The gene-editing space has been a hot topic since the end of June. That was when Intellia Therapeutics (NTLA -9.36%) and Regeneron Pharmaceuticals (REGN -1.61%) released positive phase 1 data from patients who had their DNA edited inside their body. It was the first result to show that the approach could work in humans. The breakthrough sent shares of every gene-editing company soaring. Most have returned to earth, but the excitement is understandable.
Caribou Biosciences (CRBU -2.71%) filed its paperwork for an initial public offering (IPO) only days after Intellia's announcement. It was perfectly timed to take advantage of the hype. And there are three reasons it might still be the best gene-editing stock to buy right now.
1. A Nobel beginning and a novel approach
The company was co-founded by Jennifer Doudna, who shared the 2020 Nobel Prize in Chemistry for her discovery of the CRISPR-Cas9 gene-editing tool. Although she is not employed by the company, she still serves on its scientific advisory board. Among the other co-founders was CEO Rachel Haurwitz. She spent years in Doudna's lab at the University of California, Berkeley, and has held the CEO title since 2012. That's the year Caribou became operational, making it perhaps the oldest CRISPR company. Despite being a decade old, it has come up with a novel gene-editing technique to treat diseases.
The original gene-editing technology used the Cas9 protein to cut DNA. That cutting tool is guided to a specific location in the genome by RNA. One downfall of CRISPR-Cas9 is that it sometimes makes cuts in unintended locations. This off-target editing can have negative consequences. It can be especially problematic if a therapy requires cuts in multiple locations. Caribou invented a way to solve the problem.
By combining RNA and DNA to guide the molecule, the company has reduced off-target edits. That's true even even when multiple edits and insertions are required. The technology is called chRDNA, pronounced "chardonnay." Because the guides are created using readily available chemical tools, Caribou believes it can one day manufacture large batches for off-the-shelf treatments instead of the time-consuming patient-specific therapies employed by most gene-editing companies.
2. The company is making clinical progress
Caribou's lead candidate is a therapy to fight B-cell non-Hodgkin's Lymphoma. It edits a type of immune cell to make it more accurate and lethal in targeting cancer cells. The cells are also edited to prevent them from being shut down quickly -- a common defense mechanism of the disease. Management believes it is the only therapy of its kind. Caribou refers to its process as "armoring" the cells, and it recently dosed its first patient in the phase 1 study. Initial data is expected in 2022.
Although its other treatments are not yet in clinical trials, they are promising. Its CB-011 and CB-012 target forms of multiple myeloma and leukemia, respectively. It plans to file an investigational new drug application for CB-011 next year. Its CB-020 is designed to target solid tumors, a notoriously difficult form of cancer to fight. Management plans to select a target for this treatment in 2022.
3. A lot of interest from Wall Street
Let's face it, one of the factors that separates successful biotech companies is whether they can keep Wall Street interested long enough to get the science to work. For Caribou, that doesn't seem to be a problem.
When the company raised $115 million in March, the funding round was oversubscribed. The company's filings with the Securities and Exchange Commission showed $146 million on its balance sheet at the end of the first quarter. The IPO raised more than $300 million on top of that.
Its IPO proved the excitement hadn't waned. Caribou increased the size of its offering twice to meet the demand. It ended up selling 19 million shares at the top of its pricing range. After a few days of trading, shares sit about even with the IPO price.
When a basket makes sense
For those excited about the potential of gene editing, Caribou's chRDNA approach to addressing some of CRISPR's shortcomings is enticing. But the field is beginning to get crowded. A new wave of companies has followed the initial trio of publicly traded CRISPR-based companies. Intellia Therapeutics, Editas Medicine, and CRISPR Therapeutics have been public since 2016. New approaches like Beam's base editing, and Verve Therapeutics' focus on heart disease have increased the choices for investors.
That said, Caribou might offer the perfect balance between a proven treatment and novel approach. Therapies using CRISPR-Cas9 have made it the farthest along in treating patients, and Caribou's new platform addresses problems that competing gene-editing approaches aim to solve. But investing in biotechs can be fraught with risk. Often, one failed trial can be catastrophic for a company.
That's why many recommend buying a small amount of several companies focusing on a particular area. Nowhere does this make more sense than in gene editing. With its combination of progress, funding, and leadership, Caribou Biosciences has earned a place in that basket.