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Genome editing. After half a century of molecular biological research, scientists can now make precise and targeted interventions in the genetic material of plants, animals and humans. What does this mean for the biotech industry? And how do investors benefit?

"Biotechnology will revolutionize our world." Such headlines could be read by investors in the 1980s. Late 1990s. Around the year 2010. At regular intervals there have been hypes and exaggerated promises in biotechnology: Gene therapy, decoding the human genome, stem cell therapy. Soon, it was said in all cases, numerous diseases would become curable.

Today, similar hopes are associated with the cryptic abbreviation CRISPR/Cas. To defeat death, to make people to measure are the visions associated with the "genetic scissors". And investors smell the next big thing.

In most cases, things didn't go as fast as we had hoped. Nevertheless, over the decades, biotechnology has achieved breakthrough medical and economic results. Genetically modified bacteria have been producing drugs such as antibodies, insulin or other hormones as production organisms for four decades. Biotechnological processes have revolutionized the development of vaccines, vitamins, amino acids, dyes or dietary supplements. Genetically modified plants can defend themselves against pests without harming beneficial organisms - their cultivation has made the use of several million tons of insecticides superfluous.

Gene therapy is also making progress. First diseases such as severe combined immunodeficiency (SCID), sickle cell anaemia and probably also haemophilia can be cured by these methods. Finally, molecular biology has indeed enabled great progress to be made in the understanding, diagnosis and treatment of countless diseases.

Investors with a long-term perspective were able to benefit massively from this. Those who invested only 4000 dollars in Amgen shares in 1998 are now sitting on a million-dollar deposit account.

Other drug manufacturers such as Biogen Idec, Celgene, Medivation and Questcore also multiplied the capital of their investors. Similarly successful were companies involved in the "infrastructure" of biotechnology. The shares of Illumina, which manufactures genetic sequencing equipment, have climbed by more than 3900 percent in the last ten years.

The other side of the coin: The price fluctuations in this sector are enormous. Amgen's share price fell from a high of 84 euros in September 2001 to 26 euros in March 2008, before taking off.

Only three technologies were and are fundamental to the success of the model companies: The first enables biotechnologists to determine the sequence of the DNA building blocks of the genetic material and thus to read out the genetic information. The second allows DNA to be replicated (cloned), and the third allows genetic information from one organism to be transferred to the cells of another in such a way that it can be used there.

The first two methods are now widely used and economically largely exhausted. They can only be accelerated and/or miniaturized and lead to the "laboratory on the chip". The genetic information of pathogens, for example, can thus be read out directly at the bedside in order to find the most effective therapy.

The third, on the other hand, was hardly medically applicable until a few years ago. For a long time, new genetic material could only be integrated into the recipient organism by chance after transmission. This shotgun method was costly and risky. How could it be ensured that the gene was integrated at a point where it not only functioned reliably, but also did not cause undesired effects or even damage? Often auxiliary genes had to be transferred, which further complicated the technology.

A few years ago, two women, the French microbiologist Emmanuelle Charpentier and the American biochemist Jennifer Doudna, made a groundbreaking discovery. Bacteria use a specific mechanism to specifically cut the genetic material of viruses at precisely predetermined sites (and only there).

Charpentier and Doudna recognized in 2012 that the so-called CRISPR/Cas system is suitable for research and medicine as a universally applicable genetic scissors (detailed explanation, page 82). For the first time, it is possible to cut genetic material at a precisely defined point and make targeted changes at this interface. This can be the deactivation of a gene. One or more new genes can also be inserted at the interface. The method is similar to the search/replace function of a word processor and can now be applied to multiple genes simultaneously.

The third CRISPR pioneer is Feng Zhang, who succeeded in extending the method to include RNA produced in human, animal and plant cells in order to transport the genetic information from the cell nucleus memory so that it can be used by the cell machinery. This makes it possible to temporarily change the genetic programme of a cell.

Using this technology, researchers have already cured mice of hereditary muscle atrophy and ALS, made human cells immune to the AIDS-causing HI virus, immunized countless plants against pests and genetically modified monkeys and human embryos. In China, the first studies on cancer patients have already begun. No wonder that the three became superstars of science, were showered with prizes and are considered candidates for the Nobel Prize.

