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7investing CEO Simon Erickson speaks with biotech expert (and former 7investing advisor) Manisha Samy about three of the industry's most intriguing opportunities.
July 26, 2023 – By Simon Erickson
For risk-tolerant investors who love a good thrill, there are few industries more exciting than biotechnology.
He Jiankui shocked the world in 2018 by announcing he’d genetically modified twins born in China. Two years later, Jennifer Doudna and Emmanuelle Charpentier shared the Nobel prize for developing CRISPR, and a globally-coordinated effort was embracing Moderna’s innovative new mRNA approach to develop a COVID vaccine and make it universally available. Gene editing found its way into the clinic, enabling a new wave of checkpoint inhibitors to help the body proactively find and detect cancer. A more comprehensive understanding of the human genome — made possible by the cost of sequencing falling bellow $500 — has unlocked a new field of diagnostics to proactively screen patients. NVIDIA’s recent investment in Recursion Pharmaceuticals is the latest move to formally introduce artificial intelligence into health care.
Yet there are also several challenges that face this industry’s extreme pace of innovation. Patent infringements are common, as the courtroom is continually used to determine who owns the most cutting-edge intellectual property. Payments are still largely in the hands of insurers, who are still figuring out how to reimburse for proactive treatments. Patient privacy and regulations are polarizing topics that have kept several tech companies at bay. And several of the industry’s most important players are undergoing leadership changes, which could result in downstream consequences that impact both their customers and the system at-large.
How should investors approach this roller-coaster that we call the biotech industry? Are there exciting new trends and scientific breakthroughs that demand our attention? Are there larger, ‘safer’ companies who capitalize on those trends by providing the picks and shovels to enable them? Are there smaller, ‘off the radar’ companies who are very risky but also offer enormous potential upside?
To help us answer those questions, we’ve brought in an expert. Manisha Samy has spent her career in health care and seen it from several different angles. From being a scientist at the lab bench, to doing cutting-edge research at Stanford and Sloan Kettering, to making investment recommendations at ARK Invest or 7investing, she has an informed opinion about the most innovative things taking place in biotechnology.
7investing CEO Simon Erickson begins by asking Manisha what she’s most excited about in health care today. Manisha explains that AI is aggressively finding its way into new opportunities and that NVIDIA‘s (Nasdaq: NVDA) recent $50 million investment in Recursion (Nasdaq: RXRX) could be a good sign that AI is becoming more prevalent in drug development. Genomic sequencing leader Illumina (Nasdaq: ILMN) has unlocked quite a bit of information about the human genome. This will help not only for designing new drugs, but could also unlock new breakthroughs in computing as well. As examples, Microsoft (Nasdaq: MSFT) and Hewlett Packard are both working on bio computers and on using DNA for memory storage.
The two then dive deeper into Illumina, whose next-generation, short-read sequencing approach has reduced the cost of sequencing the human genome from $3 billion to less than $500 over the past two decades. Yet Illumina’s spin-off and then attempted re-acquisition of its GRAIL subsidiary is facing scrutiny from customers, investors, and regulators. The FTC is demanding Illumina divest GRAIL due to antitrust concerns, the EU is slapping Illumina with fines for violating its process, and activist Carl Icahn has gotten a seat on the Board while Francis DeSouza has resigned as CEO. Is Illumina still a good company to invest in?
Simon and Manisha then turn to Invitae (NYSE: NVTA), who is an adopter of Illumina’s sequencing technology to provide diagnostics to screen for genomic variants or even cancers. After years of aggressively making acquisitions to support its top-line growth, Invitae is now undergoing a turnaround to fix several of the financial issues it’s gotten itself into. Manisha discusses her thoughts on the company and it’s bigger-picture vision and strategy.
In the final segment, Manisha introduces three small-cap biotechnologies companies that she believes should be on the radar of interested investors: Nanostring Technologies (Nasdaq: NSTG), Ginkgo Bioworks (NYSE: DNA) and Caribou Biosciences (Nasdaq: CRBU).
Publicly-traded companies mentioned in this podcast include Amazon, Caribou Biosciences, Ginkgo Bioworks, Hewlett Packard, Illumina, Invitae, Microsoft, Nanostring Technologies, NVIDIA, and Recursion Pharmaceuticals. 7investing’s advisors and/or its guests may have positions in the companies that are mentioned.
