Who Will Win the CRISPR Race?

A Deep Dive into Beam Therapeutics

Introduction

Which emerging technology will have the biggest impact on the modern world? Well, we believe that all of them will play a significant role, artificial intelligence will transform our day-to-day activities, robots will deliver our food and perform your next surgery, and new rocket technology will take us where we have never been before. There is one potential candidate that might have the biggest impact on the human race, as it entails manipulating life itself.  We imagine the ability to modify genes might become the most disruptive technology in healthcare within the next decade. This new frontier in genomics might be the most exciting revolution in the biotech sector ever. 

Biotech and our Unicorn Portfolio

The biotech sector is one of our favourites in the Unicorn Portfolio because our primary goal is to look for asymmetrical risk/reward opportunities.  In this portfolio we tolerate the higher risk for the chance of a 10 or even a 100 bagger, but we manage our risk by keeping speculative positions relatively small compared to our overall portfolio. 

Retail investors flocked to this enticing sector when words like CRISPR became more publicly known. This created a massive bubble at the end of 2020 and the beginning of 2021. The recent risk-off nature of the market has brought down the valuations of these companies significantly and there might even be a few good deals going around. Investors should keep in mind that this sector is inherently risky and that these companies can absolutely go to $0. Obviously, the potential reward is also massive, but we must warn investors to never get greedy and always do your due diligence. With that said we went deep into the world of gene editing to really understand the landscape, the technology and the players involved.

The Basics of Gene Editing

The human genome is a 3-billion letter transcript of codes that uses only a four-word alphabet. Unfortunately, any typos can have serious consequences. Even a single misspelled or misspelt word can lead to devastating diseases. Gene editing is actually quite a simple concept, it is simply the cutting and pasting of our genetic code. Using this we can fix our spelling errors just like we do in Word.  Well, in all honesty it becomes very complex when you go into the finer details as we will see later when we analyse the different technologies. CRISPR stands for Clustered Regularly Interspaced Short Palindromic Repeats. Today, CRISPR is used as a broad term that covers a variety of technologies. Essentially it refers to a set of tools used to edit genes or edit genomes. 

Directing our attention to the possible applications of this technology might open our eyes to its massive potential. Cancer drug screening, cancer treatment, rare disease treatment, genetic disease treatment, HIV treatment and many more. As with all these disruptive technologies, there is also a dark side to CRISPR. How far do we go, because this technology can be used for far more than just treatments? We can eliminate the genes that we do not like or choose the colour of a baby's eyes.  Should man have this much power? We are not the ones to judge or go into an ethical debate. Instead, we are excited about the technology and how it can stop people from suffering.

The Gene Editing Landscape

There are currently four big public companies focussing their efforts on gene editing. Before we look at these companies it might be essential to understand a few early-stage biotech terms.

In Vivo - (Latin for "within the living") describes treatments that are directly administered into the patient. 

Ex Vivo - (Latin: "out of the living") is when the cells are taken out of the body for treatment or modification and then returned to the body. This is also known as cell therapy. 

Pre-clinical - is mostly laboratory research or research performed on animals. 

IND Enabling - these studies must usually provide details on dosing and toxicity prior to the approval of human studies 

Clinical phase - there are usually three clinical phases where treatments are administered to patients. They vary in their goal and the number of patients treated. Phase I asks: Is the treatment safe? Phase II: Does it work? Phase III: Is it better than what is currently available?

Marketed - The product has been FDA approved and can now be sold for specific treatments.

CRISPR Therapeutics is probably the most well known because they have CRISPR right there in their name. They also have the most advanced pipeline with 5 product candidates for 3 therapies in clinical trials. They are targeting hemoglobinopathies (blood disorders), immuno-oncology and regenerative medicines with their CRISPR-Cas9 technology. While they do have an ex vivo and in vivo pipeline, they are mostly considered an ex vivo company since that division is much further along. They should be bringing their first CRISPR based product CTX001 to market in 2023, if FDA approval is successful this year. The target for this therapy is Beta Thalassemia and Sickle Cell disease.  They are also collaborating with biopharmaceutical company Vertex Pharmaceuticals. It is quite common to see these smaller biotech companies form partnerships with the large pharma companies.

