The S&P 500 has taken off since the start of the year, climbing 17% so far and spurring some to wonder if a bull market is just around the corner. That has helped lift growth stocks as investors prepare their portfolios for better times.
And one particular stock to benefit is biotech CRISPR Therapeutics (CRSP 0.34%). The stock has advanced 24% so far this year. And this innovative company could be at the very beginning of its share performance story. In fact, the average Wall Street estimate calls for a 70% gain over the coming 12 months.
Are analysts too optimistic about this gene-editing specialist, or could this rising star really skyrocket from here? Let's find out.
A key catalyst ahead
First, it's important to note that CRISPR's recent share increase and potential gains ahead aren't just a movement with the rising market. A key catalyst lies ahead, and that has helped (and could continue to help) share performance.
Today, CRISPR doesn't have any products on the market, but that might change soon. The company and partner Vertex Pharmaceuticals have submitted exa-cel, their gene-editing candidate for blood disorders, to regulators in the U.S., Europe, and the U.K.
The U.S. Food and Drug Administration (FDA) offered priority review for exa-cel in treating sickle cell disease -- a status to speed up the process for potentially game-changing treatments -- and set a decision date for December. Under standard review procedures, the FDA will decide on exa-cel for beta thalassemia in March. Clinical trial data for both indications have been strong, so there's reason to be confident about the therapy's future.
CRISPR will take 40% of potential profits, with Vertex taking the rest, but even this lesser share represents a big deal for the company. That's because exa-cel could be on the road to blockbuster status.
The treatment might generate $1.7 billion in sales in 2028, according to Evaluate Pharma, a website that analyzes the pharmacology sector. Today, treatment options for sickle cell disease and beta thalassemia are limited, and exa-cel is designed as a one-time curative treatment, so the product could be a game changer.
A possible approval also could be seen as a vote of confidence in CRISPR's gene-editing technology, which is used across its pipeline.
Another candidate approaching the finish line
And speaking of the pipeline, CRISPR is ushering another candidate toward the finish line. The company's immuno-oncology candidate, CTX-110, is involved in a phase 2 trial that could support a regulatory request. And the FDA has granted it regenerative medicine advanced therapy status, which offers an opportunity for faster approval.
Beyond developing potential products itself, CRISPR also may help others do so and generate revenue this way. It signed an agreement earlier in the year allowing Vertex to license its gene-editing technology for use in its diabetes program. Vertex paid CRISPR $100 million up front and just recently reached a milestone, spurring a $70 million payment to CRISPR.
Some of the news might be baked in
Now, let's get back to our question: Is Wall Street too optimistic about CRISPR right now? It's true the stock has climbed since the start of the year. And it's also true that some of the good news might be baked into the share price already. After all, investors expected the exa-cel submission and have been following the candidate's progress through clinical trials.
That said, a 70% increase from here, as Wall Street predicts, still leaves CRISPR trading much lower than its peak back in 2021 -- a time when we had much less visibility about the company's future.
Of course, CRISPR might not return to those peak levels anytime soon, and an actual approval might not spark a tremendous gain. But over a period of a year, with the potential of an approval, initial product revenue, and progress from CTX-110, it's very possible CRISPR'S shares will advance 70% from today's level. And if the company brings CTX-110 to market in the coming years, gains could continue.
All of this means optimism about this innovative stock today isn't overdone -- and CRISPR makes a compelling buy for investors looking for the next biotech star.
