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This gene-editing stock was on fire throughout 2019. Will it stay that way?
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CRISPR Therapeutics (CRSP 0.01%) has done very well for itself, with the company's stock almost doubling in 2019 as optimism surrounding its gene-editing technology continues to grow. Considering how much of a game-changer gene-editing technology can be for patients with incurable conditions, it makes sense that people are excited.
While shares have tumbled over the past couple of months, this might be a good thing for investors looking to buy this promising stock at a cheaper price. If you're on the fence about CRISPR or are looking for a stock with great upside potential, here are a few reasons why CRISPR looks like a good pick in 2020.
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CRISPR is arguably the top name in the relatively young gene-editing market right now. The company currently has nine drug candidates, with four either having begun clinical testing or close to starting.
CRISPR's flagship candidate is CTX001, a drug that targets sickle cell disease and transfusion-dependent beta-thalassemia (TBT). Patients with either of these conditions have malformed red blood cells that struggle to deliver oxygen throughout the body. Approximately 300,000 infants are born with sickle cell disease each year, with another 60,000 born annually with TBT. At present, there are no treatments for either condition.
The other three noteworthy candidates in CRISPR's pipeline are CTX110, CTX120, and CTX130. These drug candidates are a type of new cancer-immunology treatment known as a chimeric antigen receptor T cell (CAR-T) therapy. These types of treatments involve modifying a patient's immune cells in a lab to make them better at killing cancer cells. While it's traditionally quite expensive, CRISPR's technology could possibly make these new CAR-T therapies cheaper than the competition.
While the drug is still in early clinical testing, CRISPR reported some success with CTX001 back in November when it announced that two patients had been treated successfully with the drug. The two patients, one diagnosed with sickle cell disease and the other with TBT, managed to eliminate all of their symptoms following a single CTX001 infusion.
In the case of TBT, the number of required blood transfusions dropped to zero, while the sickle cell disease patient experienced zero occlusive crises (blood vessel blockages that occur due to the abnormal shape of the patient's blood vessels).
CRISPR has confirmed that it will be providing more data for both CTX001 and its cancer immunotherapies sometime this year. That means that investors can look forward to further potential catalysts in 2020, likely toward the latter half of the year.
In general, investors shouldn't take too much stock in the financial figures of early-stage biotech stocks unless there's something really alarming going on (like not having enough cash). Revenue figures change dramatically once a drug receives approval, and companies tend to report significant losses until drug candidates reach late clinical stages.
However, CRISPR's situation is different. In its recently released fourth-quarter financial results, the company reported an impressive $77 million in revenue, a substantial improvement from the mere $100,000 seen last year. Annual revenue for 2019 came in at $289.6 million in comparison to 2018's $3.1 million.
While this virtually all comes from CRISPR's collaboration agreement with Vertex Pharmaceuticals, the important point is that CRISPR is now reporting a profit. Net income for the fourth quarter came in at $30.5 million, whereas last year the company saw a net loss of $47.6 million.
| CRISPR Therapeutics | Market Cap | Revenue | Net Income (Loss) | Cash Position |
|---|---|---|---|---|
| Q4 2019 | $3.1 billion | $77 million | $30.5 million | $943.8 million |
| Q4 2018 | $1.6 billion | $100,000 | (47.6 million) | $456.6 million |
No other notable gene-editing stock out there is reporting a profit right now. Even if CRISPR ends up dipping into a net loss again in subsequent quarters, the fact that the company managed to report a positive net income this early on in its drug development program is impressive.
Given how young the gene-editing industry is and how experimental this technology can be, positive clinical results in this field can have a positive effect on all stocks in the sector. When Intellia Therapeutics presented new data regarding two of its drug-editing programs earlier in February, shares of all gene-editing stocks -- including CRISPR -- shot up, despite the fact that they are all competitors.
While this might seem strange at first, it makes sense given how young this industry is. Further clinical proof that gene-editing drugs work, no matter where it comes from, is good for the entire sector. A rising tide lifts all ships, and CRISPR investors also should look out for potential catalysts from other gene-editing companies, which could act as an indirect catalyst for CRISPR's stock.
Intellia, Editas Medicine, and Sangamo Therapeutics are all working on sickle cell disease and transfusion-dependent beta-thalassemia treatments of their own. Positive developments from their treatments could have a spillover effect on CRISPR's stock. Editas stated recently that it expects to file an Investigational New Drug (IND) application for EDIT-301, its sickle cell drug, by the end of 2020.
The answer is yes, it definitely can. CRISPR Therapeutics has plenty of good things going for it, and there is a lot of long-term enthusiasm surrounding both the company and the industry. While shares of CRISPR have fallen a fair bit over the past couple of months -- down 14% since the start of 2020 -- so have other gene-editing stocks. As such, it doesn't seem to be as much of a problem with CRISPR in particular as it is a sector-wide phenomenon. Since there's no real news that appears to be behind this decline, I wouldn't worry about it too much.
Instead, now looks like a good time to buy gene-editing stocks, because they're trading at a bit of a discount. Back in November, Oppenheimer analyst Silvan Turkcan issued a price target of $80 for CRISPR Therapeutics, suggesting at least a 57.1% upside to the stock based on current prices. That seems very reasonable, and I wouldn't be surprised if CRISPR does much better than that in 2020.
However, CRISPR still remains a high-risk investment given the fact it's an early-stage biotech stock. If you want to buy shares right now, keep your position on the smaller side. Never risk too much of your portfolio on a single stock, no matter how promising it might seem.