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Simon Erickson 00:02
Hello, everyone and welcome to this edition of our 7investing podcast where it’s our mission to empower you to invest in your future. You can learn more about our long term investing approach and actually see all of the stock recommendations on our scorecard for just $1 at 7investing.com/subscribe.
Simon Erickson 00:18
I think it’s a great time to be talking about biotechnology. There’s so much innovation going on in healthcare right now and who better to talk to about innovation in biotech than Manisha Samy. Manisha Samy is a senior researcher at Stanford. She’s also a former analyst at ARK Invest and also a former lead advisor at 7investing. I think I speak for everyone, when I say welcome to the 7investing podcast, Manisha!
Manisha Samy 00:43
Thank you, Simon, it’s a pleasure being here and being able to talk biotechnology with you again. So thank you for having me.
Simon Erickson 00:50
You’ve always been ahead of the curve. And we’re going to be talking about a couple of the hidden gems that maybe investors should put on their radar in the biotech field.
Simon Erickson 00:58
Before we get into that though, we’re going to talk a little bit higher level of some of the big things going on in healthcare. Not even just in biotechnology, but in healthcare, and maybe a couple of companies that it might be impacting.
Simon Erickson 01:09
And so maybe my first question, Manisha, you’ve seen the healthcare industry from a bunch of different angles, whether that’s from a hospital perspective, from the lab bench, from a research perspective, as an investor. You know, a bunch of different ways of looking at this. My first question, I think, is just what are a couple of things that you’re really excited about that’s going on in healthcare right now? Feel free to take the question in any direction that you’d like.
Manisha Samy 01:30
Sure. Well, first of all, I love the fact that we can actually talk about cures for rare diseases and cancer. So that’s the start of it. But more and more, we’re seeing technology being imbued everywhere. So machine learning and AI. And it sounds like buzzwords, but we’re actually taking the next step. Now, for example, there’s a company called Pathos. I am pretty sure it’s still private, but they’re using machine learning to basically cut cut through the noise, and go straight to kind of what are the compounds are affecting certain diseases. Trying to reduce the time it takes to develop drugs, with a higher probability of having it approved. So we’re seeing a lot of that a lot of data that we have accumulated over the years, we’re finally making use of it. I still think it’s still very early days. But now we have kind of the tools, but it’s a matter of figuring out figuring out which tool to put together. We’ve had sequencing starting in 2012, and seeing in recent years, how CRISPR has impacted the therapeutics landscape. And now we have companies dedicated to building are automating DNA synthesis. So being able to help CRISPR. So now taking all those tools and putting it together to see what we can come up with. And it’s not just healthcare that’s impacting. It’s impacting other industries, whether it’s directly tech, the tech world, or ecological areas, or bio intelligence. So it’s really impacting everywhere, even agriculture. So that’s very cool to see.
Simon Erickson 03:10
You know, it has been interesting seeing technology get into healthcare. You know, we just spoke in preparation for this podcast two days ago. And right after we got off the phone, we just saw that NVIDIA had made an investment in a company that you were following [Recursion, ticker RXRX]. And the shares were up 80% today. Can you talk a little bit about kind of how you’re seeing machine learning AI enter the healthcare industry now?
Manisha Samy 03:30
Machine learning and AI is basically the lynchpin for most of these companies. I think with that it would be almost impossible to see the advancements that we have in healthcare. So it’s Nvidia, Amazon, all of these companies have been involved. Microsoft, Hewlett Packard as well. They’re working on bio computers. So DNA computing. It’s not just technology seeping into healthcare. It’s healthcare seeping into these traditional tech companies as well. And they’re working in tandem.
Simon Erickson 04:04
It’s pretty neat. We’ll jump into a couple of those companies here in a minute. But I do want to frame this by talking about genomic sequencing. This is something that you and I have chatted about for years. And Illumina has kind of been always the 800 pound gorilla in this room, right? They were the ones that really made sequencing more affordable and that just unlocked so many more applications here within healthcare.
Simon Erickson 04:22
But Illumina has, interestingly, kind of run into some hurdles here in the last couple of years. And certainly the last couple of months, we saw that the FTC just demanded that they would divested their Grail acquisition and then slap them – adding insult to injury – with a $476 million US dollar fine for pursuing Grail without getting the proper EU antitrust approvals.
Simon Erickson 04:48
I know that we have a long history with Illumina, I know that it’s been a company that’s on your radar Manisha. But first and foremost, what do you think about their pursuing Grail in the first place? Is that even a good move for them strategically?
