If you have visited this site before you know that I mainly invest in technology – Luckily there is many fields within this category that fascinate me and sometimes I am able to turn my interest and curiosity for the future into investment opportunities. Emerging technologies and future trends are everywhere to be found – you just need to know where to look.
One of those fields are biotechnology – which actually laid the foundation for my portfolio when I first started stock investing 7 years ago. One of the most prominent companies of my country: Novo Nordisk (NOVO-B), a Danish pharmaceutical giant – became my very first pick even before I managed to build a position in Microsoft (MSFT) and Tesla (TSLA).
But Novo Nordisk is not the topic of this post – In fact today marks my exit of that very first position I made back in 2014 in order to make room for one of my most exciting investments yet: CRISPR Therapeutics (CRSP), another play in the biotechnology sector – And more specifically within genomics.
What is CRISPR?
So while I am adept in consumer and information technology, I am by no means an expert within the field of genomics. It is an incredibly difficult science and stands at the absolute cutting edge of what is possible within health care today. In fact one of the founders, Dr. Emmanuelle Charpentier of CRISPR Therapeutics, was awarded a Nobel Prize in 2020 for her scientific achievements.. I did however spend the last month and a half trying to understand what the technology really is, what is can be used for and what challenges and risks are involved.
CRISPR which is an acronym for clustered regularly interspaced short palindromic repeats and is a method for genome editing. In short and oversimplified terms Emmanuelle and her team discovered that some bacteria has a built in self defense mechanism in a protein called Cas9 able to delete genetic code in the DNA of living organisms. The CRISPR system is programmable and that makes for a so called pair of ‘genetic scissors’ which can then be manipulated by researchers and scientists to change the genetic code of humans, animals and plants with extremely high precision. All this is of course a vastly more complicated process but this is the best and most simple description I can make of how I understand the technology right now.
Use cases
The true revolution of the CRISPR/Cas9 system lies not only within its precision in gene editing but also because it has dramatically lowered costs. The first human genome ever sequenced took 13 years of development and cost $2.7 billion to complete. Today each human genome can be sequenced using deep learning in as little as a day and for less than $1000 and quickly moving towards $100.
China began human trials using CRISPR back in 2015 and have presented evidence that the technology appears both feasible and safe. This is great news and as It has been used as therapeutic for lung cancer which is an especially big issue in China and currently has no good cure.
Sickle cell anemia is another disease where CRISPR shows early promise. It is a genetically inherited defect that causes the red blood cells to become crescent-shaped which then can obstruct the small blood vessels causing extreme pain and damage in vital organs. Today it drastically decreases life expectancy in those unfortunate enough to suffer from it. CRISPR Therapeutics is on the forefront of potentially curing this disease and clinical trails are progressing steadily. This particular disease is more approachable as it is easier to deliver these tools into blood cells relative to solid tissue.
Another great thing about CRISPR is its wide range of application. Just as well as it will be used in curing sickness in humankind so can it be utilized in solving challenges within livestock and farming. Genetically engineered salmon already exist today and have been deemed safe to eat by the FDA. They are made to grow faster to help meet the demands of feeding the world, reducing overfishing and the carbon footprint of meat production.
Gene editing – Controversies and ethics
When talking about editing genes of living organism there will be its fair share of controversies surrounding the topic. And for good reason too – Rarely have we been this close to shaping the world exactly as we see fit.
The above example regarding the salmon is one of my examples where gene editing has been met with controversies and resistance. AquaBounty (AQB) the company behind it has spend over two decades getting their product approved for market. They have met both political resistance and nature activists have given them their fair share of trouble. People are worried that these ‘Super-Salmon’ may end up in the wild seas and compete against our natural species – A fear unjustified as they are to a large degree made completely sterile, location tracked through a microchip and kept in closed off water basins. But for some… The mere thought of editing DNA in live material comes too close to playing God…
In November of 2018, Chinese scientist He Jiankui announced to the world that he had performed germline engineering on human embryos which for the first time ever had been brought to term. The twins dubbed ‘Lulu & Nana’ – Are allegedly completely healthy and normal children yet carry one big change. Before being born the embryos had been genetically modified so that they would not inherit their fathers prohibiting and terrible disease of HIV. The disease carrying gene had simply been removed in a lab using CRISPR.
It is a fascinating story and the act spurred widespread criticisms from other scientists and major pushback from the public. Discussions revolved around the topic of ‘designer babies‘ – A dystopian concept of potential parents picking and choosing attributes and enhancements for their coming child – like choosing what eye color they might have, making sure they grow tall and increasing their baby’s IQ.