In November 2014, Hollywood star Cameron Diaz and Twitter boss Dick Costolo presented Charpentier and Doudna with the "Breakthrough Prize in Life Sciences", which comes with prize money of 2.4 million euros. For the journal "MIT Technology Review", CRISPR/Cas is already the most important biotech discovery of the century. Optimists estimate the sales potential of the technology at four to ten billion dollars in 2025.

These perspectives also ignite the imagination of investors. But the question is: Are they realistic? And which companies will actually benefit? Of course, all three researchers are involved with their patents in the market leaders in this field. Charpentier co-founded CRISPR Therapeutics, Doudna the companies Caribou Biosciences and Intellia Therapeutics. Together with Zhang, she is also involved in Editas Medicine.

Caribou was founded by Doudna in 2011 in Berkeley, USA. The company has raised more than USD 40 million in venture capital and sees itself as a technology developer. It focuses on veterinary medicine as well as industrial and agricultural applications and works with Novartis, among others.

Intellia Therapeutics was founded in Cambridge, USA, in 2014 as a spin-off for the treatment of genetic diseases in humans. While Caribou is still financed exclusively by venture capital and revenues, Intellia first raised $85 million from venture capitalists and then went public in May 2016. Together with Novartis, the company plans to use CRISPR technology to upgrade immune cells of cancer patients outside the body against tumors and then return them to the patients.

Editas, also founded in Cambridge, Massachusetts in 2013, received $163 million from venture capitalists before being listed on the Nasdaq for the first time in February 2016. In addition to Doudna, Zhang also holds an interest in this company. Editas collaborates with Adverum Biotechnologies, Allergan and Juno Therapeutics.

Finally, CRISPR Therapeutics was co-founded by Charpentier in Basel in April 2014 and raised $127 million in venture capital before being listed on the Swiss Stock Exchange in April 2017; major shareholders include Bayer, GlaxoSmithKline, Vertex and Celgene. The company develops therapies for genetic diseases.

Since the IPO, securities have generally brought their investors price gains. However, the fluctuations were enormous (box below left). How much fantasy is in these titles today, ein Blick shows on the market value. On the stock exchange today, the three flagships are valued together with vier Milliarden dollars - despite the fact that none of the three companies are generating revenues except for funds paid by pharmaceutical partners for licensing, research and achievement of contractual milestones ("milestone payments").

Mario Linimeier, one of the managing directors of the fund boutique Medical Strategy, who has been observing the sector for a long time, nevertheless considers the shares to be of long-term interest: "Genome editing technology has disruptive potential. Der technology is facing a very big future." The interest of major pharmaceutical manufacturers will also have a positive effect on the share price development time and again.

The fundamental problem remains that none of the companies has carried out a clinical study to date. Scientists agree that CRISPR/Cas is a fantastic tool for research: very fast, modular, and inexpensive. The necessary "ingredients" for a CRISPR/Cas experiment can be obtained for less than 100 dollars. They do not agree on the question of whether the technology is actually suitable for therapeutic purposes. Many experts are still concerned about the accuracy of the method. In addition, for some it does not seem scalable enough for industrial applications because the number of successfully modified cells per experiment is too small.

A second essential point is the unresolved patent issue. Such disputes are widespread in the biotechnology industry and rarely lead to clear winners. The dispute over so-called DNA chips is famous. Thanks to an unusually broad patent, the US company Affymetrix repeatedly succeeded in blocking competitors and thus ultimately progress.

The long-standing patent dispute over two other important biotechnological inventions - humanized antibodies and RNA interference - ended with a settlement. It is therefore impossible to predict who of the "big four" will be able to use which parts of the technology for what commercial purposes.

The star cult around the inventors of the CRISPR/Cas method has led to companies that use other, more complex methods of genome editing being less in the center of attention. They work with methods that are not controversial under patent law, such as zinc finger nuclease or TALEN. TALEN, the "transcription activator-like effector nuclease", is an enzyme that also recognizes and cuts up specific sequences in the DNA. Zinc finger nucleases are artificially produced enzymes that can dock at certain sites in the genome and cut the DNA there. Its name is derived from a finger-like structure in which a zinc atom is embedded. They can be built to recognize a specific DNA sequence. They can also be used to cut up a complex genome at a specific point and insert new genetic material in a targeted manner. However, their production is more complex and more expensive than using the CRISPR/Cas system. The most serious disadvantage is that the production of enzymes is complex and therefore time-consuming and costly.

