Gene therapies are among the most promising medical breakthroughs in history. They deliver genetic material to cells to either treat or cure disease. Gene therapies can target genetic mutations that cause diseases, such as inherited disorders like hemophilia or muscular dystrophy. They can also give new functions to cells allowing them to fight disease with the potential to treat and cure illnesses like cancer and heart disease.
The large size of the total addressable market makes gene therapy an attractive commercial opportunity for both strategic and financial investors. In 2020, gene therapy financing reached a record level of $20 billion, which was approximately double the 2019 total. As shown in this week’s chart, these investments have helped support a 28% annual increase in the number of gene therapies in clinical development between 2017 and 2020. Projections estimate 20%-25% annual growth in patients receiving these treatments through 2025, as new therapies move into clinical trials and begin commercial sales.
Picking which therapies will successfully progress through trials and into commercialization is a difficult task, given the high failure rate inherent in the drug development process. Another way to gain exposure to this trend is through investing in the infrastructure that enables these therapies. Several components of the gene therapy infrastructure, such as manufacturing and logistics, are experiencing supply constraints given the current and projected growth in these treatments.
Manufacturing gene therapies is a complicated process. Many therapies utilize viral vectors, which allow genetic material to be delivered into cells. Manufacturing viral vectors is technically challenging. Today, a limited number of contract manufacturers possess this capability, creating delays in the drug development process and significant backlogs at these manufacturers. There are also significant barriers to building new facilities to handle the demand — driven by the long lead time required to construct new manufacturing plants, as well as limitations in the specialized expertise needed to bring these facilities online.
The logistics around gene therapeutics represent another vital part of the infrastructure that continues to be developed. These treatments are more sensitive to temperature and environmental conditions than traditional therapeutics. As a result, it can be difficult to coordinate the delivery of these medications across multiple sites, as well as track the temperature and chain of custody. Mistakes that occur in the supply chain can be devastating to patients and costly to the clinical trial backers.
Amid the challenges presented by manufacturing and logistics, there is also opportunity. By utilizing specialized expertise and technology, the potential emerges to alleviate some of the logjams in the process and bring these life-saving medications to market more quickly. There are also other avenues to invest in the drug development infrastructure — including bioanalysis, which measures drug safety and efficacy, as well as services to help manage clinical-stage drug trials.
As advances in science and technology continue to create improvements in the standard of care, an opportunity exists to invest in the infrastructure that helps enable these breakthrough technologies. Working with managers who have the specialized expertise and relationships to bring these to market could lead to investment opportunities, while simultaneously bringing life-enhancing treatments to patients who critically need them.
The material provided here is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.
This material is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
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