Cathie Wood doesn't mind going against the grain. In the past, she's made big bets with her Ark Invest funds that haven't been in sync with the conventional wisdom. And she appears to be doing it again with Beam Therapeutics (BEAM -1.02%).
Shares of Beam Therapeutics have plunged more than 50% year to date. That hasn't phased Wood one bit. She loves this beaten-down stock. But is it in trouble?
Covering her bases
Beam Therapeutics is a leader in developing base-editing therapies. Instead of cutting DNA as most gene-editing approaches do, base editing chemically modifies a DNA base to make it another base. It's similar to erasing a letter in a word and writing in a new letter.
Wood appears to be a big believer in the promise of base editing. In addition to Beam Therapeutics, her Ark Invest portfolio includes Intellia Therapeutics and Verve Therapeutics, both of which have base editors in their pipelines.
Unsurprisingly, Wood's Ark Genomic Revolution ETF has loaded up on Beam Therapeutics. The exchange-traded fund (ETF) has repeatedly bought the stock in recent months, including adding more than 22,000 shares in early October. Beam now ranks as Ark's 16th-largest holding.
Her flagship Ark Innovation ETF has also gotten in on the action. It owns over 6 million shares of Beam Therapeutics compared to 2.2 million shares for Ark.
Trouble brewing for Beam?
Generally speaking, the more programs a biopharmaceutical company has in its pipeline, the less risky it is. Investors like a drugmaker to have a greater number of shots at success. They typically applaud when a company adds a new clinical-stage program to its lineup.
Beam Therapeutics, though, is going in the opposite direction. Last week, the company announced that it won't continue to prioritize internal development of BEAM-201, a base-editing cell therapy in phase 2 clinical testing. Instead, Beam said it now plans to look for a potential partner for the program and other potential ex vivo (outside the body) CAR-T programs. BEAM-201 is one of only two clinical-stage candidates in Beam's pipeline.
The company also stated that its hepatitis B virus (HBV) program (which isn't at the clinical stage yet) will be paused. Beam hopes to find a partner for the HBV program as well.
Beam Therapeutics CEO John Evans said the company had "to make the difficult decision to focus our resources on those clinical programs and research areas we believe have the highest potential for near-term value creation." The reprioritization of its development efforts includes a reduction of close to 20% of the company's staff.
Is Beam Therapeutics stock still a buy?
Wood's Ark Invest funds haven't purchased any shares of Beam Therapeutics since the news broke about the company's pipeline moves. Is the gene-editing stock still a buy? I think there's a two-part answer.
Beam isn't -- and hasn't been -- a stock suitable for many investors. The company isn't profitable. There's no guarantee that its experimental base-editing therapies will be successful. However, investors comfortable with taking on a significant level of risk and who have a long-term perspective have seen a lot of potential with Beam in the past. They still should, in my view.
Beam will focus primarily on two promising programs. BEAM-101 is being evaluated in a phase 1/2 study targeting sickle cell disease. The company hopes to advance BEAM-301 into early-stage clinical testing next year in treating alpha-1 antitrypsin deficiency. If these candidates prove successful in clinical studies, Beam Therapeutics should be worth much more than its current market cap of around $1.5 billion within a few years.
