CRISPR, Genetics And AI — Why 2023 Could Be Biotech’s Year

If there’s one overarching theme that investors in biotech stocks should pay attention to in 2023, it’s “genetic medicine, genetic medicine, genetic medicine,” says Christopher Anzalone.


Anzalone is biased, of course. He’s the chief executive of Arrowhead Pharmaceuticals (ARWR), a leader in a technology known as RNA interference, which turns off problem genes at the center of inherited diseases. But Anzalone isn’t alone in believing genetic medicine will shine in the not-too-distant future.

And many believe 2023 could be a good year for biotech in other ways, too. Though the sector is known for wild fluctuations in its stocks, a number of biotechs are starting to ride a steady course, thanks to promising new research. Along with genetic medicine, the industry is making inroads to treat Alzheimer’s disease, obesity and a host of other maladies. Some analysts expect global biotech sales overall to quadruple over the course of this decade.

To be sure, challenges also lie ahead. The SPDR S&P Biotech (XBI) exchange traded fund, a barometer for biotech stocks, is 13% off its high point in August. Supply chain shortages, high inflation and a potential recession continue to undermine biotech research efforts. Meanwhile, Big Pharma is trying to navigate a looming patent cliff that could eat up $200 billion in revenue by 2030. That has helped form a powder keg for a potential biotech buying spree.

Where The Prospects Are

Still, biotech executives are enthused about their scientific prospects in 2023. The genetic medicine theme features companies like Moderna (MRNA) and BioNTech (BNTX), which hope to shift the mRNA focus from Covid to new use cases like personalized cancer vaccines.

Crispr Therapeutics (CRSP), with partner Vertex Pharmaceuticals (VRTX), could snag the first approval for a gene-editing drug using CRISPR technology.

Among other biotech stocks outside of genetic medicine, Biogen (BIIB) and Eli Lilly (LLY) will vie for the upper hand in treating Alzheimer’s disease, and the obesity treatment landscape will evolve with a likely second approval from Lilly.

Some analysts also see a revival in the nonalcoholic steatohepatitis space riding on Madrigal Pharmaceuticals‘ (MDGL) coattails. Known as NASH, nonalcoholic steatohepatitis is liver inflammation caused by excess fat cells.

Time For A Shake-up For Biotech Stocks?

With a recession threatening and hot inflation continuing, it all couldn’t come at a better time. That’s especially true, given other risks specific to the biotech sector.

biotech stocks deploy CRISPR
Gene editing is expected to be a large part of the biotech industry’s blueprint for fighting disease. (©vege/

Investors in biotech stocks must watch out for the imminent patent cliff, which could wipe billions off companies’ top lines over the next decade. Some of their bread-and-butter drugs will lose exclusivity and face competition from generics and biosimilars for the first time. This could kick off a buying spree as companies look to buy revenue streams. That could be a boon for biotech stocks with promising midstage assets.

Arda Ural says it’s an exciting time for biotech stocks. Ural is the Americas Industry Markets Leader, Health Sciences and Wellness for accounting firm Ernst and Young.

“We are at an inflection point of many forces,” he told Investor’s Business Daily.

Ural added there is a “strategic pivot the industry has to make. We’ll see how the deal-making will be affected as a result of that. You’re talking about the revenue acquisition, which is to fix the near term and also positioning yourself in unmet medical needs in the long-term. Very critical time. Very strategic time in 2023.”

Biotech Stocks Focus On Genetics

The deep focus on genetic medicines has undeniable ties to the pandemic, which thrust a technology discovered decades ago to the forefront. Now, biotech stock investors are watching to see whether the messenger RNA companies can put on a second act.

“I think the pandemic really shows the versatility, the scalability and the programmability of these approaches,” said Michael Severino, CEO of privately held Tessera Therapeutics and a CEO-partner at Flagship Pioneering.

Severino left his role as vice chairman and president at AbbVie (ABBV) to take a leading spot at Flagship, the venture capital firm behind Moderna, Tessera and other biotech names. Tessera has a gene-writing platform.

