Tune in for Motley Fool advisor Karl Thiel's debut on Industry Focus as our resident biotech expert discusses the advances and challenges of CRISPR gene-editing technology, as well as how investors should be thinking about the space.
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This video was recorded on September 22, 2021.
Emily Flippen: Welcome to Industry Focus. Today is Wednesday, September [22nd], and I'm your host, Emily Flippen. Today, I am joined by Karl Thiel, who is making his first Industry Focus debut as a full-time advisor on our team here at the Fool, and we're going to be talking CRISPR gene editing technology. Karl, you've been a longtime Fool, but you're relatively new full-time Fool.
Karl Thiel: That's right.
Flippen: How is it going so far?
Thiel: It's been going great. I get to see how the sausage is made in a different way, I suppose, and the sausage is yummy, so it's good stuff.
Flippen: Yeah. Hopefully, it hasn't turned off your appetite, seeing behind the scenes a little bit. Well, as part of our team, you've been heading up our new biotech breakthrough service, so I thought it'd be fun to have you on today and talk CRISPR technology. I will say that it should not be confused with CRISPR Therapeutics (CRSP -2.56%), which is this one of a handful of companies that are looking to capitalize on this technology. But I will say, I am a generalist a bit in this space. I know that you've been working in and following this space for decades. You have a lot more specialized knowledge here than I do. Selfishly, I'm really excited to hear you, I guess, give your thoughts about this entire industry.
Thiel: Yes. Where should we start? We are going to talk about what I think CRISPR or gene editing more generally can do.
Flippen: Yeah, let's talk about it. I think there are probably a lot of listeners, maybe I'm wrong, but maybe there are a lot of listeners out there who have never even heard of CRISPR technology before. Maybe start with just explaining to us, what is CRISPR and should they be excited by it?
Thiel: One of the things that's been really interesting about the past year or so is that a bunch of stuff that seemed really esoteric and out of the mainstream has become more so. A lot of people now are familiar with like water monoclonal antibodies and how do we use them and why. CRISPR is another one of those things that considering that it's a geeky lab technique. It's actually relatively well-known, I think, even among the general populace, just because it's captured so much of the popular imagination. Basically, it often gets referred to as a pair of genetic scissors. The idea is that you have this mechanism that can go in and very precisely genome make a cut where you want to. So you can potentially excise little bits of DNA and insert new things in their place. Ultimately, the idea is that much like gene therapy, you can introduce new genes where there were, say, faulty genes or stop some faulty process from happening in the genome. It's interesting. You can look at it two ways. The implications of it are massive when you think about.
Flippen: I was going to say dystopian.
Thiel: Well, right. It could be terrifying, it could be fantastic, and then there's the reality as well, which is, I think, quite a bit different from how people think about the potential of the technology.
Flippen: That potential is not really being capitalized on right now. Am I right in saying that? There are a lot of businesses out there that see the opportunity. But to the best of my knowledge, there is no FDA-approved CRISPR base, I guess, treatment currently, right?
Thiel: That's true. One thing that I think often gets overlooked in this field is that CRISPR actually is having a massive commercial implication every day, which is that it's very widely used as a laboratory technique. Usually, what happens is when an academic institution makes a discovery, they lock up a bunch of patents around it, which is exactly what happened with CRISPR. That's a point of contention, but nevertheless, there's some key patents on that area. They hold onto it tightly when it goes to human therapeutics. But when it comes to using it as a research tool, it's very easy to use. It's very widely licensed around. Labs all over the world are using CRISPR every day, and you can imagine what you use it for. There's a lot of stuff in the genome that isn't understood so you can use CRISPR. The beauty of CRISPR is that it's cheap, it's easy, it's fast. You go in at the most simple level, just say like, "Hey, I'm going to knock out this gene from a system so that I can see what difference it makes, so like have some idea what that gene does." That stuff is going on all the time, and that's incredibly important. What you're talking about is, is there a CRISPR-based cure or anything like that? No, there's nothing yet. In fact, work is still in the scheme of things relatively early at this stage.
Flippen: When I think about the two publicly traded companies that I'm familiar with working on CRISPR technology, the first one is CRISPR Therapeutics, second one being Editas Medicine. I've always struggled, I suppose, differentiating the technology between these two businesses now. Obviously each are going after, I guess, different therapeutics, different treatments for different diseases. But you just mentioned that CRISPR technology itself has been in labs, it's been licensed. Is there any fundamental difference between businesses about how they're approaching CRISPR?
