CRISPR Therapeutics' (CRSP 1.35%) gene-editing technologies use the Cas9 enzyme as a mechanism for cutting a targeted piece out of DNA -- with the aim of treating serious illnesses and conditions. Its therapies might just change the world. On the other hand, the company has been posting substantial losses as it moves toward bringing treatments to market, and its performance outlook is uncertain.
Should investors put their money behind this promising biotech stock, or is this a case where the fruits of a revolutionary concept will never be realized? Read on to see why two Motley Fool contributors come down on different sides of the bull-versus-bear debate on CRISPR Therapeutics.
Image source: Getty Images.
A high-risk, high-reward biotech play
Keith Noonan: For biotech investors with high risk tolerance, I think CRISPR Therapeutics' intriguing product pipeline and progress thus far make the stock a worthwhile portfolio addition. But it's also fair to say the gene-editing technology company probably isn't a great fit for all investors.
At this point, CRISPR Therapeutics is basically in a pre-revenue state and recorded just $94,000 in collaboration-based sales in the third quarter. The company is burning cash and posted a net loss of $174.5 million in the third quarter, but it still has a solid balance sheet to work with -- ending the period with cash and equivalents totaling roughly $1.97 billion.
CRISPR is gearing up to request regulatory approval for its CTX001 therapy, which is now known as exa-cel, for the treatment of beta-thalassemia and sickle-cell disease. There seems to be a good chance that the treatment will make it to market at some point in the not-too-distant future. With the company approaching the final steps of getting the treatment commercially approved in the U.S. and Europe, CRISPR may be on the verge of shifting into recording meaningful sales -- and it has other products in the pipeline that could take performance to another level.
Although the company's CTX110 therapy for the treatment of type 1 diabetes and hematological and solid-tumor cancers remains in phase 1 clinical testing, it has the potential to change the lives of patients and transform CRISPR's financial performance. The biotech's CTX130 treatment for solid tumors is also in the clinical stage, and the company has a handful of other treatments in research and investigational stages.
CRISPR Therapeutics stock trades down roughly 77% from its lifetime high, but I admit that it wouldn't make sense to call the stock "cheap" by any conventional metrics. With a market capitalization of roughly $3.8 billion and an unpredictable sales outlook, CRISPR Therapeutics shares remain a risky investment. On the other hand, the company could be on the verge of getting its first treatment to market, and the promise of other therapies in the pipeline makes the stock a worthwhile high-risk, high-reward play.
A hard road ahead
George Budwell: Wall Street is an unabashed fan of the gene editing pioneer CRISPR Therapeutics. The average analyst price target on this biotech stock, after all, implies that the company's shares could appreciate by a noteworthy 93% over the next 12 months.
Wall Street's upbeat price target centers around CRISPR and partner Vertex Pharmaceuticals' ongoing regulatory filings in the U.K., U.S., and European Union for exa-cel as a treatment for the rare blood disorders sickle cell disease and beta thalassemia.
What's all the fuss about? Analysts estimate CRISPR could pocket up to $1.8 billion in exa-cel revenue by 2031. That's a tidy sum for a company with a market cap of $3.9 billion at the time of this writing.
There are some glaring problems with this revenue estimate, however. First and foremost, there is no guarantee that patients will flock to gene editing technologies upon approval, especially when more traditional therapies already exist.
In the case of sickle cell disease, for example, Pfizer recently paid $5.4 billion to acquire the oral therapy Oxbryta. It's hard to imagine the pharma giant doling out that kind of cash if management were overly concerned about the competitive threat of novel gene editing therapies like exa-cel.
Now, CRISPR's exa-cel might turn out to be a game changer for these rare blood disorders. But patients will have to feel comfortable with this novel technology, and third-party payers will have to be willing to cover it for exa-cel to be a commercial success. Wall Street, though, doesn't seem to be taking these sizable barriers to adoption to heart, which is odd given that exa-cel is a highly novel therapeutic.
Should you buy CRISPR Therapeutics stock?
CRISPR appears to be on the verge of getting its first major treatment to market, but investors should consider their personal risk tolerance and expectations for exa-cel and the rest of the company's pipeline before making a decision on the stock. If you're seeking exposure to the biotech space and are willing to take on high levels of risk in pursuit of potentially explosive returns, the stock could make for a sensible portfolio addition.
Otherwise, the uncertainty surrounding the company's performance outlook and potential for dramatic valuation contraction if exa-cel stumbles means the stock may be too risky for many investors.