Nevertheless, Sangamo Therapeutics, which focuses on zinc finger nucleases, has been the clear favourite of many investors over the past 18 months. The share price has more than quadrupled since then. "The catalyst was a partnership with Pfizer to jointly develop treatments for hereditary hemophilia and ALS, a partnership with Gilead Sciences to develop approaches for cancer therapy, and initial positive data from a clinical trial in patients with Hunter's syndrome," explains Linimeier.

It is also true for TALEN that the production of the enzyme is complex and expensive. However, many researchers consider it to be better suited for therapeutic use because of its precision. At present, however, there is no company that uses TALEN as the sole tool for therapies. Cellectis, which is listed on the Nasdaq, uses the method because the number of successfully modified cells is far higher than with any other technology. For example, the company uses a cell line modified by TALEN to combat a specific form of leukaemia. Initial clinical studies conducted jointly with Pfizer and Servier showed the safety of the application.

Bluebird Bio, also listed on the stock exchange, uses a modification of the TALEN technology as a method for the treatment of hereditary diseases and cancer; however, there is no clinical study with TALEN yet.

Despite its obvious advantages, CRISPR/Cas has largely replaced TALEN. The company Addgene, which sells kits - complete packages containing the ingredients for both technologies to researchers - reports that it sold a record number of 2800 TALEN kits in 2013, but that demand has steadily declined since then. The same applies to zinc finger kits. By comparison, Addgene sold more than 20000 CRISPR kits in 2015.

Which method will ultimately prevail is therefore still open. But one thing is already clear today: the technology of genome editing will revolutionize our world.

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Concept check - what exactly is CRISPR/Cas?

Bacteria are regularly infected by viruses. They defend themselves by cutting up certain sections of the viruses' genetic material and thus rendering them ineffective. If bacteria have successfully survived a viral infection, the gene segments of the virus are stored in a kind of container directly in the genetic material of the bacteria.

This supply cabinet consists of groups (clusters) of short DNA sections that can be read both forwards and backwards (so-called palindromes) and are repeated several times ("repeats"). The pieces of the viral genome are arranged in regular spaces (they are regularly interspaced). The cryptic abbreviation CRISPR thus stands for clustered regularly interspaced short palindromic repeats.

This part of the mechanism serves, so to speak, as the immune memory of the bacterium. The CRISPR region with the fingerprints of the viruses can be read if necessary and rewritten into RNA - a kind of working copy of the genetic information. This RNA forms a very characteristic loop structure on which the profile of the virus is ultimately attached.

This is where the exciting element for research and medicine comes into play. The so-called Cas enzyme, another element of the bacterial immune system, recognises this loop structure and docks to it. The free end piece of the RNA - the profile of the virus - together with the attached Cas, is attached to virus genes that have penetrated the bacteria during a new infection.

The RNA end piece with the virus information on the Cas enzyme thus serves as a sniffer dog, so to speak, that guides the enzyme to exactly the right place. There, the Cas enzyme cuts up the site that is pre-drawn by the RNA. The usual designation of CRISPR/Cas as "gene scissors" is therefore very appropriate.

Researchers and physicians can use the Cas enzyme to make targeted changes in the genetic material of plants, animals and humans. By attaching a corresponding RNA to a CRISPR loop, the Cas protein can be directed to any desired site in the genome to cut the DNA.

In nature, random DNA fragments are inserted at the cut site. The region in question, which originates from a virus, is then no longer functional. With CRISPR/Cas, individual genes can be specifically switched off in the same way. The change is then indistinguishable from a naturally occurring mutation. But it is also possible to add something new with CRIPR/Cas: If DNA snippets whose ends fit the interface are added during the treatment, they fit very precisely into the precisely identifiable position. In this way, gene segments can be specifically exchanged or inserted at defined positions in the genome.

The CRISPR/Cas method is only one of the possibilities of so-called genome editing, which also includes methods such as TALEN, zinc finger nuclease and others. Their common characteristic: unlike classical genetic engineering, the place where the change occurs can be precisely controlled. CRISPR/Cas is the most elegant, inexpensive and simple of all these methods. It is therefore also used by universities and research institutions in countries where large research budgets are not available.

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Author: Dr. Ludger Weß

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