As a hotly followed gene-editing company, CRISPR Therapeutics (CRSP 1.11%) is on the bleeding edge of biotechnology. With its early-stage pipeline of groundbreaking therapies in immuno-oncology, regenerative medicine, and hereditary blood disorders, there's a chance that this biotech could be one of the decade's wildest success stories.
Assuming it can actually get its ambitious ideas to work when they're used to treat living patients, at least. Over the past year, the company's shares have fallen by more than 67% as a result of a cool reception to data from its headliner clinical trial. Is CRISPR Therapeutics destined to join the graveyard of once-promising biotech contenders, or will it work out the kinks in time to impress investors?
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CTX110's potential means that it might be smart to buy the dip
CRISPR's wholly-owned lead program is called CTX110, which is a cell-based therapy that's being developed to treat B-cell malignancies. It's currently in phase 1 clinical trials, with the potential for a new registrational trial in the first quarter of this year. If the company can show that CTX110 is a winner in the remainder of its early-stage trials, it'll be critical validation for its approach, which will catalyze growth in the stock.
In terms of its features, the advantage of CTX110 in comparison to similar therapies is that it can be manufactured using the donated cells of a healthy person. That's essential, as competing cell therapies typically require harvesting cells from the patient, shipping them to a central manufacturing hub, performing the manufacturing process to convert the patient's cells into the therapy product, and then reinfusing them into the patient.
Because CTX110 is made from healthy donor cells, it's also possible to make doses ahead of when patients need them. That cuts the turnaround time between diagnosis and treatment, and it also ensures that the therapy product performs more uniformly in the clinic. If CTX110 eventually gets approved for sale and commercialized, it's exactly these characteristics that will give it an edge in terms of gaining market share and commanding a high margin.
There's just one problem. Despite the benefits that an off-the-shelf solution like CTX110 can provide in theory, only 38% of patients in the therapy's ongoing phase 1 trial were reported to have a complete response to being treated.
Unfortunately, these worse-than-expected clinical trial results from CTX110 were responsible for at least some of the stock's decline in 2021. Management is confident that tweaks to the dosing can improve the number of patients who respond completely, but it'll take some time.
If CRISPR can beat the market's newly lowered expectations for CTX110's efficacy, investors who were willing to buy the stock when it was beaten down could get a large boost to compensate them for taking on the risk.
This isn't a stock for conservative investors
Independent of any of its pipeline programs, it's important for people to keep CRISPR Therapeutics in context as a biotech stock. The company's $902.4 million in trailing revenue is nonrecurring, stemming from collaborations like the one it has with Vertex Pharmaceuticals and the associated milestone payments rather than consistent sales of any therapy product.
In my view, between its $2.5 billion in cash and having a powerful player like Vertex as an ally, CRISPR has enough resources in hand to succeed down the line. Still, if it can't find success with its clinical programs despite its gene-editing platform and numerous attempts, there's unlikely to be a future for the business. In other words, this is a standard early-stage biotech that's quite risky to invest in, and that won't be changing anytime in the next few years.
For people who do choose to invest, the biggest growth in the short term will come from reporting positive results in the clinic, especially with its immuno-oncology programs. The other side of the coin is that less than stellar results pose a significant risk, and there won't be much warning for investors if things go awry.
If you can't tolerate the idea of the stock dropping 30% overnight -- and perhaps taking many months to report some good news that would help its shares recover -- steer clear. If, on the other hand, you're willing to bet on it because of the game-changing nature of its therapies in development, don't be afraid to buy it today.
