CRISPR Therapeutics (CRSP -1.35%) has been making headlines lately as a result of its groundbreaking gene-editing collaboration with Vertex Pharmaceuticals (VRTX -1.02%). The backstory is that the two companies recently filed for a spate of regulatory approvals for the CRISPR/Cas9 gene-edited product, exa-cel, as a functional cure for two rare blood disorders, sickle cell disease and transfusion-dependent beta thalassemia.
What arguably hasn't been appreciated, however, is CRISPR's other clinical assets in immuno-oncology, regenerative medicine, and in vivo therapeutics. Wall Street has essentially assigned these other programs zero value, evinced by the fact that CRISPR's stock is trading at under three times its last stated cash position. In fact, this meager valuation arguably doesn't even reflect the full commercial potential of exa-cel. Wall Street's pessimism might represent a once-in-a-lifetime opportunity for savvy investors.
Image Source: Getty Images.
What's important to know right now?
CRISPR is currently advancing multiple immuno-oncology candidates in the clinic, all of which may represent a major leap forward in the field of off-the-shelf cell therapies. What's more, CRISPR has so far retained full commercial rights to its most advanced CRISPR/Cas9 gene-edited anti-cancer cellular therapeutics. This singular unit has the potential to generate billions in annual revenue in the second half of the decade.
But immuno-oncology is only a small part of CRISPR's overall value proposition. The gene-editing pioneer is also collaborating with Vertex's ViaCyte subsidiary to develop revolutionary gene-edited cellular therapeutics for type 1 diabetes (T1D). Now, the economics of this collaboration hasn't been fully disclosed, but this program is inherently high-value due to the sheer size of the T1D market.
By the end of the decade, T1D therapeutics are expected to eclipse $24 billion in annual sales, according to a report by Research and Markets. CRISPR and Vertex are attempting to disrupt this enormous space by bringing a functional cure to market for T1D. Yet this fact has been completely ignored by Wall Street from a valuation standpoint, despite Vertex's proven track record of innovating in hard-to-treat indications such as cystic fibrosis.
CRISPR's nascent in vivo therapeutics program, though, is where things get truly interesting from a value creation standpoint. With a strategy focusing on gene disruption and whole gene correction, CRISPR is building a platform that may be able to effectively treat a wide variety of severe human diseases.
The company plans on trialing its initial in vivo candidates in the cardiovascular space, but the sky is the limit if it can get beyond the proof-of-concept stage. Again, this program could also be worth untold billions, although, to be fair, the very early stage nature of this in vivo effort does require a great deal of caution from an investing standpoint. That being said, in vivo therapeutics could turn out to be CRISPR's main value driver by the decade's end.
What's the investing thesis?
CRISPR arguably only needs to notch a few more wins across its diverse clinical pipeline to grow into a $25 billion to perhaps $50 billion company by 2030. That's a testament to the enormous value of its various programs in immuno-oncology, regenerative medicine, and in vivo therapeutics. And for perspective, the gene-editing company is currently being valued at approximately $5 billion. So there's a lot of room for growth for the company in the years ahead.
On the more speculative side, CRISPR might be on the cusp of a parabolic growth spurt. A win in T1D alone would probably transform the biotech into a $100 billion entity, thanks to the strong prospects that the technology will also be used in the even larger type 2 diabetes setting, estimated at $136 billion in 2029. And then there's the untapped commercial potential of CRISPR's in vivo platform in cardiovascular diseases, a market currently worth over $100 billion in annual sales for both drugs and devices.
Armed with his background, it's fairly evident that Wall Street is expecting exa-cel to have an extremely slow commercial ramp-up and CRISPR to fail in most, if not all, of its other clinical ventures. That's a pretty dire take in light of the company's unprecedented ability to transform a novel technology into a commercially viable product in less than 10 years' time. So if you're looking for an unusual growth opportunity, this small-cap biotech stock may be worth adding to your portfolio right now.
