July 26, 2018
In a rare move for a biotech expert who primarily takes bullish long-term positions, John McCamant has issued short sale recommendations for three stocks in the CRISPR space. The editor of The Medical Technology Stock Letter and contributor to MoneyShow.comexplains his concerns about this specialized group while also reiterating a Strong Buy rating for one gene-editing play which does not rely on CRISPR technology.
CRISPR is a relatively new gene editing technology that has generated a significant amount of publicity in both the lay and scientific media. Recently published research points out the potential for off-target CRISPR gene edits that could cause severe, and possibly irreversible side effects in humans.
On July 12, the FDA released highly anticipated gene therapy guidance documents. After reviewing the draft guidelines, while the FDA is no doubt optimistic of the future of gene therapy, in our view, the proposals suggest that there is a lot to prove before a company even begins human gene editing studies.
Right after the FDA guidelines were released, Nature Biotechnology published what we believe is the most negative, objective research study on CRISPR to date, calling into question the viability of that technology as a therapeutic option in the near-term.
As a result, we are reiterating our Buy recommendation on Sangamo Therapeutics. The company is a leader in gene therapy and gene editing, with by far the most advanced clinical programs in the field. Importantly, however, the company does not rely on CRISPR-based technologies.
We are also initiating short sale recommendations on three CRISPR-related gene-editing stocks – Crispr Therapeutics AG, Editas Medicine and Intellia Therapeutics.
The FDA requirements for beginning a study in gene editing are, we believe, much more stringent than companies are prepared for and/or may not have or not be able to accomplish that easily now that the official guidelines are out.
For cells that have been genetically modified using genome editing, the nature and method of genomic modifications should be included. Moreover, potential off-target effects should be noted in the preclinical package. This, in our view, among other challenges, may be the single largest risk factor for CRISPR products specifically (e.g., the FDA placed a clinical hold on Crispr Therapeutics before the start of its first human trial).
After reviewing the documents, in our view the greatest challenge is the current unknown result of editing genes – off-target toxicities that may occur long after the initial single gene insertion or deletion. Unexpected breaks in double-stranded DNA could either turn on/off genes with various permanent consequences. The objective of long-term follow-up observations is to “to capture delayed adverse events in subjects as well as to understand the persistence of the gene therapy product.”
In the new guidelines, the FDA recommends carefully selecting the patient population and disease to be treated when designing such protocols given patients with short life expectancies, multiple co-morbidities and exposure to other agents such as radiation or chemotherapy could confound results.
Further considerations include the duration of the long-term follow-up period, which the FDA recommends 15 years for integrating vectors such as gammaretroviral and lentiviral vectors and transposon elements, up to 15 years for genome editing products, and up to five years for AAV vector products.
Importantly, the FDA recommends testing subjects at least annually for persistent vector sequences until they become undetectable. It is recommended that the sponsor “sample the likely population of transduced cells without being overly invasive (e.g., peripheral blood is suitable to test for the presence of hematopoietic stem cells rather than bone marrow biopsy).”
In the context of the gene-editing guidelines, it is recommended that the sponsor propose a long-term follow-up plan that covers monitoring of potential delayed adverse events that may result from off-target activities. In other words, in vivo/in vitro analysis such as INDEL – insertion and deletion of bases in a genome, as well as any adverse effects that may arise from the specific organ system the gene editing system targets.
This again, to us, is a major potential roadblock for companies that use CRISPR as their primary gene-editing tool and is probably why they have yet to be cleared for human development by the FDA.
On the flipside, it supports the multiple Investigational New Drug application (INDs) that have been granted to Sangamo Therapeutics over the past two years with more to come, and the likely fact that the company’s ZFNs – which are not CRISPR technology – result in undetectable off-target effects utilizing the most sensitive assays around.
Research published in the prestigious scientific journal Nature Biotechnology suggests that the FDA’s concerns with off-target INDELs is only the tip of a Titanic-sized iceberg for CRISPR-focused stocks; CRISPR-Cas9 can cause significantly greater genetic havoc than experts previously thought, and the study concludes perhaps enough to threaten the health of patients who would one day receive CRISPR-based therapy.
The DNA damage found in the new study included deletions of thousands of DNA bases, including at spots far from the edit site. Some of the deletions can silence genes that should be active and activate genes that should be silent, including cancer-causing genes. The DNA chaos that CRISPR unleashes has been “seriously underestimated,” said geneticist Allan Bradley of England’s Wellcome Sanger Center, who led the study. “This should be a wake-up call.”
This leads to the question of why haven’t scientists from the CRISPR companies seen off-target effects when they analyze the DNA of CRISPR’d cells? “You find what you look for,” said Bradley. “No one is looking at the impact (of these DNA changes) on downstream genes.” And few studies conduct full-out genome sequencing of CRISPR’d cells.