Ark Invest CEO Cathie Wood has a reputation as the queen of investing in businesses with the chutzpah to try and disrupt their industries via cutting-edge innovations. Recently, she has been buying up a trio of biotech stocks left and right. All three are admittedly on the riskier side.
But there's reason to believe that these biotechs might be worthwhile for investors with a slightly lower risk tolerance than Wood's. Let's sift through her recent trades to see if these stocks might be up your alley, or too ambitious to touch.
1. Ginkgo Bioworks
With a total of eight separate purchases between Jan. 22 and Jan. 29 alone, Cathie Wood has been an enthusiastic buyer of shares in Ginkgo Bioworks Holdings (DNA 10.60%).
It's no surprise what might draw her to this company as it stands to disrupt major biopharmaceutical manufacturing processes. In a nutshell, Ginkgo aims to be a highly automated platform for biopharmas to use, so they can inexpensively implement their plans to produce genetically engineered organisms like yeast or bacteria.
Currently, it takes a lot of time and hands-on work to design and to culture bespoke microorganisms. And there are additional challenges associated with manufacturing them at scale.
Ginkgo's platform of robotics and artificial intelligence (AI) aims to take over all of the most difficult parts of the workflow for its customers, handing them their desired end product with minimal hassle -- whether they're looking for specialized yeast cells or just a chemical by-product that those yeasts generate.
So far, the biotech hasn't proved that its ambitious business model is profitable, but it did produce trailing-12-month revenue of $315 million, so it's clear that it's providing some value. Once Ginkgo can prove that it's reliably making progress toward operating profits each quarter, it'll be a sign that the stock is ready to buy -- but it isn't there just yet.
2. CRISPR Therapeutics
Wood liked CRISPR Therapeutics (CRSP 0.34%) stock enough to buy it 12 times in January. Given that the company just nabbed a pair of approvals for its first product, a gene therapy called Casgevy, she's likely banking on its revenue -- and eventually its profits -- to rise rapidly over the next year or two.
Wall Street analysts, on average, expect the biotech to report around $163 million in sales in 2024. In the longer term, it may retain its leadership in the gene-editing and gene-therapy space, assuming that it can advance its next set of pipeline candidates.
Of particular interest are CRISPR Therapeutics' oncology programs and its gene-editing programs, all of which are in early- to mid-stage clinical development. The two oncology programs target B-cell malignancies, and the disclosed gene-editing programs are for inherited cardiovascular diseases. The idea is to edit patients' genes and (hopefully) permanently correct an error, thereby improving their health.
Such an ambitious set of goals won't be easy to reach without a setback or two along the way, but the fact that CRISPR recently commercialized its first medicine could mitigate a significant amount of the downside risk. If you buy this stock today, be aware that the level of hype in recent months might have caused its valuation to rise to unsustainably high levels.
3. Recursion Pharmaceuticals
Wood bought shares of Recursion Pharmaceuticals (RXRX 3.57%) no fewer than 20 times in the first 29 days of January, and now it makes up 1.6% of Ark Invest's combined holdings.
What's so special about this company? For one, it's using AI to make the drug discovery and development process more reliable, and perhaps quicker and less expensive, too.
Recursion's approach is to throw tons of biological and chemical data at its AI models, which then suggest which leads for drug development are the most likely to be promising if investigated in further pre-clinical laboratory work.
Screening opportunities that way could in principle lead to fewer failures down the line, not to mention more effective medicines. Thus, biopharma players might be inclined to team up with the company, and its own pipeline development efforts could be more successful than those of others.
At the moment, these capabilities are only theoretical. But Recursion isn't the only biotech working on the problem, and it's clear that Cathie Wood is intent on getting exposure to several of the contenders, because the victor could hit it big.
That doesn't mean you need to follow in her footsteps and invest. Recursion still isn't profitable. And it hasn't proved its core business model can actually work, though it does have trailing-12-month revenue of $47 million from its collaborations. Dip your toe into some shares only if you can tolerate a lot of risk.
