Intro to Genetics
In 2003, the first human genome was sequenced through a global effort named the Human Genome Project. The price tag? $3 billion.
But before we get any further into why this is important, let’s make sure we understand what DNA is.
DNA is the instruction manual for life. At a molecular level, it’s just 4 different chemical compounds that bind together in a twisted structure. Those compounds are adenine (A), thymine (T), cytosine (C) and guanine (G). “A” binds with “T” and “C” binds with “G.” This takes place inside the nucleus of each one of our cells – all 40 trillion of them. Short sections of our DNA are called genes which ultimately make up our characteristics and even our habits. These genes are strung together in bundles called chromosomes. We have 23 pairs of chromosomes in each one of our cells. And our cells make up our tissues, organs, everything about us. These 40 trillion cells have 3 billion base pairs in each one, making up thousands of genes and encoding for hundreds of thousands of proteins. These are crazy numbers!
The ordering of these “base pairs” [A-T, C-G] make us…us. The way this works is through two processes called transcription and translation. Transcription is when DNA unwinds and RNA copies the genetic information. RNA is ribonucleic acid [vs. deoxyribonucleic acid (DNA)] and its job is to turn DNA into proteins. RNA carries the copied section of DNA out of the cell nucleus into the cytoplasm where something called a ribosome is sitting. The RNA latches onto the ribosomes and here, based on the nucleotide pairs (also known as genes) it coordinates the order and length of specific amino acids. These chains of amino acids are known as proteins which regulate nearly every function of our body. For instance, hemoglobin is a protein that tells our blood cells how much oxygen to transport to our cells. This is just one small example of thousands of functions that proteins serve.
And of all of it is coordinated by those nucleotide base pairs in DNA, in each one of our 40 trillion cells. It literally boggles my mind. The complexity and efficiency of these processes are absolutely incredible.
So now that we understand a little more about what DNA is, it makes sense that if the instructions are messed up, then other stuff starts going wrong. For example, people with sickle cell anemia have one wrong base pair in one chromosome. That severely limits the function of their blood cells and therefore the oxygen levels in their cells.
The result is a life expectancy between 42 and 47 years old. All because of one messed up base pair, out of 3 billion! But what if you could understand the genetic code so well that you could create therapeutics to change things at the DNA level?
Well, that’s the promise of the genomics sector. Rather than treating the symptoms of disease, what if scientists and researchers could actually cure diseases once and for all? Herein lies the potential for genomics and the associated technologies.
A good place to start is sequencing because that really underlies the discovery of genomic breakthroughs. Without intimately understanding the genetic code, knowing what to change is impossible. The market leader for the past two decades has been Illumina. It has roughly 90% market share in what’s called next-generation sequencing (aka 2nd gen). The technology improved upon 1st gen (aka Sanger Sequencing) by bringing down the cost curve at an alarming rate. It did this by chopping up DNA into very small pieces and then using PCR (polymerase chain reaction) to replicate the DNA shards and using computers to map the correct location for each shard. It’s pretty amazing technology and the result is the ability to sequence a genome for under $1,000 instead of $3 billion.
The deflationary power that Illumina brought forth is nothing short of a miracle. But researchers are now finding that there are some drawbacks of next-gen sequencing, namely that the “reads” (sections of DNA) are too short. Rather than getting a thorough look at huge portions of chromosomes, DNA is spliced into small segments. The problem with this is that full gene segments can’t be properly analyzed. One main reason is that the shape of DNA actually matters. Short-read sequencers can understand the order of the nucleotide base pairs but they don’t understand the structure of DNA, which affects gene expression. Essentially, the shape of DNA directly affects how and when the proteins it encodes for are made. This has lots of implications for drug companies that are trying to create genetic therapies.
So this leads us to the two companies that are leading the charge in 3rd generation sequencing – one is a private company and the other is public. The private company is Oxford Nanopore and they’ve been able to create incredibly long strands of sequenced DNA. In fact, much longer than its public counterpart, Pacific Biosciences. The reasons for this aren’t super important but Oxford’s technology is not quite as accurate and a bit more expensive (though the costs are declining very rapidly) than PacBio. What’s interesting is that Illumina tried to buy PacBio in 2018 but the FTC shot the acquisition down and the deal really only unwound recently, as Illumina had to pay roughly $100 million in break-up fees. The crazy thing is that PacBio, a company that was only worth $1 billion not too long ago, has technology that is more advanced in long-reads than Illumina. It seems like it would be the obvious choice for Illumina to invest heavily into 3rd gen but there could be an innovator’s dilemma here. Illumina already has a mature product and they are partnering with a few companies like 10x Genomics in order to understand gene expression while utilizing their own 2nd gen machines.
The other interesting thing is that there are sort of two schools of thought. Some people think a combination of short-read and spatial profiling like 10x Genomics is going to be good enough but others think long-read will eventually take over. I’m definitely not qualified to answer this question but going back to the cost curves seems crucial. If long-read sequencing can improve the costs at a rate anywhere in the same ballpark as Illumina, it seems inevitable that understanding the shape of DNA more fully will be important. Yes, maybe a hybrid system gets you there as well but the integration of software and sequencing will likely be tighter with one provider. That might be a trivial consideration but having that data in one place will likely be much easier for researchers. Plus, long-read companies may benefit from selling more and more consumables rather than a hybrid Illumina/10x where they have to share the reagent and test kit revenues. This is a bit of conjecture but I’m leaning towards the high-end of the market going to long-read companies. Now, that’s surely not to say 2nd gen is toast. There will likely just end up being different use cases. And that leads us to talk about one of the fastest-growing use cases for 2nd gen…
A biopsy, up until now, has been a slice of tissue that is analyzed and determines whether that organ contains cancerous cells. You may have heard of someone getting a lung biopsy and then they were officially diagnosed with lung cancer. That means the doctor goes in and literally cuts out a small chunk of someone’s lung and then that tissue sample is shipped to a lab where it is analyzed. This process takes about 21 days and costs roughly $12,000. On top of this, specifically in the lungs, there are complications in about 12% of cases. This has been the main way to confidently tell if someone has cancer.