Michael Severino, Flagship Pioneering
Michael Severino left his post at AbbVie for Flagship Pioneering, the venture capital company behind Covid vaccine maker Moderna. (Tessera Therapeutics)

“The success of the mRNA vaccines shows how rapidly that (technology) can progress,” Severino told IBD. “I don’t think there are many people who, before this pandemic, would have been able to comprehend going from identification of the pathogen, sequence in hand (a full read of the virus’ DNA) to vaccine to administration to something approaching a billion people around the planet in the very rapid time frame we’ve all seen.”

New Uses For mRNA Technology

The Covid pandemic offered a paradigm shift for companies using mRNA technology. Among those de facto leaders, Moderna, is now turning its sights back to cancer. In a recent study, Moderna added its personalized cancer vaccine to Merck‘s (MRK) blockbuster cancer drug, Keytruda. The combination reduced the risk of relapse or death by 44% in patients with melanoma.

In cancer, the way tumor cells mutate is highly individualized. So, Moderna is creating bespoke cancer vaccines targeted to each patient’s own tumor mutations. The vaccine prompts the immune system to create T cells capable of taking on those specific mutated tumor cells. If they return, the body’s defense system is ready.

BioNTech, meanwhile, just started a Phase 1 study to test a vaccine that would prevent herpes. The study will enroll 100 healthy volunteers, ages 18-55, in the U.S. It’s being developed with the University of Pennsylvania.

Anzalone, Arrowhead’s CEO, is more skeptical of mRNA.

“I don’t think we’ll see more interesting uses of it next year,” he said. “It’s a powerful technology and I’ve always thought that the low-hanging fruit with mRNA is vaccines. That makes total sense to me. I think we still are a breakthrough or two away from applying this to other disease states.”

Other Genetic Medicines In The Works

But Anzalone says other genetic medicines are ready for their day in the sun.

In Arrowhead’s case, this means using RNA interference, or RNAi, to silence genes. While mRNA tells the body to make something — in the case of the Covid vaccines, a spike protein — RNAi turns off genes. The firm is using the technology to stop the production of specific proteins.

Christopher Anzalone, Arrowhead Pharma
Arrowhead Pharma CEO Christopher Anzalone says genetic medicines are ready for their day in the sun. (

“It’s a strikingly powerful technology because there are a number of disease states characterized by the overproduction of something,” Anzalone told IBD.

In 2023, Arrowhead expects to begin Phase 3 studies of its gene-silencing technology, in patients with alpha-1 liver disease, with partner Takeda Pharmaceutical (TAK). The company also expects to begin final-phase studies of two drugs in cardiovascular diseases.

Novartis (NVS) and Amgen (AMGN) are using drugs that block RNA to lower LDL cholesterol and lipoprotein A. Amgen licensed its drug from Arrowhead.

Arrowhead also expects to have initial data from its efforts to deliver RNA-interfering drugs into the lungs. If successful, it would be “revolutionary for the field,” Anzalone said.

Success In Gene Silencing

The field has seen other successes. Biotech stock Avidity Biosciences (RNA) soared more than 55% on Dec. 14 after testing a gene-silencing drug in patients with a form of muscular dystrophy.

After a single dose, the drug led to an average 45% reduction in the amount of protein created by the targeted gene. Every patient in the study responded.

News like this, along with Arrowhead’s progressing pipeline, show the promise for RNA interference, says Anzalone. It took awhile to “wrestle it to the ground,” he said. “But now the gene-silencing tech is “scalable and reproducible and reliable.”

“Genetic medicine is different because it’s hyper surgical,” he said. “If you do it correctly, you’re only doing one thing and you can really tailor it to a person’s genetics. So this is absolutely the future of medicine. We are just starting this. I don’t think we’ll even call it genetic medicine five to 10 years from now. We’re just going to call it ‘medicine.’ “

Will CRISPR Spark Biotech Stocks?

CRISPR biotech stocks
Some biotech firms worry about using CRISPR or other gene-editing techniques to combat disease. (THOM LEACH / SCIENCE PHOTO LIBRARY/Newscom)

The world is also on the threshold of a potential first approval in CRISPR. Unlike the RNA approaches, CRISPR provides a permanent genetic change to disease.

Crispr Therapeutics and Vertex expect to finish submitting their application for FDA approval of a CRISPR treatment for sickle cell disease and beta thalassemia in the first quarter.

The two blood diseases are caused by an inherited mutation that impacts hemoglobin, a protein within red blood cells.

