This September, Cathie Wood bought shares of Beam Therapeutics (BEAM -1.02%) more than a dozen times for two of Ark Invest's exchange-traded funds (ETFs). At the beginning of October, the biotech stock was the 13th-largest holding in the Ark Genomic Revolution ETF and the 19th-largest holding in the flagship Ark Innovation ETF.
Beam Therapeutics is a clinical-stage drugmaker working on a new approach to gene therapy. Plenty of biotechnology companies are developing potential one-shot cures to serious inherited diseases, but Beam's proprietary technology makes it stand out.
Should you follow Wood's lead and load up your own portfolio with Beam Therapeutics stock? Let's weigh its strengths against the challenges ahead to find out.
Why Cathie Wood is buying up Beam Therapeutics stock
In a nutshell, gene therapies aim to help patients produce functional copies of a specific protein that they can't produce on their own. Beam Therapeutics' method involves a base editing technique that targets and alters a single base in the genome for a change.
Base editing could have enormous safety and efficacy advantages over other methods. For example, gene therapy candidates from CRISPR Therapeutics and its CRISPR-focused peers break DNA strands to make edits. These types of breaks can occur naturally, and our cells have multiple mechanisms for repairing the damage. Unfortunately, that repair work can undo a therapy candidate's intended change.
If Beam Therapeutics' base editing technology works as well the company expects, investors who buy now could see enormous gains. In addition to a handful of new treatment candidates it's developing in-house, the company has half a dozen potentially lucrative partnerships. For example, last January, Pfizer gave Beam $300 million up front and a chance to earn over $1 billion in future milestone payments to develop new therapies for the treatment of rare genetic diseases.
What everyday investors need to know before buying the stock
Beam's techniques are new and are intended to make permanent changes. This combination makes regulators justifiably nervous, so development timelines aren't going to be very reliable.
Last August, the U.S. Food and Drug Administration (FDA) placed a clinical hold on BEAM-201 that effectively halted the experimental lymphoma treatment's development. The FDA lifted the hold a few months later, but it's been over a year since the company announced any new partnerships with established pharmaceutical companies.
Larger clinical trials make developing new drugs exponentially more expensive as candidates advance. Without any approved products to sell yet, Beam Therapeutics lost $179 million in the first half of 2023. It finished June with $1.1 billion in cash, but its losses will most likely accelerate as it carries multiple gene therapy candidates through the clinical trial process.
Image source: Getty Images.
A little behind
Beam is still enrolling sickle cell disease patients into its first clinical trial with its most advanced candidate, BEAM-101. This is an experimental gene therapy for patients severely affected by sickle cell disease and beta-thalassemia.
Unfortunately for Beam, the FDA approved a gene therapy from bluebird bio for beta-thalassemia over a year ago and an expansion to include sickle-cell disease patients could be around the corner. The agency is also reviewing applications from CRISPR Therapeutics and its partner, Vertex Pharmaceuticals, regarding another gene therapy candidate for the same patients BEAM-101 is aimed at.
Wood knows that it's going to be years before Beam Therapeutics begins realizing steady revenue from sales of its therapies. She's not worried that a future launch of BEAM-101 could buckle under pressure from entrenched competition because she's thinking even further ahead.
The stock market has high expectations for Beam Therapeutics despite the challenges it faces. Its recent market cap is up around $1.9 billion, which means its price could get beaten severely if investors catch the slightest hint of trouble. Only those with a sky-high tolerance for risk should follow Wood into this stock right now.