Manisha Samy 04:59
Strategically, I think their biggest mistake was divesting it in the first place. And I think that’s what a lot of investors are upset about is, from kind of the larger point or a larger viewpoint, why divest a company only to buy it back a few years later at such a large premium? You know, at that point, you’re thinking, Do you actually know what you’re doing? And that really impacts kind of investor trust. And it makes you question, you know, is the right person at the helm of Illumina. And of course, during that period, there was a transition in leadership. But I think that has been the biggest issue.
Manisha Samy 05:45
With Grail. I think it does make sense that they wanted Grail. Given that, well what we did joke was, you know, the Holy Grail is Grail, because it’s early cancer detection. And Galleri. So that’s one of their main products. If you look at their specifications, what they’re able to do, they’re able to catch cancer pretty early, multiple different types of cancers. So I can see why Illumina definitely wants Grail. And they want to stay competitive. But at the same point, they have an installed base. So it’s not necessarily like they need Grail to be successful. You know, they don’t want to be a dinosaur.
Manisha Samy 06:30
Illumina has always prided themselves of being the most innovative and tech board, so I can see why they do want to have Grail. Now, the fine. They did say that they will appeal it. I think they’re gonna fight tooth and nail to make sure that the Grail acquisition remains. I think they already did close it, correct me if I’m wrong. But whether they divest it, I think they’ll be fighting quite a bit to make sure that they don’t have to divest it. But it’s going to take a toll on them.
Simon Erickson 07:01
It’s going to be interesting, too. And I’m glad you brought up the leadership because it has been a transition. Kind of what is Illumina’s role in this in this bigger picture of healthcare, right? You’ve got Jay Flatley, CEO for so many years, kind of pushed down the cost of sequencing. So to make them inexpensive enough to make them available to not just be used by the largest academic or government funded projects. It’s now something that you can actually start doing things in diagnostics. And it seemed like that was with Francis Desouza coming in as CEO, kind of the goal was to, perhaps be more of a diagnostic provider. It raised a lot of eyebrows, though, of whether Illumina was competing against its very customer base. It was wanting to use those machines for their own purposes.
Simon Erickson 07:40
But anyway, there is a CEO transition going on right now. Francis has stepped down as CEO, largely because we have an activist investor on board. Carl Icahn has now got a seat on the board. He’s pushed to get Francis Desouza replaced, the CEO succeeded in that. Desouza is resigning. There’s an interim CEO, Charles Dadworth at the time.
Simon Erickson 07:58
Manisha, what do you think about this from an investing perspective? Is it good that we’ve got kind of an empty chair at the helm of Illumina right now, is this a much needed change? Or what do you think about this change in leadership that they’re going through?
Manisha Samy 08:11
I think, well, investor trust has definitely shifted downwards. But in terms of whether this is a good move, I think, perhaps is given, though it is hard to say I think it was under Flatley’s leadership that we divested Grail and under Desouza’s, we’re trying to buy back Grail. So it could be, you know, maybe Francis Desouza was on the right path of this is what Illumina needs. But at the same time, do we really want to be competing with our customers and our clients? So whether right now, we have an empty seat. But it does, especially during all of these appeals? It’s good that we have, well, the former general counsel as the interim CEO. But then that really leaves Illumina a little bit imbalanced, in my opinion. You really need kind of a steady, strong hand. From an investor point of view, I think, especially when you’re going up against the FTC, that’s a very bold move. To basically not get regulatory approval before closing a deal. So we’ll see. It’s hard for me to even fathom who the next proper CEO would be. I don’t know if you have any thoughts on that?
Simon Erickson 09:34
Elon Musk, of course [laughs]. Of course, it’s gonna be fun. He’s collecting companies everywhere. And then my final question on this one, I mean, it seems like we’ve seen in big tech has followed the same problems with regulators, right? It seems like Amazon and Facebook and everyone’s kind of in the hot seat or the crosshairs of regulators are trying to break them up. Illumina has faced the same challenges. It’s tried to make acquisitions in the past that had the nix put on them. And now just as here’s another one too that the regulators are involved with. A lot of this is the fundamental technology of sequencing. I know that Illumina is short read sequencing. You’ve got other companies out there like PacBio, trying to do longer reads sequencing. You got nanopore sequencing. Do you think that there is a winner in terms of the technology that gains the mass market of sequencing? Are we still going to kind of see these different approaches that are each going to have their own application?
