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Why Shares of Allogene Therapeutics, Beam Therapeutics, Intellia Therapeutics, and Schrödinger Are Volatile This Week

By Jason Hawthorne – Oct 15, 2021 at 9:57AM

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A key gene-editing readout had Cathie Wood shuffling her portfolio.

What happened

After the Food and Drug Administration paused Allogene Therapeutics' (ALLO -5.24%) clinical trials last week, the stock was crushed. It has rebounded 31% this week through Thursday, according to data from S&P Global Market Intelligence. That still leaves it down 30% since the beginning of the month.

The FDA's intervention appeared to spur trading by ARK Invest in Beam Therapeutics (BEAM -0.70%), Intellia Therapeutics (NTLA -3.07%), and Schrödinger (SDGR -5.36%). Beam, Intellia, and Schrödinger were up roughly 13%, 9%, and 10%, respectively, this week through Thursday, also according to data from S&P Global Market Intelligence.

A scientist looks at a double-stranded DNA helix floating in the air.

Image source: Getty Images.

So what

The FDA hold was placed after a bone marrow biopsy revealed a chromosomal abnormality in one of the patients in the clinical trial for Allogene's ALLO-501A therapy. 

Although the various ARK Invest ETFs hold no shares of Allogene, the disappointment prompted a sell-off in many gene-editing stocks last week. That prompted Cathie Wood to make some trades. 

In addition to buying almost 1 million shares of CRISPR Therapeutics (CRSP -1.51%) this week (a company whose own data received a lukewarm reception last week), Wood's funds added to their positions in Beam Therapeutics and Intellia Therapeutics while making a small sale of Schrödinger. 

As it stands, ARK owns about 12% of Beam at an average cost about 10% below where it currently trades. It holds a little over 8% of Intellia, a position that has gained nearly 250%. For Schrödinger, it owns about 3.5% of the outstanding shares and is sitting on a 24% loss. 

Now what

There are bound to be setbacks with any new therapy. This one slightly dampens the enthusiasm for gene-editing after Intellia and Regeneron shared positive results from the first in-human application of the technology in June. 

If Cathie Wood's trades are any indication, she remains confident in the technology. For investors with a long-term horizon and appropriately diversified portfolios, it could make sense to add on the weakness.

The volatility is a good reason it can be beneficial to take a basket approach with emerging industries, buying a small portion of several companies. With so much potential, it only takes one big winner to make the basket a successful investment. So far for Wood, that's Intellia.

Jason Hawthorne owns shares of Beam Therapeutics. The Motley Fool owns shares of and recommends Schrödinger, Inc. The Motley Fool recommends the following options: long January 2023 $75 calls on Schrödinger, Inc. and short January 2023 $75 puts on Schrödinger, Inc. The Motley Fool has a disclosure policy.

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