ARKG - What is Genetics Investing?

Broadly, genetics is the study of genes, their variations and hereditary characteristics. As Live Science describes it, genetics involves looking at how traits are passed on through generations. So what is genetics investing?

When it comes to genetics investing, companies in this niche life science sector are mostly focused on four areas: DNA sequencing, genetic testing, gene therapy and genomics, which includes genome editing.

Additionally, there are several major branches that make up the genetics tree: classical genetics, molecular genetics and evolutionary genetics. There are various other subcategories within those branches, all of which are components of genetics companies that market participants can invest in.

Here the Investing News Network provides a breakdown of each of these areas, the ways to invest and what could disrupt this ever-evolving market.

Genetics investing: Key areas

Before diving into investment opportunities in the genetics market, it’s important to understand the industry and what the four key areas mentioned above actually are. They are defined as follows:

• DNA sequencing: According to the National Human Genome Research Institute, DNA sequencing involves figuring out the order of the four “bases” that make up the DNA molecule. These chemical building blocks are adenine, guanine, cytosine and thymine, and determining their sequence allows scientists to understand what type of genetic information a section of DNA holds.
• Genetic testing: The US National Library of Medicine defines genetic testing as testing that pinpoints changes in chromosomes, genes and proteins in order to diagnose a genetic disorder. There are thousands of genetic tests, such as molecular genetic tests, chromosomal genetic tests and biochemical genetic tests.
• Gene therapy: Gene therapy is an approach that uses a person’s genes to treat or even prevent diseases. There are several different kinds of gene therapy, such as replacing a mutated, disease-causing gene with a healthy version of the gene, getting rid of a mutated gene that isn’t working properly and even introducing a new gene into the body to fight off diseases.
• Genomics: Genomics is the overarching study of all of a person’s genes. It includes how those genes interact both with one another and with a person’s environment. Genome editing purposefully alters the DNA sequencing of a living cell.

Genetics investing: Market size

The DNA sequencing market is a rapidly growing industry. According to a Variant Market Research report, the industry is projected to reach US$26.1 billion by 2025, up from US$6.6 billion in 2017. It is seen growing at a compound annual growth rate (CAGR) of 18.7 percent during the period.

According to the report, inherited rare disorders, prenatal and neonatal disorders and an increase in cancer have contributed to this segment’s growth. DNA sequencing has become a vital component of this growth as it has played a key role in remodeling molecular biology and genomics research.

“The knowledge of DNA sequences of genes and other parts of the genome of organisms has become essential for life science research and also in applied fields, such as forensics, cancer diagnostics, and others,” another report from Reportlinker states.

Genetic testing is another segment of the genetics industry that is growing at a fast pace. Unsurprisingly, technology has had a huge impact on genetic testing, and so has the fact that governments and regulatory bodies are turning their attention to this market in order to regulate and raise awareness.

A Global Market Insights report estimates that the genetic testing market will reach US$22 billion by 2024, fueled by an increase in genetic diseases such as cancer, cystic fibrosis and Alzheimer’s disease.

In terms of gene therapy, an increase of novel molecules in the market is projected to fuel the market until 2022, at least according to a Technavio report. In the pharmaceuticals sector, gene therapy is one of the more advanced treatment options, and gene therapy pipeline candidates are robust in late-stage clinical trials.

According to the report, chronic and rare conditions including cancer, cardiovascular diseases and central nervous system disorders will drive demand for gene therapy applications. By 2026, Grandview Research estimates that the market will be worth US$5.55 billion, growing at a CAGR of 33.9 percent during the forecast period of 2018 to 2026.

Finally, the global genomics market is seen reaching US$27.6 billion by 2025, posting a CAGR of 9.1 percent over the next six years. As noted by Research and Markets, genomic studies in the clinic have steadily risen, as shown by the rise of targeted therapies. Biotech and pharmaceutical companies are expressing interest in this sector, which is expected to further fuel genomics’ growth in the coming years.

Genetics investing: How to invest

For those looking to dive into the massive, overarching genetics sector, there are a wide range of investment opportunities to consider. Investing in a stock is always an easy choice, but doing so is high risk, high reward due to the volatility of the market, especially when it comes to wins or losses with the US Food and Drug Administration (FDA).

Exchange-traded funds (ETFs) are another popular option for gaining exposure to the industry, and come with less risk than investing in a single stock. Here’s a look at stocks and ETFs to consider.

Genetics investing: Stocks

For those looking for behemoth genetics companies, there are seven large-cap companies for consideration. The list includes Seattle Genetics (NYSE:SGEN), Bluebird Bio (NASDAQ:BLUE) and Genomic Health (NASDAQ:GHDX).

When it comes to genetic testing, there are several key stock options, including Exact Sciences (NASDAQ:EXAS), Myriad Genetics (NASDAQ:MYGN) and Invitae (NYSE:NVTA).

Gene therapy stocks are also a popular investment choice when it comes to genetics investing. These include companies like Spark Therapeutics (NASDAQ:ONCE), Audentes Therapeutics (NASDAQ:BOLD) and Orchard Therapeutics (NASDAQ:ORTX).

Some options for genomic stocks have already been mentioned, but Sarepta Therapeutics (NASDAQ:SRPT) and Veracyte (NASDAQ:VCYT) are also options to consider.

Genetics investing: ETFs

For those that would rather invest in the industry overall rather than an individual stock, ETFs are the way to go. Genetics ETFs include:

• Ark Genomic Revolution ETF (ARCA:ARKG): This ETF tracks companies that develop CRISPR technology, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells and agricultural biology.
• Global X Genomics & Biotechnology ETF (NASDAQ:GNOM): This ETF invests in stocks that are involved in genomic science, which includes gene editing, genomic sequencing, genetic medicine and therapy, computational genomics and biotechnology.
• iShares Genomics Immunology and Healthcare ETF (ARCA:IDNA): The focus of this ETF is companies involved with genomics, immunology and bioengineering.

Genetics investing: What’s next

Looking ahead in the genetics industry, the FDA announced late in 2018 that it is taking measures to advance “reliable and beneficial” genetic tests that will improve the lives of patients. Its plan will allow test developers to use the Clinical Genome Resource consortium’s ClinGen Expert Curated Human Genetic Data to support clinical validity in premarket submissions.

The regulatory agency has never before acknowledged a database that includes information about genes and genetic variants and how they relate to diseases. The move will allow test developers to use information in the database instead of having to generate the information individually.

“Technological and clinical advances in genetic tests mean that patients and providers have a better understanding of the causes of disease and potential treatment options,” the agency said.

“The availability of genetic tests is opening up new opportunities to segment illnesses into more treatable subsets and enabling the development of targeted therapeutics aimed at these previously unknown categories of disease.”

In terms of what will — and already has — disrupted the genetics industry, CRISPR technology has been on the rise for quite some time. CRISPR technology is the result of short repeating DNA sequences with “spacers” dividing them.

As it currently stands, there are a range of clinical trials underway involving CRISPR technology. According to Doudna Labs, “CRISPR-CAS9 gene-editing strategies have revolutionized our ability to engineer the human genome for robust functional interrogation of complex biological processes.”

CRISPR technology may be in its early stages, but in the coming years its impact will be second to none. Kalorama Information projects that this segment will increase 33.7 percent between 2017 and 2023, growing from US$779 million to US$5.2 billion during that time.

As can be seen, the genetics industry is vast and complex, but it is also undoubtedly promising and ripe with investment opportunities now and, assuredly, for years to come.

This is an updated version of an article originally published by the Investing News Network in 2015.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.