Thematic investing: Exploring the genomics market

Investment strategiesThematic investing: Exploring the genomics market

September 10, 2021

Key things to know

  • Genomics is the study of the complete set of DNA that provides instructions to a living being. A genome consists of all the genes of a specific organism.

  • The field of genomics is revolutionizing the potential identification and treatment of illnesses including infectious diseases, genetic disorders and chronic conditions.

  • While we remain in the early stages of practical application of this newly developed knowledge, genomics is an economic area that bears closer scrutiny for investors.

Genomics represent a technological advancement that has already touched many of us and promises to have an even greater impact on our lives going forward.

One of the common applications has been individuals’ ability, for a modest fee, to discover significant information about their lineage. While this investigation into one’s ancestral background has become wildly popular, it only scratches the surface of what genomics makes possible.

Most fascinating are the potential medical applications. In the past two decades, medical researchers have made tremendous leaps of progress in gene sequencing, opening the door to potential major breakthroughs in treating or curing previously incurable diseases. A revolution in medical care is on the horizon, with dramatic implications for human longevity and quality of life.

Like any technological development, the genomics revolution also promises to create investment opportunities, particularly in specific industries that these evolving developments directly affect. While we remain in the early stages of practical application of this newly developed knowledge, genomics is an area of the economy that bears closer scrutiny for investors.

While we remain in the early stages of practical application of this newly developed knowledge, genomics is an area of the economy that bears closer scrutiny for investors.

Understanding genomics

The study of genomes focuses on the complete set of DNA that provides instructions for living things. DNA is an organic chemical that contains genetic information and is found in most cells of every organism. A genome consists of all the genes of a specific organism. It’s sometimes described as a giant recipe book with directions on how to create a living thing.

Several sub-sciences comprise the field of genomics. They revolutionize the potential identification and treatment of illnesses including infectious diseases, genetic disorders and chronic conditions. These sub-sciences are:

  • Genomics sequencing: Determining the exact order of genetic material.
  • Computational genomics: Deciphering insights from genomic sequences using both traditional analysis and artificial intelligence algorithms.
  • Gene therapies: Modifying genes or manipulating their expression to treat and cure diseases.
  • Gene editing: Inserting, deleting or replacing DNA at a specific site in the genome of an organism.

The National Institutes of Health and the U.S. Department of Energy funded the human genome project beginning in 1990. By 2003, the project successfully sequenced the DNA of a handful of early volunteers. That trailblazing venture cost more than $3 billion, providing similar information you may gather today by paying about $100 to a private DNA test service.

Since the original groundbreaking work, research and development in the field has become much more cost-effective. Companies and organizations have taken advantage of declining costs to pursue genomics research aimed at enhancing knowledge and developing new medical treatments.

The rapid development of mRNA-based vaccines1 (those developed by Pfizer/BioNTech and Moderna) to combat the COVID-19 virus is a prime example of how genomic developments contributed to a dramatic, practical application. The speed of vaccines coming to market likely would not have been possible without the genomics work that has occurred in recent decades.

Dramatic leaps in medical treatment

Scientists have now identified more than 50,000 genetic diseases caused by a single gene mutation in humans, known as Mendelian diseases. These are positioned to become the first to be treated through genomics applications.2

Examples of Mendelian (single-gene) diseases3

Disease

Type of inheritance

Estimated affected globally

Cystic fibrosis

Autosomal recessive

70,000

Duchenne Muscular Dystrophy

X-linked recessive

300,000

Hemophilia A

X-linked recessive

140,000

Huntington’s Disease

Autosomal recessive

(U.S.) 30,000

Rett Syndrome

X-linked recessive

373,000

Sickle cell anemia

Autosomal recessive

120,000,000

Another example of the successful application of gene therapies includes the restoration of vision for some people who had succumbed to gradual, inherited blindness.4 It’s expected that many more therapies related to a host of other diseases and illnesses will be tested and ultimately proven to be effective.

The U.S Food and Drug Administration began to approve gene therapies in 2017. Domestically and around the world, human clinical trials are underway that could uncover new therapies for a variety of afflictions. Even these may only be scratching the surface. While the advancements made to date are impressive, researchers continue to pursue a truly comprehensive understanding of genetic variation in humans.

Personalized medicine

Genomics creates an unparalleled opportunity for medical professionals to deliver a truly personalized approach to treating what ails their patients.

Genomic sequencing advancements allow doctors to go well beyond the traditional family and medical histories that they have typically gathered from patients. By putting more personalized genome information to work, it could be possible for physicians to specify a treatment approach that is unique to the individual’s genetic makeup. This enhanced level of precision medicine offers the potential for improved treatment outcomes.

