Motley Fool Hidden Gems Investing - CRISPR, Gene Therapies, and Cure Pricing Conundrums

Episode Date: September 17, 2022

Genetically edited humans are already here. Gene editing has massive implications for treating chronic illnesses and even the food we eat. So what does this mean for your investments and, y'know, possibly humanity? Ricky Mulvey talks with Motley Fool Advisor Karl Thiel about: - How CRISPR works - Some of the possibilities for CRISPR, from sickle cell cures to drought-resistant crops - How investors can approach investing in gene therapies - Biotech metrics to watch. Companies mentioned: BLUE, CRSP, GILD, EDIT, VRTX, NTLA Host: Ricky Mulvey Guest: Karl Theil Engineers: Tim Sparks, Dan Boyd Learn more about your ad choices. Visit megaphone.fm/adchoices

This family is on the brink of civil war. On September 18th, Mobland, the hit original series, is back on Paramount+. We are the Hartigans. Don't know them yet? Then Google us. From the underworld of Guy Ritchie. Do you want to step up the ladder?

I want Comet dead. Starring Tom Hardy, Pierce Brosnan, and Helen Mirren. Do I have to do everything myself? You want more? I'll give you more! Mobland, new season hits September 18th Paramount Plus. We're used to the idea, honestly, of paying millions of dollars to treat people with a disease, but we're not used to paying it to a drug company. We're used to paying it to

physicians and hospitals and healthcare systems, right? So all of these are paradigm shifts. And when you're talking about that kind of paradigm shift, one thing to remember is that the innovator actually has a lot of brush to clear away in terms of regulation, reimbursement, physician habits and more. And the followers kind of benefit from that. I'm Chris Hill, and that's Motley Fool advisor, Carl Thiel. Today, we're talking about CRISPR and the exciting frontiers of genetic cures. Ricky Mulvey caught up with Carl to talk about how CRISPR actually works, the endless possibilities for this technology, including drought-resistant crops, and how investors should approach this promising yet incredibly complex

space. The era of the gene-edited human is here. Whether that scares you or not scares me a little bit. So today we're talking about CRISPR and the exciting frontiers of gene-editing technologies. Joining us now is Motley Fool advisor, Carl Thiel. Thanks for being here. Great. Yeah. Thanks for having me. This is fun stuff to talk about. It's going to get weird, so buckle up. Let's talk about CRISPR first. There's a lot of gene therapies, but CRISPR is the most famous. I've heard this described as genetic scissors or word processing editor for genes. How would you describe CRISPR or CRISPR-Cas9 if we want to get a little technical. Yeah, yeah. The scissors analogy is a pretty good one. The word processor

analogy is maybe a little bit of an overreach at this point. If you had a word processor where you tried to do a paste and it worked between 10% and 30% of the time or something like that, that's maybe a little closer where we are. CRISPR really is sort of a pair of molecular scissors, and it's a natural phenomenon. It grew out of the battle since the beginning of time between bacteria and their arch nemesis, the bacteriophage, which is a virus that infects bacteria. So this is their method. They grab little bits of chopped up virus, they insert it into their own genome, and they look to match it up later. When they find it, they send out this little protein mechanism, Cas9 protein, and it takes little bits of the genetic information with it,

knows right where to find a cut, and it just cuts it in half. And usually that is enough to disrupt the virus. So, that's the natural thing. Now, what people have discovered, and it's been known, the basic idea of that mechanism, I think, has been known since the 1980s. But a much more recent discovery was really the details of how this works and that you can do it in human beings. And so, part of the art is to not only cut DNA where you want to cut it, but then actually try to insert something in that place. And it's the second part that's still you know, very much a work in progress. I mean, it's definitely done. It's done with varying levels of success. I think people are getting better at it, but that's kind of where the rubber

meets the road, I think, for a lot of therapies. So, why is the promise of CRISPR so much greater than other gene therapies? What's it doing differently? So, in some sense, their gene therapy, so traditional gene therapy is done by introducing genetic information into cells using a virus as a vector. You basically use a virus as a Trojan horse to get something in there. And depending on the kind of virus that you use, and these are all engineered to not cause disease, but depending on the virus you use, you get some very different effects. One, either they don't integrate into the DNA, which means every time the cell divides after that, the gene therapy doesn't divide with it. It only goes with one cell. After time,

it would be diluted. And therefore, that kind of gene therapy is only useful in certain cells that don't really divide. So, it's only useful in, say, the liver or in the eyes. And even so, you'll find over time that might fade. The other approach is to use lentiviral or retroviral vectors that do integrate into our DNA. But the problem there is that you don't necessarily have great control over where into the DNA they get integrated. And so, there's potential for trouble there. But at the same time, there's been a lot more work on gene therapies over the years. They have more experience with it. And so, I think, you know, as you look at the new Bluebird biodrug coming out, that kind of is a clear indication of where we are. It's not clear that Bluebird,

