Despite its shares being down almost 10% over the past five years, there's reason to believe that CRISPR Therapeutics (CRSP 0.34%) is finally about to soar. With its first medicines approaching commercialization, and plenty of promising programs in its pipeline, shareholders are in for what will probably be a profitable ride, and soon.
But more importantly than that is the company's runway for growth over the long haul. Here's why investors who buy the shares soon could gain serious returns between now and the end of the decade.
The near term looks good, but the long term could look even better
At the moment, the biotech is in the final stages of bringing its first gene therapy to the market. That therapy, which it calls exa-cel, is intended to treat transfusion-dependent beta thalassemia (TDT) and sickle cell disease (SCD). It was developed with the help of Vertex Pharmaceuticals. CRISPR has already submitted the appropriate materials to regulators for their consideration, and if they grant approval for both of the indications, by Q2 of 2024 it will be raking in cash and its stock will be flying.
So this business is at a unique moment in its history, and it's on the verge of realizing revenue from sales of a medicine for the first time. Assuming it actually gets approved, exa-cel's addressable patient population may be only around 30,000 people in the U.S. For 2024, Wall Street analysts are estimating that the biotech will bring in about $169 million in revenue from exa-cel, even though its addressable market is quite small.
But with some additional post-market research and development (R&D) work on exa-cel to make it usable for more people, management thinks that the addressable population could eventually swell to more than 166,000 patients. If it were to go even further and develop a gene editing therapy that actually permanently corrected the genes that cause the two ailments, which it hasn't started on yet, it could treat as many as 450,000 people. That's the kind of market and the kind of program in which CRISPR Therapeutics' absurd long-term value lies, assuming it can live up to its ambitions.
In a nutshell, it's one of the leaders in developing gene editing therapies that can potentially cure hereditary illnesses. While all but one of its programs in that vertical are in the pre-clinical trial phase, between now and 2030 that will change. Imagine the reputation that the company could build by being among the first to cure numerous inherited diseases. Aside from the high probability of extreme hype surrounding its stock, it could help a lot of people, and make a boatload of money along the way too.
As if that weren't enough, it also has a pair of oncology therapies in clinical trials, as well as a medicine for diabetes in the works, not to mention a candidate that could treat cardiovascular disease that will enter the clinic soon for the first time. The markets for those projects are gargantuan, and over the next 6.5 years or so it is very likely that they will move to be within its reach, even if some of its programs fail along the way.
Be wary that there's no bargain here
Despite its sunny future, there are a couple of catches with an investment in this stock that might be dealbreakers for some investors. Right now, CRISPR's price-to-sales (P/S) ratio is about 45, meaning that its shares are extremely expensive. If it gets exa-cel approved for one or both of the indications that it's seeking, its shares probably will rise sharply immediately, and potentially even more as time goes on and earnings data trickles in. While eventually its revenue might grow enough to bring its P/S multiple down, there will probably not be an opportunity to buy it at a significantly cheaper valuation anytime soon, given its large pipeline and its popular status as a leader in gene editing.
The other catch is that the longer you plan to hold your shares, the more exposure you'll have to a less-than-ideal outcome with its clinical trials. While it's true that the whole point of buying it is to get exposure to the upside of those same trials, it's important to understand that a biotech developing highly innovative medicines is not going to have a flawless record. Bumps along the road can be painful, and shareholders might see the stock drop by as much as 30% depending on the phase of the trial that flounders and the precise nature of the problems. If that's a possibility that'll keep you up at night, this isn't the stock for you.