“I believe that gene editing and CRISPR will be a mainstay in medicine and wouldn’t be surprised if, in the next 10 years, it accounts for a third of the full pharma market,” Crispr CEO Samarth Kulkarni told IBD.

Biotech Cures Vs. Treatments

The notion of a cure in medicine is elusive, says Tessera’s Severino. Outside of a handful of examples, modern medicine can’t really cure chronic, life-threatening, life-altering diseases, he says.

“We can manage them, we can reduce symptoms, we can delay progression. And those are worthwhile goals,” he said. “But if one can achieve a cure, you can take the potential benefit to yet another level. By addressing the underlying errors in our human genome that lead to disease, we can actually now think about cure in a way that’s never been possible before.”

Sean Bohen, CEO of biotech stock Olema Oncology (OLMA), shares enthusiasm for correcting single-gene defects. But he’s skeptical about using the technology in cancer. Crispr, for example, is testing an off-the-shelf form of CAR-T treatment using donor cells. Traditional CAR-T trains a patient’s own immune cells to find and destroy cancer.

“We have seen some toxicity in the (studies) that are concerning,” he told IBD. “I think it will be overcome with time. That’s one of the elements that will slow it down is that concern about what happens when you do something permanent to the genome.”

Artificial Intelligence Use In Drug Development

Still, optimism in genetic medicine persists. One reason is the growing use of artificial intelligence in drug development.

Global Biotech Revenue chartIt’s important to note that the cost to sequence a full human genome is declining rapidly. A genome is the blueprint of a person’s entire DNA. It shows where mutations exist and whether those are driving an existing disease or the risk of developing one.

In drug development, artificial intelligence can be used for everything from identifying patients and enrolling them in studies, to sifting through massive databases to find druggable targets. Using AI, a computer can find or engineer an antibody that fits perfectly into a protein’s structure. This could help block a disease in which the protein is the culprit.

Biotech BioXcel Therapeutics (BTAI) gained FDA approval for a treatment it developed using AI in April. The drug treats agitation in schizophrenia and bipolar disorder. BioXcel used artificial intelligence to identify the compound that eventually became that drug, dubbed Igalmi.

AI Is ‘In The Eye Of The Beholder’

BioXcel Chief Scientific Officer Frank Yocca says artificial intelligence “is in the eye of the beholder.” It involves writing algorithms that can question big data sets. It’s not “like a Coke machine where you put the money in and, at the bottom, your product comes out.”

artificial intelligence biotech stocks
Artificial intelligence is playing a more significant role in the biotech industry, executives say. (

What biotech stock investors need to understand, says Olema’s Bohen, is that “artificial intelligence” doesn’t work without “actual intelligence.” Companies can use artificial intelligence to help them build drugs that perfectly hit specific targets in the body.

“But if you didn’t understand the target, then your medicine did nothing,” he said.

Biotech companies are ramping up their artificial intelligence efforts, helping them sift through genetic data for new targets, identify patient populations or make business more seamless. But AI should inform the decision-making, not make the decisions, Bohen says.

Biotech Stocks Battle In Alzheimer’s

Biotech stock investors are also watching specific battles play out in areas like Alzheimer’s disease, obesity and cardio-metabolic spaces such as NASH.

The FDA on Friday approved one of experimental Alzheimer’s treatments from Biogen. Another from Eli Lilly trails slightly in the pipeline. Both target built-up plaque in the brain called beta amyloid.

A long, complicated and controversial history surrounds beta amyloid in Alzheimer’s. Biogen actually has another approved drug that uses this mechanism, Aduhelm. But the Centers for Medicare and Medicaid refused to broadly reimburse for it, noting the drug’s benefit on cognition remains dubious. Biogen’s new second drug, now called Leqembi, slowed cognitive decline by 27% over 18 months.

Alzheimer's disease genetic medicine
A couple of biotechs are experimenting with drugs to treat Alzheimer’s disease. (Juan Gartner —

The Biogen news sent biotech stocks focused on Alzheimer’s disease higher on Nov. 30. On Friday, Biogen shares jumped 3.6% before being halted for the Leqembi announcement.

Lilly’s donanemab is in Phase 3 testing. In midstage studies, it showed potentially best-in-class amyloid-lowering.

