Cathie Wood is known for buying tomorrow's potential success stories today, when their share prices may be in the doldrums and their products haven't yet reached the market -- or haven't reached their full potential. She gets in early at a great price, with the idea of reaping enormous rewards down the road. Wood's flagship Ark Innovation ETF has climbed by double digits this year, beating the S&P 500.
Sometimes Wall Street agrees with Wood, and analysts expect a particular company's share price to surge from today's levels. That's the case for CRISPR Therapeutics (CRSP 0.34%), a gene-editing company that Wood has been buying hand over fist. Wall Street predicts the gene-editing player's stock could climb 100% in the coming 12 months.
Are these predictions on target, or too optimistic? Let's find out.
Two big regulatory decisions
CRISPR Therapeutics is heading for its biggest moment ever -- regulatory decisions on what may become its very first commercialized product. The U.S. Food and Drug Administration (FDA) expects to decide on exa-cel for sickle cell disease in December and for beta thalassemia in March.
Exa-cel is a gene-editing treatment developed using CRISPR technology to fix faulty genes responsible for disease. Potential approvals could be huge for two reasons.
First, a regulatory nod could result in blockbuster revenue for CRISPR Therapeutics and its partner, Vertex Pharmaceuticals (VRTX -0.06%). Today, treatment options for the blood disorders sickle cell and beta thalassemia are limited -- and patients face a lifetime of hospitalizations. Not only does exa-cel offer them an option for treatment, but the candidate is designed as a curative treatment. So we can imagine doctors and patients rushing to give the potential product a try.
Second, as mentioned, exa-cel uses CRISPR gene-editing technology, a platform the company applies throughout its pipeline. So, an approval could be seen as a vote of confidence in this method, and a good sign for CRISPR Therapeutics' other programs.
Meanwhile, CRISPR Therapeutics is working on another candidate that could reach the finish line in the not-too-distant future. It's studying immuno-oncology candidate CTX-110 in a phase 2 trial that could support a regulatory submission. The company also is studying two other immuno-oncology candidates, CTX-112 and CTX-130, in phase 1 trials. Thanks to encouraging early data, the FDA has granted CTX-110 and CTX-130 "regenerative medicine advanced therapy" (RMAT) designation, a pathway to faster approval.
So exa-cel may be just the beginning of CRISPR Therapeutics' product story.
A source of revenue right now
Another positive point is that CRISPR Therapeutics is already generating revenue thanks to the strength of its technology. Earlier this year, Vertex Pharmaceuticals licensed the company's gene-editing platform for use in Vertex's type 1 diabetes program. That involved a $100 million up-front payment from the big biotech player. And CRISPR Therapeutics earned $70 million in the most recent quarter after a research milestone was achieved.
CRISPR Therapeutics still isn't profitable, but this opportunity for revenue generation is limiting losses until the company is able to launch a product -- and that launch could be right around the corner.
Is Wall Street being realistic?
Now, let's consider Wall Street's estimates that CRISPR Therapeutics' share price will double over the coming 12 months. Do I think they're realistic? Not necessarily. Though I'm positive about this stock and think it will gain significantly over the long term, I don't think it will soar 100% in such a short period of time.
A lot of the optimism about an exa-cel approval may be baked into the shares, so they might not immediately take off and head steadily higher if the FDA offers a nod.
But that doesn't mean you should avoid shares of this innovative biotech company. They're trading a lot lower than they were a couple of years ago, when we had less visibility on future revenue prospects.
Also, I think an approval and the earnings growth that may follow could act as catalysts over time, pushing the shares to gains over the long haul. And if CRISPR Therapeutics announces progress from its phase 1 and phase 2 candidates, the stock could have another reason to climb.
So, even if this Cathie Wood stock doesn't soar according to Wall Street's predictions, that's OK. It still makes a solid long-term buy that may deliver top rewards over the years to come.
