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Gene Editing Hype
Gene editing has for a while been hailed as the new frontier in medicine. The peak enthusiasm with investors on this topic was in early 2020, with the related stocks having cooled off since. No matter the market sentiment, gene editing is still a big deal for medical and pharmaceutical companies as well as patients and doctors.
Gene editing is the next step after gene therapies. Gene therapies add a healthy gene to the genome but leave in place the defective gene. Editing, in contrast, actually repairs the faulty gene.
Two of the leading firms in the sector are CRISPR Therapeutics and Editas Medicine.
Which one, if any, should you pick as an investment?
Quick Primer on CRISPR Gene Editing
Many diseases are due to defective genes, leading to non-functional organs or biochemical processes. They are very often difficult to cure diseases. Infectious diseases can be solved by killing pathogens. Other problems can be solved through surgery or drugs. But when the point of failure is in every cell and requires the body to be changed at the DNA level, this is a lot harder.
For a long time, it was believed that the only solution was gene editing at the early embryo stage to solve the problem when there is only one cell or, at most, a few hundred stem cells. Even then, inserting a new, functional gene in defective cells was tricky and prone to failure, as the random entry of the new gene could damage other parts of the genome.
This was until the CRISPR-Cas9 system was discovered. It can be used to target a specific place in the genome. And then to do almost anything molecular biologists want, from knocking out a gene, entirely deleting it, or also editing it. It can also insert, in a controlled fashion, entirely new genetic sequences.
This changed everything. Previous methods were too crude to be efficient or safe for most patients. CRISPR brings molecular biology to the next level, allowing precise and in-vivo gene editing to become repeatable and predictable.
Beyond CRISPR-Cas9, researchers have also discovered CRISPR-Cas12. It has slightly different characteristics that might prove better in some cases, like editing multiple genes at once. Or for cell types that do not tolerate Cas-9 well.
While CRISPR Therapeutics favors Cas9, Editas Medicine favors a version of Cas12. If you are technically minded and want to learn more about the difference between the 2 CRISPR systems, I recommend reading this scientific publication and this article.
CRISPR Therapeutics' Technology
The company was founded in 2013 under the name Inception Genomics and went public in 2016.
One of the founders of CRISPR Therapeutics is Emmanuel Charpentier, the discoverer of CRISPR-Cas9 and the Nobel Prize of Chemistry in 2020 for that discovery. So, it is safe to assume that the company has a crack team regarding the scientific side of CRISPR-based gene editing.
Its technology is based on CRISPR-Cas9, allowing for the edition of precisely targeted genome sections.
Editas Medicine's Technology
Editas Medicine was founded in 2013 and went public in 2016. It initially started working with Cas9 but is now focused on a proprietary version of Cas12 that they engineered: AsCas12a.
We have covered in detail the unique capacities of Cas-12a in a dedicated article. To resume it shortly:
- Hard-to-solve problems with Cas9 could be workable with Cas12a
- It results in higher chances of gene editing happening than with Cas9.
- More than one gene can be modified at once with CAs12a
CRISPR Therapeutics has made the most progress on 2 diseases, Beta-thalassemia and sickle cell diseases (SCD).
This uses an “ex-vivo” technique: stem cells from the patients are collected, modified/repaired with CRISPR-Cas9, and reintroduced in the body.
Both are under clinical trials in collaboration with Vertex. In June 2022, results from a clinical trial revealed that 42/44 patients with thalassemia were free from the need for blood transfusion, with the 2 others requiring a lot less blood transfusion.
No serious adverse event was found in SCD patients. Two thalassemia patients had serious adverse events, which have since been healed.
Overall, the blood therapies using CRISPR-Cas9 seem to be a success, and the safety profile acceptable considering how life-threatening and difficult to live with are the diseases treated. You can learn more about the experience of the cured patient in this podcast interviewing one of the participants in the trial.
