Gene editing pioneer CRISPR Therapeutics (CRSP 0.34%) passed a major milestone on Dec. 8. The U.S. Food and Drug Administration (FDA) approved its first therapy, Casgevy, to treat patients with sickle cell disease.
The medical community cheered, but the stock market's response caught many investors off guard. Instead of shooting higher, CRISPR Therapeutics stock fell 8% on the day of its big announcement.
Is CRISPR Therapeutics a good biotech stock to buy on the recent dip? To answer that, we need to understand what its new therapy can and can't do.
What Casgevy from CRISPR Therapeutics does
Patients with sickle cell disease (SCD) produce faulty hemoglobin that unravels and causes their red blood cells to form the characteristic sickle shape that the disease is named after. Casgevy is an infusion of a patient's own stem cells that have been modified by CRISPR/Cas9 technology to produce fetal hemoglobin.
Sickle-shaped red blood cells regularly cause debilitating and painful vaso-occlusive crises (VOC) in random organs when they jam up the blood vessels that serve them. During the clinical trial supporting Casgevy's approval, 29 out of 31 patients were able to go a median duration of 22.2 months without a VOC event. Moreover, none experienced VOC events that required hospitalization.
In addition to SCD, Casgevy could also become a treatment for another rare hemoglobin-related disorder called transfusion-dependent beta-thalassemia. The FDA is currently reviewing an application to treat TDT with Casgevy and expects to announce an approval decision on or before March 30.
Image source: Getty Images.
What Casgevy can't do
One infusion of Casgevy is all that it takes to keep SCD patients away from expensive hospital emergency departments for at least a year. You might expect this benefit to drive all 16,000 eligible patients in the U.S. to receive it, but that isn't going to happen.
Before treatment with Casgevy can begin, patients need to deplete their existing blood cells with a dangerous chemotherapy regimen. The actual infusion of Casgevy is relatively simple, but preparing patients to receive it involves a lot of expensive hospitalization.
Many SCD patients will balk at all the preparation required to receive Casgevy. For those who remain undeterred by the medical consequences, getting their health plan to pay for the process and treatment will be another challenge.
Casgevy isn't a prescription that patients renew over and over, so it needs to be incredibly expensive up front to recoup the billions that have been spent developing it. CRISPR Therapeutics' collaboration and marketing partner, Vertex Pharmaceuticals (VRTX -0.06%), set a list price of $2.2 million for Casgevy. This high price is going to limit access, and it isn't the only challenge the new therapy faces.
Looking ahead
Casgevy is the first CRISPR-based gene therapy approved by the FDA, but it isn't the only option available to roughly 16,000 eligible SCD patients. On Dec. 8, the FDA also approved Lyfgenia from Bluebird Bio (BLUE 1.13%) to treat the same limited group.
Lyfgenia is also made from an SCD patient's own stem cells, but instead of CRISPR/Cas9, it uses an attenuated virus to insert edited genes for a modified form of adult hemoglobin. Lyfgenia and Casgevy weren't tested on the same population, but cross-trial comparisons suggest they're similarly effective. Among 32 evaluable patients who received Lyfgenia, 30 remained free of severe VOC events for at least six months.
Despite similar efficacy results, Bluebird set the list price of its SCD therapy 41% above the competition at $3.1 million. Bluebird designed outcomes-based contracts so payers can claw back some of that expense if patients experience VOC events that require hospitalization during the first three years following treatment.
Unfortunately for Bluebird, its outcomes-based contract can't help insurers recoup the expenses that patients rack up during the conditioning regimen that proceeds the administration of its $3.1 million therapy. With a higher price but similar efficacy results, I'll be very surprised if Lyfgenia is used to treat a leading share of addressable SCD patients.
Beyond Casgevy, CRISPR Therapeutics has a handful of candidates in early clinical-stage testing. It's still too early to predict future sales for any of these programs, but we can be sure that they'll drive research and development expenses to new heights.
A buy now?
Top-line Casgevy sales aren't likely to exceed $1 billion annually, and CRISPR Therapeutics' share of those sales will be limited by the terms of its marketing collaboration. In a nutshell, Vertex Pharmaceuticals will sell the drug and cut CRISPR Therapeutics a 40% share of net profit or loss.
CRISPR Therapeutics finished September with $1.7 billion in cash and equivalents after losing $243 million in the first nine months of 2023. We still can't predict when CRISPR Therapeutics will be able to make ends meet, but the stock boasts a big $5.1 billion market cap.
While there's a chance that Casgevy sales drive CRISPR Therapeutics stock higher, its launch is anything but a guaranteed success. It's best to steer clear of this stock for now unless you have a sky-high tolerance for risk.
