The market has had its ups and downs so far in 2023 although it has generally been northbound. And after last year's downturn, investors hope the recent run will continue.

One stock that could ride the market rally is CRISPR Therapeutics (CRSP -2.79%). This biotech is seeking to develop breakthrough therapies for difficult-to-treat illnesses using gene editing, and the company's focus in this area earned it a prominent place in the Ark Genomic Revolution ETF, an exchange-traded fund overseen by Cathie Wood.

Wood isn't the only one on Wall Street who likes CRISPR. Analysts' average price target for the stock is currently $86.40, according to Yahoo! Finance, implies an upside of 94% over its stock price as of this writing. Let's figure out whether these expectations are realistic. 

A major potential catalyst on the way 

The biotech industry is volatile. It isn't that rare to see companies, especially relatively small ones, double or more in a year. Such performances are typically driven by positive clinical or regulatory news. So to figure out whether CRISPR Therapeutics could (almost) double in the next 12 months, the first thing to check is whether the company has important potential catalysts on the way. And the answer is a resounding yes. 

CRISPR is slowly but surely moving closer to regulatory approval of exa-cel, a potential gene-editing therapy for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). Both are rare genetic illnesses of the blood that carry significant burdens for patients. For instance, many people with TDT need blood transfusions regularly, which is expensive and risky. 

The company developed exa-cel with the assistance of biotech giant Vertex Pharmaceuticals. The two partners have submitted applications for the therapy in targeting TDT and SCD in Europe, and they expect to finish doing the same in the U.S. by the end of the first quarter. Regulatory agencies could approve exa-cel by year-end or in early 2024. Here are two reasons to believe the treatment has an excellent shot at approval.

First, it aced its clinical trials. Here's one example. Of 44 TDT patients treated in a late-stage study, 42 were transfusion-independent after exa-cel. The remaining two experienced substantial reductions in transfusion volume. Second, there are few therapy options for SCD and TDT. Since exa-cel addresses a severe unmet need, health industry regulators are more likely to do their best to ensure that it makes it to the market.

If the treatment does earn the green light, it's hard to say how much upside, if any, is in store for CRISPR Therapeutics. But considering that it wants to target 32,000 SCD and TDT patients, and since gene-editing treatments routinely command price tags over $1 million, the eventual payoff could be massive, even if CRISPR Therapeutics will keep only 40% of the profits per its agreement with Vertex.

The biotech's market capitalization is just $3.4 billion right now. In my view, the company's share price will rise meaningfully if exa-cel does earn the nod from regulators. 

There is more to come for this biotech

CRISPR Therapeutics also has several ongoing clinical programs that could register meaningful progress this year. They include potential gene-editing cancer treatments CTX110 and CTX130. Still, the company's performance in the next year will largely hinge on exa-cel. What could that look like?

The shares have already had a roller coaster of a year, rising by more than 30% at one point, although they are currently up by 10% year to date. Investors can expect the volatility to keep up, and I believe CRISPR will end up decidedly in the green over the next 12 months. However, hitting the Street's price target would be challenging, and I expect the stock to fall short of that goal.

But that doesn't mean the biotech stock isn't a buy. CRISPR Therapeutics is proving the potential of its gene-editing platform with exa-cel. Its several other promising candidates, not to mention the windfall resulting from the approval of its leading therapy, all make CRISPR Therapeutics' prospects look bright. Buying the company's shares before they soar on the strength of exa-cel's approval would be a good idea.