Intellia Therapeutics lifted the whole gene editing field when it crossed a major milestone in 2021. They published the data from the first-ever human study, evaluating an in vivo CRISPR-based gene editing therapy candidate. The data was applauded by the scientific community and showed a mean reduction in serum TTR levels of 87%. TTR stands for Transthyretin and high levels might indicate Transthyretin amyloidosis which is a deadly disease and can be the cause of cardiomyopathy and heart failure. Another reason why this data was so important is that it substantially increases the likelihood that other genetic diseases can be cured with only one treatment. Earlier this year the good news continued when they answered one of the most important questions. Does it last? and again the data was very positive after 12 months, which indicated that the serum reduction levels were sustained. Intellia has a diverse pipeline of in vivo and ex vivo therapies using the CRISPR-Cas9 genome editing platform.   

Editas Medicine uses CRISPR-Cas9 and CRISPR-Cas12a to research and develop treatments for diseases with limited or no current treatments.  Editas developed an in vivo therapy EDIT-101, which targets Leber Congenital Amaurosis 10,  an eye disorder. Unfortunately, the results were not great and the stock plummeted. Editas lost their credibility and they are no longer seen as a leader in the field. There have also been problems in management with frequent changes in executives. Things might still turn around for Editas but it seems like an unnecessary risky investment in an already risky environment.

Beam Therapeutics is the new kid on the block and is sometimes referred to as CRISPR 2.0. Beam is pioneering Base Editing. This is still a very early stage company and although they have a broad and diverse portfolio, Beam currently has no therapies in clinical trials, we hope this will change soon. Their lead candidate BEAM-101 is also targeting Sickle Cell disease and received IND approval in 2021. Earlier this year Beam entered a collaboration with Pfizer to advance novel in vivo Base Editing programs for a range of rare diseases.  We will break down Beam using our Unicorn Scoring process later in the article.

There are multiple other smaller companies using CRISPR technology and two big private companies which should have eagerly awaited IPOs soon, they are Mammoth Biosciences and Prime Medicine. Mammoth uses CRISPR-Cas12, CRISPR-Cas13, and CRISPR-Cas14 while Prime Medicine uses an even newer technology called Prime Editing. Next, we will discuss the differences between all these technologies.

Gene Editing Technologies

We want to apologise at this point in the article because we are about to get very technical but we will try to keep it as short and simple as possible. There are images attached demonstrating the different technologies (readers are welcome to skip this section and look at the images).  There is no doubt that gene editing works as it has been proven by research studies and clinical data. There are however two main considerations:

• How to deliver the CRISPR components so they end up editing the specific cells you want?
•  How to ensure CRISPR is not having off-target effects?

CRISPR-Cas9 is where this whole revolution started. It was actually discovered from bacteria's immune systems. CRISPR-Cas9 gene editing can make permanent and precise changes in DNA sequences and thus edit the underlying genetic mutation.  The basic components of the CRISPR-Cas9 molecule are the Cas9 protein which acts like a pair of molecular scissors and the guide RNA. The guide RNA will scan across the DNA sequence until it finds its match. The Postospacer Adjacent Motif (PAM) scans the opposite strand of the DNA also looking for its match. Once both the guide RNA and the PAM have found their match, the Cas9 protein will cut both strands. This allows the programmed DNA to be inserted. The natural repair mechanism of the DNA cell will be activated to fix the double-stranded break. 

There are a few risks associated with this technology. The potential for off-target edits does exist because the guide is very small and it might find multiple matches along the 3-billion letter human genome. There is also a limited ability to only target certain genes due to the need for a specific PAM sequence near the target location. The biggest issue is that a double-stranded break is created and there might be errors when the cells repair themselves.

