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Randall Dishmon | May 20, 2022

Diagnosing investment opportunities in genetic medicine

Completing the map of the human genome set all research, drug development, and diagnostics on a new and exciting course. Randall Dishmon discusses where he sees investment opportunity in this emerging field.

2003 represented a “Big Bang” moment in medicine when the Human Genome Project completed its goal of mapping the full human genome. This launched the field of genomics and set all research, drug development, and diagnostics on a new and exciting course. A key advancement has been the discovery that several of our most vexing and deadly diseases are caused by genetic mutations. This provides the opportunity to screen, diagnose, and begin treatment long before any disease has even manifested.   

When exciting breakthroughs like this are discovered, investors naturally want to know how they can get exposure in their portfolios. But investing in companies engaged in gene-based drug development is hard to do. The payoff can be high, if you hit on a company with a breakthrough molecule, but the odds are against you. Roughly 90% of drugs that enter clinical trials never reach a commercial stage.1 Development-stage drug companies are well known for having huge price swings even when things are progressing well — and in the event of a clinical setback, a stock can sell for half the price that it was just minutes before. 

Where do we see opportunity?

The Invesco Global Equities team has found that ideas focused on the foundational, enabling technologies in genetic research and drug development offer better opportunity than investing in drug developers. As you’ve heard before, the general stores that sold picks and shovels made far more money than the average gold miner in the California Gold Rush of the mid-19th century. The same is true here — we believe there’s a research advantage that can be garnered and the businesses are much more predictable.

Illumina Inc. is a company we have liked for years, and it is among the biggest players in genetic medicine. It is a U.S.-based company that produces about 70% of the genetic sequencing systems at work in the world today.2 Those systems are used in academia and biotechnology, by drug developers and in diagnostic settings.  

Entire companies have been built on a foundation of Illumina systems, and the world of medicine is moving rapidly toward them. The COVID-19 vaccines developed by Moderna Inc., Pfizer Inc., and others, were done in a remarkably short period of time after the virus was sequenced on an Illumina system. Once COVID-19’s molecular traits were understood, the solution came quickly. In comparison, the typical vaccine development timeline had taken 5-10 years, sometimes longer, to play out.3

Where will the next breakthrough come from?

DNA is an acronym that is often tossed about, but it stands for deoxyribonucleic acid. Cutting to the chase, DNA is essentially the recipe for the production of the proteins in your body. Each of us has thousands of proteins in our body, and those proteins play a variety of critical roles in human cells. Genetic disorders are often the result of not having a particular protein, having too much of it or too little of it.  Knowing this, clinical researchers can develop treatments to fix protein-related issues that are causing diseases such as cancer.  

Cancer, yearly, is the world’s second-biggest cause of death.4 Early detection of it would be both a big life saver and a big money saver, as early treatment is far less costly to the world’s health systems.  Early detection of genetic markers can lead to early management of risk factors in diet, behaviour and treatment. Time is a huge advantage in treatment outcomes and early detection of genetic predisposition can give patients an unprecedented amount of time.

DNA testing is already being used for several cancers. Genetic tests for several types of breast cancer, colon cancer and others are readily available today and widely used already.  This is just the beginning. Over the next several years, we expect screening to become available for the early detection of an increasing variety of cancers, well before patients have displayed any symptoms. Illumina is poised to participate in that in a variety of ways.

Conclusion

As the field of genomics and genetic medicine advances, many of the most challenging health problems we face will have more and more answers.  There are many ways that investors can participate. Illumina is one that we’re particularly excited about, and we have others in the portfolio as well.  

The history of drugs was rooted in chemical formulations, but 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.

Randall Dishmon5 is a Senior Portfolio Manager for Invesco Global Focus Fund and Invesco Global Balanced Fund (equity)6.

1 Source: Phase II Trials in Drug Development and Adaptive Trial Design

2 Source: Illumina company filings

3 Source: John Hopkins University & Medicine: Vaccine Research & Development

4 Source: Our World in Data: Causes of Death

5 Portfolio manager is part of Invesco Advisers Inc., which is an affiliate of Invesco Canada Ltd and the subadvisor of the fund(s). Invesco Canada Ltd. and Invesco Advisers, Inc. are indirect, wholly owned subsidiaries of Invesco Ltd. 6 On May 3, 2021 Invesco Global Endeavour Fund was renamed Invesco Global Focus Fund and the Fund’s investment objectives were changed. The performance of this Fund for the period prior to this date would have been, and the quartile rankings may have been, different had the current investment objectives been in place during that period.

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