CRISPR Therapeutics (CRSP 0.34%) scored a major win in recent days, earning the world's first regulatory nod for a CRISPR-based gene-editing treatment. The U.S. Food and Drug Administration (FDA) approved Casgevy (developed as exa-cel) for sickle cell disease (SCD) and will consider it for beta thalassemia early next year. A few weeks earlier, U.K. regulators authorized the therapy for both blood disorders.
This represents CRISPR Therapeutics' first commercialized product, meaning revenue growth is just ahead. Since the U.S. approval, though, the company's shares have slipped, falling a little more than 4%. With its first major product approval behind it, has CRISPR Therapeutics said goodbye to its biggest share-performance catalyst, or could this biotech player gain over the long term? Let's find out if the shares are a buy after the company's landmark win.
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A gene-editing specialist
First, a bit of background on the company and its exciting new product. CRISPR Therapeutics is a specialist in gene editing, or the repair of faulty genes responsible for disease. The company uses a technique inspired by the way some bacteria protect themselves from viruses. It's called CRISPR, short for clustered regularly interspaced short palindromic repeats of genetic information.
CRISPR gene editing involves the cutting of DNA at a particular location, allowing a natural repair process to happen.
The company uses this technique throughout its pipeline, so a nod from regulatory agencies is a vote of confidence in this innovative technology.
CRISPR Therapeutics partnered with big biotech Vertex Pharmaceuticals on Casgevy. Vertex has taken on 60% of the program's expenses but also keeps 60% of profit. This is a good deal for the smaller company as it allows it to benefit from Vertex's commercial expertise -- Vertex already markets billions of dollars of cystic fibrosis drugs annually -- and minimize its costs. At the same time, even a 40% share of profit could be big for CRISPR Therapeutics as Casgevy has the potential to become a blockbuster.
Today, treatments for sickle cell disease and beta thalassemia are limited, and Casgevy is designed as a one-time curative therapy. So, in spite of the complex treatment procedure, involving blood stem cell collection and a chemotherapy phase, patients and doctors may flock to this new option. Today, about 16,000 patients are eligible for the treatment, according to CRISPR Therapeutics and Vertex.
A $2 million price tag
Revenue growth won't happen overnight though, as the treatment procedure takes a period of months, so it will take time to recruit patients and launch their therapies. The companies are also working with payers regarding reimbursements for the treatment, which carries a list price of $2.2 million.
Now, let's take a look at CRISPR Therapeutics' stock. The shares have climbed about 50% this year on anticipation of the regulatory win, but they remain considerably lower than their peak when there was much less visibility on future revenue. Even if the shares don't return to that high point, revenue growth ahead should offer them a significant lift over time.
Let's consider our question: Is CRISPR Therapeutics a buy after its big win? It's true the approval may have been baked in to today's share price, but the future revenue potential isn't. And this revenue, when it starts and as it grows, could represent an ongoing catalyst for the stock. It's also important to remember that CRISPR Therapeutics has a pipeline of candidates based on the same gene-editing technology. Any progress there could also support share performance.
So CRISPR Therapeutics' share price and growth catalysts are far from over. The stock may not soar from here overnight, but that's OK. Long-term investors are likely thinking of potential over at least five years, and from that perspective, CRISPR Therapeutics looks like an excellent buy right now.