Manisha Samy 10:27
So I don’t think that short read sequencing is the best technology. But hey, short read sequencing has been able to drive down the cost of sequencing. So until long read sequencing and nanopore sequencing can come on par with short read sequencing in terms of costs, Illumina is here to stay. Because they are the best for short reads sequencing. They’ve brought down the cost, they continue to do that. And they have the installed base. A lot of these academia are academia labs, and even in industrial labs and whatnot, they have a certain protocol that they’re using when they’re doing research. It takes five to 10 years or even 11 years, there are cycles. They can’t in the middle of a project, just switch over to a new protocol. And using a new type of sequencing whether from short to long read that creates too much variable. So Illumina is here to stay, they have the installed base. So at least for the next few years.
Manisha Samy 11:30
And so I would say long read sequencing and also nanopore sequencing, they have some time to really bring down that cost. So PacBio is long read. And they’re very good at what they do. It is just the cost is not quite there. I do know that Invitae did strike a partnership, a small partnership with PacBio to use their long-read sequencing for I believe it was for exome sequencing, specifically, and the only deterrent was the costs. So if the cost goes down, I can easily see longer and sequencing kind of, say 20 years from maybe not 20 years, less than 20 years at the pace of that we’re moving in actually taking over. But again, it’s making sure that they do it right before the next kind of cycle change. When labs are looking at their budget, and they’re deciding, Hmm, what’s out there, that is the best of the best keeps costs down. So then, but I think for now, Illumina is safe, and they’re just kind of a steady gorilla. They don’t have to worry about anything. And I think that’s part of the reason they really want Grail. They need to stay relevant.
Simon Erickson 12:49
As my next topic, you just mentioned the company that I wanted to talk about in the second part of the program here. Which is a company that was enabled by that stable gorilla of Illumina. And it is Invitae.
Simon Erickson 13:00
Invitae was one of the companies that really jumped on the lowering cost of sequencing, they started applying short read sequencing want to do as a diagnostic. There were certainly applications to try to make health care more proactive. And so kind of the initial applications on invasive prenatal testing, right, for babies to see if there were conditions that could be treatable. But then also kind of a bigger picture of patients to understand their own genome, and maybe get ahead of the curve proactively treat things that might not even be showing symptoms just yet. To better understand your DNA so you could take action. It was a really, really, really neat company Manisha, I know that you and I both were have been really big fans, investors even, in Invitae.
Simon Erickson 13:37
But Invitae has been going through a real struggle these last couple of years. Maybe can you frame the conversation of some of the challenges that Invitae has run into? And why the stock has, quite frankly, suffered quite a bit in these last couple of years?
Manisha Samy 13:50
Yeah. Now we have a new CEO for Invitae. But before we had Sean George and he had been at the helm of Invitae for years. And he is quite the visionary. So he had this kind of imagination and this worldview of, you know, a patient should have all the information in their hand with a push of a button. They have holistic care. And as you said, thus far healthcare has been reactive. Let’s make it proactive. Here’s your genome, here’s the likelihood of you getting certain diseases. Let’s do this. For a woman that wants to get pregnant. Let’s get your gynecologist and your primary care and everyone kind of that was his ultimate goal envision being able to press a button and you know, here are all the doctors, here’s all the information. They have everything under one stack. And even though it’s a technically a molecular diagnostics company, it’s more of a tech company. They’ve made a number of acquisitions. I think they take the award for the number of acquisitions. In terms of companies, and, you know, there were. So internally, they had genetic counselors, which is very new. The only company that I am aware of that actually has genetic counselors in house, which is very valuable because a lot of people don’t understand how to read, they can get their genome sequenced. But doctors don’t know what it means. They’re just like, they’re just like us. They look at the report, and they’re like, Ah, okay, I don’t know what to do with this. So having genetic counselors, it makes the information valuable.
Manisha Samy 15:32
Now, with all of their acquisitions, it’s a matter in my opinion, have was at the right time. I think, after having so many acquisitions, it’s been okay, how do we integrate them all in at the same time, a lot of moving parts, maybe too many parts, even though the vision was there. Investors are worried about cash burn.