Thiel: Yeah. Into that mix, you mentioned Editas and you mentioned CRISPR Therapeutics. I would also throw in Intellia, is another publicly traded company that gets a lot of attention, and there's others at this point. There's Beam Therapeutics, there's Caribou. We can get into some of the stuff that's adjacent to that that's coming up. I would say at this point, you watch these companies and they seem to jockey ahead of each other or behind, depending on who's doing what and what little bits of data they might be putting out. I would say the most fundamental difference at this point is, how are you using the technology? Editas started early on with the idea of we are going to do in vivo CRISPR Therapeutics. In other words, we're going to go give you an injection. It will do its work. It will hopefully affect the cure, and that's it. CRISPR Therapeutics started earlier on with ex vivo stuff, which is we're going to take cells out. We are going to manipulate them in the laboratory, then we are going to reintroduce them to you, and that's called the ex vivo work. Now, I need to be clear. CRISPR Therapeutics, Editas, Intellia, they are all doing both in vivo and ex vivo. They're both pursuing both things, but it's where each company has initially focused. That's a key difference, and you can probably imagine obviously an in vivo therapy, somebody where you're just like, "Hey, we give you an injection, ideally, we give you a pill, we give you something like that." That's a lot easier, that fits a lot more into a standard commercial model. The other one is a little more complicated. I think that explains some of the difference.
Flippen: I will say, I follow Editas a bit, and I've struggled with that investment just because it always has felt a bit like a waiting game. You follow the news, maybe they take a step forward in terms of getting approval for a clinical trial or step backwards as competitors get approvals, and trying to just get a new drug applications to even start testing on treatments using that CRISPR technology. All the meanwhile, they're just burning through CapEx, that there's putting money into research and development. As an investor, I'm sitting here, I'm twiddling my fingers, waiting for something to happen. You never really know what. So I'm curious, when you think about investing in CRISPR technology, is it something that is worth the thumb twiddling? Worth sitting through the CapEx, getting maybe a basket exposure to the industry, or is there a right time? Should we wait until we see, I guess, meaningful improvements, maybe even the approval for certain types of treatments after these things happened?
Thiel: That's a great question and a really big question.
Flippen: Apologies. [laughs]
Thiel: No, just because it's still like, should I take the risk of investing in development stage biotech, or should I wait until the product is approved? Honestly, you can take both approaches, you can justify them. I will say, specifically in the case of Editas, this is a company that's been recommended before by The Motley Fool over 100 percentage points since our original recommendation. Obviously, that was not a bad time. That was not that long after the IPO, actually at a time when Editas was literally the only publicly traded CRISPR company. Not a bad time for that, but you could ask. Obviously if you invest in something early and you take all the risk and wait through all of the trials and everything else, and they're successful, you're probably going to come out ahead. But you could ask, was that worth the risk adjusted weight? It's really hard to say. There's so many uncertainties, and sometimes analysts are terrible at predicting not only the success rate of drugs, but also like how will that drug sell in the market. If you think that you have a beat on something that's going to do better in the market that's expected, by all means, you can do great waiting until it's approved. Take that part of the risk out of the equation and just invest then and you can do really well. But in the case of this field in CRISPR, I think it's evolving so quickly and there's so many discoveries going on that if you want to be in it, I think it makes sense to maybe take a basket approach and be looking around the edges of it opportunistically now.
Flippen: What do you think would you say is the largest misunderstanding that investors may have about CRISPR technology? As someone who's followed this space, is there anything that you see or read about that just irks you that drives you insane because it's just so wrong?
Thiel: They did mechanisms that are related, and those aren't. You've now got a number of really interesting private companies coming up and I'll just mention a few. One is Arbor Biotechnologies which recently partnered with Vertex. Vertex is already partnered with CRISPR Therapeutics but they're partnering with Arbor as well. Arbor has a different Cas mechanism for editing that's a little more compact, might potentially have some advantages. There's not really any evidence right now but it's certainly interesting enough. You've got Excision, I think it's Excision BioTherapeutics, I might have last part of the name wrong. But they just got FDA approval to go ahead with a clinical trial in HIV and they are using a different mechanism now. They're going in and because HIV is a retrovirus that incorporates itself into the genome, they're going in and basically finding it and shredding it out with the idea that you could hopefully create a functional cure for somebody who is otherwise on lifelong antiviral treatment. There's companies that are using it now for diagnostics. Sherlock is one and Mammoth Biosciences is another one that's pursuing diagnostics both pretty well advanced with COVID tests. Again, the idea would be that you get PCR level accuracy but in 15 minutes or something like that and hopefully quite cheaply. There's just an enormous amount going on in the field and I will also point out that CRISPR is not the only gene-editing technology out there. It's the new kid on the block. There's a technology called TALEN that's been around for quite a long time. There are other gene editing techniques out there, and honestly, it's not entirely clear that CRISPR is better, or certainly it's not probably and likely to be better in every circumstance. There are definitely circumstances where you're going to be wanting to use one of these other ones. I think it's a great, all the attention that CRISPR has gotten because I think it's moved forward a lot of gene editing platforms, including ones that maybe weren't getting as much attention. I think there's just more investment in the area and that helps all this move forward.
