Can the ARK Genomic Revolution ETF reverse its downtrend?

Ark Invest’s genome editing fund, the ARK Genomic Revolution ETF [ARKG], has suffered in 2021 so far, with the fund’s value falling 17.9% between the start of the year and 19 May’s close.

The fund reached unprecedented highs of $114.83 during intraday trading on 20 January, before a dip starting in mid-February saw its price plummet to $81.74 at close on 8 March. The ARK Genomic Revolution ETF had a steady performance through to the end of April but started to pull back again towards the end of the month, with the fund losing 17.19% of its value between 27 April and 19 May.

Will a new step in the evolution of gene-editing technology help to reverse the downward trend in the ARK Genomic Revolution ETF?

  

New gene therapy

At the heart of what Ark refers to as the genomic revolution is a technique known as CRISPR (which stands for clustered regularly interspaced short palindromic repeats). This involves inserting desired genetic sequences into gaps created by snipping lengths of genetic code using either targeted RNA scissors or the cell’s natural repair mechanisms to create the desired changes in the cut section.

CRISPR has been on the rise for much of the last decade but has proven haphazard and difficult to scale until recently. The approach has been bolstered by several key breakthroughs in the precision with which it can be applied.

First, researchers from the Whitehead Institute in the US announced a new approach in April, known as CRISPRoff, which enables precise, reversible control over gene expression — in other words, the ability to turn a particular gene off and on again as desired.

Then, on 11 May, a study was published in Nature that, according to its authors, offers “a potential avenue for pursuing precise human gene therapy”. While the traditional CRISPR approach carries significant unpredictability, the research harnessed CRISPR-based CopyCatcher systems “to detect and quantify genetic somatic gene conversion (SGC) events”, or examples of genes being replicated unusually accurately when copied from one part of the genome to another.

The CopyCatcher systems identified several unexpected gene loci which accounted for unusually high rates of the faithful gene replication in fruit flies (Drosophila), including one, c-MYC, which appeared to suppress the frequency of SGC in mammals. Downregulation of c-MYC appeared to promote SGC in human cells.

“These studies provide a clear proof of principle for a new type of gene therapy in which one copy of a mutated gene could be repaired from a partially intact second copy of the gene,” Ethan Bier, senior author of the study and science director for the Tata Institute for Genetics and Society at the University of California, said in a News Medical article.

“These studies provide a clear proof of principle for a new type of gene therapy in which one copy of a mutated gene could be repaired from a partially intact second copy of the gene” - Ethan Bier

 

While existing gene therapy treatments involve placing a healthy copy of a mutated gene elsewhere in the genome, these only restore “enough gene activity to allow the patient to limp by,” said Bier. The new research opens up the prospect of repairing mutated genes with a high level of precision in situ. Genetic disorders such as muscular dystrophy, cystic fibrosis and congenital heart defects are among the conditions whose treatment could be revolutionised by the discovery.

 

Competitive genes

Two of the ARK Genomic Revolution ETF’s holdings, CRISPR Therapeutics [CRSP] and Vertex Pharmaceuticals [VRTX], have recently collaborated to develop a CRISPR-based gene-editing therapy, CTX001, to treat sufferers of two genetic disorders: transfusion-dependent beta-thalassemia (TDT) and severe sickle cell disease (SCD). The fund’s fourth-largest holding (as of 19 May), Novartis [NVS], produces the Zolgensma treatment for patients with spinal muscular atrophy (SMA). If the new research proves able to improve the efficacy of these kinds of genetic treatments, it will be good news not only for the companies’ investors, but also for their patients.

The ARK Genomic Revolution ETF could use the lift if this transpires. Through 2021 to 19 May, it underperformed three major competitors in the biotechnology ETF space: the Global X Genomics & Biotechnology ETF [GNOM], the Invesco Dynamic Biotechnology & Genome ETF [PBE], and the Principal Healthcare Innovators Index ETF [BTEC].

  

The Global X Genomics & Biotechnology ETF holds CRISPR Therapeutics and Vertex but not Novartis in its holdings. The fund had outperformed both the Invesco Dynamic Biotechnology & Genome ETF and Principal Healthcare Innovators Index ETF, neither of which hold any of the three companies.

However, over the past 12 months (through 19 May’s close) the ARK Genomic Revolution ETF’s growth of 58.88% has far outstripped its peers. In comparison, the Global X Genomics & Biotechnology ETF, Invesco Dynamic Biotechnology & Genome ETF and Principal Healthcare Innovators Index ETF have grown 24.19%, 20.46%, 21.80%, respectively, in the same period.