The appeal of high payoffs from backing companies that succeed commercially with a gene-based drug is attracting an increasing number of investors into the genomics space.
This is based on recognition that while the history of drugs was rooted in chemical formulations, the future is molecular and biological.
“Set against an aging world population, solutions will be required to address many of the diseases that grow in frequency as we age. Genomics and genetic medicine are going to play a big role in that,” explained Randy Dishmon, senior portfolio manager, global equities at Invesco.
However, turning opportunity into real potential requires an understanding of which parts of the ecosystem are best-placed to benefit from the research and development cycle.
“We have found that ideas focused on the foundational, enabling technologies in genetic research and drug development are better than investing in drug developers,” Dishmon said.
The right company counts
Invesco believes there is a research advantage that can be garnered – and that these businesses are much more predictable.
An example of this is a US-based company that is among the biggest players in genetic medicine, producing about 70% of the genetic sequencing systems today. Yet those systems are also used in academia, biotechnology, by drug developers and in diagnostic settings.
Another case in point is a company that produces lab equipment used in the guts of almost every medical and research laboratory in the world. The company has a stable, diverse business that should provide years of attractive compounding in the future.
One appealing business line is within the growing area of rapid, accurate diagnostics and testing, an area that looked attractive even before Covid-19 brought a significant acceleration to the theme.
“Given its technical leadership, this company was well-positioned to be one of the first to roll out a PCR test for Covid-19, in the early days of the pandemic,” added Dishmon. “Rather than this being a one-off, it appears that Covid-19 testing will be part of our lives, and therefore part of this company’s revenue mix, for the foreseeable future as new waves of the virus continue to impact various parts of the world.”
Another focus for investors should be DNA testing, which is already being used for several cancers.
“This is just the beginning,” explained Dishmon. “Over the next several years screening will become available for the early detection of an increasing variety of cancers, well before patients have displayed any symptoms.”
Since cancer is the world’s second biggest cause of death on a yearly basis, early detection will be both a big life saver, as well as a big money saver, as early treatment is far less costly to the world’s health systems.
“Early detection of genetic markers will lead to early management of risk factors in diet, behaviour and treatment,” he added. “Time is a huge advantage in treatment outcomes and early detection of genetic predisposition will give patients an unprecedented amount of time.”
