Using Genomics to Find Olympic and Investment Gold

Dan Roarty

Dan Roarty (pictured) and Edward Bryan

As the Olympic Games in Sochi draw to a close, a new era for international sports may be beginning. Uzbekistan last month revealed a program to test children’s genes to predict their athletic potential. With genomics becoming more mainstream, we believe investors should take a long-term view and look beyond the traditional companies involved in genetic testing.

Since Gregor Mendel first suggested the existence of a gene in the 1860s, genomics research has progressed at an incredible speed. Recent technological advances have moved genomics out of research labs and into the real world.

Companies today offer a variety of genetic tests, ranging from suggesting appropriate diets to estimating the risk of being cheated on by a significant other. A DNA sequencing machine, testing for cystic fibrosis, was the first of its kind to win US Food and Drug Administration approval last year. Treating cancer with therapies that target specific genetic mutations is now standard medical practice. And not only since Angelina Jolie had a double mastectomy after testing positive for a gene mutation that gave her an 87% risk of breast cancer.

Costs of Gene Sequencing Plummet

While genomic research might be unsettling for some and not without controversy, scientists agree that we have barely scratched the surface of genomic discoveries. That is because sequencing a whole human genome now costs just US$1,000 compared to more than US$1 billion at the beginning of the 21st century.

The lower price, made possible by years of technological innovation, is a huge leap forward in genomics. It allows sectors other than healthcare, such as farming and sports, to benefit from research. As more genes are sequenced because of lower costs, it creates a deeper pool of genetic information, which in turn increases the amount of information that can be gleaned from an individual genome. 

Growth in genetic sequencing is likely to continue at this breathtaking speed. New discoveries will fuel demand for more testing, reducing the costs of sequencing further.

 

We believe that we are still in the early days of the market potential of genomics. That can be exciting news for investors. However, investors should also be cautious. The medical technology market is still highly regulated and there are a myriad of ethical issues that may arise as genomics affects more of our daily lives. That means investors should take a long-term view to best benefit from the fast-growing world of genomics.

Accessing the Investment Potential

We suggest that investors take a closer look at those companies that position themselves across different markets. Makers of gene testing tools might currently be among the biggest winners, but that could change once gene sequencing becomes more of a commodity.

Over time, the value created by sequencing may move from life science companies to those that take the gathered information and apply it profitably, whether that is in the consumer products, diagnostics, or pharmaceutical sectors. The deluge of new genomic data will also need to be analyzed and stored, allowing technology companies to benefit.

Certain governments have been faster than others to consider population-wide sequencing studies. But we believe that investors should approach genomics with a global view because new markets, technologies and applications can ultimately emanate from a variety of countries.  

Uzbekistan is to start testing for its future sports champions from next year. Who knows what progress genomics will have made by the time the next Olympic Games roll around?

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.

Dan Roarty is Team Leader, Global Growth/Thematic Portfolios at AllianceBernstein (NYSE:AB). Edward Bryan is a Portfolio Analyst at AllianceBernstein (NYSE:AB).

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