Equities are unpredictable in the short run. How the market will behave in the next six to 12 months is anyone's guess. However, over more extended periods, of five years or more, things become much more (if not wholly) predictable. The market tends to reward companies based on financial results and an improving outlook.
Before investing in a stock, intending to hold it long term, it's critical to determine how the company is likely to perform on these fronts. With that in mind, let's look at a rising star in the biotech industry: CRISPR Therapeutics (CRSP 2.19%). How do the company's prospects look for the next half-decade?
CRISPR Therapeutics' financial results
CRISPR Therapeutics is a clinical-stage biotech, so it has no products on the market yet. Unsurprisingly, the company is consistently unprofitable, but its overall financial situation looks rather competitive when pitted against its similarly sized peers. CRISPR recorded $70 million in revenue in the second quarter, up from $150,000 a year ago.
The company generates some revenue thanks to a collaboration agreement with biotech giant Vertex Pharmaceuticals (VRTX 0.72%). CRISPR also ended the period with $1.8 billion in cash, equivalents, and marketable securities, compared to $1.9 billion at the end of 2022. That's not bad for a mid-cap clinical-stage biotech.
NASDAQ: CRSP
Key Data Points
More importantly, CRISPR Therapeutics' financial results should improve in the next five years. The company is on the verge of receiving approval for exa-cel, a gene-editing treatment for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT), developed with Vertex. The partners have completed regulatory submissions in the U.S. and Europe. Approvals should start rolling in by year-end.
CRISPR Therapeutics and Vertex Pharmaceuticals initially plan to target 32,000 TDT and SCD patients. Based on the scarcity of treatment options for both diseases, and the high price tags gene-editing therapies routinely command (typically above $1 million), the opportunity here is vast. Per its agreement with Vertex, CRISPR Therapeutics will receive 40% of the profits and incur 40% of the costs of exa-cel.
That should be enough for the company to generate decent and growing sales in the next five years, after it launches this product.
The outlook beyond exa-cel
Exa-cel could be the first therapy approved by the U.S. Food and Drug Administration that utilizes the Nobel Prize-winning CRISPR gene-editing technique. Here's why that's important: CRISPR Therapeutics uses this same technology for its other candidates -- hence the company's name. Once it has a proven way to develop groundbreaking therapies that can jump through all the clinical and regulatory hoops on the way to approval, the next five years should yield plenty of clinical progress for CRISPR Therapeutics.
The company's pipeline features several programs although most are still in their early stages. Two of the most advanced are CTX110 and CTX130, a pair of oncology candidates. CRISPR Therapeutics is enrolling participants for a phase 2 study of the former and a phase 1 of the latter.
Both CTX110 and CTX130 have received the "regenerative medicine advanced therapy" (RMAT) designation from the FDA. One of the requirements for this nod is early clinical evidence indicating that an investigational medicine could properly address a serious disease in which there is an unmet need for therapies. This isn't a guarantee that CTX110 and CTX130 will go on to earn approval -- not even close. But the designation is neither random nor meaningless.
CRISPR Therapeutics has other programs in early-stage clinical studies, including more oncology candidates and several potential therapies for type 1 diabetes; some should move to the clinic in the next five years. Will the company record only positive results from its ongoing programs? No, hardly any biotech can pull that off. However, there should be significant clinical progress in that time frame.
And in all likelihood, CRISPR Therapeutics' stock performance won't be entirely at the whim of its pipeline success (or lack thereof), thanks to exa-cel. That should grant the company some room for error.
Is CRISPR Therapeutics stock a buy?
In my view, CRISPR Therapeutics' current market capitalization of $4 billion doesn't fully factor in exa-cel's potential. And while there certainly won't be smooth sailing in the next five years -- there rarely is in the volatile biotech industry -- I'd bet on the company being able to deliver above-average returns. It should have both exa-cel and potential pipeline progress, some of which could be groundbreaking. CRISPR Therapeutics isn't developing just run-of-the-mill medicines.
The company seeks to create curative therapies for illnesses, including some that have so far been considered lifelong diseases. That's what it aims to do with exa-cel. And if it can get even one more therapy close to approval in the coming years, which seems likely, its shareholders will benefit. That's why CRISPR Therapeutics shares are worth buying.
