Portfolio manager Cathie Wood is known for having an aggressive appetite for risk when it comes to the investments she makes in her exchange-traded fund, the ARK Innovation ETF (ARKK +3.53%). Between its stakes in biotech companies with no products on the market and in rising stars like Tesla, its holdings are often in long shots that have the potential to be transformative for their industries or for the world.
On that note, there are two promising -- but speculative -- biotechnology businesses in the ARK portfolio that investors might be interested in if they're patient enough to hold onto their shares for a few years before seeing major returns. Over the next five years, Wood's thesis for both will be tested, so people who buy shares now could join in her eventual profits -- or her losses, which have been substantial for both stocks over the last 12 months.
NASDAQ: CRSP
Key Data Points
1. CRISPR Therapeutics
CRISPR Therapeutics (CRSP +0.02%) is a gene-editing biotech that is working to develop cures for hereditary conditions including sickle cell disease and beta-thalassemia. Before the end of 2022, it expects to ask regulators at the Food and Drug Administration to approve the gene therapy exa-cel, which it claims can functionally cure both diseases. That means sometime in 2023, it could be realizing revenue from sales of its treatments for the first time ever, which will be a major catalyst for the stock.
But CRISPR's true potential actually lies beyond exa-cel. It's also investigating a handful of candidates as off-the-shelf immunotherapies that could treat different cancers, among them lymphoma. The off-the-shelf aspect is what differentiates these programs from the immunotherapies in development by most other companies, and it's also the most exciting thing about CRISPR.
A common problem with sophisticated cell therapies made using genetic engineering is that the patient's body may reject the cell therapy upon infusion. To get around that issue, biopharmas use each patient's own cells as the starting material to manufacture their specific therapy. That's effective, but it's also tremendously expensive because of the costs involved with drawing a sample, shipping it to a manufacturing site, processing it to make a single person's therapy, and then shipping it back to be infused into the patient.
What CRISPR hopes to do is produce non-personalized immunotherapies that don't trigger rejection. If it succeeds, its treatments will be far more scalable to manufacture, far more profitable to sell, and maybe even more effective than those produced by its competitors. That possibility is exactly what Wood is betting on with her investment, but it's almost certain to take a bit longer than a year or two to come to fruition because of how ambitious the goal is.
If you're willing to take a risk that CRISPR won't ever be able to figure it out for the chances of outsized rewards if it does, this is a good stock to buy.
2. Intellia Therapeutics
Intellia Therapeutics (NTLA +1.08%) also plans to use advanced gene-editing techniques to treat people's genetic diseases. Like CRISPR Therapeutics, it doesn't have any revenue outside of what it makes from collaborations -- and that only totaled around $33 million in 2021. In terms of its pipeline, it has an early-stage program for sickle cell disease, and other early-stage programs aiming to address transthyretin amyloidosis, a rare hereditary liver disease.
NASDAQ: NTLA
Key Data Points
Excitingly, its therapies for those conditions could be curative, though management is careful to remind investors that those treatments could still deliver much-needed relief to patients for long periods without being complete cures, technically speaking. But it isn't anywhere close to commercializing any of its therapies, so it's definitely a stock you'll need to hold onto for at least three or four years before it has the possibility of delivering major returns.
Furthermore, Intellia is developing capabilities similar to CRISPR's with regard to off-the-shelf immunotherapies, though CRISPR's are further advanced. It's pretty clear that Wood bought into Intellia to diversify her bet on easily scalable immunotherapies and give herself two opportunities to succeed. It might make sense for you to do the same if you're looking to hedge your other gene-editing stock plays.