Another application of CRISPR Therapeutics' technology is cancer treatment. The idea is to use modified immune system cells to attack cancer cells. Until now, cells from the patient had to be genetically modified, which took several weeks, which often can be too late for a patient's quickly degrading health.
Instead, the company is developing a modified cell that can be manufactured in advance and fit all patients. The method to target the cancer cell is not new, but the possibility to start treatment immediately is. The option to produce a batch of products for hundreds of patients at once is also precious, as it can reduce the complexity and costs of this therapy.
The company has currently 8 candidates in the pipeline, of which 2 already in clinical trials.
CRISPR Therapeutics is also collaborated with the company ViaCyte to improve its product. ViaCyte is aiming to cure type-1 diabetes. This is a disease affecting 8 million people and requiring lifelong treatment with insulin.
The issue with ViaCyte's current design is that it requires a lifetime of immuno-suppression treatments, which come with their own set of risks and issues. This in turn drastically reduced the size of ViaCyte's market.
With the help of CRISPR, ViaCyte is aiming at turning its solution into a lifelong cure for all type-1 diabetes.
Promisingly, the same idea could be used for many other diseases where a specific type of cell needs to be replaced. This could include type-2 diabetes, affecting more than 6% of the world's population, as well as hepatitis, cirrhosis, or other degenerative diseases.
Each of these 3 applications uses the ex-vivo approach of modifying cells in a lab and re-injecting them in the patients. This is not possible for some diseases, for example, muscular or pulmonary diseases. So CRISPR Therapeutics is also trying to modify the cells of the patients directly in the body, with so-called “in-vivo” techniques. This either uses viruses as vectors of mRNA techniques not dissimilar to mRNA vaccines.
This is targeting a wide array of diseases including muscular dystrophia and cystic fibrosis (both in partnership with Regeneron), hemophilia (in partnership with Bayer), and cardiac diseases.
In the long run, CRISPR Therapeutics expect the in-vivo technology to become their flagship product and the center of their commercial strategy, “able to solve 90% of the most prevalent severe monogenic diseases” (see page 35)
Overall, CRISPR therapeutic has done a lot of progress.
It is currently applying for commercialization of its blood therapy products which could concern as many as 30,000 patients in the US and EU. Approval is never a sure thing, but published data last summer of 2022 indicates life-changing efficiency and an acceptable safety profile. Likely, the product could be approved for severe cases at least. This should prove a strong catalyst for the stock as it would be the first product approval for CRISPR Therapeutic.
Further improvement could grow this market to 166,000 patients, or even 450,000 if the in-vivo method proves successful (see the linked presentation page 8).
The cancer treatment trials are still in the early stages, so impossible to predict the outcome. Preliminary data have been encouraging.
The diabetes treatments entered trial on 2nd February 2022. So it is too soon to judge it, but results from this trial could be another strong catalyst for the stock in 2023.
Editas Medicine was previously working, through its EDIT-101 treatment, on curing blindness due to Leber congenital amaurosis 10. The phase 1/2 clinical trial went well, demonstrating the proof of concept.
However, Editas is now looking to license out its technology for this disease, and focus exclusively on its blood disease treatment. It seems the strategic reorientation is due to:
- This treatment relied on the Cas9 method, something the company is not interested to use moving forward.
- This leaves the existing pipeline relying exclusively on AsCas12a, which is not subjected to any dispute about patents and IP, contrary to Cas9 technologies.
- It is a very niche application, with only 1,500 relevant patients in the US.
Editas is now focusing on Sickle Cell Disease (SCD), hence going into direct competition with CRISPR Therapeutics' own gene editing treatment for SCD.
Edita's strategy is counting on the engineered AsCas12a CRISPR system, delivering a superior editing efficiency and specificity than its competitors' system using Cas9.
The company is using ASCas12a to activate the genes of fœtal hemoglobin in adults, producing functional fœtal hemoglobin to replace the one not working in cases of SCD.
