With CRISPR Therapeutics (CRSP 0.34%) in the news thanks to its successful work in developing cutting-edge gene therapies, it's easy to assume that everything in the business is going swimmingly. Between the fruits of its ongoing commercialization process and a quickly expanding development pipeline, it's certainly true that it has more than one opportunity at impressing the market and enriching its shareholders.
Still, even the most successful companies experience setbacks from time to time, and this biotech is no exception. So let's learn about what just happened, why it matters, and what this player is going to focus on to keep growing in the long term in light of everything else.
This collab collapse isn't good news
As well-informed investors know, CRISPR Therapeutics wouldn't be what it is today without the help of collaboration partner and benefactor Vertex Pharmaceuticals (VRTX -0.06%). Vertex chipped in to cover 60% of the costs associated with developing and commercializing CRISPR's recently approved gene therapy Casgevy, and it also paid the biotech $900 million in 2021.
Now that Casgevy is commercialized for both sickle cell disease (SCD) and transfusion dependent beta thalassemia (TDT), Vertex captures 60% of the profits, and the two companies continue to work together to make the therapy a success. But as of January 8, Vertex isn't keen on playing ball with one of the biotech's earlier-stage programs.
Specifically, Vertex pulled out of a cell therapy program to treat diabetes using genetically edited stem cells. The program, called CTX211, is in phase 1 clinical trials, so it isn't as though commercialization is around the corner, or even within the next few years. Investors haven't even had a chance to see a full readout of safety or efficacy data yet. But it's possible that leaders at Vertex weren't impressed by what they saw in their earliest clinical-stage glimpses.
While the pair will continue to collaborate on other early-stage projects, including in diabetes, it's undeniable that the deal's collapse is a setback for CRISPR. Though the company has a whopping $1.9 billion in cash and equivalents, its trailing 12-month research and development (R&D) expenditures alone are $396 million. Costs related to CTX211 likely only represent a tiny sliver of that sum, but every dollar counts, especially when that dollar is contributed to the cause by someone else.
Still, this bump in the road is a very minor one in the grand scheme of things, and it's unlikely to derail the business in any significant way.
Acquisitions and development deals on the menu
Separately from CTX211, CRISPR has a new opportunity that's likely to influence the value of its stock over the next couple of years. Now that its gene therapy Casgevy is approved for both of the indications it sought, the company can turn its attention to bolstering its pipeline via business development activity. Since late last year management has been on the lookout for potential new collaboration partners, attractive pharmaceutical assets for purchasing, and perhaps even promising young biotechs to buy outright.
Based on comments by company leaders, it's reasonable to assume that finding partners for CRISPR's early-stage programs is highly likely, particularly within the domains of treatments for auto-immune diseases and advanced cell therapies for cancer. Such moves typically trade custody of clinical development and commercialization responsibilities in exchange for the rights to royalty payments.
Doing so is favorable when a business doesn't have the resources it thinks it needs to advance a program, or when a program is no longer considered to be within the core focus of its platform. After all, it's better to have the chance to capture some royalty payments from a medicine's commercialization by another company rather than nothing at all.
But don't be too surprised if CRISPR acquires pharmaceutical assets or other other biotechs if management thinks there's something the company can use to bolster its capabilities. Anything that could help to address its pain points in cell therapy manufacturing would be particularly appealing. And don't forget: It has plenty of money on hand to cut deals, though with its $242 million in debt it probably won't be borrowing much to make bigger acquisitions.
In short, this biotech's future is bright, and having the opportunity to go on a dealmaking spree means that shareholders are exposed to a whole set of potential catalysts.