Manisha Samy 15:53
And what’s really interesting right now, Simon, I don’t know if you’ve noticed is, even the latest earnings, their gross margins continue to improve. So are you seeing that, but unfortunately, with all the cash burned, and all the acquisitions, there are, I believe they’ve actually stepped away from a lot of their businesses and their acquisitions. And they’ve mo now they’re focusing on cost cutting right now, I think they have enough. So in terms of cash burn, to have enough to run through the end of 2024. And Shaun George did stepped down. I believe you had mentioned that Ken Knight is the new CEO. I do think that he does make sense to be the next CEO, I with the new phase with a new phase of a company, you need new DNA. I noticed that Ken Knight, in his background, I used to work at Caterpillar and then and Amazon in global delivery. So not traditional science, not necessarily not necessarily the person who’s going to be, you know, the visionary of this is where healthcare is going to go. But he has kind of the right background and experience of okay, how do we deliver kind of the logistics of things, especially since in retail is global. It’s not just us based. So putting everything together, making it streamline, because that is something that Invitae prides itself in, it’s making everything streamlined, making it cost effective. And at one point, they call themselves, the Amazon of medical genomics. So who better to have as a CEO than someone who was in charge of well, distribution and global delivery at Amazon. So I guess that’s my two cents on that.
Simon Erickson 17:53
That is a very valuable two cents, many che a great, great perspective on that, you know, as we look back on Invitae, it’s amazing to see what they were trying to accomplish. From the very beginning of the company right spun out of Genomic Health, you’ve got Randy Scott brings Sean George onboard, they wanted to not only make the diagnostic testing more affordable, but then also have a way to proactively help patients as the second phase. And in the third phase, kind of create this infrastructure like you just mentioned, that can be shared between companies developing the drugs and the patients and the doctors and kind of this, this giant dream, this vision of what healthcare should be and they attack it head on, and it was very noble. I think that perhaps it was also too noble, knowing that healthcare is hard. And running a company of any size is hard, especially a publicly traded company. And certainly the acquisitions kind of came back to be very, very difficult to to manage along with Wall Street’s expectations and that has certainly cost to the the bottom line. You know, as you see kind of the dilution of shares and some of the other things that were related to them.
Simon Erickson 18:56
Manisha, I believe I’m correct in saying that you and I are both still Invitae shareholders. We have suffered greatly over these last couple of years. But from this point going forward, the market is always a forward looking machine. You’ve got Ken Knight as CEO, like you said, an operational really smart guy had some great background, and a track record of success with large companies before Are you holding on to shares of Invitae? Do you think they’re doing the right thing? All things considered going forward by cutting the headcount and kind of being a leaner and meaner organization now?
Manisha Samy 19:27
I do think they’re doing the right thing. And I’ll start off with Yes, I am planning to continue to hold my shares. I’m rooting for them still, because I still believe in the vision and what they’re trying to do. They’re very, they’re very unique company. I can’t say that there are very many companies that are trying to achieve what they are. But I think before they can actually do and actually achieve that. What’s being done right now is necessary cutting costs and unfortunately, it’s the way that Wall Street is They’re looking quarter to quarter they’re not looking 10 years down the road. They want to see, you know, the bottom line, you know, every quarter for therapeutics companies, they want to cure cancer every corner. So I think right now, yes.
Simon Erickson 20:15
I’d like to follow up on that one Manisha, you still see Randy Scott is still chairman of the company, right? And he’s always been the big vision right there with Sean from the beginning. But it’s certainly that he understands the the quarterly desire from Wall Street to see quarterly results is in vitae. So we’re gonna focus on the bigger mission or is this kind of like we need to kind of retool the expectations and communicate that to the investing to investors as well?
Manisha Samy 20:38
I think is closer to the latter, where I believe they still have the vision and tapped, but they understand that there are certain things that they need to streamline, and they need to get down operationally before they can attack that vision. So I think they’ve also realized making all those acquisitions in a shot in such a short period of time was probably the wrong move strategically. So shelving that reducing the headcount, making it leaner and also having a leaner organization means you’re more agile. So hopefully, that agility makes them you know, more flexible, and they can really adapt to the market. So, you know, I’d love to see how the rest of the year pans out for in vitae. Both from Yes, I do have steak and maybe just success, but also in their vision. It’s like you said it’s a very noble vision. A lot of companies are not working on something that they are. So I am looking forward to seeing what Invitae has in store for us.
Simon Erickson 21:46
Absolutely. Well, let’s transition to the second part of the program here. You know, the first part we talked about some larger companies, companies I know a thing or two about, we’re not going to go outside of my comfort zone and talk about some hidden gins of the biotech and genomics world. Fortunately, we have Manisha here and she knows them very, very well. And I’m going to smile and nod on several of these.