The company have also programs at an early stage in oncology (cancer) in partnership with BMS and Immatics. Other organs are also researched, likely for in-vivo therapies. Little has been disclosed about these programs so far.
The initial trial for SCD treatment on 2 patients has shown a good safety profile in the results published on December 2022. The initial results are also demonstrating the proof of concept of the treatment, having increased significantly the hemoglobin levels in the patient's blood and reduced or removed symptoms of the disease. Data from additional patients should be published in mid-2023.
The next step is including 40 patients in a clinical trial at phase 1/2, with the first results expected by the end of 2023.
Financials and Valuation
CRISPR Therapeutics' valuation in early 2023 has shrunk significantly from a peak of $13.7B in January 2021.
As the company does not have a commercialized product yet, it relies on its cash balance and deals with larger pharmaceutical companies.
For example, it registered $912M of revenue from its collaboration with Vertex in 2021. This can be compared to $438M in R&D spending and $102M in general administrative spending in the same year. With only 500 employees, the company seems rather lean, efficient and focused on innovation.
The company has approximately $2B in cash, which should cover the company's needs up to 2024. It has no significant debt or liabilities beyond current operational liabilities and leases for its manufacturing facilities.
Overall, the company finances are sound, even if it might need to raise more money at one point if its sickle cell disease and thalassemia drugs are not quickly approved. In that respect, the elevated share price of 2021 should have been better utilized to raise funds than risking the current lower valuation.
Like most biotech companies, Editas Medicine's valuation is quite lower than its peak at $5.6B in January 2021.
Regarding the maturity of its portfolio, Editas is just launching the 40+ patient trials that CRISPR Therapeutics has already finished. So, it is likely lagging 1-2 years behind when discussing possible commercialization.
The company was losing $193M in 2021, of which $142M was spent on R&D. As it currently has $507M in current assets, its liquidity is sufficient for the whole of 2023, even considering the extra cost of the incoming clinical trial.
Editas Medicine might need extra funding before reaching commercialization, but this will likely not be the cause of a serious dilution of shareholders, thanks to the solid current cash position. It issued shares worth $203M in 2020 and $249M in 2021, making good use of the then-higher share prices.
Overall, Editas Medicine is at an earlier stage than CRISPR Therapeutics. But thanks to its focused approach centered on only one treatment and disease, it has a similar risk profile when it comes to cash balance and risk of dilution.
Which one to choose?
CRISPR Therapeutics is the sector leader, benefiting from its first-mover advantage, having been founded by the discoverer of Cas9 technology. It also has a much wider portfolio, covering SCD and other blood diseases, cancer, and even diabetes. So, its overall potential addressable market is much wider.
It is also more advanced in its clinical trial, having a realistic chance to see at least one product commercialized in a 12-24-month time frame.
Where CRISPR Therapeutics might be lacking is in its reliance on Cas9 technology, which might be better understood but slightly less efficient in the long run. It is difficult to judge if these technical differences will result in practical differences in therapeutic efficiency.
Editas Medicine is a trailblazer in turning Cas12a into a practical medical tool. By concentrating its effort on SCD, it is directly targeting CRISPR Therapeutics' own SCD treatment. So a lot of the future success or failure of Editas will depend on whether its treatment for SCD proves superior to CRISPR Therapeutics.
Both company valuations can be considered somewhat equivalent, as CRISPR Therapeutics has a much higher valuation and a much more diverse pipeline, especially as both share a similar risk profile with a large cash cushion enough to cover the next 1-2 years of spending.
It is also possible that both companies will reach commercialization and share the SCD market on relatively equal terms.
For investors looking at a very innovative and focused company, Editas Medicine might be a favored choice.
For investors looking at a more spread R&D risk, CRISPR Therapeutics' wider pipeline should prove more reassuring. The upside in the 4-6 years timeframe of CRISPR Therapeutics might also be larger, thanks to its venture into the very large diabetes market.