There are good investments and there are great investments. CRISPR Therapeutics (NASDAQ:CRSP) stock certainly qualifies as the latter.
This is a company that, four years after it went public, has only been profitable for one year, yet its future is so promising that its stock is trading for 540% more than it did in 2016.
What's the big deal about CRISPR Therapeutics? The biopharmaceutical company says it is using breakthrough gene-altering therapies to treat diseases such as sickle cell disease (SCD) and beta-thalassemia, both of which are inherited blood disorders that don't have a cure and require frequent blood transfusions. The company is also working on gene therapies to treat type 1 diabetes, muscular dystrophy, cystic fibrosis, multiple myeloma, and solid tumors in pancreatic cancer and lung cancer.
CRISPR Therapeutics is actually named for the technology it uses: CRISPR stands for "clusters of regularly interspaced short palindromic repeats." The gene-editing technology uses Cas9 proteins to locate a sequenceof DNA within a cell and alter it.
CRISPR Therapeutics' potential has excited investors
Though CRISPR Therapeutics has yet to bring a product to market, some of its clinical trials have had amazing results. In June, the Swiss company announced that in a joint trial with Vertex Pharmaceuticals (NASDAQ:VRTX), five patients with beta-thalassemia and two patients with sickle cell disease were treated with gene therapy CTX001.
Two of the early beta-thalassemia patients are now transfusion independent 15 months afterward. The first SCD patient in the trial is transfusion independent and free of vaso-occlusive crises (VOCs), a painful condition when blood vessels are blocked by sickled red blood cells, seven months after his dose of CTX001.
Beta-thalassemia, which reduces the body's production of hemoglobin, is extremely rare. Sickle cell anemia is common among African Americans but also can affect Latinos and people of Indian, Asian, Mediterranean backgrounds. The U.S. Department of Health and Human Services says 300,000 babies worldwide are born every year with the disease and 100,000 people in the United States are currently living with the disease.
While the results are quite promising, the study is still in its infancy. .
It pays to get in on a good thing early
If you had invested $100 in CRISPR Therapeutics stock when it went public in 2016, how much would that be worth today?
By the end of the day on Oct. 19, 2016, the day CRISPR Therapeutics went public, the stock was trading at $14.09, you would have bought seven shares. Assuming you bought at that price, your original $98.63 investment would be worth $632.45 as of the close of trading Friday when the stock went for $90.35 per share. That's a gain of 541%.
CRISPR Therapeutics isn't the only biotech to use CRISPR-Cas9 technology. Others include Editas Medicine (NASDAQ:EDIT) and Intellia Therapeutics (NASDAQ:NTLA), both of which went public in 2016. Neither of those has done quite as well as CRISPR Therapeutics since its IPO.
Compared to a biotech ETF such as the iShares NASDAQ Biotechnology ETF (NASDAQ:IBB), CRISPR has shined. The ETF closed at $89.16 on the day of CRISPR's IPO. As of Friday's close, IBB was at $136.41. If you had invested $100 on Oct. 19, 2016, you would have a return of only 36%.
But is it still a good deal?
Clinical-stage biotech stocks are inherently risky plays because there are so many hurdles these companies have to clear before they can make money. The therapies have to be approved by the Food and Drug Administration (FDA) and many therapies look promising only to fail in late-stage clinical trials.
CRISPR Therapeutics looks like a solid bet, though, both from a cash standpoint and in its strength of pipeline. The company has four candidates already in trials. It is already making money, though not a lot of it. Last year, CRISPR Therapeutics generated net income of $66.8 million, thanks to $289.5 million in collaboration revenue.
The other major question for clinical-stage biotechs is whether they have enough capital to pay for research and development until the therapies pay off. Last quarter, the company burned through $54 million in cash. However, CRISPR Therapeutics says it has more than $900 million left, so it can continue that burn rate for more than four years. The possibility that CRISPR Therapeutics' technology could actually cure diseases, not just treat them, easily makes this a risk worth taking.