The Business of Gene Therapy
By David Armstrong - FoxMarketWire
NEW YORK Gene therapy is the Holy Grail of biotechnology.
The ability to replace defective genes in the human body will have a profound impact on health care,
promising cures for cystic fibrosis, vaccines for cancer and potential treatments for almost all of the
genetic disorders that afflict humans.
So it makes sense that some investors sifting through the sprawling and confusing biotech arena
may find good deals in companies that concentrate solely in developing genetic therapies
Commercial gene therapy products are not yet available. So revenues from gene therapy companies are
often thin and based mostly on licensing agreements and deals with larger pharmaceutical companies.
But observers predict that within the next five to 10 years, the first gene therapy products will be
available, and the rewards for companies that make biotechnology drugs could be enormous.
"It's almost unmeasurable," said Jeff Margolis, an analyst with Aurora Capital. "What is it worth to cure
cystic fibrosis, hemophilia, diabetes? And cancer vaccines? It's incalculable what the value of that would
be."
Like the rest of the biotech sector, most gene therapy stocks have been in a steep plunge over the past
two months. Some say that companies are trying to push the technology too far, too fast. The death last
year of Jesse Gelsinger, a patient in gene therapy trials at the University of Pennsylvania, and
subsequent revelations that some other researchers were failing to adequately report complications to the
FDA, brought intense scrutiny to the fledgling industry.
This week the Dept. of Health and Human Services proposed sweeping new oversight for clinical trials,
including substantial monetary fines for researchers and institutions that violate established research
protocols.
"Investors need to be careful about how they proceed," said John McCamant, editor of the Medical
Technology Stock Letter, an influential investment newsletter in the biotech field. "It takes some time,
and there is some risk. It's a completely new paradigm. We preach to our investors very strong
diversification in the sector."
But, he added, the companies on top are poised to reap large rewards. That said, here are a few
companies to keep an eye on as health care moves into the future.
Cell Genesys
The company recently reported promising progress with its GVAX cancer vaccine. The treatment is not
a pure genetic therapy. Instead, it is a DNA-based vaccine, modifying tumor cells outside the body to
induce an enhanced immune system response and then injecting the cells into the patient.
Margolis rates Cell Genesys a strong buy on the basis of its GVAX vaccine. The company owns a 12
percent stake in Abgenix, a maker of antibodies for inflammatory and autoimmune disorders and a slew
of strategic licensing agreements, all of which brought the company revenues of some $33.6 million last
year.
The stock, trading at a little over $17 a share, took a hefty plunge over the last two months. Margolis put
a target price of $32.50 on the stock over the next twelve months.
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