Attached image source: https://www.cambridge.org/core/journals/mrs-bulletin/news/crispr-implications-for-materials-science

CRISPR-Cas12 works on the same principles as Cas9 but there are a few improvements. First, the Cas proteins are smaller but the more important difference is the guide structure. The structural difference means that the entire gRNA is less than half the size of Cas9. Cas12 has a different PAM sequence, which allows it to target more genes. Cas12 also creates a double-stranded break but it is a staggered break, which helps scientists to design more complementary structures. The last difference is that CAS9 cuts very close to its PAM site so the site is disrupted and it can only cut once. The CAS12a cuts much further from its PAM site which allows it to stay bound and make multiple cuts. This enhances the efficiency of editing.

Attached image source: https://mammoth.bio/2019/06/10/the-cas-proteins-behind-crispr-diagnostics

CRISPR-Cas13 is an outlier in the world of CRISPR since it operates on RNA rather than DNA. It can be used for efficient, multiplexable RNA sequence editing. This gives Cas13 the potential to create therapies by influencing gene expressions without altering the genome sequence. This could potentially lead to fewer off-target effects.

Base Editing actually uses the same Cas9 enzyme but with one major difference. It has a  cytosine deaminase attached to it. This novel approach uses a chemical reaction to create precise, predictable and efficient genetic editing at the targeted site. Base Editing enables a single targeted base to be replaced while avoiding the double-stranded DNA breaks of the CRISPR-Cas9 approach. Beam Therapeutics often uses this analogy:

If existing gene-editing approaches are scissors for the genome, our base editors are pencils erasing and rewriting one letter in the gene

This amazing technology has some limitations due to the characteristics of single-strand cuts. Not all diseases are single-point mutations and therefore this approach will not work on all diseases. There is also the possibility of by-stander off-target edits, which will have to be thoroughly tested.

Attached image source: https://beamtx.com/our-science/

Prime Editing If CRISPR-Cas9 is  cut and paste then Prime Editing is search and replace.  Prime Editing is still in its infancy but it has the potential to find the precise target in the genome and replace the faulty segment with a copy of the correct DNA.

Attached image source: https://www.nature.com/articles/d41586-019-03164-5

We are most excited about Prime and Base editing, both were discovered by the same person, Dr David Liu. He is also a co-founder of both Beam Therapeutics and Prime Medicine. It might seem like these companies are competing, but Dr Liu sees it differently, this quote is from an article where people asked him questions regarding CRISPR:

As was announced, Prime editing for human therapeutics will be jointly developed by both Prime Medicine and Beam Therapeutics, each focusing on different types of edits and distinct disease targets, which will help avoid redundancy and allow us to cover more disease territory overall. The companies will also share knowledge in Prime editing as well as in accompanying technologies, such as delivery and manufacturing

The rest of the article can be read here:  https://www.statnews.com/2019/11/06/questions-david-liu-crispr-prime-editing-answers/

It is truly an excellent piece to read. It provides the answers, by probably one of the most knowledgeable people in the world on this topic, to some of the more difficult questions.

Beam's Data and Pipeline(6/10)

Beam's pipeline is attached as an image. Beam currently has one therapy ready for clinical trials and two therapies in the IND Enabling stage. The rest of the 8 therapies are still in the Research or Lead Optimization phase. We will focus on the therapies that are in the latter stages.

BEAM-101 and BEAM-102 both targets Sickle Cell Disease but they use two completely different mechanisms.

 BEAM-101 uses fetal haemoglobin activation, while BEAM-102 is going for a more direct approach targeting the sickle-causing mutation. BEAM-101 is quite an interesting approach using a rare condition of hereditary persistence of fetal haemoglobin. This mutation causes humans to have red blood cells with greater than normal amounts of haemoglobin F or fetal haemoglobin. The condition is actually harmless but it does have a very unique characteristic. When newborns inherit this gene from one parent and the sickle cell gene from the other parent, the high levels of haemoglobin actually fights the sickle cell disease and they don't have the normal symptoms associated with sickle cell disease. Beam artificially recreates this mutation in people with sickle cell disease using their Base Editing platform. Data from animal studies prove that not only is the base editing successful but it also showed robust fetal haemoglobin induction. Very importantly Beam managed to bypass the two potential off-target effects.

