Gene editing refers to techniques that allow researchers to modify the DNA of various organisms. Given that it offers the potential to help discover innovative therapies, it isn't surprising that more and more drugmakers are turning to the technology.

Two prominent biotechs that focus on gene editing are CRISPR Therapeutics (CRSP -5.64%) and Bluebird Bio (BLUE 5.32%). While both stocks have lagged the market recently, there's substantial upside potential for these innovative biotechs.

But which one is a better long-term investment? Let's dig in and find out.

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The case for CRISPR Therapeutics

CRISPR Therapeutics' most advanced program is exa-cel, a therapy that targets sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). Both are rare blood-related diseases. CRISPR is developing this therapy with Vertex Pharmaceuticals.

Exa-cel isn't easy to administer. It involves collecting the patient's stem cells, modifying them using gene-editing technology, and reinserting them into the patient.

But the therapy has been impressive in clinical trials. All 31 SCD patients treated in one study were free of vaso-occlusive crises (painful side effects of SCD), with follow-up ranging between two months and 32 months. Also, 42 of the 44 TDT patients treated were transfusion-free, while the remaining two experienced a substantial decrease in transfusion volume.

CRISPR and Vertex plan to initiate rolling submissions to the U.S. Food and Drug Administration (FDA) for exa-cel in treating TDT and SCD in November, and they expect to complete the submissions by the first quarter of 2023. The two partners are on track to submit applications for the gene-editing therapy in Europe by the end of the year.

In other words, exa-cel could earn approval within the next year in the U.S. and Europe. CRISPR will target a market of 32,000 people across both SCD and TDT. Gene-editing therapies are expensive, and even with a relatively small pool of potential patients, exa-cel could generate billions of dollars annually. Per its agreement with Vertex, CRISPR will keep 40% of the profits and be responsible for 40% of the associated costs.

CRISPR Therapeutics has several other candidates, but most are still in the early stages of development. The company's gene-editing platform could rack up significant wins in the years to come, helping its stock provide solid returns to shareholders.

The case for Bluebird Bio

Bluebird Bio has had a great year, at least on the regulatory front. The company earned U.S. approval for two gene-editing therapies: TDT therapy Zynteglo, and Skysona, a treatment for cerebral adrenoleukodystrophy (CALD). CALD is a rare progressive neurological disease that primarily affects young boys.

Bluebird's treatments won't be cheap: It priced Skysona and Zynteglo at $3 million and $2.8 million, respectively, making them the two most expensive therapies in the world.

Note that there are few safe and effective therapy options for these illnesses. And most of the current standards of care for both are expensive and do not rid patients of their conditions. Bluebird estimates that about 850 patients will be eligible for Zynteglo -- a one-time curative therapy for TDT -- in the U.S.

At a price of $2.8 million, that amounts to $2.38 billion, not an insignificant sum for a biotech with a market cap of only $445 million.

Bluebird is currently working on other potential gene-editing therapies that target SCD; they include lovo-cel, which is undergoing late-stage studies. The best-case scenario for the company would be to generate solid revenue from Zynteglo and Skysona, giving it the funds to push its current pipeline candidates through their development phases.

The company's stock may have substantial upside potential, provided things go its way, both in the clinic and on the market.

The verdict

Both of these stocks seem relatively risky, but CRISPR Therapeutics looks like the better biotech stock. Bluebird already has two gene-editing therapy treatments approved, but it still faces an uphill battle due to various factors. Zynteglo and Skysona are challenging to administer, and both are very expensive.

When Zynteglo earned conditional approval in Europe, where it was priced at 1.58 million euros, Bluebird Bio instituted a payment-plan option. Patients or third-party payers had to make an up-front payment of 315,000 euros, followed by four more payments spread out across several years if the therapy was effective.

Bluebird eventually exited the European market because it had trouble striking lucrative deals with third-party payers. It could face similar issues in the U.S. And while some of them may apply to CRISPR Therapeutics too, the difference is that CRISPR has a better financial position, not to mention the backing of a larger biotech with plenty of funds.

CRISPR Therapeutics ended the second quarter with $2.1 billion in cash and cash equivalents, compared to Bluebird's $218 million. The former recorded a net loss of $185.8 million, compared to the latter's $100.1 million.

Earlier this year, Bluebird expressed concerns about its ability to remain in business until the end of the year due to its precarious financial situation. The company has since instituted cost-cutting initiatives to save funds, but it's much more dependent on the immediate success of its gene-editing therapies than CRISPR Therapeutics.

The market isn't convinced that Bluebird's treatments can be successful. That's why despite the recent approval of Skysona and Zynteglo, Bluebird's market capitalization of $445 million is still much lower than CRISPR Therapeutics' $3.9 billion. In my view, the market has this one right.