Benefits and risks of investing in gene-editing stocks
The benefits of investing in gene-editing stocks include:
- Significant long-term growth potential.
- Gene editing is now a proven technology.
- Potential for acquisition by larger drugmakers.
- Most gene-editing stocks are available at discounted valuations compared to previous years.
While investing in gene-editing stocks can generate significant long-term returns, it also comes with several risks and challenges. These include:
- High volatility.
- Capital requirements could dilute the value of existing shares.
- Risk of failure in clinical trials.
- Risk of failure in securing regulatory approvals.
- Potential reimbursement hurdles after approval.
Methodology: How these stocks were chosen
The primary criterion for selecting these stocks was a focus on developing therapies using gene-editing technologies. Big drugmakers that partner with companies with gene-editing pipelines but don't develop gene-editing therapies in-house were excluded.
Size was also a consideration. Only companies with market caps of at least $200 million were included in the selection process.
The viability of the companies' gene-editing technologies was also an important factor. Preference was given to those who have programs in clinical development rather than only in preclinical trials.
Should you invest in gene-editing stocks?
Investors with a high risk tolerance who have investing horizons of at least five to 10 years and are especially interested in disruptive technologies may want to consider investing in gene-editing stocks. They should also be comfortable with binary outcomes: One clinical trial result or regulatory decision could make or break a company.
However, risk-averse investors should probably avoid gene-editing stocks. Income investors will also want to look elsewhere, as no gene-editing company currently pays a dividend.