Sometimes a company pioneers a brand-new technology, turning an industry on its head. Tesla did that to the automotive industry. After gas engines had been the standard for over a century, this newcomer showed that the future could be electric.
The biotech industry could soon experience a Tesla-like moment. CRISPR Therapeutics (CRSP 0.42%) potentially offers a new way to treat disease. The stock has slid lower over the past few years, which could be an opportunity for investors to pounce on shares before an upcoming potential catalyst.
Here is why CRISPR Therapeutics should at least be on your watch list today.
Treating disease in a new way
Science has helped humankind treat many types of diseases and viruses over the years. For example, a vaccination triggers an immune response by the body to attack an invader, something that doesn't belong. But what if a genetic mutation causes a problem? The body doesn't know better for a genetic condition like sickle cell disease, which impacts the body's red blood cells. Your genes are the blueprint of your body; it'll manufacture faulty red blood cells because your genes tell it to. There's no "invader" to treat; it's only following the instructions the genes provide.
CRISPR is among the companies pioneering a technology called Cas9, a gene-editing tool. Suppose your body had faulty instructions (genes) and was doing something that made it sick (such as with sickle cell disease). Cas9 gene editing is the equivalent of going into your genetic code and changing the instructions so your body starts building red blood cells properly.
The company has developed a pipeline of potential treatments, both collaborations and wholly owned, that can treat a variety of conditions in four key areas, including:
- Hemoglobinopathies -- hemoglobin disorders such as sickle cell disease
- Regenerative medicine -- starting with treatment for diabetes
- Immuno-oncology -- allogeneic immune cells for cancer
- In vivo -- a new delivery method that introduces edited genes directly into a patient's cells
This isn't like Jurassic Park, where scientists can throw genes together to make dinosaurs (who knows, maybe someday it will be). Treatments with Cas9 technology are much like the pharmaceutical process, and so companies like CRISPR are developing pipelines that undergo rigorous testing.
A roadmap to growth
Tesla brought its business mainstream when it launched the Model S in 2012; CRISPR could soon be on the verge of its debut. The company is applying for regulatory approval for its exa-cel therapy, which could treat sickle cell disease and transfusion-dependent beta-thalassemia (TDT). The product, co-developed with Vertex Pharmaceuticals, could become the first Cas9 product to receive approval if successful.
Approximately 100 million people worldwide carry genes for sickle cell and other hemoglobin diseases, which shows how impactful CRISPR's therapies could be. That is just one product, but there is a diverse pipeline that spans CRISPR's four focus areas:
Image source: CRISPR Therapeutics.
They probably won't all make it to market -- all pharmaceutical companies swing and miss. Still, CRISPR only needs a few home runs to bring in the money to grow its pipeline, and shareholders should be pleased as the company isn't currently generating revenue.
CRSP Revenue (Quarterly) data by YCharts
Other companies are pursuing gene-editing therapies; however, CRISPR winning the race to market could potentially give it the influx of cash it needs to solidify its spot as an industry leader.
Are we getting ready for take-off?
It's hard valuing a company like CRISPR. Not only is there no revenue or profits, but it's a biotech company -- you don't know what products will ultimately make it to market. However, one could look at its enterprise value, which is the stock's market cap (plus debt, but CRISPR has no long-term debt) minus the company's cash. In other words, what does the market pay for just the business?
Below, CRISPR's enterprise value is near three-year lows. The big difference between the company now and then is how much further CRISPR's research and pipeline have progressed. Today, you have a business that's applying for regulatory approval, and products hitting the market could be imminent. That seems like a sound argument that the stock's more attractive; you're getting a much more developed company at 2023's enterprise value.
CRSP Enterprise Value data by YCharts
Investors should approach CRISPR as a long-term hold. Becoming an industry leader in such a potentially important field is how shareholders can realize the most value from shares. The market might hold its breath until that official approval comes, but CRISPR could be looking at decades of growth if its product development succeeds.
