The U.S. Food and Drug Administration recently granted fast-track status to the first experimental new therapy from CRISPR Therapeutics (CRSP 1.08%). That's a big deal for the young biotech and its collaboration partner, Vertex Pharmaceuticals (VRTX 0.10%).

Both of these companies stand to earn a great deal if their one-time cure for blood-based disorders performs as well as hoped. Let's compare the different challenges and opportunities ahead of these biotechs to see which is the better stock to buy at the moment.

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The case for CRISPR Therapeutics

If the name didn't tip you off, CRISPR Therapeutics is trying to develop new treatments that use Cas9, an enzyme bacteria used to fight viral infections, to edit DNA at precise locations called clustered regularly interspaced short palindromic repeats (CRISPR).

This biotech's first new drug candidate to begin human trials, CTX001, is aimed at two blood-based disorders with the same problem. Patients who inherit sickle cell disease and beta-thalassemia can't make enough functional hemoglobin and require regular transfusions to replenish the oxygen-carrying protein.

In the U.S., CRISPR Therapeutics is running its first sickle cell trial with CTX001, and beta-thalassemia patients are testing the same candidate in ongoing European studies. If successful, the stock will soar, but there's still a lot that can go wrong.

Instead of pills or injections, CTX001 is an IV bag full of a patient's own stem cells that CRISPR Therapeutics tweaked in a manufacturing facility off-site. Once reinfused, CTX001 cells are supposed to embed themselves in the bone marrow of patients with sickle cell disease, or beta-thalassemia, and produce enough hemoglobin to permanently reduce their dependence on blood transfusions.

The only way to know CTX001 works as intended is by watching and waiting. In the meantime, CRISPR Therapeutics is racking up development expenses that it has no revenue to pay for. In 2019 the company will ramp up its attempt to advance a cellular cancer therapy it still owns outright. The candidate, CTX110, uses a one-size-fits-many approach instead of manufacturing a new batch for every patient. An off-the-shelf treatment that works as well as commercially challenged CAR-T therapies could be worth billions in annual revenue, but developing it won't be cheap.

CRISPR Therapeutics finished September with $487 million in cash after burning through $117 million during the first nine months of 2018. Now that clinical trials have begun, development costs will chew through that cash cushion like a lonely puppy. Collaboration partner Vertex Pharmaceuticals will split expenses and, hopefully, profits related to CTX001. When it comes to a CTX110 study that CRISPR Therapeutics wants to start early next year, though, the start-up will be on the hook for the whole bill. 

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The case for Vertex Pharmaceuticals

Check out the latest Vertex Pharmaceuticals earnings call transcript.

This drugmaker spent just $75 million upfront to partner with CRISPR years ago, which means the first clinical trials for CTX001 could completely flop and Vertex Pharmaceuticals shareholders would hardly notice. That's because the company's cystic fibrosis treatments are generating blockbuster sales now, and potential competition is miles behind.

During the first nine months of 2018, sales of cystic fibrosis treatments rose 41% to $2.2 billion, and Vertex is expected to lead this space for a long time. The company recently posted data from a trial with its experimental three-drug combination that improved patients' lung function 14% from baseline after four weeks. For comparison, Vertex's Orkambi earned approval to treat similar patients after producing a 3% improvement. Sales of Orkambi and its follow-up, Symdeko, reached an annualized $2.1 billion run rate during the third quarter, which makes the experimental triplet a potential blockbuster as well.

Over the past year, Vertex poured $1.3 billion into research and development to stay several steps ahead of the competition. Despite the heavy investment, operations were still able to generate an impressive $1.1 billion in free cash flow over the same period.

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The better buy

Cystic fibrosis affects roughly 75,000 people in North America, Europe, and Australia, and a year's supply of Vertex's treatments runs into six figures annually. The potential hasn't gone unnoticed, and investors expecting several more years of impressive growth have driven the price of Vertex stock up to 15.7 times trailing revenue. For comparison, biotech stocks generally trade at mid-single-digit multiples of trailing sales.

It will be over a year before CRISPR can tell investors when to begin thinking about steady revenue, but expectations of success have already pushed the company's market cap up to $1.6 billion at recent prices. That means the first clinical trial results must exceed already lofty expectations to realize any gains in the years ahead.

CRISPR could be a great tool to help discover and develop new treatments that cure serious diseases, but that doesn't make development any less risky. Roughly 90% of experimental drugs that enter clinical trials end up on a scrap heap.

Vertex investors have little to lose if CTX001 doesn't make it to the big show but still get to share in the success if it's a hit. Despite its high valuation, a relatively clear path to years of continued growth makes Vertex Pharmaceuticals the better stock to buy now.