The aforementioned scientist was sentenced 3 years in jail for breaking ethical medical standards and for defying government laboratory practices. And since then even stricter regulations have been put in place by medical ethics boards around the world. As far as my investment goes I believe this to be a good thing – Nothing could be more damaging to the science or the companies built up around it than if unregulated practices like these leads to irreversible damaging to human hereditary and would make a solid argument for never bringing it to market.
Thankfully, the worst aspects of these practices like superficial changes to the body or increasing intelligence remains furthest a way from reality. According to several experts whos work I have read and studied over the last couple of months the generally consensus is that these things are by far the least understood part of the human genome and that regulations already put in place will keep progressing in this area even slower. If you plan on holding CRISPR-related stock over the next decade or two it is unlikely this topic will ever come in harms way as it wont even be possible.
Why CRISPR Therapeutics (CRSP)?
Now that I have explained a bit about the technology and the effect it might have on the world you might be wondering how exactly I settled on CRISPR Therapeutic in particular. It is a good question and it has been a true challenge for me to narrow it down to this one specific company.
Truth be told, this is very early stages for this medical science and no one is quite ready for market yet. Human trials are in its early beginnings and there are lots of things that could bring delays or go wrong underway.
Were it not for disadvantageous tax laws on certain foreign ETF’s in my country of residence I would have preferred to simply put my money into something like ARKG – ARK Invest Genomic Revolution ETF. That would have been a far safer option riding on the more general promise of CRISPR and other advanced genomic technologies. At least for now.
The risk I run by investing into single company in this category is not only the chance of failed clinical trials and patent disputes but also any risks that usually come along with betting on a technology in such an early state. Who knows if something alike to “CRISPR 2.0” is just around the corner? Ultimately making this pioneering example redundant for practical use overnight.
That is a risk I will have to live with going into this investment. But I have chosen CRISPR Therapeutics exactly for this very reason as well. They were first and are true pioneers – Their founders are literally behind the science. And while many companies have followed in their wake and are also making progress and showing promise – CRSPR remain the market leader and the biggest. They are furthest in their clinical trials and have the best results so far – And along with this they own the most patents. They have partnered with both Vertex (VRTX) and Bayer (BAYN)- Two colossal and well established biopharmaceutical companies working towards a shared goal of bringing gene editing to the market and ridding the world of many terrible and difficult, complex diseases.
In many ways CRISPR Therapeutics is the safest of any of the single CRISPR stocks to pick right now – Although a good case can also be made for genomic service companies who currently have a more clear path to success: Illumina (ILMN), Thermo Fisher Scientific (TMO), 10x Genomics (TXG).
Investment strategy
So with my investment in CRSP I will be trying a strategy I have not yet had the need to utilize before – Dollar Cost Averaging. What this means is that I will not be buying the entirety of my desired position in one go, but rather split it up into a few smaller purchases over time. I bought about half today and will be buying the other half throughout the rest of the year – should the price per share fall dramatically I will then consider adding more to this position than originally planned.
The reason for doing so is that we are currently in an extremely volatile and primarily downtrending market – Especially for technology and growth stocks. 2 months ago this stock was sitting at cool $210 per share. As of now it is $115. Some might see this is as a steal – And of course I also see opportunity. However with a large investment like this is for me I am looking at the long term and that does not only apply to the future. Going back just a little bit further, a year or so on the graph this stock was sitting at a mere $34 per share. Suddenly the half off discount I am seeing from 2 months ago looks like an enormous premium from a year ago.
Splitting up my investment makes it a safer one for me – I usually avoid it as to not waste money on brokerage fees but here the potential risk is much larger than what I am used to. On the other hand – if things go as expected I will be looking at multiplying my investment by an order of magnitude.
Lastly I like to end all this by mentioning that there are many great companies out there to choose from if you are interested in this topic for your investments. So far I have also neglected to mention Jennifer Doudna – The person responsible for the other half of the 2020 Nobel Prize given to Emmanuelle Charpentier for this particular breakthrough.
Jennifer Doudna co-founded Intellia Therapeutics (NTLA) – another great option to look into if considering individual companies to buy within the space. I also looked into Editas Medicine Inc (EDIT) but that one seemed to present a lesser case than the first two.
Disclaimer: I am not a financial advisor, the opinions expressed in this article are entirely my own – always invest at your own risk.
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