Are investors getting ahead of themselves on gene editing?

The technology holds great promise and attracts a lot of money. Whether it will disappoint or thrive, however, depends on which side of the regulation divide it falls.

This week, a UK inquiry looking at whether altering DNA in human embryos is ethically permissible found “no absolute reason not to pursue it.” The news provides a fillip to those arguing it could be used to wipe out genetic diseases in certain families. But before the decision becomes UK law, the report said, more research is needed to determine when it is medically and socially acceptable. Expect fierce resistance from critics in the interim.

“The people of Britain decided 15 years ago that they don’t want GM food. Do you suppose they want GM babies?” said David King, director of London-based watchdog Human Genetics Alert.

With the debate over human applications getting so heated, one could be surprised by the strides it has made in the food and ag industry. Agriculture majors such as Monsanto and Syngenta are already investing in the technology, either by backing external companies or via allocating research funds internally.

But interest in gene editing extends beyond corporates. Historically, food and ag used to be snubbed by biotech investors, Pontifax AgTech’s Ben Belldegrun told us last month. But gene editing is “sucking them in,” he said, allowing for “larger funding rounds.” Pontifax and its co-investors took part in a $110 million fundraising for Precision BioSciences at the end of June. Elo Life Systems, the company’s food and ag unit, is working alongside the Queensland University of Technology to develop drought-resistant chickpeas.

There are other examples. Also last month, Cibus, a company that uses gene editing to design better performing crops, raised $70 million in a Series C backed by giant money manager Fidelity, real estate firm Alexandria Venture Investments and pharma-focused Cormorant Asset Management. Public markets have also proved open to the technology: Calyxt, another ag gene editing business, spun out from its French parent last year through a $64.4 million Nasdaq IPO. How to explain such faith in the technology?

Much of it lies in how gene editing differs from previous attempts at improving plant and animal species. Originally, farmers engaged with genetic selection by saving seeds from their strongest plants, and through conventional breeding. They may not have known the scientific explanation behind it, but that resulted in stronger subsequent generations of crops. Yet, these methods had drawbacks: they were slow to act, and improvements sometimes came with unwanted baggage in the form of undesirable traits.

In the 1990s, these started to be complemented by conventional genetic engineering, which produced GMOs. Such approaches relied on transplanting DNA sequences of other organisms into target species, to import desirable traits. But European regulators imposed a de-facto moratorium on the licensing of GMO products in 1998, citing (as yet unverified) risks to the environment and human health. It later allowed some to come in, but approvals came at a very slow pace and after a very stringent, onerous process. The EU’s “precautionary principle,” whereby extensive risk assessment must be put in place before any GMO product enters the market, remains in place.

Yet there is hope that gene editing will escape those regulations, allowing it to target a much bigger market. In its most common form, dubbed CRISPR, it uses molecular scissors to make tiny changes in organisms’ DNA sequences. Those changes are more precise and more natural than those obtained through genetic engineering, proponents say, because they could have occurred through a classic genetic mutation (no external DNA is being imported). Advocates think this makes gene editing little different from traditional plant breeding.

So far, this message has been well received by regulators. In April, the US Department of Agriculture gave its green light to using the technique to create genetically altered crops. The European Court of Justice said in January that gene editing might not need to come under GMO regulations, and the UK’s advisory committee on the matter seems sympathetic to that opinion. The ECJ is set to issue a formal ruling on July 25. Investors must be hoping the court sticks to its original intuition.

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