Simon Erickson 22:05
But Manisha, the first company that you brought up was a company called NanoString Technologies, N S T G is the ticker on this one. It’s a $200 million market cap, still a very small company, but tell us about this one.
Manisha Samy 22:16
It is and it’s been that small for quite some time, unfortunately. So NanoString Technologies. So this company is also they have their own sequences that barcoding based sequencing system. So we talked about sequencing with Illumina. So yes, we talked about short reads long reads nanopore barcoding sequencing is there’s a certain type, I won’t go into the details and bore everyone. But they have the encounter system. What’s really interesting about NanoString is they have multiple products. So most recently, they had launched geomatics, digital spatial profiling is what it does. So taking a sample, you’re you basically get a 3d vision, say, if you have a sample of cancerous tissue, you can take, it can see kind of the molecular composition and a 3d format. So it’s very useful for scientist and someone like me, who really geeks out and nerds out over things like this. So scientists love it.
Manisha Samy 23:19
But the thing that they have an issue with is their sales team. So the technology is there for that specific product. But it’s getting, it’s getting it out there. So the installed base, and the install base for the encounter system, which is their kind of bread and butter, the guts of revenue.
Manisha Samy 23:38
And one thing that I’m really interested in is something that they’ve talked about prior to 2016, actually 2023 now, so it’s been a number of years, it’s their Hide and Seek sequencing machine. So FPE is something called, I believe Formalin, or foreman…actually, I’m not even going to try what it stands for, I can’t remember. The last part is paraffin embedded, but basically, it’s another tissue that you get, but FPE samples, it’s very hard to get. So when you get samples from patients, or if you’re just doing studies, it’s limited supply. So if you do something incorrectly, it’s gone forever, with time and see, all they need is the smallest of samples and you’re able to sequencing sequences. And not only that, usually after sequencing it once it degrades. So with theoretically, with their sequencing machine, you’d be able to repeat the same experiment with the same sample multiple times over. So that would be very valuable to both academia but also therapeutics based companies, if they’re able to see if they’re getting a sample from patients or clinical trials. If they make a mistake or they can learn more get more data from it.
Manisha Samy 25:02
So this could be it does, I don’t think it would be the next Illumina by any chance, but it can be enormously valuable for the scientific community. And I could see as long as they get distribution and sales down. So mastering is run by a bunch of scientists, which is great. But you also need the business people, the people who know kind of how to sell what to do market. So they need that second piece. And then I think we can see this stuff growing quite a bit.
Simon Erickson 25:38
Fantastic. Okay, run by scientists, for better for worse needs a sales team to get out there. NanoString Technologies, some interesting tech that they’re looking at, they’re in the sequencing world.
Simon Erickson 25:46
A second one is is one that I was a little bit more well known, perhaps for our audience: Gingko Bioworks is the one that hit the public market just a couple of years ago, given back a lot of those games. But to be fair, it probably was a little bit overvalued when it hit the public markets. What can you tell us about what Gingko was working on?
Manisha Samy 26:02
Sure. So Gingko is working on automated DNA synthesis. So they’re automating the entire process. They’re also working on designing new cellular capabilities. Just today, I saw in their press release that they got the contract for from a bio intelligence and biosecurity program to basically it’s a cutting edge bio sensor that’s able to capture chronologically, kind of what is happening around it. So, you know, if there’s a mutation or if you look at an ecological point of view, or climate change point of view, it can even store kind of, oh, levels of, you know, carbon has changed and whatnot, and it’s able to encode it in DNA. So being able to create something like that is very unique, and bio intelligence huge. Everyone talks about terrorism, but bio threats are actually even scarier than, you know, bombings or anything like that. Just, I mean, we saw it COVID I mean, COVID was not bioterror or bioterrorism or anything, but it definitely terrorized the entire world.
Simon Erickson 27:14
Manisha Samy 27:17
So, if you can imagine if ever, if anyone had ever, you know, if they use biotech, I think are thinking of that as part of warfare. That could be hugely destructive if especially if it’s aerosolized and anything like that. But so having these surveillances out there, you know, whether it’s through water or whatnot, it’s huge and what they’re able to do, but also, when they did go public, it was largely because of CRISPR was cutting DNA, well and they were able to insert DNA. So now we need a, well, something that’s reliable to actually insert back into the cell. So when we’re cutting DNA, if you want to correct a genetic mutation, and we know the correct sequence, well, why who wouldn’t want an automated way of synthesizing new DNA in a cost effective manner that is reliable, that can be built into a therapeutic?
