Check out the latest Editas Medicine earnings call transcripts.

What happened

Last year was a roller coaster for the three leading CRISPR stocks. CRISPR Therapeutics (NASDAQ:CRSP) touched year-to-date gains of over 200% at one point. Intellia Therapeutics (NASDAQ:NTLA) eclipsed an 80% return at its best, while Editas Medicine (NASDAQ:EDIT) never found its footing, maxing out near 40%.

None of those high-water marks mattered in the end. Shares of CRISPR Therapeutics settled at a 21.7% gain for 2018, far better than its two counterparts, according to data provided by S&P Global Market Intelligence. Intellia Therapeutics lost 29% for the year, while Editas Medicine closed the year with a 26% loss.

Why was there so much volatility for CRISPR stocks in 2018, and what can investors expect in 2019?

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Image source: Getty Images.

So what

Two things in particular dictated the trajectory of CRISPR stocks in 2018: runaway hype and back-to-reality observations unveiled in peer-reviewed research papers. For instance, investors and analysts handed CRISPR Therapeutics a market cap of over $3 billion at its peak last year -- an unreasonable valuation for a preclinical biopharma. This bubble had much to do with hyped media coverage of CRISPR gene-editing tools, but it didn't take long to remind investors of the speculative nature of these investments.

The gene-editing trio came crashing back to earth several times over the course of the year after scientists published findings demonstrating that there's much left to learn about how CRISPR tools will work -- or not work -- in human cells.

Among the alarming findings include a study that showed a majority of individuals could be immune to some of the cutting enzymes used in the therapeutic candidates and the possibility that the genetic scissors could stir up a DNA repair mechanism that allows cancer to spread and grow.

Some of these obstacles can be overcome, but solving others may prove thornier. That didn't stop the first drug candidates from moving into the clinic. CRISPR Therapeutics began phase 1/2 trials for CTX001 in beta thalassemia and sickle cell disease. Meanwhile, Editas Medicine received the regulatory green light to initiate a phase 1/2 trial for EDIT-101 in Leber congenital amaurosis type 10 (LCA10).

A hand holding up an illuminated piece of DNA.

Image source: Getty Images.

Intellia Therapeutics wasn't as fortunate. It encountered two public delays, first losing its head of clinical development to a new joint venture between CRISPR Therapeutics and Bayer, then announcing it won't push its first drug candidate into the clinic until 2020. The delay was explained away as providing time to nail down its novel delivery system, which, depending on how its peers fare, could end up being an advantage. But that doesn't change the fact it will be quite far behind its peers.

Now what

Despite the volatile performance last year, investors were certainly excited to see two of the three publicly traded CRISPR companies move their first drug candidates into clinical trials. This year, investors will be eagerly awaiting initial results from those groundbreaking studies and yearning for more preclinical assets to graduate to the clinic.

Nonetheless, it's important to consider an important truth: The torrid pace of innovation in life sciences may have created the incredible investing opportunity in gene editing, but it's also the source of tremendous risks. One could argue that the current generation of CRISPR tools now entering the clinic are already outdated, which is an argument open-minded investors cannot dismiss. While some of the hype surrounding CRISPR has cooled down, investors might expect more volatility in the year and years ahead as scientists explore what's possible -- and not possible -- with gene editing in human cells.