If doctors could fix disease-causing DNA, then some of the most unforgiving diseases could be cured. Therein lies the promise of gene editing. While the technique is a little overhyped relative to our understanding of how to make it work within the human body, the smart money is on the long arc of technological progress. We'll figure it out eventually and investors who hold a diverse basket of gene editing stocks will be handsomely rewarded in the long-run.

What's less certain is which gene editing toolkits will work best. Scientists are beginning to turn away from CRISPR platforms that require cuts to both strands of DNA (the same ones used by the three publicly traded CRISPR pioneers) and explore other gene editing systems, such as CRISPR base editing, CRISPR prime editing, or toolkits that don't use CRISPR at all.

For instance, Precision BioSciences (NASDAQ:DTIL) has developed the ARCUS gene editing system. The platform avoids some of the bigger obstacles facing CRISPR tools, is 100% owned by the company, and has already delivered promising early clinical results. While the gene editing stock tripled in the five weeks since the beginning of November, then crashed 50% in a single day, it's still worth a closer look.

A doctor in the background and a model of DNA in the foreground.

Image source: Getty Images.

What is ARCUS?

Scientists jacked the idea for CRISPR gene editing tools from bacteria that wield Cas enzymes against viral invaders. Precision BioSciences copied Mother Nature, too, but used the I-Crel enzyme from a species of algae as the foundation for the technology platform. The company calls its engineered I-Crel enzymes ARC nucleases. The ARCUS platform boasts several immediate advantages over its CRISPR-Cas peers: 

  • Smaller: The I-Crel enzyme is smaller than Cas enzymes, which make it easier to deliver into human cells. CRISPR companies have yet to solve the delivery obstacle.
  • Simpler: CRISPR systems require multiple parts, including a cutting enzyme and a guide RNA to find the target DNA sequence. I-Crel is a homing endonuclease, which means it can be programmed to find and cut target DNA sequences without any help.
  • Precise and powerful: ARC nucleases can't make truly random genome alterations. They can also be used to delete, insert, or edit base pairs.
  • Single-stranded breaks: The I-Crel enzyme only cuts one strand of DNA. CRISPR-Cas tools currently being used in the clinic make double-stranded breaks, which can cause problems depending on how the cell stitches the genome back together.

It should also be noted that Precision BioSciences owns 100% of the intellectual property supporting the ARCUS gene editing platform. That means the company offers investors a way to own gene editing applications outside of healthcare, too. 

A wholly owned subsidiary, Elo Life Systems, is deploying the toolkit in agricultural biotech applications. The pipeline currently includes heart-healthy canola (in collaboration with Cargill), zero-calorie sweetener ingredients from watermelon and stevia, and high-protein chickpeas. 

The latter could become an important product for animal-free protein applications, as many plant-based protein companies, including Beyond Meat, currently rely on pea protein. If chickpeas live up to their potential and can be interchanged with peas (one obstacle: enabling neutral flavors), then Precision BioSciences could be well-positioned to capture a stealthy growth opportunity in plant-based proteins. CRISPR Therapeutics and Editas Medicine can't say that.

A stick figure man standing on ascending arrows and looking through a scope.

Image source: Getty Images.

What's driving this gene editing stock's volatility?

Wall Street let Precision BioSciences slip all the way to a market cap of just $300 million -- a far cry from the $1 billion-plus valuations doled out for CRISPR companies -- in late October. Analysts soon realized their mistake. 

On Nov. 6, the company reported preliminary clinical results from a phase 1/2a study for its first drug candidate, PBCAR0191, in certain difficult-to-treat blood cancers. The base dose of the therapy was well tolerated with no serious adverse events or dose-limiting toxicities reported in the first three patients after 60 days. Importantly, two of the three patients achieved objective responses, meaning their tumors shrank. The third demonstrated signs of anti-tumor activity. 

The update for PBCAR0191 is a great example of the potential of gene editing. Precision BioSciences deployed the ARCUS platform to engineer chimeric antigen receptor T (CAR-T) cells to target CD19, an antigen expressed on the surface of certain immune cells. That allowed the CAR-T drug to efficiently home in on cancerous white blood cells. 

Perhaps more important, the CAR-T cells used aren't from the patients involved in the study, but are instead from donors. That trait, called allogeneicity, allows the cellular medicine to be used "off-the-shelf" rather than extracted from patients, grown in the lab, and injected back into patients in a timely and costly process. In fact, PBCAR0191 expanded (meaning it multiplied) once inside the patients.

Investors were a little less certain of the next data update at the Annual Meeting of the American Society of Hematology (ASH), this time including nine total patients. The individual that achieved the longest duration response relapsed after six months, while two patients with responses at the 14-day mark showed signs of disease progression at the 28-day mark. While all patients involved in the study had advanced disease, and Precision BioSciences is still exploring higher doses of its drug candidate, investors panicked and sold off shares

That may be a harsh reaction, although shares are still up 50% since the beginning of November, but investors have other developments on the horizon.

  • A phase 1/2a clinical trial of PBCAR20A, an allogeneic CAR-T drug that targets an antigen called CD20, is on track to begin recruiting patients before the end of 2019. The asset is being developed to treat cancers affecting white blood cells.
  • The company is on track to file two additional investigational new drug (IND) applications for off-the-shelf CAR-T drug candidates in 2020, which will pave the way for clinical trials to begin.
  • Precision BioSciences and Gilead Sciences have teamed up to develop a gene editing drug aimed at chronic hepatitis B. Considering peers are racing to develop functional cures, that may be the end goal for the duo, too. They expect to file an IND in 2020.
  • Before the end of 2019, the gene editing pioneer expects to choose one of its six discovery-stage assets for its lead rare disease program.

Don't overlook this gene editing stock

Precision BioSciences exited September with $206 million in cash, which should be plenty to see it through the next few development announcements. Now that shares have tumbled after tripling, it may not be the best time to conduct a public stock offering to pad the balance sheet. 

Either way, at a market cap of only $1 billion right now, this gene editing platform has a lot to offer investors including promising clinical results and a stealthy long-term catalyst in agricultural biotech applications. If you're interested in genetic medicines, or if you already own any of the three CRISPR stocks, then it may be time to give the ARCUS gene editing system a closer look or spot in your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.