Shares of CRISPR Therapeutics (CRSP -1.98%) are down nearly 17% over the past year but up over 16% so far in 2023. The clinical-stage biotech company is named for the CRISPR/Cas9 gene-editing method that won the Nobel Prize for chemistry in 2020, and the buzz for the company seems to be growing.

CRISPR is an acronym for clustered regularly inter-spaced short palindromic repeats, which are found in the DNA gene sequences of prokaryotic organisms, such as bacteria or archaea, a group of single-celled organisms.

The company is looking to CRISPR/Cas9 gene editing to find therapies for a multitude of maladies. It is working on therapies in four areas:

  • hemoglobinopathies (inherited blood disorders that usually involve red blood cells)
  • immuno-oncology (a way of stimulating the body's immune system to fight cancer)
  • regenerative medicine (replacing or reactivating damaged tissues or organs)
  • in vivo repairs (work done on a living organism)

Some institutional investors are bullish on the stock's future. Cathie Wood's ARK Investment Management LLC owns 7.83 million shares (a 10% share of the company), while Capital International Investors owns 5.6 million shares of CRISPR Therapeutics (7.1%). Here are three things these savvy investors know about the company.

1. CRISPR could launch its first commercial therapy this year

CRISPR Therapeutics and collaborator Vertex Pharmaceuticals (VRTX 0.20%) have said they plan on submitting their Biologics Licensing Application (BLA) for exa-cel to the Food and Drug Administration (FDA) this quarter. The therapy, if approved, would be the first CRISPR therapy to be approved by the FDA to treat a genetic disease.

The gene-editing therapy has shown promise in fixing the genetic mutations that cause two rare blood disorders: transfusion-dependent beta thalassemia (TDT) and sickle cell disease (SCD). In trials, the therapy didn't just treat the diseases; it cured most TDT and SCD patients. Of the 31 patients in the SCD CLIMB-121 trial, all were free of vaso-occlusive crises after 2 months to 32.3 months. Of the 44 TDT patients in the CLIMB-111 study, 42 were transfusion free after 1.2 months to 37.2 months after exa-cel treatment.

Exa-cel will likely be a big disruptor in the industry. TDT is quite rare, affecting 1 in 100,000 people worldwide, according to data from the National Organization for Rare Disorders (NORD). However, SCD is more common. According to NORD, in the U.S., approximately 100,000 people, mostly African Americans, have the condition.

Exa-cel has several regulatory preferences in the U.S. (Fast Track, Regenerative Medicine Advanced Therapy, or RMAT, and Orphan Drug designation) that will speed its review and give the therapy some exclusivity. The company puts the prospective population for exa-cel at more than 450,000 people in the U.S. and Europe.

The therapy will likely be expensive for patients and lucrative for CRISPR and Vertex. It would justify a big price tag if it could end transfusion and hospitalization expenses for some TDT and SCD patients. Vertex will receive 60% of the revenue from exa-cel, with CRISPR receiving the rest plus a $200 million milestone payment if the therapy's BLA is approved.

Exa-cel works through editing a person's stem cells to make high levels of fetal hemoglobin in red blood cells. Those cells are then injected back into the person via a stem-cell transplant, allowing the patient to produce their own healthy red blood cells.

2. Patience is required for this investment

CRISPR isn't yet profitable, and it might take a long time to get there. While the company has $2 billion in cash, it finished 2022 with only $6,000 in collaboration revenue.

The FDA could take as much as a year to approve exa-cel, if it does so at all. Being the first CRISPR-based therapy to treat diseases, it will be well studied before the regulatory body signs off on it. The FDA will examine issues including the risk of toxicity from the therapy, as well as chromothripsis, or poorly organized chromosomal abnormalities that could lead to cancer.

Knowing all that, there's a good chance the stock could see more volatility, even after it reaches the commercial stage.

While CRISPR Therapeutics has shown that it has the ability to bring a therapy through trials, producing and marketing require different skill sets the company will have to develop. Or, it's possible that a larger company could buy CRISPR.

3. Two other therapies could soon follow

CRISPR has two other oncology therapies that could become marketed products in the next couple of years: CTX110 and CTX-130, both chimeric antigen receptor (CAR) T cell therapies. CRISPR wholly owns both, meaning that unlike with exa-cel, the company would retain all revenue if it successfully launches them.

CTX-110 targets CD19, a protein seen in several B-cell malignancies, such as large B-cell lymphoma, chronic lymphocytic leukemia, and Waldenstrom macroglobulinemia. The therapy, after success in a phase 1 trial, is now in a phase 2 trial.

CTX130 targets the CD70 protein to treat T-cell lymphomas, including certain solid tumors, and did well in a phase 1 trial to treat renal cell carcinoma.

Overall, the company's pipeline includes 25 programs, a reason to be excited about the long-term prospects for the stock.