The market experienced a wild ride in 2022, making investors hesitant to invest in the stock market. However, the S&P 500 appears to have turned the corner this year, rising 17% so far.
In this recovering market, growth stocks that are still undervalued are a good option for risk-averse investors. CRISPR Therapeutics (CRSP 0.34%) is a gene-editing biotech company. Let's take a look at why it's not too late to add this stock to your portfolio.
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No approved products yet
Some investors may be put off by this biotech company's lack of approved products on the market. It has yet to generate revenue or profits. But that could change soon. A biotech company can become a market leader with just a few blockbuster therapies. CRISPR has outperformed the market this year, gaining 25% so far.
CRISPR and its partner Vertex Pharmaceuticals announced the launch of their first product in March. Vertex will be able to use CRISPR's sophisticated gene-editing technology (CRISPR-Cas9) for its type 1 diabetes (T1D) program under the terms of the nonexclusive licensing agreement. Vertex anticipates that it will soon develop "fully differentiated, insulin-producing hypoimmune islet cells for T1D."
Both companies haven't disclosed more information on this collaboration. However, the product, when developed, will be promising as the T1D market is huge. It is projected to grow at a compounded annual growth rate of 8% to be valued at $14 billion by 2030.
Under the terms of the deal, Vertex paid CRISPR $100 million up front for those rights and could pay up to $230 million more in R&D, product, and royalty revenue if and when it launches a product using CRISPR's technology.
The near-term future is bright
Vertex has another agreement with CRISPR to use its gene therapy, exa-cel, to treat both transfusion-dependent beta-thalassemia (TDT) and severe sickle cell disease (SCD).
Both companies completed regulatory submissions in Europe, the United Kingdom, and the United States in the first quarter. The U.S. Food and Drug Administration (FDA) granted an expedited review for SCD and a standard review for TDT in June. FDA expects to announce a decision for the SCD review by December and for the TDT review by June.
Exa-cel has shown promising results in clinical trials for both diseases. Approximately 89% of TDT patients did not require blood transfusions during the twelve-month testing period. For SCD, about 94% were free of painful vaso-occlusive crises caused by the disease for at least a year.
The company hopes that exa-cel will be the first CRISPR gene-editing therapy to reach the market. Patients could require one course of the therapy. Exa-cel could cost up to $2 million per treatment, according to the Institute for Clinical and Economic Review. If the estimates are correct, it could result in massive sales for CRISPR.According to the amended partnership, Vertex will receive 60% of the profits, while CRISPR will receive 40%.
FDA has earlier approved gene therapies. Therefore, chances look good for CRISPR. Besides, exa-cel uses CRISPR's gene editing technology, so getting approval for it will open many doors for the company that uses this technology on various other candidates in the work.
CRISPR had no product revenue in its most recent first quarter, but it did earn $100 million in collaboration revenue.
Vertex is already an accomplished biotech company. If these agreements with Vertex are successful, it will encourage other biotech companies to collaborate with CRISPR.
CRISPR Therapeutics is developing other candidates. If and when these are approved and released to the market, they have the potential to significantly increase its revenue, potentially causing its stock to skyrocket.
CRISPR ended the quarter with $1.8 billion in cash, cash equivalents, and marketable securities on its balance sheet, which it could use to fund future pipeline development.
Is it the right time to buy?
CRISPR's stock could outperform the market in the long run with innovative gene-editing therapies that could be vital in treating and curing genetic diseases. The global gene-editing market is expected to be worth over $20 billion by 2030 and with a potential blockbuster product on the way, CRISPR's future looks promising. However, keep in mind that it may take many years for the company to have a successful and approved product that generates consistent profits. This undervalued biotech stock is a good buy right now for investors willing to wait for it to reach its full potential.
