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Investing in the gut: Fixing the bacterial bugs in our microbiome

COVID-19 has intensified interest in the human microbiome, as researchers contemplate whether bacteria living in the gut might affect susceptibility to infection. Drawing on our experience in public markets and Ahren Innovation Capital’s knowledge of private markets, we look at the companies making strides in live biotherapeutics, using ‘bugs as drugs’, and key challenges that need to be overcome.

Investing in the gut: Fixing the bacterial bugs in our microbiome

A typical human harbours thirty-eight trillion bacterial cells, more than 90 per cent of which live in the gut.1 Numerous studies highlight these bacterial cells – our microbiome – are closely connected to health, evolve over the course of a lifetime, and can be affected by factors such as diet, medication or stress. Trying to understand the connections between flora in the gut and other complex operations in the body is a research priority.

With respect to COVID-19, there are efforts to decipher the links between gut health and susceptibility to viral infection, improving vaccine responses, and even using faecal material as an infection early warning system. [More details on these areas can be found at the end of this article in Figure 3: Microbiome and COVID-19 spill overs.]

Cheaper sequencing has allowed us to build up powerful genomic datasets

“It’s only recently that we have been getting very good quality genomic data on the microbiome,” says Dr Joanna Green, senior investment associate at Ahren Innovation Capital, an investment institution focused on early stage companies at the intersection of deep science and deep technology.2 “

“Traditionally, you would take a sample, swab it, see what grows and then analyse it. But many of the bacteria found in the gut simply won’t grow or require specific culture conditions that can be hard to replicate. It’s only recently cheaper sequencing has allowed us to build up powerful genomic datasets.”

Scientific advancements

The sharp drop in sequencing costs has made it possible to go beyond sequencing just the 16S rRNA gene (commonly carried out to identify and compare bacteria within a given sample) to whole genome microbial sequencing. This has led to an unprecedented advancement in understanding microbes in our bodies, and it is hard to represent the scale of the research frontier.

In 2007, there were approximately 200 human microbiome samples and 21,000 sequences available for research. Ten years later, the numbers were 27,000 and 2.2 billion respectively,3 and the datasets continue to grow. For example, a recent study of waste produced by people of different ages in 32 countries led to the identification of more than 4,000 different strains of bacteria, 77 per cent of which had not been identified before.4

Advances have also been made in bioanalytics and data science, strengthening the understanding of how microbes interact with themselves, one another and the human body. The hope is that further modelling and deep learning will bring better understanding of how communal bacteria impact health.

Developers dream of creating personalised treatments, tailored for individual needs

Ultimately, developers dream of creating personalised treatments, tailored for individual needs. This means moving beyond using a small number of strains of ‘good’ bacteria in functional foods, like bio-yoghurts, to specialist medical applications. It is a rich seam to explore, as current research suggests intestinal microbiota might influence everything from the incidence of irritable bowel disease (IBD) to depression, conditions that afflict millions.

In the process, it could bring significant opportunities for companies able to translate that knowledge into safe and scalable commercial treatments. The Swiss contract developer and manufacturer Lonza suggests the market could be worth €1 billion by 2035. Aside from Lonza, whose pipeline is illustrated below, interest in the field means there are a further 200 drugs being evaluated in different phases of development.5

Figure 1: The potential of live biotherapeutics to treat disease
The potential of live biotherapeutics to treat disease
Source: Lonza, as at April 2019
Figure 2: Lonza forecast: Live biotherapeutics market worth €1bn within 15 years
Lonza forecast: Live biotherapeutics market worth €1bn within 15 years
Source: Lonza, as at April 2019

Bugs as drugs

If changes in microbiota drive disease, repairing those changes or perhaps modifying the composition could help reverse certain conditions. By exploiting knowledge about bacterial communities, live biotherapeutics (LBPs) - using ‘bugs as drugs’ - could become an exciting new treatment class.

Multiple private companies are working on microbiome-based therapeutics

“In the near term, there are some commercial opportunities,” says Green. “For example, when Clostridium difficile (C-diff) bacteria dominate the gut microbiome it can cause recurrent diarrhoea. There are multiple private companies working on microbiome-based therapeutics and looking to commoditise the transplantation of faecal material or introduce specific bacterial strains to rebalance the gut. I would be surprised if something does not reach the market in this area soon.”

