Mark Odendahl 00:49
Welcome to the Industries in Motion podcast from RBC Capital Markets, where we'll be exploring what's new, and what's next in today's fast moving markets and industries. To help you stay ahead of the curve. Please listen to the end of this podcast for important disclaimers.
My name is Mark Odendahl, and I am head of US Capital Markets Research. Let's get into today's episode.
I'm happy to introduce our next guest, Dr. Luca Issi. He is our Senior Biotech Analyst at RBC Capital Markets. Luca is part of a larger biotech team here at RBC where we have four senior analysts publishing research in the US. Luca joined RBC in 2020. Prior to RBC, he was an investor at Bain Capital Life Sciences, where he led private and public investments across biopharmaceuticals, medical devices, specialty pharma, and tools and diagnostics.
Mark Odendahl 04:52
Luca, thanks for joining today.
Luca Issi 05:34
Absolutely. Thanks, Mark. It's a pleasure to be here.
Mark Odendahl 05:40
Luca, first off want to say congratulations, you joined in 2020, you quickly rolled out on the gene cell and gene therapy areas. You followed that up in 2021, with a successful expansion of your coverage in gene editing. So we're really excited to have you on the podcast today to take us through those sub-sectors of this evolving sector in the biotech industry. Your recent initiations mentioned that genetic medicine is a new wave of innovation in biotech. Can you expand on that?
Luca Issi 06:16
Yeah, absolutely. Happy to, Mark. Yeah, so I think the bad news here is that we have five to 1000 monogenic diseases, meaning diseases that are caused by a single gene, and many more that are actually polygenic in nature caused by more than one gene. So that's the bad news. However, the good news is that now we have a toolbox and allow us to actually tackle many of those diseases. And the money is just pouring in. We actually put in our nutrition support. In the last few years $150 billion has been deployed across VC, equity, market partnerships and M&A. And you know, this, this influx of capital has actually made an impact for patients and shareholders, right, we have 18 drugs that are currently approved in the genetic medicine space, we have 10 more that we believe are gonna come down the pike in the foreseeable future. Many of them are actually already on the calendar from, you know, on the FDA, if you could do for days, they're already scheduled for either later this year or early next year. And probably market I think the COVID vaccine is the epitome of what genetic medicine can do. This is mRNA. And this vaccine has made a huge impact for both humanity and shareholders. Right. A recent actually, publications from Yale suggests 280,000 deaths have been prevented by this vaccine 1.2 million hospitalizations had been presented by this vaccine. And at the same time, Pfizer and Moderna together this year are going to generate more than $50 billion in revenues from these, these vaccines. So again, perfect example of space and in applications where genetic medicine have made an impact for both shareholders as well as, as patients and humanity.
Mark Odendahl 08:28
When you think about genetic medicine, what are the key modalities that define the space?
Luca Issi 08:35
The way I think about it is four different buckets. So there is a way to turn off genes. This is called RNAi, or RNA interference. There are ways to actually do the exact opposite. Instead of turning off genes, you want to turn on genes. And you can do that either with gene therapy or mRNA. We're already talking about mRNA earlier. And then you have the latest and greatest which is gene editing. You mentioned your comments earlier. This is kind of the latest and greatest in genetic medicine. This is essentially a way to edit genes and you can edit them in a variety of ways you can turn them off, you can turn them on, can correct them, you can insert sequences, they are so very, very exciting space. And then the fourth one is really cell therapy, which is a way essentially using cells as a therapeutic. So instead of utilizing a drug or a monoclonal antibody, you're essentially delivering cells. And again, we already have a few drugs. They're approved by Kim Ryan Yescarta in the cell therapy space and many more coming down the pike.
Mark Odendahl 09:42
That's a great rundown on our RNAi. How did we go from an interesting molecular finding in worms $240 billion in market cap?
