December has been a big month for CRISPR Therapeutics (CRSP 2.35%). On Dec. 8, the Food and Drug Administration (FDA) granted approval for CRISPR's gene-editing therapy, Casgevy, as a treatment for sickle cell disease. It was a monumental decision as it also marked the first approval for a therapy utilizing the CRISPR/Cas9 gene-editing technology.
Despite this positive news, shares of CRISPR Therapeutics have stalled in December. In fact, the stock is down since the news of the approval, and month to date it has fallen by 10%. Why the stock isn't doing better could have to do with a simple saying on Wall Street.
NASDAQ: CRSP
Key Data Points
"Buy the rumor, sell the news"
There has been growing optimism this year that CRISPR Therapeutics' gene-editing therapy, which it has been developing with Vertex Pharmaceuticals, would inevitably obtain approval. And on Nov. 16, weeks before its approval in the U.S., CRISPR announced that Casgevy had received approval in the U.K. News of that approval sent the stock higher, and it likely led to rumors and excitement of it obtaining similar approval in the U.S.
So on Dec. 8, when investors learned of the approval, shares of CRISPR did initially climb and hit a 52-week high of $76.97 -- only to end up closing at $64.54. Many investors may have taken advantage of the rising value and were likely eager to unload the stock given that the near-term upside may be limited now that the approval has taken place, and thus, the hype surrounding the stock may die down.
A big spike in volume suggests offloading
Amid news of the approval, there was a big increase in trading activity of CRISPR's stock. And with the share price falling this month, that does suggest that a lot of investors were eager to cash out their gains on the stock.
CRSP 30-Day Average Daily Volume data by YCharts
High volatility is not unusual for a stock such as CRISPR, especially on news of an FDA approval. And the volatility still may not be over. While the FDA did grant Casgevy approval as a treatment for sickle cell disease, there's still another decision coming next year -- whether it will obtain approval as a treatment for transfusion-dependent beta-thalassemia. The PDUFA date for that is set for March 30, 2024.
Approval will give CRISPR's financials a boost
Regardless of where the stock goes in the short term, in the big picture, approval of Casgevy means that CRISPR's financials will improve. The company splits the profits with Vertex, with CRISPR taking a 40% cut off the earnings on Casgevy. For a treatment that costs $2.2 million, the margins on Casgevy should be strong and help improve CRISPR's bottom line.
Through the first nine months of the year, the company has recorded $170 million in collaboration revenue. But with operating expenses totaling over $462 million, the company has incurred a net loss of $243 million over the past three quarters.
CRISPR's costs may increase as the business works on commercializing Casgevy, but over time investors should expect to see an improvement in the bottom line, potentially leading to profitability in the long run.
Should you buy CRISPR's stock?
With shares of CRISPR falling in value this month, it's an excellent time for long-term investors to consider adding the healthcare stock to their portfolios. CRISPR has a bright future ahead with Casgevy and more treatments still in its pipeline. This can prove to be an excellent stock to buy and hold for years. Gene-editing therapies are still in their early growth stages and CRISPR is already establishing itself as a key player in the industry.