BEAM-102 uses their Base Editing platform to directly correct the sickle cell disease mutation. This is referred to by Beam as a point mutation or a single base edit. This novel approach to cure sickle cell disease showed tremendous potential in their preclinical studies. 

Most of the other preclinical data has been very promising but we have to deduct points for not having any therapies in clinical trials yet.

Management (8/10)

Beam Therapeutics was founded by Feng Zheng, David Liu, and Keith Joung. These are some big names in the field of genomics.  Dr Liu is the inventor of Base Editing and Prime Editing. Dr Zang and Dr Liu are also co-founders of several other gene-editing companies. Both have long lists of accolades and are clearly leaders in the field of genomics. John Evans is the CEO since 2017, he is evidently more of a businessman, bringing significant experience as a company builder, deal maker and drug developer in the healthcare industry. 

Financials (5/10)

Beam's revenue is negligible since it is a preclinical biotech. Therefore we have to look at their balance sheet and their cash burn. 

Beam has $2.2B in cash and only $150M in debt, this is clearly a healthy balance sheet. Beam's Free Cash Flow was actually positive for the trailing twelve months but we do expect significant losses as Beam expands its operations and enters clinical phases.

Partnerships also play a key role for these early-stage biotech companies. Pfizer has paid Beam $300M upfront and the deal could be worth over $1.3B if they are able to achieve all the milestones, plus royalties on net sales if any drugs are approved.

Conviction (8/10)

We chose to be part of Beam's journey from an early stage, given the scientific pedigree of their management, the evidence for their next-generation base editing platform and their exciting pipeline. The fact that Pfizer chose Beam to partner with, is also a huge boost of confidence. Pfizer is an established company, with a massive budget and they would have done their research before choosing a partner. Beam also partnered with Sana Biotechnology, another biotech company with massive potential, focussing on cell engineering. 

Upside Potential (10/10)

Giving a price target for this company does not really make sense. If they succeed their TAM is enormous and the share price can 10X or even 100X in a decade, if they dont it could be worth $0. This is the nature of early-stage biotech companies. We believe Beam has come down to a reasonable valuation and it is a good time to start dollar-cost averaging into this potentially life-changing company. 

Risk (10/10)

• The long wait 

Beam is making shareholders and more importantly, patients wait a very long time for potentially life-altering therapies.

• Behind the leaders

The long time to clinical trials adds further risk, due to the fact that Beam will be playing catch-up across much of their initial clinical trials. While the scientific rationale for Base Editing sounds promising, the landscape and competition might drastically change by the time Beam is ready for pivotal trials and eventually commercial launch.

• Possibility of dilution when more cash is needed

Beam will need a lot of cash to execute on their ambitious pipeline and their cash burn might increase as they enter later clinical stages. This opens the door to future share dilution if Beam seeks financing via further equity offerings.

• The Patent Battle

We are not even going to go into this issue, with patents being filed and issued left and right. No, one is really sure who owns what technology, not even Beam can give us a clear answer. They recently acknowledged: 

The extensive patent filings related to CRISPR and Cas make it difficult for us to assess the full extent of relevant patents and pending applications that may cover our base editing platform technology.

• Regulation, ethical debate, cost

Maybe we should stop here. As we mentioned before, this company runs a real risk of going to $0 and that is why, unfortunately, it gets a 10/10 for risk.

Conclusion

Although Beam did not quite reach our Great Business category on our Unicorn Scorecard, the potential of this company is simply enormous. Gene-editing technology has the potential to manipulate every single recipe found in nature. We can remove genetic defects and enable optimal traits in humans, plants and animals. Or perhaps all the current gene editing, base editing and prime editing technologies might prove to be entirely primitive when a new technology emerges. 

For the more risk-averse investors that still want some exposure to gene editing, we recommend a basket approach where you can add many of the public companies like Intellia, CRISPR Therapeutics, Editas Medicine, Caribou, Verve or look for an ETF with exposure to this technology. This will probably not end as a winner takes all race and there will be many successful companies if gene editing is approved as a treatment option for various illnesses. 

Disclosure

This article is not financial advice and is based on the opinion of the author. Always do your own due diligence when investing.