Top Trends for Genetics Stocks in 2017

When asked what is most challenging about the stem cell market, Dr. Ross Macdonald’s answer is unequivocal: “Translating market expectations into clinical and investment reality.”
Those expectations were sky-high a decade ago. Stem cell and genetics stocks were a hot ticket item back then, with investors—and the general public—confident that this new therapeutic approach would revolutionize medicine.
Then came the disappointments. Promising companies went bankrupt; others became penny stocks. And interest in the sector cooled.
But that’s changing once again. The arrival of CRISPR-Cas9 technology has generated more interest around the topic of gene-editing, while stem cell companies like Dr. Macdonald’s own, Cynata Therapeutics (ASX:CYP), are moving product candidates into pivotal clinical trials. There is a lot happening in this space—and this time around, those heightened market expectations just might be realized.
So what can you expect from genetics stocks in 2017? We touched base with those in the know to bring you some predictions for the year ahead.

An optimistic outlook based on increased clinical trials

“With many cell and gene therapy companies expected to advance their pipelines in 2017, we believe the next 12 to 15 months will be positive for the sector,” David Pernock, CEO of Fibrocell (NASDAQ:FCSC), told Life Science Investing News.
His optimism is echoed by others in the industry. “It is clear that there will be some extraordinary progress in the very near future,” Dr. Macdonald said, noting that there are more than 600 clinical trials using mesenchymal stem cells underway.
Both men have good reason to be excited: their companies recently embarked on pivotal clinical studies.
“Fibrocell is focused on generating human clinical data from the Phase I/II clinical trial of FCX-007 in the third quarter of 2017,” Pernock told us. This therapeutic candidate is intended to treat Recessive Dystrophic Epidermolysis Bullosa (RDEB), a debilitating—and often fatal—blistering disease.
There are no treatments currently available for RDEB, aside from bandaging and antibiotics—and those only treat the symptoms of the disease. If successful, therefore, FCX-007 could change the lives of patients living with this rare disorder.
Meanwhile, Cynata is making history. The company recently initiated the world’s first clinical trial with a product derived from allogeneic induced pluripotent stem cells. That study should be completed in 2017.
Bottom line? Expect to see more clinical trials from genetics companies in 2017. This industry, stuck in the pre-clinical phase for so long, looks to be moving ahead.

Manufacturing remains a concern

Of course, that doesn’t mean it’s all smooth sailing from here. So much depends on the results of those clinical trials—yet even if every endpoint is met, the genetics industry will still face hurdles.
“I believe the most common challenge is the ability to manufacture,” Pernock told us, reflecting on what it takes to bring a new gene therapy to market. Dr. Macdonald reiterated that point for stem cell products: “We expect the sector will focus more on ensuring the sustainable commercial viability of msc-based therapeutics, in particular the ability to manufacture product to allow reasonable margins.”
The question is simple: why is manufacturing these products so costly?
“The challenge has been to manufacture gene therapy vectors consistently at the quality level necessary for routine clinical use,” explain Otto-Wilhelm Merten and J. Fraser Wright in an article for Molecular Therapy—Methods & Clinical Development.
Starting materials have to be high quality, purification methods need to be stringent and regular testing must be performed in order to prevent contamination. These manufacturing processes should be both scalable and cost-effective—and those are issues the industry is still figuring out.

CRISPR-Cas9 continue to make headlines

As for the most exciting place to put your money? Peter Young, president and managing director of Young & Partners, thinks CRISPR-Cas9 gene-editing shows promise.
“The market will … tend to favor certain areas of new development,” he predicts in a June 2016 article for Pharmaceutical Executive, “such as genome editing (CRISPR) and immunotherapy.”
CRISPR-Cas9 has, of course, generated plenty of investment interest in 2016. The first American IPO of the year, Editas Medicine, is built around this gene-editing technology. The company had a strong initial showing, even as other biotechs stumbled: its stock soared 130 percent between January and March.
CRISPR-Cas9 court proceedings derailed that performance somewhat—but that didn’t stop several other gene-editing biotechs from going public. And according to Young, the market may favor these companies in the months ahead, even with the legal uncertainty over patent rights.

Stay tuned …

What’s the state of this sector going forward? Thomas Bold, CEO of regenerative medicine company RenovaCare (OTCQB:RCAR), puts it best: “There’s a general anticipation that more and more products and technologies will be inching their way towards the marketplace after decades of bench research, billions of dollars of risk capital and years of intense regulatory approval. These events, alongside greater public acceptance, bode well for 2017.”
We hope the following months will bear that optimism out, and you can bet we’ll be tracking developments closely. Stay tuned to Life Science Investing News for the latest on this sector.
Don’t forget to follow us @INN_LifeScience for real-time news updates.
Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.