Spurred by promising clinical results in an important trial, each of the three major CRISPR stocks had a great performance in the second half of 2019. Unfortunately, they didn't keep the momentum going in the first month of 2020.
Shares of Intellia Therapeutics (NASDAQ:NTLA) fell 18.8% in January, according to data provided by S&P Global Market Intelligence. That was followed by a 14.7% loss for shares of CRISPR Therapeutics (NASDAQ:CRSP) and a 10.7% tumble for shares of Editas Medicine (NASDAQ:EDIT).
While each has recovered some ground in the first week of February, this trio of pharma stocks is no stranger to volatility. Investors should probably expect that to continue as clinical programs advance in 2020.
What it means for investors
In November, CRISPR Therapeutics reported data for the first two individuals in the trial, one with sickle cell disease (SCD) and one with transfusion-dependent beta thalassemia (TDT), treated with its lead drug candidate CTX001. Both enjoyed significant benefits in their standard of living, which investors interpreted as a sign that CRISPR gene editing might actually live up to the hype.
That fueled annual gains of 113% for CRISPR Therapeutics last year. While Editas Medicine and Intellia Therapeutics gained only 30% and 7%, respectively, each had been sitting at a year-to-date loss in October.
What relevance does that have for the tumbles taken in January? First, it's not unusual for stocks to regress to the mean. Stocks that are red hot eventually cool off, while those that tumble without good reason eventually recover some ground.
Second, and the more important consideration for investors, is that the early stage results for CTX001 mean relatively little for the industry's pipeline of CRISPR-based gene editing drug candidates.
Consider that CTX001 is an ex vivo tool. Researchers harvest bone marrow from patients, extract specific types of stem cells, and engineer those with CTX001. The engineered stem cells are then grown in the lab before being reinjected into the patient.
Many other CRISPR-based drug candidates are designed as in vivo tools. That means the gene editing payloads are designed to engineer a patient's DNA while inside the body. An in vivo approach is inherently more complex and will be more difficult to control compared to an ex vivo approach.
Put another way, investors cannot take the promising, early stage results from CTX001 and extrapolate it broadly across all first-generation CRISPR tools. Wall Street certainly isn't, if the correlation between technical approach and stock performance is any guide.
Consider that the two most advanced drug candidates from CRISPR Therapeutics rely on ex vivo engineering. By contrast, the lead drug candidate from Editas Medicine relies on in vivo methods.
The lead pipeline asset from Intellia Therapeutics is also an in vivo tool, though unlike the lead assets from its peers, it has yet to advance to clinical trials.
Investors should expect 2020 to be a busy year for these CRISPR stocks. CRISPR Therapeutics will have more clinical data from CTX001 and the first set of data for its lead oncology asset CTX110.
Similarly, Editas Medicine should have results for EDIT101 and progress additional assets, while Intellia Therapeutics is preparing to finally enter the clinic with NTLA-2001 in the second half of the year.
Investors cannot know if the next batch of results will be as rosy as the initial data for CTX001, but they can probably expect another year of volatile stock movements.