There's no hotter gene-editing stock on the market right now than CRISPR Therapeutics AG (CRSP +7.05%). It's up close to 130% so far in 2018, much higher than other biotechs that are also focused on developing gene-editing therapies.
But CRISPR Therapeutics' market cap now stands at nearly $2.6 billion with no products on the market or even in clinical testing yet. Is the stock still a buy at its current price tag?
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Tremendous potential
As its name indicates, CRISPR Therapeutics is developing therapies using CRISPR gene editing. Some have called CRISPR the biggest biotech discovery of the century. Using CRISPR, which stands for Clustered Regularly Interspaced Short Palindromic Repeats, scientists can use bacterial enzymes to cut DNA at a targeted location. This targeted editing opens the door to treating a wide range of genetic diseases and even some diseases not caused by genetic mutations.
Right now, CRISPR Therapeutics' primary focus is on using CRISPR gene editing to treat two rare blood diseases caused by different mutations in the hemoglobin beta (HBB) gene: beta thalassemia and sickle cell disease. The biotech's lead pipeline candidate, CTX001, targets both of these diseases.
CRISPR Therapeutics isn't alone in its excitement about the potential for CTX001. Vertex Pharmaceuticals (VRTX +0.87%) announced a collaboration with the small biotech in 2015, a deal that included a sizable up-front cash payment and Vertex buying a stake in CRISPR Therapeutics. In late 2017, the two companies announced that they would co-develop and co-market CTX001.
CRISPR Therapeutics and Vertex are on track to begin a phase 1 clinical study of CTX001 in beta thalassemia later this year. This will be the first clinical study in humans using CRISPR gene editing conducted outside of China.
However, the planned phase 1 study for CTX001 in sickle cell disease was placed on clinical hold by the U.S. Food and Drug Administration (FDA) in May. CRISPR Therapeutics CEO Samarth Kulkarni said last month that the biotech has "a clear path to resolve the current clinical hold."
Success in beta thalassemia and sickle cell disease could realistically make CTX001 a multibillion-dollar product. However, CRISPR Therapeutics isn't just looking at those two diseases. The company is also conducting preclinical testing using CRISPR gene editing for half a dozen other genetic diseases.
In addition, CRISPR Therapeutics plans to file for approval by the end of 2018 to begin a phase 1 clinical study evaluating CTX110, an allogeneic chimeric antigen receptor T cell (CAR-T) therapy targeting CD19+ malignancies. The company also has two other allogeneic CAR-T therapies in preclinical testing.
Allogeneic therapies are kind of the holy grail for CAR-T. Current autologous CAR-T therapies require taking T cells from a patient's blood, genetically engineering them to target cancer cells, allowing them to multiply, then putting the T cells back into the patient's bloodstream. Allogeneic CAR-T is an "off-the-shelf" approach that uses other individuals' donor cells. Allogeneic CAR-T holds the potential to be faster and much less expensive than current autologous CAR-T therapies.
But tremendous risks, too
The downside for CRISPR Therapeutics is that it's still really early for using CRISPR gene editing in humans. Several potential risks have already been identified with CRISPR.
One is the possibility of off-target genetic changes. Researchers have also identified the possibility that gene correction using CRISPR could increase the risk of cancer. Gene correction involves the deletion of a targeted DNA sequence and insertion of a new DNA sequence. CRISPR Therapeutics' lead candidate CTX001 uses gene disruption -- the deletion of a DNA sequence only. However, some of its other experimental therapies do use the gene correction approach.
But CRISPR Therapeutics doesn't just face potential scientific risks associated with CRISPR gene editing. The biotech also faces competition. Other companies are developing treatments for several of the same diseases that CRISPR Therapeutics is targeting, including another CRISPR pioneer, Editas Medicine (EDIT +9.35%).
There are also questions about patent rights. A U.S. Court of Appeals recently announced a decision that was favorable to Editas and not-so-favorable for CRISPR Therapeutics.
On top of all of this, it's possible that other gene-editing approaches are developed that make CRISPR obsolete. While that doesn't seem likely to happen over the next few years, it's nonetheless a real risk.
Is CRISPR Therapeutics a buy?
I'm going to split hairs a bit in answering the key question. For conservative investors, CRISPR Therapeutics is probably a stock to avoid. There's too much risk involved. However, for more aggressive investors, I think that CRISPR Therapeutics is worth rolling the dice.
The stock's valuation is lofty considering how far CRISPR Therapeutics has to go before having an approved product on the market. But if the biotech's gene-editing therapies are successful, the stock should be worth a lot more than it is today. The risks are real, but so is the promise.