At the time of writing, Seres Therapeutics, a Massachusetts-based biotechnology company, had just reported positive data from a Phase 3 trial of an oral treatment for recurrent C-diff infections in the US. News that the treatment helped cut the short-term reinfection rate by 30 per cent versus a placebo led to a surge of interest in the stock, even before regulatory hurdles were cleared.6 Although it is too early to anticipate what might happen, food giant Nestlé has a long-standing relationship with Seres and holds nine per cent of the stock. Nestlé Health Science has been clear about its intention to challenge established medical paradigms and is seeking treatments “fundamentally different from traditional drugs”.7

Others see potential in immuno-oncology. “Immuno-oncology is one of the largest commercial opportunities,” says Matt Kirby, equities fund manager with responsibility for healthcare analysis at Aviva Investors. “Cancer is a disease of the genome: people accumulate mutations in their cell DNA. We know patients using immunotherapies tend to have mixed results, even with various combination treatments. The variability of an individual’s microbiome could help explain this. Eighty per cent of immune cells in our bodies are found in the intestine, and the gut microbiome helps stimulate immune response. A key question the scientific community is working on is: which microbes are required for which population?”

There are a wide variety of other therapeutic areas where scientists believe the microbiome could play an important role

There are a wide variety of other therapeutic areas where scientists believe the microbiome could play an important role. Microbes are essential in the production of metabolites (substances necessary for metabolism, needed for cell growth) and can have a systemic impact. Biotech companies like LNC Therapeutics, supported by the French state-backed investment bank BPI, have pivoted to explore the relationship between the gut microbiome, metabolic disorders and obesity.

There is also increasing evidence that the microbiome may influence the brain, impacting depression and other neurological conditions like Parkinson’s disease through the gut-brain axis.

“This is probably one of the more exciting, ‘blue-sky’ areas that is five years plus away from delivery,” says Green. “Researchers have been looking at the connection of the gut to the brain through the vagus nerve or endocrine signalling and the dataset there seems to be getting stronger.”

Microbes in the intestine are thought to communicate with the central nervous system through several channels; companies like Kallyope in the US are using a systems approach to identify the hormonal and neural circuits involved in the progression of certain conditions, aiming to target the circuits via the gut.

The research and manufacturing landscape

Meanwhile, numerous challenges have emerged regarding the development of accurate, scalable diagnostics and the handling and manufacturing of live bacteria for medical purposes.

“This is an area where large publicly traded companies are playing a leading role,” says Kirby. Diagnostics companies like Qiagen see microbiome diagnostics as an interesting long-term opportunity. Most of the firm’s efforts are aimed at addressing how complex it is to extract the data. Progress is needed around how to stabilise samples and open-up cells for DNA/RNA extraction.”

CDMOs are playing a key role in addressing manufacturing challenges

Contract development and manufacturing organisations (CDMOs) are also playing a key role in addressing manufacturing challenges. Leading players include BacThera, a joint venture between Lonza and bioscience group Christian Hansen, which was created to fill the need for end-to-end manufacturing in 2019.

Hansen already has a monopolistic position providing bacteria for consumer food products, like yogurts, enabling it to build an extensive microbial library through trial-and-error. It also has expertise in anaerobic (oxygen-free) microbial manufacturing.

Once the appropriate bacteria are developed, they need to be delivered in capsule form for oral delivery. The challenge is that the capsules need to be able to withstand the acidic environment of the stomach before they are dissolved in the intestine. There are other practical issues to ensure capsules are acceptable for consumers; for example, they might need to disguise certain smells. This is another area where Lonza has expertise following its acquisition of US capsule specialist Capsugel.

Alongside the diagnostics and manufacturing challenges, standardisation of processes is also critical. There is a need for large-scale, consistent studies to develop understanding, most likely to be carried out by consortia of pharmaceutical companies.  

It is also important to note our current understanding of the microbiome is largely based on sample populations in the US and western Europe. As many external factors can impact the microbiome, and some are geographically dependent, embracing greater diversity will be vital in developing robust conclusions.

Gut instincts

Academia and the private sector have made significant progress in advancing the microbiome field and public companies are now beginning to make their moves. As yet, there are no ‘pure-play’ LBPs in which to invest at scale, but as we continue to improve our understanding of the human microbiome and later-stage clinical trials begin to read out, the field has potential to provide another leg of growth to companies who have positioned themselves appropriately.

The hope is that important breakthroughs will be made for individuals who have suffered with long-standing, debilitating conditions for years.

Figure 3: Microbiome and COVID-19 spill overs
Microbiome and COVID-19 spill overs
Source: Aviva Investors, August 2020


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