Manisha Samy 28:17
So Gingko has a lot of potential. It’s the equivalent of a Twist Biosciences and now there’s that entire market. And I think Ginkgo Therapeutics has a lot of well, a lot of use cases, I would say,
Simon Erickson 28:37
And they got the right ticker DNA, that’s a good one to get if you’re wanting to go into this field.
Manisha Samy 28:41
I think they really lucked out with that ticker.
Simon Erickson 28:44
Well done well done on grabbing the right ticker for that one. And then the third one, you mentioned, you’re talking about CRISPR and gene editing. I mean, this kind of goes back to the roots of all of this research: Caribou Biosciences. Tell us a little bit about this one Manisha?
Manisha Samy 28:57
Yes, Caribou Biosciences. First of all, I will say it hurts my soul that it’s less than half a billion dollar. It was founded by Jennifer Doudna. I’m sure, by this point, most people have heard of her. She did win the Nobel Prize. I forgot which year it was, but she was the one who discovered CRISPR and she also co founded Caribou. It’s now CEO is Rachel Horowitz, but they’re working on allogeneic CAR-T. We all have heard but for those who aren’t, just as a reminder, CAR-T therapy, we’ve had a number of FDA approvals. T cells that have been re engineered, put back into patients and it fights basically kills only cancer cells and we’ve seen complete remission rates for metastatic patients.
Manisha Samy 29:52
So right now, their main indications are for things that have already have a poor CAR-T approvals For, but it’s a proof of concept. So what you can imagine for Caribou is once they have the proof of concept and just today, they actually really some very positive data for non Hodgkins lymphoma. 69% complete remission rates out of 16 patients, which is really good, anything very good, and the safety profile is safe. And part of the safety is actually what a lot of people probably have overlooked is they’ve patented, a different type, well, not a different type of CRISPR. But they have redesigned it. So they have CRISPR. So CRISPR is easier to parse, you have a guide RNA, and then your, your Cas-9, which does the cutting function. So they’ve paired guide the guide RNA with pieces of DNA. So with CRISPR Cas-9, the traditional but everyone has been talking about you kind of the downside is they’re off talk or off target effects, which is basically you make cuts at the wrong area, unintended cuts, just because they’re it’s not a perfect match. But that could be that if that if it’s the wrong place that can be drastic for patients, if it’s put back in, so with this new what they call CRISPR CHR DNA safer, more precise, and it’s patented. So if anyone wants to use it, they have to license from Caribou.
Manisha Samy 31:36
If you go back to from my ARK days, the white papers I wrote CRISPR, Caribou was one of the earliest players in CRISPR technology. So they have the patents they have I mean, co founder with Jennifer Doudna, they have the greatest minds. So the fact that it’s less than it just reminds me kind of the early days in 2016 or 2017. When we had CRISPR Therapeutics and tell the unedited us when there were around 200 300 million market cap, now they’re on, you know, billions. I think Caribou should be right up there with along with alongside them. And yes, they’re earlier stage.
Manisha Samy 32:15
But I think it’s, you know, once you have your proof of concept, it’s kind of like the Intellia story where they’re behind of the three public CRISPR companies. But once they were proven, they just kind of went on their way. And I think the same is going to be true for caribou and they’re just multiple, they have multiple platforms. I said allogeneic CAR-T, autologous CAR-T, and natural killer cells. So NK, I won’t go into the biology for natural killer cells, but we have two types of immune system adaptive and innate. So with T cells and NK cells, we’re using both types of our immune system. So one is kind of a rapid attack, and that is CAR NK cells. So that’s pretty new. There are other companies working in car NK cells, but it’s good to it’s good that their portfolio has boats. So they have they are spanning across a number of indications. So I think, if you’re looking for a very, I guess, by market cap size, early stage company, then this is a company that has been overlooked.
Simon Erickson 33:27
I do remember those white papers. And I do remember you talking about the IP rights. And you know, it does seem like it’s a field that is constantly evolving. Certainly George Church has done a lot of the research with a lot of different cutting agents with CRISPR. And has it changed over the years? Is that an advantage to them Manisha? Are they locked into kind of the earlier stages of CRISPR? Are they able to pivot as the technology improves, and and things get better? Is this an advantage for them that they’re gonna be able to pivot and change?