there's much difference in terms of how well they work between the Bluebird biodrug for beta thalassemia and CRISPR therapeutic slash Vertex's drug for beta thalassemia coming up. They actually seem to work fairly equally, but it might end up being that the CRISPR drug is safer. And that isn't completely proven, but that will remain to be seen. But what you can do with CRISPR is iterate so much faster, do things so much more quickly, and that's how they managed to catch up to Bluebird. There's a lot of promise to do more things in the areas like base editing and things like that that are even more precise, even safer. I think that there's a lot more road to go down here. What's this mean for someone with sickle

cell? Someone who's used to dealing with sickle cell disease with current treatments, and what does this promise of CRISPR hold for them? Sickle cell is a horrible disease. People can have it to varying severities, but it causes these incredibly painful episodes. What you're looking at is people basically not having these sickling events. The experimental data we've seen so far seems to point to the vast majority of people treated having a functional cure of the disease at that point. Now, to be clear, that's just for them. That doesn't cure the disease for their offspring. And we don't know this yet, but it's hopefully a lifelong reprieve. Yeah. It's like a blood clotting thing that

sounds intensely painful. Are there any other CRISPR therapies that you're optimistic about seeing in the near future? Ultimately, I'm not sure. It's difficult to go after those particular diseases which come from the bone marrow without this kind of ex vivo approach, at least right now. But there are companies that are working on more of just a shot, the in vivo approach. I mean, there's a lot of interesting stuff going on. So, in hemophilia, which is another relatively common genetic illness. And for now, we're mostly focused on genetic illnesses, even though you could use CRISPR in some other ways. There's transthyretin amyloidosis. There's a company called Intelia, which I think probably has the lead on in vivo

work. So, just giving somebody a shot rather than just take it out and do it in the lab approach. But there's also Editas Medicine is working on a disease for a certain form of blindness. And I think that was the first to go into the clinic. It's moving quite slowly. And I don't know that yet we've seen anything super promising, but that is at least proving to be a very safe drug, and they're saying they're seeing some kind of efficacy signal out of it. Animals, living organisms, humans generally don't take kindly to having genetic information messed with. We have a lot of protective measures to protect our DNA from UV rays, sunlight, that sort of thing. With a lot of these CRISPR therapies, they're making

irreversible changes to your genetic makeup. What are some of the risks of this research in unleashing the CRISPR therapies? You're absolutely right about there being risks. I'll just push back in a sense just to say, actually, we all take pretty well to having our genomes messed with. It happens all the time. The human genome, most genomes are just chock full of the history of the species encounter with various things, bits of viruses and things that were encountered in the past. Lots of events change your genome. It's not like we're messing with something that's never been messed with before. With all that said, there's definitely a lot of work still to be done in making this a very reliable, safe to the point of mass usage

for less serious illness kind of things. And some of those are, you know, you have a cutting mechanism that's incredibly accurate at cutting where it's supposed to cut, but might sometimes cut off target. That can cause problems. And I mentioned before the whole idea of it being a word processor. Well, the whole, when you get into like, hey, we just cut something else out, now we want to put something in, that has potential problems there. Maybe the message gets off-frame, it gets inserted incorrectly. There are things that are definitely still to be ironed out there. Or it just doesn't get inserted at all. That can also happen. One thing I'm really concerned about with the rise of CRISPR is the idea that

this technology is not intensely difficult to use for a bad actor. If you wanted to do bad with CRISPR. This wouldn't be like, let's say, building an atomic bomb, where you'd have to build a lot of facilities around it, and you'd have to build a reactor, and it takes a lot of resources. We're talking about a cutting mechanism that's going to be fairly accessible to a lot of people with scientific knowledge like that. Yeah. We live in a world now where, you know, for decades now, with the idea of gene engineering, there's been this idea of, of like, hey, this is okay to experiment. What is not okay is any kind of what's called germline engineering. So, people are like, make somatic changes. And by somatic changes, they mean you're

making something that is affecting the person you're giving it to. You're affecting adult tissue. You are not affecting any kind of reproductive potential. But you could use this in germline changes. In other words, you do this to reproductive cells or to embryos, and the change you make is not only permanent to that person, but to all their offspring. And that gets kind of scary. And science works by, you know, it's very polite, and it works by norms and what's accepted. And it's pretty much universally accepted that you don't do this. And yet, it's happened. It happened in China, in a very controversial case. So, when you say this could never happen, unfortunately, you know, it could. We have standards. Let's talk about a little bit of the investing and

pricing elements of this. We're talking about cures. These aren't ongoing treatments. Pricing cures is intensely difficult. Gilead Sciences had essentially a hepatitis C drug that cured hepatitis C. It caught a lot of flack back in 2017. Many gene therapy treatments are going to cost hundreds of thousands or even millions of dollars. How are pharmaceutical companies justifying these extraordinary price tags for gene therapies? Is the pushback to these million-dollar price tags something investors should be concerned about? Yeah. So, I think we've become accustomed to some extent to drugs with $100,000 price tag, or $200,000, or $400,000. That's scary.