Luca Issi 09:55
Yeah, that's a fascinating story, Mark. So just to make a quick, quick history. Andrew Fire and Craig Mello wondered about price back in 2006. They showed work that had been done actually in the late 90s, that if you deliver a small piece of RNA in worms, you can actually turn off certain genes like small pieces of RNA. And these are like tiny little one-millimeter worms called C. elegans. And, you know, the exciting part of that is that other researchers soon after Markay primarily, essentially replicated those findings from worms to actual mice. And so, once you prove that this technology could be used in mammalian cells, the race was on, right? So we got a lot of companies starting, a lot of VC money getting to this space. Pharma was absolutely all over it. You got Abby and Pfizer having internal programs, you got to Kate Roche and Novartis signing multibillion dollar deals. Without nylon, you've got some acquisition in that space as well. Actually, Merck bought Sirna for $1.1 billion dollars. So it was very, very exciting space. And then in early 2010, data didn’t pan out, and we have had multiple issues, you know, allow them had in mortality and balance for Wanda drugs called rosuvastatin had had to essentially go back to the drawing board, as they had a few deaths in non-human primates, which was problematic. Both companies had to go through multiple rounds of layoffs. Unfortunately, Merck that bought Sirna for $1.1 billion, had to sell Sirna for $200 million, almost a $900 million loss. And investors gave up hope. And this was a space that was no longer potted sexy. And what has happened after that, if you look at the charts, from 2015, like very few investors stuck around from 2015, Alnylam moved from being a $3 billion market cap company to a $25 billion market cap company. Arrowhead was trading a cash now it's a $7 billion market cap company. Dicerna was trading cash now as a $1.5 billion market cap company. So I think this is a great example where innovations took many twists and turns if you will, it was a roller coaster ride. But the investors that actually stuck with this technology actually got incredibly rewarded.
Mark Odendahl 12:50
Thank you.
Mark Odendahl 30:31
Where is RNA AI going from here?
Luca Issi 13:10
Yeah, I think a $40 billion market cap could be just the tip of the iceberg. You know, we have, you know, multiple companies that are working on the next iteration of the technology. You know, we think this is a technology that is fairly derisked at this point. And you know, you have companies like Alnylam, working on innovations around dosing, instead of essentially dosing less frequently than it is today. Potentially stretching the doses up to six months or twice, twice a year on top of an injection. You have companies like Arrowhead working on cardiovascular targets like APC-3 N3-S or LPLA. And I do believe that many of these targets at this point are fairly de-risked.
Mark Odendahl 15:07
Thank you Let's, let's pivot to an additional bucket that we discussed earlier. And that's gene therapy. We have seen multiple setbacks in the space. What is your latest thinking there?
Luca Issi 15:21
I feel like innovation occurs linearly so there's like kind of a linear progression in innovation and sometimes investors excitement can be either above or below the mean and this is certainly a time where investor sentiment is way below the mean UniQure. And just to make it maybe a finer point, to look at gene therapy, just up to like nine months ago, cumulatively, gene therapy was a $60 billion market in terms of market cap. Now it's the $40 billion market cap, right? So you've got a $20 billion overall, that value that has been destroyed. But I do believe that now it's a great time to look into gene therapy. The reason why I believe that is the froth is gone, right? The valuation have materially pulled back. We do have clarity on the regulatory path. There was an FDA advisory committee meeting just weeks ago. And then advisory committee meeting, I believe, was pretty benign, and actually gave companies and sponsors great transparency on what they need to do to essentially get these drugs over the finish line. So I you know, I think we're not giving a hope.
Mark Odendahl 18:00
Thank you. Let's move now to gene editing. What are the implications of the recent NTLA data for the broader field?
Luca Issi 18:15
Yeah, just as much as gene therapy has been depressing. gene editing has been exciting. You know, we've seen a lot of a lot of innovation in that space, just for context, again, genetic as a way to edit different genes. Jennifer Doudna, and Emmanuelle Charpentier essentially figured out that bacteria when they get infected by viruses, they can fight the infection. And then they essentially take a mug shot of the virus and takes a piece of DNA from that virus and actually put it in their own genome. And you know, Emmanuelle Charpentier and Jennifer Doudna essentially figured out that this technology can also be used in other cells. And you know, now we have this great tool that allow us to edit gene seen in humans, we've seen a ton of IPOs in the space, the cumulative market cap actually went from $9 billion dollars12 months ago to actually $40 billion today when you're looking at the whole space more broadly. And you know, didn't tell you the NTLA data. Some people are comparing it to Neil Armstrong going on the moon for the first time, well, this the first time they were editing the parasites in human beings. And the data over the summer was pretty exciting. We've seen pretty strong reduction in TTR up to 90 plus percent. And so you know, we think that NTLA is potentially in a position to convert a disease that today is managed chronically via either siRNA or with a oral small molecule potentially with a one and done approach. And so that that has been a very important moment for the whole field.
