In this Market Foolery segment, host Chris Hill and Motley Fool Rule Breakers’ Aaron Bush talk about where genetic engineering is heading — which is out of the lab and toward really curing diseases. Yes, it’s early days. But the potential for CRISPR could be enormous. But there are some interesting speedbumps involved for biotech investors.

A full transcript follows the video.

This video was recorded on July 11, 2017.

Chris Hill: Every once in awhile, I like to walk by your desk and ask you, “What are you working on right now? What’s something that’s caught your interest?” And you had brought up this, [laughs] frankly, you brought up a word I had never heard before, and that is CRISPR. I should say, an acronym I’d never seen before. CRISPR stands for — stick with me, folks — clustered regularly interspaced short palindromic repeats. Let’s do this again, shall we? CRISPR: clustered regularly interspaced short palindromic repeats, which is essentially a very fancy way of referring to biotech engineering.

The analogy that our colleague Michael Douglass mentioned to me, and also appeared in the article I read is that, imagine a DNA strand, and you have this microscopic pair of scissors, and it enables you to snip out one little piece of the DNA, and you can do any number of things with that, depending on which DNA we’re talking about. This potentially has ramifications for food supply, for disease, for medicines, for treatments, all that sort of thing. Tell me where this space is right now, and what you’re watching when it comes to this space. Biotech engineering has been, I would say, maybe not at the forefront of the news, but certainly 15 years ago or so, when we were going to sequence the human genome, what that was such a dominant story, I think since then, this is an industry that investors have at least had on their radar to some degree or another.

Aaron Bush: Right. I think it’s still new enough to not be super relevant for investors. But every day or week that passes by, it becomes slightly more relevant. I think for the most part, the progress has been mostly restricted to labs, getting the fundamental technology itself to work, where you can actually change the genes in whatever creature. But, it is starting to move out more into the mainstream, and it’s starting to become more relevant and creating cures for diseases and actually doing things with it. In my opinion, it’s kind of like a big idea at this point. There isn’t a lot to back it up. But, if you do play it forward, it is one of those really big ideas. It’s probably on par with augmented reality, or machine learning, or cryptocurrencies, even, that can just disrupt the way that things are done at a fundamental level. So, I’m excited to see where it runs. But it’s still definitely the early days.

Hill: And that was another thing Michael Douglass mentions. He said, “This is super early stage,” and there are pure-play companies out there, one of which was smart enough to get the name CRISPR Therapeutics (NASDAQ:CRSP), so kudos to whoever nailed that one. But, you were saying before we started taping that there’s a move right now to create a patent pool, because you could see where, for some companies, this could become incredibly lucrative. You could also see a situation where — and it sounds like this is maybe part of what is driving the move toward a patent pool — everything could just get tangled up in legal “he-said, she-said, that’s my patent” stuff.

Bush: Right. One of the main blockers to the development of CRISPR is an ongoing fight over patent rights. I think we’re at the point where things are getting slow and getting caught up legally. As you can imagine, there are several universities, labs, biotech companies just clamoring over this, trying to pile on as quickly as possible, because it is going to be one of the next big things. And right now, there are a few exclusive licenses that are probably too broad in the market, and should probably be re-evaluated so that there aren’t specific gatekeepers to the technology. So, yeah, this needs to form a patent pool and simplify the licensing process, could ease that patent logjam and really help accelerate CRISPR’s development across everything, across the entire space. So, right now, this is still at the proposal level, and I don’t know how quickly that’s going to move, because there are a lot of players here. There’s still negotiation to be done, but if the negotiations go well, I think this could start to become much more relevant for investors sooner. And something with the biotech space in general is, you do need to invest early to get the big results. And if you wait until there’s a drug on the market that works, you just missed a several-billion-dollar run-up. So, it is important to be watching these early moves. And seeing how all the different players, the Editas, the CRISPR Therapeutics, and others, how they’re going to shake out in this patent pool issue.

Hill: It sounds like, as investors, we should be rooting for the patent pool to come to fruition, because that’s going to accelerate the process, instead of being — and I’m just pulling these numbers out of thin air — 10 years away from treatments being on the market, we are five to seven years away.

Bush: Yeah. I think it’s hard to put specific numbers on it, but yes, that’s definitely the idea. It’ll allow companies to more quickly start building their own technologies and their own patents on top of a larger pool that’s available to everyone.

Hill: To make this both more real and more fun, one example that I dug up when I was clicking around this morning, an article from Scientific American — which is six years old, by the way. I’m angry that no one in my life flagged this article for me. It was basically how researchers took the fluorescent proteins that appear in jellyfish genes and inserted them into a common household cat. And so, boom, glow-in-the-dark cat. I mean, who’s not excited about that?

Bush: What else can you ask for?

Hill: Actually, our man behind the glass, Dan Boyd, when I mentioned that to him, he was like, “No. I have no interest in a glow-in-the-dark cat, they’re enough trouble as they are at nighttime. Add the glow-in-the-dark feature and that’s not sweetening the deal for me.” Really interesting stuff. Definitely something to keep an eye on.

Aaron Bush has no position in any stocks mentioned. Chris Hill has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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