By David Shook
It was the kind of tragedy that can shatter promising research in no time flat. In September, 1999, Jesse Gelsinger, an 18-year-old Arizona student who had volunteered to participate in a gene-therapy experiment at the University of Pennsylvania, died suddenly. The cause of death: Massive bodily rejection of a virus introduced into his system to treat a rare metabolic disorder.
His death sent the biotech industry into a tailspin. For a while, financing for gene-therapy experiments declined sharply -- forcing a host of publicly funded projects and biotech startups to fold or be acquired by others.
Two years later, the gene-therapy world is still picking up the pieces. Gelsinger's death prompted a crackdown by regulators on gene-therapy experimentation, and no federally approved treatment is expected to hit the market until at least 2004, analysts estimate. But interest in this new world of medicine remains strong. More than 4,000 doctors, clinicians, and execs attended the American Society of Gene Therapy's fourth annual meeting in Seattle earlier this month -- the most ever.
Today, 10 biotech companies are heavily invested in developing gene therapy -- experimental treatments in which healthy genes are inserted into malfunctioning cells as a way to correct disease. "The hurdle now is in reducing all this science to commercial products," says Dr. Gail Brown, oncologist and partner with Tanager Capital Group, a venture-capital firm in Maplewood, N.J.
Smart investors might want to keep this in mind: Despite Gelsinger's tragic death, gene therapy now finds itself in a remarkably similar position to another niche science that slogged through years of clinical setbacks and delays -- until researchers finally hit paydirt. That was monoclonal antibodies, the wonder proteins that have shown startling powers in the treatment of cancer and rheumatoid arthritis.
Today, antibody producers such as Idec Pharmaceuticals (IDPH ) and Abgenix (ABGX ) are among the highest valued pharmaceutical stocks on the market. Just like the struggling gene-therapy startups, these companies saw their initial sky-high market values tumble when results proved disappointing in the late 1990s. Not anymore. Abgenix, which traded for $2 a share three years ago, now fetches $42 after a split last year. Idec traded at $3 a share back then, and now goes for $62.
George Widera, a senior scientist for Genetronics Biomedical in Toronto, thinks the parallel holds. "Stocks of [gene-therapy] companies may be a little subdued, because the scientific progress is not moving forward very fast," he observes. "Quite a bit of research still needs to be done. But this remains a very promising field for disease research."
Today, the sector's 10 companies are among the cheapest stocks in biotech. "Right now, all the gene-therapy companies in this market are pretty much in the same boat," says Stewart Parker, CEO of Targeted Genetics in Seattle. The sharpest declines have come as part of a broader fall across the entire sector, since biotech peaked last September. And their stocks aren't moving because none of these companies will be close to producing a real drug for at least three more years.
Targeted Genetics (TGEN ), for example, trades at $4.75 a share, down from $17 a year ago. Targeted is developing a drug for cystic fibrosis. Meantime, Collateral Therapeutics (CLTX ), which is designing gene therapy for heart and artery disease, trades at $6, down from $34 in September. Cancer researchers Introgen (INGN ) and Valentis (VLTS ) each trade for $4 a share. Valentis fell from $12 a year ago, and Introgen from $15 at its initial public offering in October.
Similarly, GenVec (GNVC ), a company working in cancer and cardiovascular disease, has seen its stock fall to $3 a share, from $11.75 at its IPO in December. GenStar Therapeutics (GNT ) has fallen from $12 to $7 in the last year. GenStar is developing drugs for cancer, HIV, and hemophilia.
The four others in the field have higher stock prices. Cell Genesys (CEGE ) is the only company that has seen its stock rise recently, on positive clinical data for a lung-cancer vaccine. At $19 a share, the company is up from $12 in April but remains far from its one-year high of $34. Avigen (AVGN ), which is specializing in hemophilia treatments, trades for $17 a share -- a steep fall from $50 last year.
The same trend can be seen with Vical (VICL ), a company aligned with research giant Merck (MRK ). Vical trades for $12 a share, down from $30 in September. Finally, Onyx Pharmaceuticals (ONXX ), which is fighting head and neck cancer, trades at $12, down from $35 last fall.
The upside? All of these biotech pioneers have fairly strong cash positions that should give them enough resources to complete their clinical trials. And all have products back in human clinical trials, too. That's a good sign that gene therapy doesn't deserve the poor safety image it garnered in 1999.
Researchers now understand more fully the delivery mechanisms used in Gelsinger's and most other gene-therapy treatments. A virus is used to transport healthy genes to a diseased part of the body. Viruses are efficient as a delivery tool because cell invasion is what they do best. When a person gets a cold, the virus is infiltrating cells in the body and messing with their DNA.
The same is true for gene therapy. Doctors insert a benign virus into the patient, specially packed with healthy genes responsible for a specific function. The intent is for the genes to get injected into abnormal cells by the virus, and over time, repair the abnormality responsible for a disease. Only in the Gelsinger case did doctors come across a fatal immune response. Now, gene therapy is done under strict controls, and it hasn't again shown evidence of a toxic response.
"People have to understand that this has really never been done before," says John Monahan, CEO of Avigen, which is developing a delivery mechanism for a gene that makes proteins responsible for blood-clotting. Hemophiliacs lack this protein and must inject it much like diabetics inject insulin. "Gene therapy uses several types of protocols that are different than what you normally have for a drug. That's because, with gene therapy, it's the cells in the body which make the final therapeutic compound."
Certainly, few experts are willing to call gene therapy the next miracle cure for cancer or arthritis at this point. The clinical data still haven't been collected, compiled, and synthesized. At the same time, gene-therapy stocks have reached a point where many of them can't fall much lower. Savvy investors with an eye to the long-term might want to remember the example of antibody research, now that gene therapy has moved past a most unfortunate chapter.
Shook covers biotechnology issues for BusinessWeek Online. Follow The Biotech Beat every week, only on BW Online
Edited by Douglas Harbrecht