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Opto Sessions

Global X’s Arelis Agosto on a Generational Investment Opportunity in Healthcare

Arelis Agosto, Senior Healthcare Analyst at Global X ETFs, discusses her take on why gene therapy and editing represent a generational investment opportunity, the latest key breakthroughs in the space and the trajectory of companies such as Pacific Biosciences and Illumina, and gives an overview of the Global X Genomic & Biotechnology ETF.

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Widely recognised for her expertise in the space, Arelis Agosto is Senior Healthcare Analyst at Global X ETFs. Agosto got into the sector “by accident”, having begun her career at Clarkston Consulting, where she specialised in pharma and medtech while still a student at Babson College.

After Clarkston, she worked at Third Bridge, a research platform; here, her role involved translating industry jargon into terms financial professionals could easily understand.

At Global X Agosto focuses on “capturing that broader opportunity for the structural effects that we’re seeing across different industries”. Within healthcare, this could include “tracking the cell and gene therapy space, whether that is approvals or how they come to market, or life science tools, and seeing how all of these interact, and then communicating that value proposition”.

Prevention Over Cure

Healthcare is undergoing a transformation driven by the emergence of new technologies. These are not only impacting “how we think about developing new drugs and making them more effective and safer for patients, but also how the industry as a whole is run and even how we think about value-based care more broadly”. The industry is moving away from disease treatment and towards prevention, says Agosto.

“Cell and gene therapy, and gene editing more broadly, is certainly one of the areas that we're most excited about. It’s really changing the way we think about patient care, from solely a symptomatic way of managing illnesses, to disease modifying, or treatments with curative intent coming into the market.”

By way of analogy, Agosto highlights the rise in semaglutide treatments such as Ozempic and Wegovy. While these were primarily developed as diabetes treatments, they have lately been found to be effective in countering obesity, which is itself a significant risk factor in developing Type-2 diabetes.

“Being able to attack that at the onset, rather than when a patient already has significant complications that make it more difficult for treatment to be effective, is really important.”

The same principle, when applied to gene therapy, has profound implications across a range of diseases. “In oncology alone, we're seeing significant benefit to diagnosing illnesses, the earlier the better. It makes it easier for a physician to be able to prescribe the right treatments, and be able to accurately see an effect from those treatments.”

Earlier diagnosis could greatly improve patient outcomes. “The farther along a patient is in terms of disease progression, the harder it is to treat,” says Agosto. When treating cancers, improved genomic technology is now enabling liquid biopsies.

“If you go to your physician for your annual check-up, they’ll regularly take blood. That blood sample can actually be screened for tumour DNA, or other biomarkers that can potentially point to a patient having early signs of cancer.”

A Generational Opportunity

The implications of cell and gene therapy reach beyond cancer, however, and can have a major impact against otherwise chronic, highly cumbersome conditions such as sickle cell disease or haemophilia, both of which entail intrusive and expensive ongoing treatments such as blood transfusions.

“We have treatments coming to market that have curative intent, or hope to be a one-and-done approach — that has significant impact for patients,” says Agosto.

But, she points out, “it’s still early days”. The US currently has 32 approved cell and gene therapies, but Agosto hopes to see this expand in number and in scope, from rare disorders to more common conditions.

“There are studies currently being done for Alzheimer's, for example,” she says.

In terms of gaining exposure, Agosto says that the Global X Genomics & Biotechnology ETF [GNOM] captures the symbiotic relationships between the various parts of this rapidly evolving ecosystem.

“Illumina and the DNA sequencing space are at the most mature point in genomics”

“Whether it's gene editing and genomic technologies, sequencing technology and computational genomics or diagnostics, all of these play a significant role, and they play it together. That’s really what GNOM captures.”

The fund comprises companies that draw at least 50% of their revenue from gene editing, genomic sequencing, development and testing of genetic medicine or therapies, computational genomics and genetic diagnostics.

The fund is down 12.1% year-to-date, but Agosto attributes this to its focus, as well as the context of the broader current environment. “These are quite ‘growthy’ companies fundamentally, and when we think about the broader market right now, there’s more focus on things like de-risking.”

The Sequencing Leaders

Agosto observes that non-traditional healthcare companies are entering the sector. Grocery delivery platform Instacart offers medicine delivery services and, last September, launched Instacart Health, an initiative aimed at improving access to healthy food across the US.

Meanwhile, artificial intelligence is powering the work of Tempus, another private company that uses data from physicians and patients to enable pharmaceutical companies to develop better treatments.

In terms of public companies, Illumina [ILMN] recently increased its projection for the size of the total addressable genomics market to $120bn by 2027. Agosto sees this figure as realistic, especially given the low level of market penetration for these technologies compared to the ubiquity she envisages them achieving over time.

Price, she acknowledges, is a major factor in increasing market size. Illumina’s ultra-high-throughput sequencer, NovaSeq X, will play a key role in the company achieving 7–10% year-over-year growth in 2023, according to Agosto, because it is one of the first products on the market able to bring the cost of genome sequencing down to approximately $200 (having stood at $150,000 in 2007, according to a May press release from Illumina).

This pricing will “open the door for local laboratories and hospitals to afford a sequencing platform”, says Agosto.

Pacific Biosciences (PacBio) [PACB] is also an important company in Agosto’s view, principally thanks to the fact it increased its long-read sequencing installed base by 37% in 2022, as well as its entry into the short-read sequencing market. Agosto previously wrote that the company is “well-positioned to gain market share in the clinical market and to capitalise on the sector’s growth”.

Out of these two companies, Agosto expects the investment case for Illumina to play out over a shorter time horizon. “Illumina and the DNA sequencing space are at the most mature point in genomics”, she says, whereas PacBio will take longer to mature due to the challenges of data gathering, proof of concept, and scale involved in long-read sequencing.

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Listen to the full interview and explore our past episodes on Opto Sessions. You can also check out all our episodes via our YouTube Channel.

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