Investing in companies focused on emerging technologies is one way that you can potentially set yourself up for life-changing returns. Gene-editing company CRISPR Therapeutics (CRSP -3.45%) may have that opportunity. According to Strategic Market Research, the global genome editing market was worth just $5 billion in 2021 but is expanding at a compound annual growth rate of 17%. CRISPR has the potential to capitalize on all that growth.
CRISPR's market capitalization is $4.3 billion. That isn't terribly high and may be tempting long-term investors to buy and hold. But can the stock be a good-enough investment to help make you a millionaire?
CRISPR has both great potential and risk
CRISPR doesn't generate a significant source of revenue right now, and the big risk is that a lot is riding on the potential approval of exa-cel. It's a functional cure for sickle cell disease and beta thalassemia, which are rare blood disorders.
If the company obtains approval -- and news of that could come this year -- then its prospects will instantly skyrocket, as it could generate billions in revenue. CRISPR is developing the treatment along with Vertex Pharmaceuticals, and the two companies would share in the profits (Vertex would get 60%).
But unless and until the Food and Drug Administration approves the gene-editing therapy, there's going to be some risk involved with the healthcare stock as it doesn't have a product that today brings in recurring cash flow for the business. That's a problem because over the trailing 12 months CRISPR has incurred net losses of $681 million.
Why the stock could soar
When it comes to biotech, a single product can put a company on the map. Not only does an approved product bring in a consistent revenue source, but it also makes a company a more attractive acquisition target. Meanwhile, stronger financials may allow it to make acquisitions that further grow its operations.
As of the end of Sept. 30, 2022, CRISPR Therapeutics had cash and marketable securities on hand totaling just under $2 billion. Whether it potentially uses that to reinvest in itself or acquire another business, improving financials will help put CRISPR on solid footing and enable it to pursue growth opportunities more easily.
The company also has many other trials ongoing that are in their early stages and could lead to further growth opportunities down the road. This includes CTX110, a CAR-T cell therapy for certain blood cancers that is in phase 1 trials. Another promising treatment is CTX130, which is in phase 1 trials to test its safety and efficacy for multiple indications, including treatment of relapsed or refractory renal cell carcinoma (kidney cancer).
In general, analysts are bullish on the stock. CRISPR Therapeutics has a consensus price target of $98.22, which is more than 70% higher than where it trades today -- an encouraging sign. Price targets typically cover where analysts think the stock can go over the next 12 months or so. Analysts have been optimistic about the prospects of exa-cel's approval, and the company's rate of cash burn improved in the most recent quarter, making it a bit of a safer buy.
Can the stock make you a millionaire?
If exa-cel obtains approval, CRISPR's business looks a whole lot better than where it is today. But the problem that I see is that it may still not be enough to make the company profitable. It has incurred $687 million in losses over the past 12 months, and losses will likely continue for some time. Moreover, it will have to share in any profits that exa-cel generates.
For this to be a millionaire-maker investment, it needs more than just exa-cel. While CRISPR definitely possesses lots of potential upside, I'm not convinced it has the ability to deliver the type of returns that would be needed to help make you a millionaire.
