The biotech sector has lagged the market since the start of 2021, with the iShares Biotech ETF up less than 3% compared to the 17% gains seen by the S&P 500 over the same time frame. This year has been especially tough on the gene therapy market.
While some companies produced lackluster results, others had clinical trials placed on hold, causing the sector to lag the market. Let’s examine two ghastly gene therapy performers this year and one for investors to take a closer look at.
Scary competition for Editas
Late last month, Editas (NASDAQ: EDIT) provided a lukewarm update on its lead CRISPR-editing treatment for a genetic disease called LCA10 that causes rapid vision loss. Unfortunately, the treatment, EDIT-101, provided no benefit at the low range of dosing and only modest results in the middle range. In fact, only two of three patients in the middle dose cohort saw any evidence of improvement.
Chief Medical Officer Lisa Michaels said, “these encouraging results provide a proof of concept,” which is at least partially true as the results were encouraging, but not the stellar efficacy investors were hoping for from gene therapies. Unfortunately, her additional comments may have spooked investors: “At the end of the day, I’ll be honest with you … this trial has been going on for so long and we haven’t been communicating.” Yikes. Not exactly the reason you want to see a press release. It’s no wonder shares have been down over 45% for investors year to date.
Beyond this scary data, there are also competitors with better data that are already in phase 2/3 trials for the same disease process. Granted, the RNAi-based treatment from ProQR Therapeutics (NASDAQ: PRQR) will likely require injections into the eye twice a year, forever. While admittedly a one-and-done gene therapy injection would be ideal, right now it does not look like EDIT-101 can deliver those results anytime soon. And ProQR’s treatment has thus far delivered robust vision improvements in clinical trials. With top-line data for ProQR’s phase 2/3 trial for LCA10 due in the first half of 2022, there may not be any market left by the time Editas knows if its treatment even works well enough to sell.
Skip the CRISPR house this Halloween
CRISPR Therapeutics (NASDAQ: CRSP) had investors seeing ghosts when it released data last week from its CAR-T treatment, CTX110, sending the stock down more than 10% on Wednesday from its price at the start of the month. In an ongoing phase 1 study for large B-cell lymphoma (LBCL), CTX110 demonstrated impressive safety data, with no evidence of serious forms of an inflammatory reaction called cytokine release syndrome. Unfortunately, only 21% of LBCL patients experienced a complete response at six months. Back in December, Gilead‘s (NASDAQ: GILD) Yescarta demonstrated a 74% complete response rate in first-line therapy for LBCL, with 9% experiencing a grade 3 or higher cytokine release syndrome. Though not a true apples-to-apples comparison, CRISPR will have an uphill battle going against not only multiple positive data sets for Yescarta with significantly better response rates but also years of clinician experience with the Gilead treatment.
While CRISPR did have promising data for its gene therapy for sickle cell disease earlier this year, investors should still proceed with caution. The gene-editing company has only treated seven sickle cell patients to date, with only two patients having been monitored for over a year. Compare this to competitor Bluebird Bio (NASDAQ: BLUE), which has treated 47 sickle cell patients with up to three and a half years of follow-up and has also reported fantastic results. Not only is CRISPR at least two years behind, but it will only take 40% of the profits from its sickle cell therapy due to its partnership with Vertex Pharmaceuticals. Then there is the issue of reimbursement — Bluebird Bio is having difficulty getting paid for its already-approved gene therapies, which may signal trouble for the entire field.
All gene therapy roads go through Repligen
The gene therapy market has at times been a ghost town, riddled with clinical trial holds. In extreme cases like Audentes Therapeutics, which was acquired by Astellas Pharma, its therapy may never see daylight after multiple patient deaths were linked to its treatment. The good news is that there are many talented people working on gene therapy from many angles. And Repligen (NASDAQ: RGEN) helps supply the manufacturing side of the gene therapy delivery systems.
This biotech company sells the instruments and associated disposables that are needed for the production of biologic drugs. The $3.7 billion addressable market ranges from the equipment needed for the creation of monoclonal antibodies to COVID-related vaccines and gene therapy. This pick-and-shovel biotech is an agnostic supplier of necessary products needed to construct both today’s and tomorrow’s cutting-edge treatments.
Being an agnostic supplier, no matter which company produces a gene therapy that comes to market, Repligen shares in that win. Having two-thirds of its revenue coming from clinical trials, should some of these treatments eventually make it to market, Repligen could crush future earnings. With full-year 2021 guidance for 71%-76% revenue growth on top of 2020’s 36% revenue growth, the future looks sweet for this $13.8 billion biotech equipment supplier. It has a proven track record too, already up over 40% year to date and over 800% over the last five years.
What’s in your Halloween basket?
The market may be recognizing that the competition is far ahead of Editas and CRISPR Therapeutics, sending shares down 45% and 35% year to date, respectively. While ProQR looks enticing, Repligen has the ability to add to its growth no matter which therapy comes out ahead, plus it is already profitable. Investors looking for exposure to the gene therapy market without hitching their wagon to one or two lead compounds may want to consider adding the biotech equipment manufacturer to their watch list.
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Patrick Bafuma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CRISPR Therapeutics, Editas Medicine, Repligen, and Vertex Pharmaceuticals. The Motley Fool recommends Bluebird Bio and Gilead Sciences. The Motley Fool has a disclosure policy.
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