Flippen: I can understand the attention because it just sounds like when you talk about all the things they could treat, you mentioned diabetes, sickle-cell, HIV, the possibilities almost seem completely endless here. It's understandable that people would think this is an attractive opportunity, there's lots of different places that I can invest. The opportunities are just going to continue to be endless, but we still haven't seen any real movement. Again, for CRISPR-based therapeutic treatments for these diseases, what's holding CRISPR back? Is it some process that we just need more time to go through the FDA approval process or is it an issue that maybe CRISPR just really isn't great for treating everything but only these specific diseases.
Thiel: It's not going to be great for treating everything or certainly not for a long time. The low-hanging fruit here is diseases that are controlled by a mutation in a single gene and that's actually not that many diseases but it is some very important ones. Something like sickle-cell or Beta thalassemia or potentially hemophilia or something like HIV where you can go in and find a very specific sequence and shred it. But it's not just CRISPR, this is just I think a frustrating process to maybe investors who don't spend a lot of time in the drug development space which is that stuff takes in the best of circumstances, you can spend 10 years pursuing something. When you're talking about a new way of approaching medicine, you look at like RNAi. RNAi has been fantastic for a company like Alnylam but had to go through the valley of despair there before it came out on the other end. It took many years to develop something like antisense finally coming into its own. I mean, that got plugged away up for 30 years. Gene therapy stuff started in the early 90s. It just takes a really long time and that could definitely lead to some disappointment for people. I think CRISPR has actually moved along remarkably quickly. There's already proof of concept data, so I actually [laughs] think they're doing great [laughs] but it can be frustrating.
Flippen: It shows how impatient I am as an investor. I will say my very limited experience that I've had investing in biotech companies I have learned to take for the management teams that are bold enough to provide some expectations in terms of timeline. I don't even read those timelines anymore because I presume it's going to take at least three times as long as management believes it's going to. Again, just based off my limited experience. [laughs]
Thiel: They're not always that bad, but yeah, certainly. With Editas in particular. I mean, it took them a really long time to get that first trial rolling. Honestly, I think that's why if you look at Editas versus the market caps of Intellia and CRISPR Therapeutics, say, it's quite a bit lower and that's not without reason. They've had some management turnover, they were slower than you hoped for. That's really them I think rather than the field in general, some other companies have been able to move along a little more quickly.
Flippen: Well, as a human and as an investor, I hope that CRISPR does continue to move along really quickly. It's an exciting place to even just research if you're not interested in investing in it. For listeners out there who recognize their own risk tolerances as too risky adverse or their time horizon is simply too short to take on the risk that CRISPR technology will have in decades of development, still continue to follow the space just as a curious person as a researcher because the work that's being done here really is life-changing for millions of people. I appreciate you coming on and giving us some background knowledge [laughs] that I lacked here, Karl regarding CRISPR technology.
Thiel: Well, you are certainly welcome. There are other ways to invest also than buying these companies directly. I mentioned Vertex Pharmaceuticals, Regeneron is another company that's partnered, that's a big diverse company that is partnered in the space. There are a slew of smaller, cheaper companies that are doing different kinds of editing, there's a lot of stuff you can do. It is exciting.
Flippen: Well, Karl, thank you so much for coming on.
Thiel: You're welcome, thanks.
Flippen: Hopefully, we'll have you on again soon at sometime in the future.
Thiel: I'm going to stick around so you'll have to have me. [laughs]
Flippen: We hope. Listeners, that does it for this episode of Industry Focus. If you have any questions or just want to reach out to say hey, shoot us an email at [email protected] or tweet at us at MFIndustryFocus. As always, people on the program may own companies discussed on the show and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don't buy or sell anything based solely on what you hear. Thanks to Tim Sparks for his work behind the screen today. For Karl Thiel, I'm Emily Flippen, thanks for listening and Fool on!
