CRISPR Therapeutics (CRSP 0.34%) is gaining in prominence. The gene-editing specialist has made tremendous clinical and regulatory progress since its 2016 initial public offering, leading to market-beating returns even if it hasn't always been smooth sailing. And there may yet be plenty of upside left for the company. Gene editing could help revolutionize how we treat many challenging conditions -- and the frontrunners in the field will likely be well-rewarded.
However, investors might also be worried that the best is in the rearview mirror for CRISPR Therapeutics. Can the mid-cap biotech still deliver outsized returns? Let's find out.
CRSP Total Return Level data by YCharts
Casgevy could be hugely successful
CRISPR Therapeutics' crowning achievement, at least so far, has been the approval of Casgevy, a one-time curative therapy for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). Various regulatory bodies in the U.S., Europe, and the Middle East have granted Casgevy the green light since late last year.
TDT and SCD are blood-related diseases that cause severe hardship to patients, are extremely difficult to manage, and impose costly burdens on health systems. Casgevy's approval was a breakthrough for that reason, but that's not all. It also became the first CRISPR-based gene-editing therapy on the market. The pioneers of this particular gene-editing technique won a Nobel prize in chemistry for their work.
It will take some time before Casgevy, developed with the help of Vertex Pharmaceuticals, starts contributing to CRISPR Therapeutics' top line. The partners will split the profits and costs associated with it on a 60/40 basis, with 40% going to CRISPR Therapeutics.
Gene-editing treatments require a long and complex administration process. But once the logistics are up and running, CRISPR and Vertex could make a fortune. They estimate that 35,000 patients in the U.S. and Europe could benefit from Casgevy. The therapy will cost $2.2 million in the U.S. It may not be priced at the same level elsewhere, but it won't be cheap either.
At the very least, the market opportunity here is worth tens of billions of dollars. Could the competition steal significant market share from CRISPR and Vertex? That seems unlikely. The only competitor to note (for now) is Bluebird Bio, a small-cap biotech that doesn't have nearly as much money in the bank as Vertex. Further, Bluebird Bio only operates in the U.S., and its competing SCD therapy, Lyfgenia, comes with a boxed warning for blood cancer. It's also priced higher at $3.1 million.
There are other gene-editing specialists on the trail, but they will need to cross plenty of clinical and regulatory hurdles before challenging Casgevy. The bottom line is that this medicine could go on to reach blockbuster status even if it captures only a relatively small portion of its target market, say 30%. That should lead to solid financial results for CRISPR Therapeutics.
There's more where that came from
Maybe CRISPR Therapeutics just got lucky by stumbling upon an effective gene-editing therapy for a couple of diseases that had largely eluded researchers. But that seems unlikely, especially since Casgevy is the first CRISPR-based treatment on the market. Others have tried to emulate these feats. So far, most attempts have been abject failures. The best explanation for CRISPR Therapeutics' Casgevy success, in my view, is that it has a team of excellent scientists and researchers, an important factor for any biotech company.
CRISPR Therapeutics is running clinical trials for a handful of gene-editing candidates. It is targeting various cancers, a pair of cardiovascular diseases, and type 1 diabetes. There are more programs in pre-clinical testing that should start human clinical trials in the next few years. Don't expect a 100% success rate. No drugmaker can pull that off. However, given the company's pipeline -- and the fact that it shouldn't have trouble with funding, partly thanks to Casgevy -- we can expect CRISPR Therapeutics to make solid clinical progress from here on out.
So, it isn't too late to buy the company's shares, at least for long-term investors. There's plenty of upside left.
