What happened
March wasn't kind to any asset class because of the COVID-19 pandemic. But the month took a particularly heavy toll on risky clinical-stage biotech stocks. Shares of Adaptimmune Therapeutics (ADAP -5.26%), Atreca (BCEL 6.25%), and CRISPR Therapeutics (CRSP -1.35%), for instance, each fell by more than 20% last month, according to data from S&P Global Market Intelligence.
So what
Why did clinical-stage biotech stocks tank last month? Companies like Adaptimmune, Atreca, and even CRISPR are heavily dependent on secondary stock offerings to raise capital for their costly clinical activities. What's more, these types of companies are essentially a science experiment, which entails a whole lot of risk.
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So with the market in meltdown mode over the COVID-19 pandemic, investors clearly lost their appetite for risk in general, especially among companies that have to dilute shareholders on a regular basis to generate operating capital. The good news is that Adaptimmune, Atreca, and CRISPR are all now trading at extremely attractive valuations after last month's bloodbath.
Now what
Adaptimmune is an anti-cancer cell therapy company that sports multiple high-end partnerships. Moreover, the company is less than two years away from potentially bringing its first product to market -- an experimental synovial sarcoma treatment known as ADP-A2M4. With Adaptimmune's market cap falling to a mere $342 million after last month's emotionally charged sell-off, its stock comes across as dirt cheap right now. The company, after all, is targeting several high-value indications in a market -- oncology -- that's one of the fastest growing in all of heatlhcare.
Atreca, for its part, is a developmental biotech focused on therapies derived from the immune responses of cancer patients. The company sports several A-list investors such as the Baker Bros. and the Bill and Melinda Gates Foundation. The main downside with this company is that it lacks a late-stage product candidate, meaning it will probably remain a cash-burning clinical-stage company for several more years.
That said, its novel immunotherapy platform might also attract a deep-pocketed partner or perhaps a tender offer in the not-so-distant future. As such, Atreca might also be a worthwhile pickup for risk-tolerant biotech investors on this hefty pullback.
CRISPR is a pioneer in the relatively young field of CRISPR/Cas9 gene editing. The company is currently evaluating its first product candidate, CTX001, in a pair of early stage trials for the rare blood disorders sickle cell disease and transfusion-dependent beta thalassemia. If these ongoing trials support further development for CTX001, CRISPR could very well end up fetching a noteworthy buyout offer.
So while CRISPR is a risky biotech stock to be sure, it does offer a healthy upside potential for aggressive investors. Stated simply, CRISPR's March swoon may be an outstanding buying opportunity for the risk-tolerant crowd.