Cardio-Metabolic Focus Continues

On the obesity front, Lilly is going up against Novo Nordisk (NVO) with Amgen trailing.

Novo has an approved drug called Wegovy. But Wegovy faces supply chain challenges and shortages. Lilly’s drug is already approved as a diabetes treatment called Mounjaro. In testing of patients with obesity, Mounjaro delivered up to a 22.5% reduction in body weight.

Amgen has a competitor in the works that led to 14.5% body weight lost over three months. Though that’s numerically lower than Lilly’s 22.5%, the weight loss was faster.

Meanwhile, the NASH space continues to heat up. Biotech stock Madrigal soared 268% on Dec. 19 after its NASH treatment scored a double win in a final-phase study.

After a year, 3% of patients at the highest dose experienced at least a two-point improvement in their symptoms on an eight-point scale. Meanwhile, their levels of liver inflammation called fibrosis didn’t worsen. Fibrosis is measured in five stages. There, 26% of patients showed a one-stage improvement in fibrosis and no worsening in symptoms.

Top 5 biotech stocks in market capitalization chartCompanies only have to hit one of those goals, according to the FDA’s guidance.

“NASH will continue to ride the wave of a 2022 second-half revival,” William Blair analysts said in a recent report.

Biotech Stocks Eye Supply Chain

Despite the influx of good news, the macro environment will undoubtedly have a grip on biotech stocks. Inflation remains high, a recession is looming and the supply chain remains a tricky puzzle.

Brian Culley, CEO of Lineage Cell Therapeutics (LCTX), says Covid helped companies appreciate the shelf life of some drug components. That paradigm still exists even as Covid eases into its endemic status. Many supplies used in drug development come from China. China is rapidly peeling back its Covid-era restrictions. But complicating that, numerous companies went public in 2020.

“If you’ve got a couple hundred new public companies all flush with cash and they all want to call Charles River Laboratories (CRL) and do a rat study, wow, it became a problem,” he said. “It was frustrating at times that you couldn’t get slots when you wanted. You have delays due to reagent shortages. We started swapping material because you never knew where you were going to get it from.”

Ernst & Young’s Ural says companies will have to re-evaluate how they buy supplies. Will they seek suppliers abroad, or pay slightly more to keep their business onshore? Will they build manufacturing capabilities in house?

Novo Nordisk NVO stock
Novo Nordisk is going up against Eli Lilly and Amgen in developing an obesity drug. (joreks/

“Or will they be at the mercy of supply chain issues?” he said.

Drug Patent Expirations Loom

Biotech stock investors should also keep an eye on the macro when it comes to patent expirations. That phenomenon is due to rock companies like Pfizer (PFE), Novartis (NVS), Merck, Eli Lilly and Bristol Myers Squibb (BMY). Companies may scramble to replace revenue with new acquisitions.

Olema’s Bohen says he went through this at AstraZeneca (AZN), where he was previously the chief medical officer.

“The challenge for those companies is the (loss of exclusivity) doesn’t get pushed away very effectively,” he said. “There are some forecasts that Big Pharma is going to lose some $200 billion in revenue by 2030. That’s a lot of money. And even if it’s a slight overestimate and its $100 billion, you’re not talking chump change when you get there. So, the need is there.”

But there aren’t too many assets that can create an inflection in that time period, he says. Yocca, of BioXcel, says Big Pharma has to be strategic with what it buys. Small biotech companies with midstage assets are in the sweet spot. Still, just because Big Pharma is buying doesn’t mean biotech companies are selling.

“What’s in some of the media, they’re saying, ‘Prices are low (due to the broader bear market), pharma is going to go on a buying spree,’ ” Yocca said. “Yes, but the (targeted company) has a say in this too, and many of the companies will say no.”

Follow Allison Gatlin on Twitter at @IBD_AGatlin.


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Anzalone is biased, of course. He’s the chief executive of Arrowhead Pharmaceuticals (ARWR), a leader in a technology known as RNA interference, which turns off problem genes at the center of inherited diseases. But Anzalone isn’t alone in believing genetic medicine will shine in the not-too-distant future.


Donovan Larsen

Donovan is a columnist and associate editor at the Dark News. He has written on everything from the politics to diversity issues in the workplace.

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