Shares of the gene-editing pioneer CRISPR Therapeutics (NASDAQ:CRSP) had already fallen by half from their peak last June, but that didn't stop a Wall Street analyst from knocking it down another peg with a recent downgrade to "sell."

It's a terrible idea to sell stocks every time analysts who work for a bank tell you to, but their advice shouldn't be ignored. After all, it takes conviction to share an unpopular opinion that could lose your employer some business. Before you pull any triggers, here's what you need to know about the future of this gene-therapy stock.

Bald man scratching his head while looking at question marks on a chalkboard

Image source: Getty Images.

What could go wrong

A Citigroup analyst is worried about CRISPR Therapeutics' lead candidate, for some good reasons. Near the top is the fact that CTX001 is not the only new drug candidate for the treatment of people born with hemoglobin problems like beta-thalassemia and sickle-cell disease.

In December, Global Blood Therapeutics (NASDAQ:GBT) took a big step toward earning approval for a simpler sickle-cell disease treatment called voxelotor, which could challenge CTX001 for some patients. CRISPR's candidate involves removing a patient's stem cells, then editing their DNA offsite before shipping the cells back to be reinfused. Voxeletor is just a pill that boosts hemoglobin's affinity for oxygen, making it less sticky.

Hemoglobin sticking together causes red blood cells to form a sickle shape that doesn't pass through blood vessels as easily. That leads to organ damage and a lot of pain for people born with sickle-cell disease. While Global Blood Therapeutics probably has a winner on its hands for treating the disease, severely affected patients will probably still gravitate toward cellular therapies.

Unfortunately for CRISPR, bluebird bio (NASDAQ:BLUE) expects to send its cellular therapy LentiGlobin to the Food and Drug Administration, and to launch the drug in the EU by the end of the year. CRISPR Therapeutics didn't start dosing patients with CTX001 until late last year, and it will be a while before we have any clue how well it stacks up against LentiGlobin.

To succeed commercially, CTX001 needs to outperform LentiGlobin, which is setting a high bar with a much different method. LentiGlobin delivers a gene that allows patients to produce functional hemoglobin on their own. CTX001 snips out a bit of DNA to dial down expression of the BCL11A gene, which plays a role in preventing adults from producing fetal hemoglobin shortly after birth.

Fetal hemoglobin is a little more resilient than the adult form, but we're still not sure how well dialing down BCL11A expression will work out in humans. To top it off, dysregulation of this gene has been associated with lymphoma. That means the market will lose its mind if any patients who receive CTX001 are later diagnosed with a related form of blood cancer.

Three excited scientists gathered around a test tube

Image source: Getty Images.

What could go right

It's important to point out that investors don't necessarily buy CRISPR Therapeutics stock for CTX001 on its own. There are thousands of single-gene disorders a CRISPR-based therapy could aim for beyond sickle-cell disease, including Tay-Sachs disease, cystic fibrosis, and Huntington's disease.

In the first half of the year, CTX110 will become CRISPR's next new drug candidate to begin a human proof-of-concept trial. This CAR-T therapy is a vial of T-cells that have been modified to recognize CD19, a protein often found on the surface of cancer cells.

There are dozens of CD19-directed treatments in clinical development and two on the market, but they involve removing each patient's stem cells to make a new batch every time. CTX110 could become the first treatment to offer off-the-shelf convenience, but we really shouldn't get too excited until we see it work safely for the first people to try it.

CRISPR will fund the development of its cancer candidates on its own, but it has a collaboration partner to share expenses for ongoing trials. Vertex Pharmaceuticals (NASDAQ:VRTX) will evenly split profits and expenses related to CTX001 with CRISPR. Vertex also has rights to fully license up to four more new drug candidates. In return, CRISPR could receive up to $420 million in milestone payments for each candidate, plus royalties.

Cool your jets

The first drug to emerge from CRISPR's pipeline might not be a big hit, but investors should brace for that before buying gene-editing stocks in the first place. The latest concerns about the company's lead candidate shouldn't be that upsetting to the intrepid investors who took a chance earlier.

If you bought this gene-editing stock because you expect a robust pipeline with lots of shots on goal, nothing's changed. Wall Street analysts are simply remembering that nine out of 10 potential new drugs that begin clinical trials end up on a scrap heap, and commercial sales for gene therapies so far have been disappointing, to say the least.

Daring investors thinking about scooping up shares of CRISPR on the dip, though, might want to steer clear of this falling knife. At recent prices, CRISPR's still a $1.7 billion company. If the first attempts don't work as planned, the stock could fall a lot further.

Check out all ourĀ earnings call transcripts.