Gene Editing players have had a tough year so far, as the markets continue to sour on high-growth and futuristic stocks amid surging U.S. inflation and rising interest rates. For perspective, our theme on Gene Editing stocks remains down by 37% year-to-date. However, there was some positive news for the sector last week, after gene editing player Bluebird Bio received the unanimous backing of the U.S. Food and Drug Administration’s Cellular, Tissue, and Gene Therapies advisory committees for two separate therapies targeted at cerebral adrenoleukodystrophy (CALD) and beta thalassaemia. Although the FDA does not have to follow the recommendations of the committee, it most often does and this could put the therapies on track to come to market in the coming quarters. Bluebird stock was up by over 65% in pre-market trading on Monday.
So what’s the outlook like for the gene-editing theme at large? While Bluebird’s recent success could bode well for the prospects of other gene-editing players’ pipelines, there are risks as well in the current environment. The gene-editing sector – which primarily comprises loss-making clinical-stage companies that are burning cash – could see more volatility if investors continue to move out of riskier assets amid rising interest rates. Access to liquidity could also become an issue for some players. However, with market capitalizations of gene editing stocks remaining depressed following the sell-off over the last two years (the theme was down by 22% over 2021 as well), some companies could be attractive acquisition targets for larger pharma companies looking for expertise and pipelines in the gene-editing space.
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Following the correction, the risk-to-reward trade-off for the sector is looking much more palatable, given the potentially revolutionary drugs under development. Some areas that gene editing therapies target include cancer, rare genetic disorders that currently lack treatments, and more chronic conditions such as diabetes. Considering this, the theme could see an upside in the long term and the recent correction could be a buying opportunity. Within our theme, Intellia Therapeutics has been the worst performer with its stock down by about 64% year-to-date. On the other side, Vertex Pharmaceuticals stock has been the best performer, with its stock up by around 15% year-to-date.
|S&P 500 Return||-1%||-21%||83%|
|Trefis Multi-Strategy Portfolio||-9%||-27%||188%|
 Month-to-date and year-to-date as of 6/14/2022
 Cumulative total returns since the end of 2016