Right, right. But we've also become, we're very accustomed to a drug industry that produces treatments. So, things that you take over and over again, maybe for the rest of your life. And so, the whole idea of cures is honestly something that the market is still adapting to. I mean, cures are generally things like you take an antibiotic and it cures your infection, and the whole thing. These are cheap drugs. When Gilead introduced this $84,000 drug that cures hepatitis C, it really became a whipping boy about price. I'll also say that probably nobody actually paid $84,000. There's rebates and discounts and everything else. I think they could make a pretty good case that, hey, look at this versus the lifetime cost of

treating hep C complications, and you're actually getting a good deal on that. What happened to Gilead is that they made a ton of money for a few years as a whole bunch of people with hep C infections got cured, and then now it's a much smaller drug for them. Now, that's a conventional drug, but I think the makers of CRISPR and gene therapies are looking at that very carefully, and they realize we have to go about this differently. They're looking at different models where this is just such a huge investment. They're saying things like, either you pay for it over a period of years, you don't pay for it all at once, or if it doesn't work, we'll give you some of your money back. Bluebird Bio just got approval for Zynteglo. I think that's how they're

going to pronounce it. I'm not going to correct you on it. Thank you. It's a gene therapy currently approved for beta thalassemia. It looks like it also works in sickle cells, so they make it a subsequent approval in that. That's not a CRISPR drug. It's a gene therapy. They've priced it at $2.8 million. Now, their argument is that the lifetime cost of treating somebody with beta thalassemia with all the blood transfusions that they'll need in hospitalization on an emergency basis is something around $6.4 million. So, $2.8 million, maybe that's not so bad. What they are saying, though, is if we treat you with it, and in two years, your transfusion events haven't stopped, we're going to refund 80% of the price. That's one way to approach it. Should investors

be worried about that? Any new paradigm shift in stuff is always going to come with obstacles and rocky patches. Bluebird is a great example of how great science can meet the realities of the world and have some troubles. Well, they ran into trouble with the European government with regard to pricing a drug called SkySona, which treated a rare neurodegenerative disease, right? Actually, before they ran into trouble with that, they ran into trouble with them with Zyntegla, with the same drug. It was approved in Europe back in 2019. They just negotiated. They got a European approval, but they tried. Usually, a lot of companies go to Germany first because they tend to get the best pricing there.

They went to Germany and started trying to negotiate. They wanted to charge $1.8 million for it. Germany was like, no, we'll pay around $800,000. They could never come to an agreement and finally just withdrew. And then SkySona, the drug you mentioned, for a much rarer disease, again, when they got it approved, they started talking price and they just couldn't come to an agreement and they just pulled out, which is a shame. I think Europe has a history of being fairly hostile to gene therapies. They have a much different system that we do. They look at things like, what is the cost of effectiveness? What is the quality of life that you're going to get with this versus without it? They'll actually put a

price on that and sometimes very harsh about what they will not pay for. I don't know that it's all that indicative of what's going to happen in the U.S., but it certainly points to some of the problems. How do you approach investing in gene therapy companies? I think of something like Bluebird Bio, where they've had drugs get approved, but the stock is still not done so well. Do you have a few select favorites? Do you go for the CRISPR ETFs? Do you create your own basket? What do you do? Yeah. Specifically, the CRISPR space is small enough that I'm not even aware that there is an ETF that's really purely CRISPR. There's not that many companies in it. You could create your own basket. But you could certainly be doing

a genomic ETF or something like that. For the most part, I think it makes sense to do some kind of basket. If you have a portfolio that is invested somewhere else and you really just want to play in this area, you go ahead and pick a couple of stocks that you think are great, that's fine. But if you're serious about investing in the area, a basket approach is good. Bluebird is a great example. This is a company that, if you were weighing it up back in 2014, which i was i mean what you were looking at then was the science you were looking at the science saying like do these guys look like they're going to succeed it i believed that they would they did i mean it if you had said you know told me back then that like hey fast forward

everything they're working on is going to work they're going to succeed in beta thalassemia they're going to succeed in sickle cell they're going to succeed with their um uh called d drug They're even going to have a BCMA CAR-T that gets to market. You'd be like, oh, this is blockbusters. This is absolutely great. Well, so many other things can come into play with this. It gets very tough. Bluebird could have been a huge winner. Unfortunately, that's not how it's shaping up for them. I do think that underscores why it's good to spread some of these out. If you're interested in following these companies, is there a metric for outsiders to watch, Or are there metrics that you think matter a lot less in this realm?

