Most investors are aware that biotech stocks are prone to blasting off into space -- or falling right into the gutter. But when the market is surging and optimism is flowing, some biotech stocks can soar even higher than usual, and that means there's an opportunity to profit for investors who buy them when the market is limping along, like now.
Two gene-editing biotechs could see this beneficial effect if there's a bull market in the next few years. Let's peek at each and see why.
1. CRISPR Therapeutics
Though it doesn't have any recurring revenue right now, CRISPR Therapeutics (CRSP 1.35%) is anticipating a handful of catalysts in 2023, all of which stem from the progress of its pipeline programs and their clinical trials. The most important catalyst will be regulators' response to its biologics license application (BLA) for its candidate called exa-cel in the U.S., which it plans to file before the end of the first quarter.
Exa-cel is a cell therapy that uses genetically engineered blood cells to treat a pair of heritable disorders called beta thalassemia and sickle cell disease, and the company's clinical trial data indicates that it could be a functional cure for most patients with those conditions. It's possible that regulators might issue a verdict before the end of the year, though hearing back sometime in early 2024 is the more likely outcome, as the median approval time after a BLA submission is a little over 10 months.
CRISPR Therapeutics will end up splitting any costs and profits from sales of the medicine with its collaborator, Vertex Pharmaceuticals, which will take 60% of the haul (and expenses) per the terms of the pair's agreement. And as there are only currently around 30,000 addressable patients in the U.S. and the European Union, there isn't likely to be a huge and enduring market for exa-cel without some additional development work to expand its capabilities.
One notable risk is that the therapy could be so effective as to make itself somewhat obsolete by accomplishing the admirable outcome of reducing patients' need for treatment. Still, realizing any revenue whatsoever from sales of one of the company's programs will be a watershed moment, and it'll power a good deal of growth for shareholders.
If there's an ongoing bull market at the time of exa-cel's approval, assuming it gets approved at all, it could further bolster the stock. And that's yet another decent argument for buying it sometime sooner than later.
2. Editas Medicine
Editas Medicine (EDIT -2.50%) is another gene therapy biotech that has a solid chance to leap upward in the next bull market, though it's a bit less mature and a bit riskier than CRISPR.
Editas is pursuing a pair of gene therapies with the help of Bristol Myers Squibb that also aim to treat sickle cell disease and beta thalassemia, but both are in early-stage clinical trials. In the coming years, it could well demonstrate that its approach has benefits that CRISPR's does not.
An even greater catalyst would be if the company advanced its pre-clinical programs investigating approaches to gene editing for curing or mitigating hereditary conditions. At the moment, it's unclear which diseases it's thinking of working with -- so it's not likely to make any contribution to financial results very soon -- but any progress toward the clinic would be a notable breakthrough.
After a recent round of layoffs and program closures, Editas expects to have enough cash to survive through 2025. Its hoard of $419.6 million should also provide it with enough flexibility to make acquisitions of smaller businesses if needed.
Likewise, its trove of gene editing technology and know-how could easily be sold or licensed to keep the lights on while its research and development operations continue work on long-term projects in hopes of eventually commercializing a medicine. There's no guarantee it'll ever succeed, but chalking a few wins in the clinic in the next few years would certainly be encouraging to investors, especially in a bull market.
Both CRISPR Therapeutics and Editas Medicine offer great potential in the years ahead, assuming you can tolerate the substantial risks of investing in biotech stocks.