Manisha Samy 33:55
Oh, absolutely. Yeah. So they know what works, what doesn’t work. And now that they’ve seen kind of how everything has been shifting and changing, and they have their own patents, so they’re safe from that, the more patents you have, it’s the more I guess the higher the moat you have, right? So at this point, everyone’s going to be coming to them if they’re looking for using CRISPR. See, now I’m forgetting DNA. So they have their own patent portfolio. And they also know the lay of the landscape of other different types of nucleases. That’s not Cas-9. So I think they’re at an advantage. They’re seeing other CRISPR companies go to the FDA seeing what they have what they are required to give before they get approval. Other boards and I think it’s an a first mover advantage is not necessarily an advantage. So I think they’re get to see what others are seeing where they’re failing at and they get to learn from that.
Simon Erickson 35:01
Perfect. Well again once again those three companies if you want to follow along with Manisha’s watch list: NanoString Technologies is NSTG, Gingko Bioworks is DNA, and Caribou Biosciences, CRBU.
Simon Erickson 35:16
One last question for you Manisha. You know, for anyone listening to this program that might not have the extensive background in healthcare that you do. Might not have been doing research with Stanford, or didn’t know the hospitals in New York City and everywhere else that you’ve seen. We do want to invest in innovation, though. We do want to invest it ahead of the S curve. What are a couple of things you would recommend to investors who are interested in kind of small cap biotech companies? What should we be looking at to make more informed decisions?
Manisha Samy 35:44
In terms of companies ideas?
Simon Erickson 35:47
Yeah, if you’re looking at a company, you want to learn more about them, what’s a good place to start? Other than earnings per share, which certainly doesn’t often apply to a lot of the companies that are in this space.
Manisha Samy 35:57
Well, definitely read up on the technology. I like to always start with the management. So seeing kind of who’s at the helm, who’s driving the company? And then after looking at the technology, what’s the science behind it? And it’s a bit hard, I think that’s the hardest part of biotech. You know, it’s very esoteric. And a lot of times you don’t know, what’s fluff, what’s real. So that’s the difficult part. And that’s why you really do need to trust management and leadership. And if you have trust in them, then you can, you know, trust like, Okay, what they’re saying what they’re claiming the science is true. And if you can do that, for therapeutics, companies, look at the pipeline, look at what’s coming up. Is it something so married to other companies, or a lot of other companies doing it? Or is it something different? Usually, if I see, hey, I’ve never seen this before. That’s where my, that’s where I go into, I’ll go down the rabbit hole. And I’m kind of stuck into Google for a number of hours, and I waste my entire day. I shouldn’t call it waste. But that’s the rabbit hole.
Manisha Samy 37:02
But if you’re looking for the future, it’s not looking at what’s being done now. But what are the shortcomings a lot of times for companies that we’re following now they say, well, we need to figure this out, figure that out. And then it’s like, okay, well, what companies are working on that? And then I try and look up, okay, well, if this is what’s being done, what technologies can actually address those issues. And that’s how certain companies just percolate up through my Google searches. They don’t, I don’t randomly just kind of see them, oh, I should focus on this company. It’s just based on you know, what’s interesting, and a lot of times for biotech. This is for the nerds out there. I just love reading kind of nature articles and random science articles. And this is cool.
Manisha Samy 37:53
But on a high level, what we’re looking at nanotechnology is still very big, and biotech, and we’re still trying to crack that code, and how we can use that I think there’s still a lot of room and a lot of things, a lot of use cases that we can have with CRISPR, whether it’s in diagnostics or therapeutics, but also in virus surveillance and agriculture. So keeping abreast of those kind of those advances. And also on the regulatory side, there’s a whole slew of things there. But yeah, and it’s kind of an as a patient, you can always think about, what would you like to see different? And then then you can kind of go down that route of what’s interesting out there. And then a lot of times there are companies working on it, and you’ve never heard of them because they’re small and no one cares. But that’s where it kind of the gems are.
Simon Erickson 38:51
Absolutely. Well, a lot of exciting things going on in healthcare certainly going on and biotechnology sounds like a blend of the technical approach and then also the right leadership. Manisha Samy is a senior researcher at Stanford. Also, as we mentioned, a nice homecoming episode here as a former advisor here with 7investing. Manisha, really, really, really great to have you on the program. Thanks for being a part of the 7investing podcast.
Manisha Samy 39:12
Simon Erickson 39:13
And thanks, everybody, for tuning into this episode with our watch list of biotechnology stocks to keep on your radar. We are here to empower you to invest in your future. We are 7investing!
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