and inserting corrected, properly functioning sequences of DNA where they are needed.
Intellia is using the CRISPR/Cas9 technique in two ways: to perform gene editing directly in a patient to mitigate or cure an illness, and in the lab to engineer enhanced immune system cells or stem cells to fight cancers and autoimmune diseases. The most advanced gene-editing treatment in the company's pipeline is NTLA-2001, a candidate for treating transthyretin amyloidosis (ATTR), a rare condition that causes proteins to fold incorrectly. That treatment is being developed with Regeneron. NTLA-2001 is still in early stage clinical trials, but initial data from those studies is expected this year.
Intellia's treatment for sickle cell disease, which it is developing with partner Novartis, is the farthest along in terms of engineering a therapy outside the body. But it, too, is in early clinical trials, which are expected to be completed in 2023.
The company has about $600 million in cash and short-term investments on its balance sheet, and recently received funding from the Bill & Melinda Gates Foundation. That cash cushion is important. Even if the company eventually delivers a treatment or treatments that lead to commercial success, that won't happen for a least a few years. For investors, therefore, owning Intellia stock requires a leap of faith.
2. Beam Therapeutics
Beam Therapeutics is using a less well-known approach called base-editing. This potential new genetic therapy changes individual bases within the DNA. If CRISPR/Cas9 can be thought of as a pair of scissors, base-editing is more like an eraser and pencil. The company's technique uses a chemical reaction to repair DNA mutations, restore proper function, and silence or reactivate gene expression.
Within its pipeline, Beam Therapeutics' treatment for sickle cell disease and beta-thalassemia is farthest along, but it has not yet received approval to start human trials. That said, there's plenty of excitement around Beam Therapeutics' candidates. At the American Society of Hematology (ASH) conference in December, the company presented its two treatments for these blood disorders and demonstrated precise gene-editing with no off-target effects. That's important, because one of the biggest concerns about CRISPR/Cas9 has been that such treatments might unintentionally disrupt other parts of the genome. Management plans to submit an Investigational New Drug Application in the second half of this year.
3. Twist Bioscience
Unlike Intellia and Beam, Twist Bioscience isn't developing gene-based disease treatments itself. Instead, it's trying to industrialize biological engineering. Its core technology offers a way to manufacture synthetic DNA and encode it on a silicon chip instead of the traditional approach, which uses a 96-well plastic plate. That might seem unimpressive at first glance -- but consider the ramifications.
Image source: Getty Images.
The standard plate now used, roughly the size of a pack of index cards, holds one gene. Twist Bioscience's wafer contains nanowells, each containing 100 microscopic holes, and can produce about 10,000 different genes on a wafer set the same size as the traditional DNA synthesis machine. The dramatically scaled-down approach makes the process much cheaper and faster. CEO Emily Leproust compares her company's position to the one held by Intel in the early years of semiconductor manufacturing. Twist's platform has facilitated research in cancer, neuroscience, super-strong materials, biodegradable plastic, and energy. It might seem like a product with a limited market, but business is good.
Twist Bioscience's client base and its order volume have grown quickly, and management has identified both a near-term driver of sales and another that offers immense longer-term potential. For now, a focus on synthetic biology and genome sequencing customers offers a path to impressive growth. However, it's the drug-discovery market that could justify the Intel comparison.
| Year | Customers | Customer Growth | Orders | Order Growth |
|---|---|---|---|---|
| 2016 | 97 | N/A | $3 million | N/A |
| 2017 | 286 | 195% | $18 million | 500% |
| 2018 | 717 | 151% | $39 million | 117% |
| 2019 | 1,305 | 82% | $70 million | 79% |
| 2020 | 2,200 | 69% | $117 million | 67% |
Data Source: Twist Bioscience
Management believes its current market opportunity is about $1.8 billion, with about three-fourths of that coming from companies that are at this point creating their own synthesis supplies. The goal is to convert those makers into buyers.
With a market capitalization of nearly $7 billion, the company's stock isn't cheap. Its price-to-sales ratio is nearly five times what it was before the pandemic. That said, with awareness of gene-based medicines growing, and with billions of dollars being funneled into their research and development, it isn't hard to imagine a future where large-scale synthetic DNA manufacturing is a prerequisite for developing the next generation of blockbuster drugs. That should be an exciting thought for Twist Bioscience shareholders.
