CRISPR Therapeutics (CRSP +4.07%) received great news last week. Its gene-editing therapy, which it has been developing with Vertex Pharmaceuticals, obtained approval from the Food and Drug Administration for sickle cell disease. It's a turning point for the business, which now has its first approved product.
But what's next for the business, and where does CRISPR Therapeutics go from here? Below I'll look at where the company may be in five years, and whether it's a good time to invest in the stock.
Will it be a market leader?
The CRISPR gene-editing market is expected to be worth $14.8 billion by 2030, according to projections from Straits Research. The industry is growing at an incredibly fast compound annual rate of 29.8%. And amid its early growth, CRISPR is starting to establish itself as a big name in gene editing. It's not a huge market, but CRISPR has the potential to become an early market leader within it.
NASDAQ: CRSP
Key Data Points
Bluebird Bio also obtained FDA approval for its gene-editing therapy Lyfgenia, but it will have a black box warning on the label related to blood cancer. CRISPR's treatment, Casgevy, comes with no such warning. It's a good example of the company already setting itself apart from rivals as a safer option; Bluebird Bio, despite obtaining approval, crashed following the news as investors feared the warning would cripple the product's sales potential.
CRISPR and Vertex are also awaiting approval for their therapy as a treatment for transfusion-dependent beta thalassemia. The PDUFA date for that is set for March 30, 2024.
Further down the road, the company may have other gene-editing therapy treatments that come to market, including CTX112 and CTX131, which are allogeneic CAR T programs that are in early stage trials. CRISPR is also working on the first gene therapy treatment for diabetes with ViaCyte.
It's early on, but in five years CRISPR Therapeutics could have more approved therapies and could be well on its way to establishing itself as a leader in the market for gene-editing therapies.
Will the business be profitable?
Another big question for investors is whether or not CRISPR will be a profitable company in five years. Its recent approval will go a long way towards determining that. At its peak, analysts from Goldman Sachs project that Casgevy could generate up to $3.9 billion in revenue.
However, it's important to remember that CRISPR will share any earnings on the treatment with its development partner Vertex Pharmaceuticals, collecting 40% of the profits. In CRISPR's most recent quarterly results, which ended on Sept. 30, the company incurred a net loss of $112.2 million, which is down from $174.5 million in the prior-year period.
I don't believe that CRISPR will be profitable in five years, but it will be close to breaking even. While its expenses don't appear astronomical, it will need to spend money on commercialization efforts and its costs will increase. Plus, while the potential is high for Casgevy, it will take a while for it to reach its peak.
The good news is that even if it doesn't become profitable in five years, investors can rest assured that at least the business is moving in the right direction.
Could CRISPR become an acquisition target?
One scenario that could become a very real possibility is that another, larger healthcare company buys out CRISPR Therapeutics in an effort to diversify its operations. Now that CRISPR has an approved gene-editing therapy, it may attract greater interest from big names in the healthcare industry.
What's also attractive about CRISPR is that it has minimal debt on its books and lots of cash. Its total liabilities as of the end of September total just $359 million. Meanwhile, the company has more than $1.7 billion in cash and marketable securities. With loads of cash and not much in liabilities to worry about, that could make the stock a highly attractive acquisition target.
Predicting an acquisition is difficult, but I think there's a good chance that within the next five years CRISPR could get acquired. At a market capitalization of less than $5 billion, it's a fairly reasonably priced business given what it offers to an acquiror.
Should you invest in CRISPR's stock today?
CRISPR Therapeutics is looking like one of the better healthcare stocks to buy right now. With a high-priced treatment in its portfolio (Casgevy costs $2.2 million) and the potential for it to generate billions in revenue -- as well as tons of cash on its books and relatively modest liabilities -- the stock looks to be a no-brainer buy at this point. The recent approval has minimized the overall risk for investors.
As long as you're willing to be patient and are holding the stock for the long haul, CRISPR looks to be a top stock to buy right now.
