What happened

The three major CRISPR gene-editing stocks rose as much as 47% in May as each progressed ever closer to initiating first clinical trials. Today, investors are being forced to wonder if the companies are getting ahead of themselves in the potentially game-changing technology.

Shares of Editas Medicine (NASDAQ:EDIT) fell as much as 10.7%, while peers Intellia Therapeutics (NASDAQ:NTLA) and CRISPR Therapeutics (NASDAQ:CRSP) sank as much as 11.1% and 16.1%, respectively, following the release of two new studies that seem to indicate certain gene-editing techniques could trigger the rise of cancer.

A scientist sitting in the lab with a disappointed look on his face

Image source: Getty Images.

So what

This isn't the first time a study's release has caused CRISPR stocks to collapse. Back in January, a study purported to show that many individuals might be immune to gene-editing tools. Since key components of CRISPR systems are often borrowed from microbial genomes, the human immune system might spring into action and chop up a therapeutic tool before it can perform genetic surgery on a patient's DNA.

The good news is that that study was roundly dismissed by leading scientists in the field for several reasons, including that there are practical ways around the limitations found. The bad news is that scientists aren't so dismissive of the latest news. Even CRISPR Therapeutics CEO Sam Kulkarni told STAT the results are "plausible."

The two new (and separate) studies published in Nature Medicine today, including one from Novartis, present evidence that using certain CRISPR gene-editing tools on a cell can trigger cancer. The underlying mechanism identified is why investors might want to take the results seriously.

There are two types of CRISPR gene edits: non-homologous end joining (NHEJ) and homology-directed repair (HDR). The former is often used for simpler genetic edits, while the latter is used for more complex edits. HDR is the technique singled out in the new studies.

One of the biggest hurdles companies are trying to overcome in developing safe and effective CRISPR therapeutics is improving their efficiency -- the techniques simply don't work in very many cells that are subjected to treatment. The reason for that is simple. When a cell realizes its DNA is being cut (which it interprets as damage), it sends a protein called p53 to stitch the DNA back together, or kill the cell if a repair can't be made.

Most of the time, the only "side effect" is that CRISPR gene-editing tools using HDR don't work on a given cell. But the two studies found that there's actually a third outcome: A cell with a mutated p53 won't repair the DNA damage or kill the cell. The result is a cell lacking normal programmed-death machinery...otherwise known as a cancer cell.

Linking the inefficiency of HDR CRISPR gene-editing tools to p53 is particularly worrisome. According to STAT: "P53 mutations are responsible for nearly half of ovarian cancers; 43 percent of colorectal cancers; 38 percent of lung cancers; nearly one-third of pancreatic, stomach, and liver cancers; and one-quarter of breast cancers, among others."

Luckily, all three major CRISPR companies -- Editas Medicine, Intellia Therapeutics, and CRISPR Therapeutics -- are using NHEJ for their first clinical candidates. They are all, however, hoping to use HDR in future products that target more complex diseases.

That includes cystic fibrosis programs being developed by Editas Medicine and CRISPR Therapeutics, liver disease programs being investigated by all three companies (Intellia Therapeutics' partnership with Regeneron focuses on liver diseases), and several other programs underway at CRISPR Therapeutics specifically.

Now what

For now, it seems that the leading CRISPR stocks are safe from the boogeyman of mutated p53 -- for their pipeline inhabitants that are closest to the clinic, anyway; NHEJ techniques appear to be in the clear.

But the studies' findings could greatly limit the promise of CRISPR gene-editing tools in more complex genetic corrections using HDR techniques. It's potentially troublesome news that could bring even more regulatory scrutiny as the first gene-editing trials get underway.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends Editas Medicine. The Motley Fool has a disclosure policy.