At first glance, stocks like CRISPR Therapeutics (CRSP 0.29%) would seem like the kind to avoid right now given the current uncertain state of equity markets. After all, the biotech company currently has no products on the market and remains deeply unprofitable. With investors shifting away from speculative stocks recently, CRISPR could still see dark days ahead, even after dropping by more than 50% in the past year.
With that said, there are solid reasons to give this biotech company a second look. Let's consider why investing in CRISPR Therapeutics right now may not be such a terrible idea.
There is a lot to cheer for with this biotech
Clinical-stage biotechs certainly face a lot of risks. The uncertainty of clinical trials and potential regulatory setbacks make the industry relatively volatile. But there are certain things investors can look for to know that they aren't dealing with just any run-of-the-mill clinical-stage biotech company. Positive signs include partnerships with larger biotechs, one (or more) highly promising pipeline program, and plenty of cash on hand.
CRISPR Therapeutics boasts all three of these. The company has partnered up with Vertex Pharmaceuticals in its efforts to develop CTX001, a potential gene-editing therapy for two rare blood-related disorders called sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). There are few therapy options for both of these illnesses that are safe and effective. These are relatively rare diseases. Vertex Pharmaceuticals estimates there are 150,000 patients with TDT or SCD in the U.S and Europe.
NASDAQ: CRSP
Key Data Points
However, gene therapies aren't known to be cheap. A gene-editing treatment for TDT that was approved and marketed in Europe as Zynteglo was priced at 1.58 million euros ($1.73 million). Zynteglo has since been pulled out of the European market. CRISPR Therapeutics and Vertex Pharmaceuticals plan on submitting regulatory applications for CTX001 by the end of 2022. How has the therapy fared in clinical trials? So far, so good.
Here is just one example. SCD patients typically suffer from painful side effects of the disease called vaso-occlusive crises (VOCs). The frequency of these events differs from one patient to the next, but data on seven people with SCD treated with CTX001 showed that they experienced anywhere between 2.5 to 9.5 VOCs per year before the treatment.
All of these patients were free of VOCs after being treated with CTX001, with follow-up ranging from about five months to 22.4 months.
Image source: Getty Images.
CTX001 has also fared well with TDT patients who typically need regular blood transfusions. In a pool of 15 people with TDT treated with the gene-editing therapy, all were transfusion-independent after treatment, with follow-up ranging from 2.4 months to 25.2 months. Before the treatment, these patients needed an average of 20.5 transfusions per year on the low end and 61 transfusions annually on the high end.
While there remain clinical and regulatory hoops to jump through, CTX001 looks very promising, especially after recent comments from the company's CEO, Sam Kulkarni. If it hits the market, it could rack up more than a billion in sales annually given the value it would offer patients: a one-time curative treatment for otherwise chronic illnesses. CRISPR Therapeutics collects payments from Vertex Pharmaceuticals in connection to their arrangement for CTX001.
The company ended the fourth quarter with $2.4 billion in cash and cash equivalents, compared to the $1.7 billion it had at the end of the year 2020. That's a handsome sum of money for a clinical-stage biotech.
Promising but risky
CRISPR Therapeutics does have several other pipeline programs, including a trio of potential cancer therapies called CTX110, CTX120, and CTX130. If CTX001 earns approval, the company will experience another cash windfall that will help it advance these (and other) candidates. Of course, none of that is guaranteed. CTX001 could fail to impress health industry regulators. Or its approval could be delayed because of some deficiency in the application.
Lots of things could still go wrong for CTX001, and that doubly applies to CRISPR Therapeutics' other candidates, all of which still have a much longer way to go before regulatory submissions. That's why investors should proceed with caution here. Yes, CRISPR Therapeutics boasts explosive upside potential, but it also comes with a decent amount of risk, more so than many investors can handle.
For those comfortable with the risk and volatility, it'd be best to initiate a small position in this biotech stock and progressively add more as it earns additional clinical and regulatory wins. On the other hand, risk-averse investors will probably want to look elsewhere.
