Biotechs that utilize gene editing -- a set of techniques allowing scientists to modify an organism's DNA -- have the potential to help revolutionize medicine by developing innovative treatments for otherwise incurable illnesses. And over the past few years, some companies that focus partly or entirely on gene editing have become more prominent as the possibilities the technology could help unlock become clearer.
However, they remain relatively anonymous, especially compared to the biggest players in the biotech industry. But that's no reason for investors to ignore them. Let's consider two biotechs looking to make use of gene editing to develop breakthrough therapies: CRISPR Therapeutics (CRSP 1.11%) and Sarepta Therapeutics (SRPT 1.16%).
1. CRISPR Therapeutics
CRISPR Therapeutics has severely underperformed the market in the past 12 months. Here are some of the reasons why. First, although its leading pipeline programs have made progress (more on that in a bit), it still has no approved product. And second, like most clinical-stage biotechs, it is currently unprofitable. Given the challenging economic conditions and marketwide troubles, it isn't surprising to see investors sell off stocks like CRISPR Therapeutics.
But the good news is that the company has potential catalysts on the way. CRISPR's leading candidate is exa-cel, a potential therapy that targets two rare genetic blood illnesses: sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). CRISPR Therapeutics and its partner on these programs, biotech giant Vertex Pharmaceuticals, plan on completing the filing of regulatory applications in the U.S. and Europe by the end of the first quarter.
Exa-cel has an excellent shot at approval. It successfully eliminated the otherwise constant need for blood transfusions in the overwhelming majority of TDT patients treated in a clinical trial and substantially reduced transfusion volume for the remaining participants. It also freed all SCD patients in the trial of vaso-occlusive crises, a painful side effect of the illness.
Regulatory submissions targeting exa-cel approvals in TDT and SCD could send CRISPR Therapeutics' stock soaring. And with the 32,000 (at least) patients in the U.S. and Europe CRISPR Therapeutics and Vertex Pharmaceuticals will target with exa-cel, the medicine could be immensely successful -- especially given the typical price of gene-editing therapies. They often go for more than $1 million per treatment course. It remains to be seen how insurance companies will respond in terms of coverage.
The approval of exa-cel would also help validate CRISPR Therapeutics' long-term plan. The company is working on other exciting candidates, particularly in oncology. CRISPR should see some pipeline progress this year. Although the company hasn't been in the best shape recently, its long-term prospects look attractive thanks to its gene-editing platform.
Investors who get in today could have excellent returns in five years or more.
2. Sarepta Therapeutics
Sarepta Therapeutics focuses on rare diseases. The company has made tremendous headway within the population of patients with Duchenne muscular dystrophy (DMD), an inherited, progressive, and fatal neuromuscular disorder. Sarepta's currently approved products target DMD, and there could be one more on the way. In September, the biotech submitted SRP-9001, a potential gene therapy for ambulant DMD patients, to the U.S. Food and Drug Administration (FDA).
The agency granted SRP-9001 priority review, which comes with a six-month review time (instead of the typical 10 months) and is only given to treatments that would be an improvement over current standards of care. Sarepta could earn approval for SRP-9001 by the end of May. This likely won't be the biotech's last crack at earning the regulatory nod for a DMD candidate as it has several others in its pipeline.
Meanwhile, Sarepta Therapeutics' approved medicines are helping it grow its top line at a good clip. In the third quarter, the company's total revenue jumped by 21.6% year over year to $230.3 million. The biotech's quarterly revenue has grown steadily in the past five years.
SRPT Revenue (Quarterly) data by YCharts.
Sarepta Therapeutics remains unprofitable. The company's net loss in the third quarter was $257.7 million, much worse than the net loss of $48.1 million reported in the third quarter of 2021. Still, Sarepta has more than 40 clinical programs in the works, many of which target other illnesses. For instance, it is working on potential therapies for Limb-girdle muscular dystrophy, a group of genetic diseases that affects patients' arm and leg muscles.
In February 2022, the company announced an expanded agreement with privately held biotech company GenEdit, to develop gene editing therapies for neuromuscular diseases. Net profits will come eventually as Sarepta earns more approvals and expands its lineup thanks to its vast pipeline.
Read the fine print
Both CRISPR Therapeutics and Sarepta Therapeutics are promising biotechs developing innovative therapies, but there are some risks associated with these companies. They remain unprofitable and still have to jump through many clinical and regulatory hoops before becoming well-established -- the usual risks for smaller players in the biotech industry. It is worth it to keep these potential roadblocks in mind. Even so, adding small positions in both biotechs could pay handsome rewards down the road if their master plans actualize.
