Over the last couple of weeks, Cathie Wood's ARK Innovation ETF has been busy buying shares of gene-editing biotech Intellia Therapeutics (NTLA 3.70%). She's also been selling some shares of CRISPR Therapeutics (CRSP 0.34%), one of Intellia's major competitors. And both stocks make up around 2.7% of her ETF's portfolio.
So is the queen of disruptive growth stocks losing her confidence in CRISPR's prospects of success relative to Intellia, and if she is, is it worth following her lead?
Does it make sense to follow Wood's purchase?
The catalyst for Wood buying Intellia stock was likely the favorable data that it published on June 11 regarding one of its phase 1/2 clinical trials, a gene editing therapy for hereditary angioedema (HAE). Unlike any of the existing medicines used to treat the symptoms associated with that condition, Intellia's candidate is capable of treating the root cause: genetics.
Using its in vivo (in life) editing system, the therapy actually alters patients' disease-relevant genes, correcting the problems caused by the copies of those genes that they inherited. And per the company's update, the early signs point to those corrections leading to fantastic and long-lived reductions in symptoms -- perhaps to the point of dubbing it a functional cure.
But it will take years of successful clinical trials before the program, or any of Intellia's other programs, have the chance to make even a dollar in revenue. Nonetheless, both of its in vivo programs are in clinical development, whereas CRISPR Therapeutics' are still in pre-clinical research and development (R&D). That means it's probably at least a year or so closer to commercializing its gene editing therapy, assuming it ever happens.
So don't feel obligated to rush to buy this stock just because Cathie Wood is, as it's quite the risky growth stock given that it's in the early legs of the marathon it has ahead.
Wood probably hasn't lost her conviction
When it comes to understanding the stock sales of famous portfolio managers like Cathie Wood, it pays to have a sense of whether they're quitting after experiencing losses, securing profits, or pivoting in advance of headwinds that'll soon affect the company in question.
Wood first started buying shares of CRISPR Therapeutics in the second quarter of 2017, with an average purchase price per share of $16.52, and she built up her position steadily over the following years, reaching a peak of roughly 9.7 million shares by the end of 2020. Today, its shares trade for around $59.
In other words, ARK Invest has plenty of CRISPR stock that it can sell for big gains while still retaining its later-purchased shares to continue being exposed to the future upside. And experiencing that upside may well be right around the corner.
The biotech is approaching the potential commercialization of its flagship gene therapy program called exa-cel for two different indications -- one for treating sickle cell disease (SCD) and the other for treating transfusion-dependent beta-thalassemia (TDT), a pair of rare hereditary blood disorders. On June 8, the Food and Drug Administration (FDA) received the company's drug approval applications. Now, regulators will stew on the materials until delivering their verdicts on Dec. 8 for the SCD indication and March 30 for TDT.
Simply put, it wouldn't make sense for Cathie Wood to continue liquidating her entire position now when the stock could soon fly as a result of securing approvals that would quickly lead to the business realizing sales revenue for the first time ever. If you're a shareholder, you shouldn't sell right now, either.
The fact that Intellia has a small lead on CRISPR Therapeutics with its in vivo gene-editing therapies doesn't change much in the near term, and as they're both pioneering a new frontier of medicine, it's impossible to say which will succeed there in the long term.
It could even make sense to diversify and buy shares of both companies to increase your exposure to breakthroughs in gene-editing therapy that they might achieve, assuming you can accept that such ambitious innovation tends to entail significant risks of falling short along the way.