Mark Odendahl 20:21
Thank you. And lastly, what about cell therapy? So many patients already benefit from cell therapy but we've also seen recent setbacks with ALLO’s clinical hold. What are your latest thoughts around cell therapy and the differences that we're seeing there?
Luca Issi 20:39
Yeah, as you mentioned, multiple patients already benefited from autologous CAR T again, Yescarta and Kymriah are already a billion dollar market today. But the goal for cell therapy is really to pivot from autologous CAR T to allogeneic CAR . So autologous CAR T, which is the current standard of care, is a fairly complex process that requires complex logistics, where essentially the T cells are taken from the patients are shipped into a centralized facility. The molecular biology is done in the centralized facility, and then these cells are actually shipped back to the patients before they're infused. But the goal here is to transition from this complex approach to an off the shelf approach, having cells that are ready to go, that would be very, very important, especially for patients that are rapidly progressing with neurological lymphoma or multiple myeloma or other indications. And it look so far the data has been encouraging the response rate, the radiographic response rate has been actually pretty good. The issue has been around durability, you know, these T cells don't stay in the bloodstream for as long as we would like them to stay. And as you mentioned, the Allogene’s clinical hold last week was not helpful. However, the investigation is still ongoing. It's entirely possible that what we have seen so far for Allogene is just the molecular finding that does not have any clinical consequences. So again, let's have the investigation play out, and then we'll see what happens there. But when I kind of step back from Allogene in the clinical hold, and I look at this field more broadly. I mean, I think the companies are using the right approach, like Allogene and CRISPR are thinking about consolidation dosing, right. So that could be a way to improve durability. Instead of doing a single injections, you can do two injections back to back They are planning to combine this approach with gamma secretase inhibitors.
Mark Odendahl 23:09
It's been a fascinating conversation. It's an exciting space to cover. Given all this innovation and the need for pharmaceuticals to replenish their pipelines. How do you think about M&A in this sector?
Luca Issi 23:24
Size works against innovation. And Pharma’s have two things. One, they have lots of patent expires come coming down the pike soon and two, lots of cash. And when you look, if you look at this whole space, and if you look at where innovation has happened, most of the transformative innovation has not happened organically by pharma has happened actually in biotech companies that then end up being acquired by pharma company. So I know M&A has been disappointing this year, we have not had the number and the volume of the transactions that we have had in in prior years. But again, pharma is this is the lifeblood of this industry. This really is the lifeblood of this industry. And I think it's just a matter of time, then M&A will probably come back. And I think when I think about my space more broadly, I think that a strategic appeal of my companies for pharma is only bound to get larger over time, primarily because these companies are now in a position to potentially graduate from developing drugs for rare genetic diseases to much, much larger indications. Right?
Mark Odendahl 25:34
Luca, thanks for all the insights today, you do a great job talking through all the different pathways of this innovative field that you're in and congrats on quickly becoming a leader in genetic medicine.
Luca Issi 25:52
Fantastic, Mark. It was it was a great conversation. I appreciate your time.
Mark Odendahl 26:00
What else lies ahead in today's ever evolving markets and industries. We will be keeping track right here on industries in motion. Until then. Thank you for joining us on this episode recorded October 20 2021. Make sure you subscribe to Industries in Motion wherever you listen to your podcasts
Mark Odendahl 28:51
If you'd like to continue this conversation or you are interested in more information, please contact your RBC representative directly or visit our website at www.rbccm.com/industriesinmotion for further insights. Thank you.