What happened

Shares of CRISPR Therapeutics (CRSP 3.72%), the first clinical-stage company developing CRISPR-based drugs, fell 15.9% in early morning trading after a Wall Street analyst downgraded the stock to sell. CRISPR's price was down 12.5% as of 11:28 a.m. EST on Monday.

So what 

A Citigroup analyst cited two significant issues when he downgraded shares of the stock to sell. The company's lead candidate, CTX001, is intended to treat patients with the same hemoglobin problems as new drug candidates much further along the development timeline. CRISPR didn't start enrolling patients until late 2018, but LentiGlobin from bluebird bio (BLUE -1.31%) could earn approval in the EU later this year. An application in the U.S. isn't far behind, either.

Man in a suit watching money fly out of his pocket and into a hole in the floor

Image source: Getty Images.

There could also be a problem with CTX001's mode of action. CRISPR Therapeutics' lead candidate works by cleaving the BCL11A gene, which is involved in halting the production of fetal hemoglobin shortly after birth. While this might be a way to get fetal hemoglobin started again, it might not be the best option, because dysregulation of BCL11A has been associated with lymphoid malignancies. 

Now what

LentiGlobin doesn't snip out a gene or boost fetal hemoglobin, instead, it installs a new gene that allows sickle cell patients to produce adult hemoglobin that doesn't sickle as easily. We'll probably find out how well this approach works long before we know much more about CTX001's potential.

CRISPR Therapeutics will probably have interim results for CTX001 available for review by the end of the year. This program's being partially funded by CRISPR's collaboration partner, Vertex Pharmaceuticals, which should limit the losses if it flops.

Check out all our earnings call transcripts.