To say it is a fecund time in venture capital is an understatement.
Autonomous vehicles are spawning, artificial intelligence is advancing, cures for cancer are in the offing, even money is being re-invented. Add to the list gene editing.
Gene editing is showing itself as an increasingly powerful enabling technology in medical science, triggering a new wave of venture funding.
Underlying these bets is a growing confidence in the technology broadly and with the maturation of the Crispr editing technique in particular. The belief is that therapeutic treatments for afflictions as varied as sickle cell anemia, muscular dystrophies, blindness, hemophilia and cancer are becoming real, even if ethical considerations around the technology persist.
Key data points are a string of recently approved clinical trials of gene therapies that could prove to be milestones for the sector.
“There is a tremendous amount of justified excitement,” said Rahul Dhanda, co-founder of Crispr diagnostics company Sherlock Biosciences. “Crispr is driving a tremendous amount of change in healthcare.”
Crispr’s appeal is that it’s a relatively simple and cost-effective method of gene, or DNA, editing that finally appears to be entering an age of applied, rather than theoretical, development. Entrepreneurs and investors expect company formation to accelerate as applications broaden to new therapeutics and uses, such as diagnostics.
“It is about how the field is evolving,” said Kunwoo Lee, co-founder of Sequoia Capital-backed GenEdit. “Gene therapy and gene editing are becoming more real. People are seeing more successes.”
One key step in this evolution is leading the technology to be more precise and targeted, and in the process ease worries about random cutting. Beam Therapeutics is an example with its base-editing technique to edit just a single letter in the genome at a time without slicing the DNA.
A second big technological push has been to find new ways to deliver Crispr inside cells. Viruses have sometimes been used for delivery, as has the technique of manipulating a cell’s genome outside the body and reinserting the cell.
GenEdit, which raised $8.5 million in December from Data Collective Bio, SK Holdings, Bow Capital and Sequoia, is looking instead at polymer nanoparticles.
Evidence of this promise is showing up already in the level of patent activity, which suggests commercial value is expected. Investor scrutiny of patent portfolios and licensing rights has been on the rise.
“There is a ton of patenting going on in the space,” observes K. Lance Anderson, an attorney at Dickinson Wright.
Accompanying these shifts are other tailwinds for the sector. For one, companies have turned their targets to rare diseases, where drug development has been traditionally too expensive and difficult. These markets have plenty of opportunity.
Another is that the clinical trials themselves hold out hope of greater efficiency. As a rule, they don’t need to be as large as clinical trials elsewhere. That is because cures in gene therapy either work, or they don’t, with little grey area in between.
Yet it is the clinical trials of gene therapies that have investors most excited. Among the companies moving ahead are Crispr Therapeutics and Vertex Pharmaceuticals, which in February began treating patients in a Phase I/II trial with a Crispr-Cas9 therapeutic for beta-thalassemia. It is to be extended to sickle-cell anemia later this year.
Cripsr biotech company Editas Medicine also has approval to try to treat childhood blindness.
More are expected. “I would be shocked if we don’t see a thousand clinical trials started in the next few years,” said Jerry Williamson, CEO of NanoView Biosciences.
Clearly investors are playing close attention. One is Steven Yang, head of global venture investments at Schroder Adveq.
Gene editing “is a top investment theme for the top GPs we invest in,” Yang said. “This is one segment where we are seeing advancements in therapies where we had no cures before.”
Biotech is reaping the benefits of a multi-decade push for low-cost gene sequencing and is seeing an era of effective, targeted therapies, he said.
“I think we’re still in the early development of that,” Yang said.
This new wave will be broad, ranging from oncology to hearing loss to gene editing, he added. And as long as pharmaceutical companies fail to increase their R&D dollars, or cut them, they have to rely on young companies for innovation.
Another reason for enthusiasm is a relative scarcity of capital. Life-sciences investment, as a percentage of venture capital in the United States, fell to 18 percent in 2018, from 25 percent 10 years earlier, according to PitchBook and the National Venture Capital Association.
This is partly a supply side issue. The number of fund managers targeting biotech and gene editing has not increased, Yang noted.
“Those are the segments we like to invest in,” he added.
Clearly GPs echo this interest in gene editing and gene therapies.
“It’s definitely an important investment priority,” said Greg Yap, a partner at Menlo Ventures. “It’s something I spend a lot of time on.”
This includes platforms that broaden the reach of gene therapies and gene therapies that are difficult to create with existing technologies. Menlo has investments in Synthego and Senti Biosciences.
With more therapies on the horizon, “I would expect to see some positive outcomes over the next few years,” Yap said. “The science is very strong.”
Over the past year-and-a-half the advance in the technology has been enormous, said Bryan Roberts, a partner at Venrock.
And while researchers still only know perhaps 10 percent of biology, the accumulated knowledge is “going to dramatically expand our knowledge of biology, which will open up new avenues of therapeutics,” he said.
Roberts said investment themes include DNA reading and writing and down stream apps, such as discovery. Venrock has already invested in Inscripta, 10x Genomics and Encoded Therapeutics.
Entrepreneurs have observed this rise in GP interest. NanoView, which raised a $10 million Series B last fall and sees its exosome technology playing a role in therapeutics delivery, found that investor interest continued after the round closed.
“There is a fair amount of excitement out there without us soliciting input,” Williamson said. “I am seeing a lot of inbound.”
Activity involving strategics also appears to be picking up as the streamlining of R&D at many larger companies constricts the internal development pipelines. These corporate investors and buyers have become more active as technology roadmaps at young companies have become clearer and data collected.
“A lot of pharmaceutical companies are taking a big look at the area,” Lee said.
Recent deals in gene therapy include Roche’s still unfolding $4.8 billion purchase of Spark Therapeutics and Biogen’s planned purchase of Nightstar Therapeutics for about $800 million. Benson Hill Biosystems in March said it acquired Schillinger Genetics in the field of plant science, where the regulatory environment isn’t as complex.
Expectations are that more M&A is ahead, including of pre-revenue, pre-product companies.
“I would definitely pay attention to that,” Anderson said. “We’re likely to see a spike in M&A.”
It is likely upbeat clinical data will only stoke the fires along with invite more later stage backers.
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