A striking analogy can be drawn between the development of monoclonal antibodies and the emergence of CRISPR-based gene editing. Both technologies took roughly 10 years to transition from the laboratory to the market, and both have transformed the field of human medicine.
Since the first Food and Drug Administration (FDA) approval of a monoclonal antibody in 1986, the field has expanded rapidly, and several of the top-selling therapies of all time have originated from this technology. If CRISPR gene editing follows a similar trajectory, early shareholders in companies that develop the groundbreaking tech ought to reap huge rewards in the coming decades.
Image Source: Getty Images.
The challenge for investors is that they have an abundance of options. CRISPR Therapeutics (CRSP 0.34%) is the undisputed leader in the field, particularly now that it has earned conditional approval from U.K. health regulators for Casgevy (exa-cel) for sickle cell disease and beta-thalassemia, but the company may eventually be overtaken by rivals using next-generation platforms like base or prime editing. With this in mind, let's explore whether CRISPR Therapeutics' first-mover advantage makes it the best investment opportunity in the space right now.
Background
CRISPR Therapeutics is a biotechnology company that was founded in 2013 by Emmanuelle Charpentier, one of the co-discoverers of CRISPR/Cas9, along with Rodger Novak and Shaun Foy. The company's mission is to develop transformative gene-based treatments for serious diseases using its proprietary CRISPR/Cas9 platform. The company has partnered with Vertex Pharmaceuticals, Bayer, ViaCyte (now a subsidiary of Vertex), and others to advance its pipeline of gene-editing therapies.
Casgevy is the first gene-editing therapy to be approved by a regulatory agency. It is a treatment for transfusion-dependent beta-thalassemia, a rare blood disorder that causes severe anemia and requires frequent blood transfusions, as well as sickle cell disease, another uncommon blood disorder characterized by abnormal hemoglobin that causes red blood cells to become C-shaped.
Casgevy uses CRISPR/Cas9 to edit a patient's hematopoietic stem cells (HSCs), which are responsible for producing blood cells. The edited HSCs are then infused back into the patient, where they produce functional hemoglobin and reduce or eliminate the need for blood transfusions.
Casgevy was developed in collaboration with Vertex Pharmaceuticals, and approved by the U.K.'s Medicines and Healthcare products Regulatory Agency this month. The therapy is also under review by the European Medicines Agency and the FDA, potentially setting the stage for a broad commercial launch in 2024.
Commercial opportunity and risks
If Casgevy is approved in the U.S. and European Union, most analysts covering CRISPR Therapeutics expect the therapy to become a blockbuster seller with strong pricing power, which would create a narrow economic moat for the company.
However, Casgevy, along with the company's other gene-editing candidates, may face competition from next-generation platforms that aim to improve on CRISPR/Cas9's efficiency, specificity, and versatility. For example, base editing is a technique that can directly convert one DNA base to another without cutting the DNA strand, potentially reducing the risk of unwanted mutations arising from treatment.
Prime editing is another technique that can insert, delete, or replace any DNA sequence with high precision and a low error rate. Both techniques have been demonstrated in animal models and human cells, and are being developed by companies such as Beam Therapeutics, Editas Medicine, and Prime Medicine.
However, treatments based on these next-gen technologies are unlikely to make their commercial debuts within the next three years. Casgevy, though, does face near-term competition from more traditional forms of gene therapy such as Bluebird Bio's Zynteglo (FDA-approved for beta-thalassemia) and lovo-cel for sickle cell disease (under FDA review).
Investing thesis
CRISPR Therapeutics has a leading position in the gene-editing industry, with a strong patent portfolio and a first-mover advantage. The company is developing gene-editing therapies for a range of diseases, such as cancer, cardiovascular disease, diabetes, and more. The company also has a healthy balance sheet, with more than $1.73 billion in cash and equivalents as of the end of the third quarter.
However, CRISPR Therapeutics is not without its challenges. It faces intense competition from other gene-editing companies, both within and outside the CRISPR/Cas9 platform. The company also has to deal with the technical and regulatory hurdles of scaling up its production process, increasing its market access, and staying ahead of the innovation curve.
On the bright side, the company's valuation is relatively low, with a market cap of less than $6 billion at the time of this writing. That's a small fraction of the potential market opportunity for its diverse pipeline. For comparison, CRISPR's lead programs are targeting markets estimated (in aggregate value) to be worth more than $110 billion by 2030.
Investing takeaway
Ideally, the best treatments would always win in the market, regardless of which one debuted first. In reality, the pharmaceutical industry is not that simple. First-movers often acquire a strong competitive edge, and it is hard for later entrants to gain market share unless they demonstrate a sizable clinical advantage in terms of safety and/or efficacy, or are sold for a much lower price. With Vertex at its side and a compelling clinical profile in hand for Casgevy, the stage is set for CRISPR Therapeutics to potentially establish a strong competitive position in rare blood disorders.
The revenue from its first blockbuster franchise could then be funneled into the development of its other pipeline candidates, several of which sport dramatically higher peak sales potentials than Casgevy. Moreover, CRISPR Therapeutics has a real shot at becoming a major player on the mergers and acquisition scene within the next few years due to its first-mover advantage, which would deepen its competitive advantages over its peers.
Overall, this is a dynamic story with no clear answers. But the history of therapeutic antibodies may provide some important lessons for investors about what might be coming down the pike. In brief, pioneers in the field of antibody therapies -- such as Amgen, Regeneron Pharmaceuticals, and Roche to name a few -- ultimately used their early wins to become acquirers of other companies that had promising next-generation assets. The same story could very well play out with CRISPR Therapeutics, possibly making it the best stock to own in the emerging field of gene editing.