This isn't a metric exactly, but I do think that when you're talking about these kind of paradigm shifts, and this really is a paradigm shift, right? We're not used to curing a genetic disease. We're not used to curing chronic disease in general. We're usually used to treating it. We're not used to, we're used to the idea, honestly, of paying millions of dollars to treat people with a disease, but we're not used to paying it to a drug company. We're used to paying it to physicians and hospitals and healthcare systems, right?

So, all of these are paradigm shifts. And when you're talking about that kind of paradigm shift, one thing to remember is that the innovator actually has a lot of brush to clear away in terms of regulation, reimbursement, physician habits, and more. And the followers kind of benefit from that. And that's sort of a weird thing to think of, because usually you think of, like, you it. And sometimes in this space, the innovator really has a hard time. The imitator can sometimes do better, and even some of the more distant follow-ons. So, that's one thing to take on.

Now, if you're looking at some of the stuff going on in CRISPR, you still have to, I mean, honestly, you just have to focus on the science at this point. Yes, the science isn't everything, but it is a lot. And generally speaking, if the science works, if these drugs work, they are going to find a market and find some success. Obviously, that's not a guarantee as we have seen with Bluebird, but it's still your best way to go. Do you watch inside ownership for these companies? One thing that concerns me a little bit about CRISPR Therapeutics, CRISPR Therapeutics, the company, is that insiders just own about 0.16% of the company. Is that a yellow flag for you or is this a common theme in biotech?

I mean, honestly, it's kind of a common theme. If you look at most biotech companies, there tends not to be really high insider ownership just because it's such a capital intensive business, right? And they raise multiple VC rounds, they go public, they do multiple secondaries. Often you'll find if a company has really great news, it's followed immediately by a secondary offering because it can cost on the order of a billion to go through all of the clinical development and studies and everything else that it actually takes a drug to get to market. And so, insiders, I can't think of that many companies that really have high insider ownership. So, that to me is not all that concerning. I'll tell you this,

if you want to short-term worry about the CRISPR companies, I'd say it's this. You can have a gene editing tool that's perfect, but you still need to know what to edit. And right now, a lot of companies. There's this work on beta-thalassemia, sickle cell. It's great. Data looks great. Looks like they're going to be successful. But a lot of the other work is on making these allergenic or so-called off-the-shell CAR-T drugs for cancer. The idea is that these CAR-T drugs already exist, but they're made by taking cells out of a patient, engineering them, putting them back. They're very expensive, very slow. And the idea is they want to do the edits ahead of time to evade the immune system. So far, that data is looking pretty

underwhelming. It's not because the CRISPR doesn't work. It's because people aren't quite sure what they should be editing in order to stop an immune response. And that's kind of weighed on a number of companies in the space. Humans aren't the only things with DNA out there that can be edited. Agriculture, farm animals, those sorts of things. Outside of just medicine, what are some of the promises and applications of CRISPR in the future? Yeah, I think there's kind of what you can do, what you could do in the future, what you should do, and what's kind of feasible practically and politically at this point in an environment that honestly is, you know, pretty distrustful of science, I think, at this point in history. All those are, you know, so all those lead to

different answers. I mean, in terms of the possible, the list is endless. The most general thing I think you could say about it is that you could massively accelerate the kind of work that people have been doing for decades. People have been plugging away at plants, trying to make genetic... Honestly, people have been making genetic changes to plants since the Neolithic era when they first started planting seeds and making choices about that. We've gotten more and more directed in it. You can just massively accelerate that work to make drought-resistant crops, things like wine grapes that can resist disease. You could coax microbes into producing fuel. You could resurrect extinct species. You could make disease-resistant animals. You could

make, you know, pigs that can donate their organs to humans. I mean, there's a whole lot of possibility. In terms of what I think practically people are willing to accept at this point, I think there'll be a growing acceptance of using it to treat deadly disease, because deadly disease is deadly. I think that over time, that might grow into more willingness to see it used in more broadly in human therapeutics. I think lab use and I think some industrial uses might kind of not, I guess, upset people. Yeah. Mixing human organs with pigs, I could see how that might upset people. I could a little bit. Keeping an eye on it. Carl Thiel, appreciate your time.

Thank you. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, thanks for listening. We'll see you tomorrow.