With a targeted disruptive innovation biotechnology-related exchange traded fund strategy, investors can focus on companies driving change in targeted therapeutics, bioinformatics, CRISPR technology, and more.
In the recent webcast, Change the DNA of Your Portfolio: Growth Opportunities Through Genomics, Nicholas Grous, associate portfolio manager at ARK Invest, highlighted five innovation platforms that will experience long-term growth, including artificial intelligence, energy storage, robotics, DNA sequencing, and blockchain technology. These five sub-categories are expected to enjoy long-term growth. For instance, gene sequencing is expected to expand to $3.6 trillion in 2030 from $125 billion in 2020. Overall, ARK Invest projects disruptive innovation technologies could grow to $210 trillion by 2030, compared to $14 trillion in 2020.
The increased adoption of disruptive innovation technologies will not just be a one-off event as these innovative ideas will cover a broad swathe of industries and touch upon many facets of the global economy. For example, Grous believed that the convergence of next-generation DNA sequencing, artificial intelligence, and gene therapies should boost returns on investment significantly, potentially creating a golden age of health care likely to rival that of the 1980s and 1990s.
Simon Barnett, research analyst at ARK Invest, explained that researchers had historically been forced to choose between accuracy with short-read sequencing or comprehensiveness with long-range sequencing to break the genome into smaller segments to analyze with high-resolution optics, which is then reassembled with computer algorithms. According to Wright’s Law, for every cumulative doubling in data produced on its reinstalled base, the cost of synthesis-based LRS has declined and will continue to decline by 28%. Looking ahead, ARK projects the cost to sequence a whole human genome with long-read technology will drop to $100-$200 and its accuracy will be superior to SRS across all variant types by the end of 2025.
“According to our research, gene editing breakthroughs are creating more effective therapies at a faster rate than historically has been the case,” Barnett said.
For example, compared to zinc finger nucleases (ZFNs), which moved from discovery to the first human dose in roughly eight years, the relatively new CRISPR technology took less than half the time, three years, and can address 48% of known diseases, or almost twice ZFNs’ 28%. Prime and base editing CRISPR derivatives address even more diseases, 79% and 59%, respectively. Consequently, Barnett argued that CRISPR may be seen as a superior gene-editing method going forward, and it already shows as CRISPR has been dominating recent academic research and clinical trials.
Looking ahead, ARK expects gene editing and gene therapy companies to grow to $1.1 trillion in market capitalization by 2026. Given potential cures for diseases, the share of research and development funding for gene therapy innovations should continue to rise. By 2026, the share of total R&D spending devoted to gene editing and therapy companies could grow from 3% to 17%.
Additionally, Barnett noted that routine blood-based, multi-cancer screening combined with improvements in single-cancer screening could prevent 40% of metastatic diagnoses and increase loco-regional diagnoses by 10%. Even without improvements in cancer therapy, ARK estimates that earlier intervention could prevent 66,000 cancer deaths per year in the US alone.
The Central Dogma could help describe how biotechnology moves forward. The Central Dogma states that DNA (the genome) is transcribed into RNA (the transcriptome), which ultimately is translated into protein (the proteome). Proteins carry out virtually all critical-to-life functions but, when altered, can cause disease.
“Understanding the interactions between and among the pillars of the Central Dogma, we will improve our ability to make predictions, diagnoses, and leaps of fundamental, biological insight,” Barnett said.
“We believe the future of molecular biology is based on multi-omics techniques that integrate pillars of the Central Dogma. Based on our research, multi-omics — including life science tools, basic and translational research, population health efforts, and molecular diagnostics — could impact oncology, organ health, and population health, scaling from $110 billion to roughly $300 billion during the next five years,” he added.
As a way to capture this potential growth opportunity, investors can turn to the ARK Genomic Revolution Multi-Sector Fund (NYSEArca: ARKG), an actively managed strategy that seeks long-term growth of capital by investing in domestic and foreign equity securities of companies across multiple sectors, including health care, information technology, materials, energy, and consumer discretionary, that are relevant to the fund’s investment theme of the genomics revolution.
ARKG aims for thematic multi-cap exposure to innovative elements including gene therapy bio-informatics, bio-inspired computing, molecular medicine, and pharmaceutical innovations. The ETF aims to capture long-term growth with a low correlation of relative returns to traditional growth strategies and a negative correlation to value strategies. Additionally, the fund offers a tool for diversification due to little overlap with traditional indices. It can be a complement to traditional value/growth strategies.
Financial advisors who are interested in learning more about growth opportunities in the biotech segment can watch the webcast here on demand.