Cathie Wood's ARK Innovation ETF (ARKK 3.33%) is chock-full of risky businesses that (supposedly) have what it takes to disrupt industries and reshape societies with their groundbreaking products and services. Of course, betting on those innovators-to-be often means investing in unprofitable or otherwise unproven companies, which is part of the reason why the ETF is down 68% over the past year.
But bear markets don't last forever, and within five years or so, many of Wood's picks will be either making their mark on history or going extinct. If those odds don't scare you off, read on as there are a pair of Cathie Wood growth stocks that do show promise for investors willing to take on greater-than-average risk.
NASDAQ: CRSP
Key Data Points
1. CRISPR Therapeutics
As one of the leading biotech companies developing medicines using the much-hyped CRISPR-Cas9 gene editing technology discovered roughly a decade ago, CRISPR Therapeutics (CRSP 2.12%) isn't an investment for the faint of heart. Its clinical-stage programs are intended to treat or functionally cure illnesses like type 1 diabetes and even certain cancers. As if that wasn't enough, it's also working on a handful of pre-clinical gene editing programs that could theoretically cure hereditary diseases like hemophilia in living people.
Getting those projects through clinical trials and out the door will take at least a few years, if it ever happens. It'll also require a boatload of spending on research and development (R&D), which cost the biotech $438.6 million in 2021. But the upside potential for investors is huge as there's currently no way to treat the genetic root causes of hereditary conditions. And CRISPR looks to have the resources it'll need to accomplish its lofty ambitions.
Early in 2023, it'll submit a pair of regulatory approval packages to the Food and Drug Administration (FDA) for review. The medicines, developed in conjunction with Vertex Pharmaceuticals, aim to treat beta-thalassemia and sickle cell disease, both of which are hereditary blood disorders. If either is approved, it'll lead to some revenue within the next couple of years. More importantly, sales will buttress the company's $1.9 billion in cash and equivalents.
Investing today means getting massive upside exposure via the possibility of two near-term approvals. Still, the real treasure will be further down the line, stemming from CRISPR's wholly owned programs, as it won't need to split the proceeds from its successes with a collaborator. Still, investors need to beware of the high risk of unpredictable clinical trial failures.
2. Intellia Therapeutics
Intellia Therapeutics (NTLA 1.23%) is another gene editing stock that's pioneering medicines made by using CRISPR-Cas9 technology, among others. Its pipeline is decidedly early stage, with two clinical programs investigating editing the genes of living people to cure or permanently dramatically improve their hereditary diseases and two clinical programs for medicines that are manufactured with extensive use of gene editing technology.
NASDAQ: NTLA
Key Data Points
Its pair of potentially curative gene-editing candidates intended for changing the genetic makeup of living patients makes it the global leader in such therapies. That's also a big part of the reason why Intellia is a bit riskier than even CRISPR Therapeutics; there aren't any medicines approved for sale anywhere that are capable of rewriting people's genomes permanently.
Regulators are guaranteed to scrutinize its clinical results sharply, especially when it comes to concerns like safety. Regardless, Intellia is aiming to treat or cure a rare disease called transthyretin amyloidosis (ATTR) with one of its candidates, so it is likely to have the market to itself if it succeeds in the clinic.
Intellia will probably need to raise additional funds or find a collaborator if it wants to get its programs out the door (or at least close to regulatory submission) within the next five years. The biotech's $828 million in cash won't be enough to provision for multiple years of spending at the same rate as its trailing-12-month expenses of above $480 million. To address that shortfall, the company raised an additional $300 million with a stock offering at the end of 2022.
An additional risk is that such a sum might not be enough money to get the company through the next five years, so shareholders could get their shares diluted again. Nonetheless, Intellia currently has the resources it needs in the near term to work on its clinical programs and survive long enough to show off its potential. Much like with CRISPR Therapeutics, if this business can manage a win, it'll multiply in value -- so if you're willing to make a speculative investment, it might be a good pick for you.
