Investing in Genomics

Genomics is considered to be a major area of growth within the healthcare and wider scientific sectors over the next 20 years. Overall forecasts vary, but the numbers look great. Over the next five years the sector is anticipated to grow by 12.4% CAGR from its 2023 size of $46.2bn, to a level of at least $80bn, according to research from Markets & Markets.

Longer term forecasts see even more stellar growth. SkyQuest Technology estimates the sector could be worth around $411bn by 2031. Indeed, ARK Invest has forecasted that the genomics innovation platforms will scale at nearly a 40% CAGR through the end of this decade.[1]

Bear in mind the sector also benefits from considerable government grants all over the planet. The increasing incidence of cancer globally, for example, is prompting further public investment into genomics projects. There is a stress on finding simple and effective cancer diagnosis, for example.

[1] Source: ARK Invest Big Ideas 2024 publication (page 13).

The genomics sector is still dominated by the functional genomics sector, which accounts for around 32% of revenues. This is where a lot of the research is currently being carried out into cancer gene therapies.

Cutting edge work in Europe into CRISPR/Cas9-based functional genomics screens at the single cell level is one example of this. Analysts estimate functional genomics will continue to see the highest growth potential within the genomics sector between now and 2031.

Genomics is also playing a more important role in the development of drugs. Many companies are now using the technology as part of their drugs trials, as it can deliver a much higher level of precision in their results. With the cost of genomic sequencing dropping rapidly, the tech can also now be rolled out at the hospital and clinic level. It can help with detecting unrecognised and scarce disorders in patients.

It comes as no surprise to see that North America dominates the genomics market. Estimates vary, but the region dominates the global genomics market to the tune of at least 42%. This is thanks in no small part to the amount of money being poured into research by US pharma groups and heavily funded research organisations.

However, the Asia-Pacific region is expected to start closing the gap in genomics over the next five years. Healthcare providers in Asia are expected to roll out more genomics-based screening and therapy procedures over the next few years, and there are also some larger projects underway, like the massive Genome Asia 100K project, which is analysing 100,000 genomes within the region. This could also lead to the development of drugs specifically targeted at Asian genomes.

It all sounds very exciting. Investors should be aware that the sector does face some headwinds as well. The rapid expansion of the market means there are not enough educated genomics professionals to fill all the jobs it is creating. This could turn into a real drag on the sector.

The other issue relates to data integration challenges. Genomics is very data intensive: a single patient exam can create a terabyte of data but can mushroom well beyond that once you factor in all the subsequent procedures. As more patients fall into the scope of gene-based treatments, the amount of patient data processed will mushroom massively. Are on the ground healthcare operations going to have the required data infrastructure to meet this challenge?

There are a number of different routes towards investing in the growth of the genomics sector. Exchange-Traded Funds (“ETFs”) are a great place to start as there are now specialist genomics and biotech ETFs which are also laser-focused on the sector. The advantage of these is that they can capture a lot of the long-term growth across the genomics industry, without the risk of investing in single stocks. Furthermore, some of these strategies may deploy researchers with domain expertise to assist in stock selection, such as Doctorates in associated genomics fields.

For those who are meaningfully more risk tolerant, individual stock picking remains an option. Some safer (but severely more diluted) options include the healthcare giants which will have exposure to the sector, largely because they are helping to fund ongoing R&D and deploying the technology in the marketplace.

Private equity and venture capital funds are also very active in the space, but they have the disadvantage of requiring a great deal of capital be committed up front, and in most cases lock up capital for five or more years.

Adding a genomics themed ETF to your portfolio can provide you with the genomics and biotech exposure you are looking for without the risk of relying on a single stock for investment returns (see below). A genomics-themed ETF will consist of a number of genomics related stocks, chosen by the manager in accordance with the ETF’s objectives. This may be a focus on smaller companies, or larger, more established businesses. Some funds may track a benchmark, while others may be active and benchmark-agnostic in their stock selection based on their research and forward-looking convictions. Make sure you research the objectives of each genomics ETF before you purchase to ensure the exposure you will gain meets with your investment goals.

Here are some genomics ETFs for you to consider. These ETFs can be purchased via most established online platforms. We have a selection of investment platforms to help you get started – listed below.

Genomic Revolution UCITS ETF

Theme: Genomics Ticker: LON:ARKG Currency: USD

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BioRevolution UCITS ETF

Theme: Genomics Ticker: LON:WDNA Currency: USD

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Investors can gain exposure to the genomics megatrend by investing in listed companies that are focused on bio- and healthcare tech. Some companies in the sector include the likes of Illumina NASDAQ:ILMN and/or Pacific Biosciences of California NASDAQ:PACB for gene sequencing, CRISPR Therapeutics AG NASDAQ:CRSP for gene editing, and/or companies like Recursion Pharmaceuticals NASDAQ:RXRX that focus on the intersection of Artificial Intelligence and genomics for drug discovery. Smaller business that are positioned within the sector can also offer more significant rewards, but they will come with far more risk.