For example, today, many people may receive a similar cancer diagnosis and undergo a similar treatment regimen. Yet some patients respond better to the treatment than others. By leveraging detailed genomic information on a specific patient, it may be possible to determine a customized treatment strategy that proves to be more effective than the standard approach available under today’s protocols. This is one way that genomics could contribute to more favorable outcomes for patients.

Cost efficiencies and data crunching

Technological advancements have had a major impact on genomics-based analysis. The total cost of sequencing the human genome has dropped from $100 million in 2001 to less than $1,000 today. This makes genetic testing more accessible to individuals, creating much better information to drive treatment solutions. This is having an impact at the physician level as well as among pharmaceutical and medical device manufacturers.

With gene sequencing becoming more commonplace and scientists cataloguing significant amounts of data, digital storage capacity needs are soaring. In just a few years, the amount of genetic data stored could greatly exceed the annual storage needs of such ubiquitous services as Twitter and YouTube.5,6 A number of companies will be positioned to capitalize on this massive amount of data, particularly those that leverage genetic data, provide software analysis and/or biologics research and development. Ultimately, this should lead to continued advancements in customized treatments for illnesses and diseases.

Who stands to benefit

Anticipated advancements resulting from ongoing research and development will likely benefit:

  • Pharmaceutical and biotech companies: Ability to more deeply aggregate and analyze patient data, leading to more effective drugs and treatments.
  • Public health agencies: Gain enhanced abilities to identify viruses and other communicable diseases and encourage faster and more effective vaccine treatments.
  • Patients: Access to more personalized care that could help subdue debilitating diseases and illnesses and lead to longer, healthier lives.
  • Agricultural industry: Potential to benefit from genetic advancements that can result, for example, in more robust crops that can withstand disease and environmental challenges such as frequent droughts.

Implications for genomics investors

The combination of declining costs for genetic testing, the congregation of significant genetic data and increasingly precise medical treatments may result in significant disruption to the healthcare industry. Here are specific segments of the market where opportunities could be created:

  • Gene editing: Companies developing technology for the insertion, deletion or replacement of DNA at a specific site in the genome or organism.
  • Genomic sequencing: Companies engaged in the process of determining the complete DNA sequence of an organism’s genome.
  • Genetic medicine/therapies: Companies seeking to detect, cure or treat diseases by identifying and/or modifying an organism’s gene expression or functioning.
  • Computational genomics and genetic diagnostics: Companies using computational and statistical analysis to decipher biological insights from genome sequence and related data.

Potential risks to our outlook

In this fast-developing field, several variables could alter the expectations we’ve laid out above. The potential risks to our forecast include:

  • Disappointing outcomes: Anticipated treatments and techniques prove to be less effective than expected in human trials or have unexpected side effects.
  • Delayed approval process: Significant time lags in the regulatory process.
  • Slow adoption: Patients prove to be hesitant in trusting the new medical approaches as well as a time lag in training physicians on new techniques.
  • Privacy concerns: Governments intervene to protect individuals’ genetic data, potentially limiting collection, storage and analysis of data.
  • Moral & ethical concerns: Gene editing for non-disease related genetic purposes creates significant questions about their use.

While the general outlook for the potential benefits of the genomics revolution is positive, it’s important to be aware of potential obstacles.

Preparing for the future

Genomics and precision medicine could have a dramatic effect on the healthcare industry and how practitioners develop and deliver medical solutions. The convergence of human biology with big data, advanced analytics and scalable computing power offers unprecedented insight into how diseases of all kinds afflict us, and how to treat and prevent them. From the use of new therapies to altering our own DNA, we believe genomics’ far-reaching potential to transform healthcare creates a compelling, thematic investment opportunity.

Ascent Private Capital Management of U.S. Bank provides Investment Management, Investment Consulting and Investment Monitoring for clients with complicated investment scenarios. Learn more

Request a call.

Let’s start a conversation. Please request a call and an Ascent wealth management professional will contact you shortly.

Find an office.

Ascent’s regional team locations across the U.S. offer personalized support and a full suite of wealth management services.

INVESTMENT STRATEGIES

Investing in private markets

Long the domain of institutional investors, private market investing could offer benefits to savvy and risk-aware accredited investors.

INVESTMENT STRATEGIES

Thematic investing: One eye on the future

For patient, long-term investors, thematic investing can be a way to potentially benefit from the megatrends that are shaping the global economy of the future.

Start of disclosure content
Footnote
Return to content, Footnote
Disclosures
Start of disclosure content
WI-002 Not-not-may: Bank only
WI-118C EH Credit Products only
XX-021 Tax/legal advice - Bank only
WI-201 Ascent Family Office Services
WI-021 Opinion disclaimer: Bank only
WI-003 Factual information