What happened

Shares of the three leading companies developing human therapeutics based on CRISPR gene-editing technology fell as much as 11.4% today. There was no new news that could be interpreted as detrimental to CRISPR Therapeutics (NASDAQ:CRSP), Editas Medicine (NASDAQ:EDIT), or Intellia Therapeutics (NASDAQ:NTLA). But on July 23, many media outlets published stories commenting on a study released one week earlier.

While the stock moves may seem to be based on the rehashing of old news, there are good reasons investors shouldn't be too quick to dismiss the concerns. As of 2:44 p.m. EDT, CRISPR Therapeutics stock had settled to a 9.5% loss, while Editas Medicine shares were down 10.4%, and Intellia Therapeutics stock had sunk by 7.2%.

A chart drawn on a chalkboard, showing an abrupt dive

Image source: Getty Images.

So what

On July 16, scientists published a study in Nature Biotechnology demonstrating that using CRISPR tools to edit faulty DNA sequences can lead to unintended deletions and rearrangements of genetic material. The lead author, Dr. Allan Bradley, issued a cautious summary of the study:

This is the first systematic assessment of unexpected events resulting from CRISPR/Cas9 editing in therapeutically relevant cells, and we found that changes in the DNA have been seriously underestimated before now. It is important that anyone thinking of using this technology for gene therapy proceeds with caution, and looks very carefully to check for possible harmful effects.

The researchers, who hail from the prestigious Wellcome Sanger Institute, found that some of the genetic changes occurred far away from where CRISPR tools cut a genome, locations which would elude existing diagnostic tools used to gauge off-target effects. In other words, the field has "seriously underestimated" the potential for unintended genetic alterations because it hasn't been looking in the right places.

All three companies made statements to Reuters last week regarding the study. CRISPR Therapeutics commented: "We do not use the methods described in this Nature Biotech paper ... nevertheless, in our work, we do not see similar findings." Editas Medicine said it was "not specifically concerned." Intellia Therapeutics said it didn't think the findings would affect the future of CRISPR-based therapies.

While it's important for investors not to panic over the latest study showing potentially unintended consequences of using gene-editing tools, it is worth noting that most of the recent uncertainty injected into CRISPR stocks has come from observations of DNA repair mechanisms -- one thing gene-editing tools have little to no control over. While companies focus on developing safe and effective ways to cut a genome, they must rely on natural cellular processes to stitch up the genome afterwards.

For instance, in June, investors worried over two studies showing that CRISPR tools could activate a faulty DNA repair mechanism and result in cancerous cells. The latest study from the Wellcome Sanger Institute was not concerned with the same question, but demonstrated that researchers may be overlooking the details of how genomes get stitched back up.

Now what

An open-minded approach to investing in CRISPR Therapeutics, Editas Medicine, and Intellia Therapeutics would nod to the awesome potential of the technology while acknowledging the risks of an early-stage investment. Recent stock moves hint that the hype may need to come back down to earth, as there's much left to understand about using CRISPR tools in human cells. To date researchers have focused mostly on the ability to cut DNA, but it may be time to start paying closer attention to what happens after that.

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.