Maxx discusses misconceptions surrounding one of the market's oft-used buzzwords.
January 22, 2021
Perhaps it was because of the coronavirus pandemic, or perhaps it had to do with the stellar rise of Ark Invest. Whatever the catalysts, it felt like 2020 was a tipping point for investing in genomics. There’s just one problem: the rise of genomics as an investing opportunity has come at the cost of its commodification. Today, the word “genomics” means everything and nothing — and it’s costing long-term investors.
The word is lazily attached to describe everything from liquid biopsies to genetic testing platforms to CRISPR gene editing. There’s apparently a “genomics revolution” occurring. You can choose from multiple ETFs tracking “genomics stocks” to passively own a “piece of the future”.
Genomics isn’t the first technical term to become commodified in this way. The word “biotech” is often incorrectly used interchangeably with “biopharmaceuticals”, which neglects non-healthcare applications of biology as technology. The term “clean energy” means at once batteries and electric vehicles and renewable energy and hydrogen fuels cells and… you get the idea. The term “synthetic biology” is used to describe the adherence to engineering principles in biology, but, well, it just sounds a lot cooler.
The commodification of technical terms often starts with harmless intentions. Coherent science communication is harder than it looks, which creates a never-ending search for better ways to bridge the divide between the lab and the masses. The problem is that, once a term catches on, our algorithm-driven world amplifies it beyond the original meaning. Most of us at 7investing have worked in the media. Competence and nuance increasingly take a backseat to optimizing for search engines and engineering headlines. Wait, maybe we should call it “synthetic journalism”? Now that’s catchy.
Why does this matter to investors with a long-term mindset? The commodification of technical terms strips away valuable context and nuance. Investors that think “biotech” and “biopharma” are the same thing might miss out on upcoming opportunities in industrial biotech, such as using genetically engineered yeast to manufacture spider silk that can be woven into athletic apparel. Bolt Threads is currently working with Adidas on this very opportunity (among many others) and is one of the best-run companies in biotech.
Similarly, investors that group companies together under the “genomics” umbrella might fail to see the differentiating factors among competing technology platforms. Take liquid biopsies as an example.
The idea of a liquid biopsy is to detect tiny amounts of circulating tumor DNA (ctDNA) shed by cancerous tumors into a patient’s blood. There are a growing number of liquid biopsy products on the market, which are used to detect the presence of advanced cancers before more expensive or more invasive diagnostic tools. The Holy Grail of liquid biopsies is to use them more frequently, in seemingly healthy individuals, to detect early-stage cancer months or years before symptoms appear — possibly turning most cancers into manageable and curable diseases.
Detecting earlier-stage cancer is going to be very difficult because the signal, the amount of ctDNA present, is extremely faint. Whereas ctDNA from an advanced tumor comprises about 0.46% of the material in blood, ctDNA from an early-stage tumor comprises just 0.01%. Companies working to achieve the Holy Grail of liquid biopsies will need to greatly expand the technology stack beyond genomics and will likely need to incorporate biomarkers beyond ctDNA.
A few other omics are likely to add tremendous value, although they’re easy to overlook when most investors and analysts are preoccupied with genomics.
Type of Omics
Value Add in Liquid Biopsy
Understanding how genomes or multiple genes (DNA) affect biologic function
The foundation of liquid biopsy is detecting ctDNA. This is why Illumina acquired Grail in 2020.
Understanding how genomes or multiple genes (DNA) affect biologic function when genes are turned on or off
Chemical modifications of DNA (the DNA sequence is the same but the modification affects gene expression)
Detecting chemical modifications between identical DNA sequences can help strengthen the signal. This is why Guardant Health acquired Bellwether Bio in 2019.
Understanding how proteomes or multiple proteins affect biologic function
Detecting early-stage cancers almost certainly requires protein biomarkers in addition to ctDNA. This is why Exact Sciences acquired Thrive Early Detection in 2020.
Understanding how transcriptomes or multiple RNA transcripts (RNA) affect biologic function
Detecting RNA shed by cancerous tumors, which may survive in the bloodstream longer than proteins in specific cases or be shed at different times of day.
Investors who adopt the commodified “genomics revolution” mindset would almost certainly fail to identify the context and nuance of developments and acquisitions happening in plain sight within the liquid biopsy space.
Think about this in practical terms. Whereas most of Twitter might be obsessed with Grail’s long-term potential because the company has grabbed more headlines, I think it might be possible that Grail becomes a casualty of the first-mover disadvantage. It played a big role in kicking off the liquid biopsy field, but our understanding of biology has shifted the goalposts quite a bit in recent years.
Companies that emerged later or added different pieces to their technology stacks as the science improved — Guardant Health gobbling up Bellwether Bio, or Exact Sciences acquiring Thrive — might be better positioned for success when early-stage cancer liquid biopsies are ready for commercialization in the late 2020s. It might even be possible for Adaptive Biotechnologies to jump into the space with its novel technology platform that maps the immune system (this is called “immunomics”).
For early-stage cancer detection using liquid biopsies, I would currently rank the technology stacks as follows: Exact Sciences, Guardant Health, Grail, and then a slew of hungry start-ups. I wouldn’t necessarily rule out the hungry start-ups.
Admittedly, it can be difficult to keep track of the rapid pace of innovation, but you really don’t need to be a scientist to develop a basic understanding of how these omics puzzle pieces fit together. You simply have to appreciate the value of context and nuance more than following investing trends on social media. Combine that with a long-term mindset and you should have a tremendous advantage over most investors, including those on Wall Street.
Already a 7investing member? Log in here.