But imagine if a simple blood draw could replace all of this? Well, that’s pretty much a reality now. Officially, there are two FDA-approved liquid biopsies – one is made by Guardant Health and the other is from Foundation Medicine, which was bought a few years back by the biopharma giant, Roche. Guardant’s test specializes in non-small cell lung cancer but the company is actively testing its product for other types of cancer like colorectal. It comes down to detecting ctDNA (circulating tumor DNA). These are tiny pieces of DNA that slough off from tumors and are found in the bloodstream. Using technology that is way above my pay-grade to explain, these liquid biopsy tests can detect whether there are meaningful amounts of ctDNA and if so, can diagnose cancer.
I want to make one thing clear. These liquid biopsies won’t replace tissue biopsies just yet. Guardant describes it as a “liquid-first paradigm.” So the first action will be liquid and then if the test is positive, that confirms cancer. But if it’s negative, a tissue biopsy will still be in order. Getting a false negative through a liquid biopsy is certainly possible so it makes sense to verify with an actual tissue sample.
One interesting reason why liquid biopsies could be game-changing is that, since it’s so easy to draw blood, feedback loops for researchers become tighter. For instance, an oncologist can study how her patient is reacting at a genetic level. Previously, it would be too much of a burden to do multiple tissue biopsies and so the feedback loops would be basically non-existent.
As we led into this discussion on liquid biopsies, this is a fast-growing use case for 2nd gen sequencing companies like Illumina. Most liquid biopsy companies use Illumina as a sole supplier in the sequencing of ctDNA. This is the case for another company named Personalis which provides biopharma customers with mainly tissue biopsy analysis right now though they are actively working on a liquid biopsy solution. That’s also true for Exact Sciences, which bought Thrive, a liquid biopsy company to make sure their flagship product, the Cologuard, wouldn’t be disrupted. Cologuard was and still is a leading test for detecting colon cancer. It was complementary to colonoscopies. Similar to the liquid biopsies, it could detect colon cancer but if results were negative, a colonoscopy should still be done. This is also because Cologuard can’t detect polyps which could potentially turn cancerous down the road. However, the compliance rates for Cologuard aren’t great because you essentially poop in a bucket and ship it to Exact Sciences where they analyze your stool (allow me to use the proper scientific word). Liquid biopsies, on the other hand, are much easier. The positives for the liquid-first paradigm are clear. I think it’s fairly inevitable that all cancer, if possible, will be detected with a simple blood draw.
This leads us to the next area in genomics, where companies act as the middleman between doctors and patients. An example is Invitae where they are essentially a high-powered laboratory that sources sequencing technology from all sorts of players to make sure they can provide fast turnaround times and high-quality tests for doctors and oncologists. This was and still is disruptive to how genomics testing happened in the past. About 10 years ago, one of the bigger players was Myriad Genetics that produced a test that could detect the BRCA gene, which is a high-probability marker for breast cancer. However, they asserted monopoly-like pricing power which Medicare and private payors hated paying for yet it was necessary. Invitae came along with the vision to decrease the cost to test as many genes as possible. Tests went from multiple thousands of dollars to now, where the average cost of a test is roughly $450.
Another player in this space is Fulgent Therapeutics which has seen unreal growth specifically for COVID testing. Sitting at a critical juncture between hospitals/doctors and patients means these companies can adapt to new innovations and build or acquire the capabilities to add more value. For instance, Invitae recently bought ArcherDx, a liquid biopsy company to ensure they were staying up-to-date with innovations in the industry.
Invitae and Fulgent also have direct-to-consumer offerings where couples can get genetic testing before they get pregnant to understand the risks for their future child. Or perhaps they would like to test for specific genetic mutations. A competitor in this space is a company you’ve likely heard of, 23andme. However, revenues for 23andme have been declining for the past few years. Why? The lack of recurring revenue is one main culprit. People send in their swabs and then they can find out their true heredity. But this doesn’t change. Where your ancestors are from is…well, where your ancestors are from. But what does change is your DNA. Well, not exactly. The sequence of your base pairs doesn’t change but what does is the expression of your genes. These are called epigenetic changes where nature, rather than nurture actually affects the transcription process. One example of this is methylation. A number of things can cause it, like smoking, where healthy lung cells no longer replicate at a fast enough rate because certain proteins were not “turned on” by the associated genes. The scientific explanation is quite dense (here I am saying this again) but the basic idea is that our environment can affect the expression of genes which turn into proteins after being copied into RNA from DNA.
CRISPR and Gene Therapies
Yes, this is a cliff-hanger. If you’re like me, a feeble human, my brain is by hurting now. So subscribe below to make sure you stay in the loop as this series continues and we talk about CRISPR and how all of these technologies are actually being used (yes, this genetics series will be free)…