CRISPR therapies(NASDAQ: CRSP) is recognized as a pioneer in the field of gene therapy. This biotechnology has the potential to revolutionize medicine through precise modifications of a person’s DNA to treat and cure genetic diseases. In 2023, the company’s Casgevy product for sickle cell disease became the first-ever CRISPR-based therapy to be approved by the Food and Drug Administration (FDA) in a major company milestone.
Nevertheless, commercialization has been slow and the market is already waiting for the next potential blockbuster drug. At the time of writing, shares of CRISPR Therapeutics are down 46% from their 52-week high, leaving investors wondering what comes next. If you’re considering buying stock in this gene therapy pioneer, here are three things you need to know.
Part of CRISPR Therapeutics’ appeal as an investment is its first-mover advantage, which relies on several proprietary processes for diagnostic and therapeutic applications of CRISPR. Casgevy’s approval, co-developed with Vertex Pharmaceuticavalidated its technology to move forward with a broader pipeline of drug candidates.
A crucial part of CRISPR is the requirement that therapies be manufactured using the harvested stem cells of individual patients. CRISPR Therapeutics operates an industrial laboratory facility that provides strategic flexibility to scale operations. The oncology, cardiology and diabetes programs have candidates in various stages of clinical studies and human trials.
By 2025, the company expects expanded indications for Casgevy, along with updated efficacy data for its portfolio of candidates, which could serve as a potential catalyst for investors to assess.
There is some optimism that CRISPR Therapeutics is still in the early stages of significant long-term opportunities. The company’s balance sheet, with $1.9 billion in cash, means CRISPR has the time and capital to take the necessary steps to become commercially sustainable.
On the other hand, the latest financial trends leave much to be desired. In the third quarter, CRISPR reported just $602,000 in global revenue, which did not substantially benefit from the initial launch of Casgevy, marketed and distributed by Vertex.
The update shows that a single patient has received the commercial therapy, which carries a price tag of $2.2 million. This hefty sum can be justified based on its life-saving potential, but it also highlights the economic challenge of widespread adoption. According to Vertex, 40 patients have begun the complex cell collection process that is expected to translate into accelerating collaboration revenue for CRISPR.
Based on Wall Street consensus estimates, from expected sales of $14 million this year, CRISPR is expected to generate $132 million in revenue by 2025 as its Casgevy treatments gain traction. Yet that is not enough to make a dent in the expected large financial losses for the coming years. An estimated loss per share of $5.15 for 2024 is only expected to decline to a loss of $5.02 next year.
That’s not necessarily a problem for high-growth stocks, but it does pose a risk for investors to rebalance. If sales continue to disappoint, company shares trading at a pricey 31 times next year’s sales could be vulnerable to a deeper sell-off given the future price-to-sales (P/S) ratio.
CRSP market cap data from YCharts
CRISPR Therapeutics’ success will depend on its ability to bring multiple new drugs to market to support a more viable business model.
At the same time, the company will face emerging competition from other biotech players pursuing similar CRISPR techniques for drug development. Companies like Intellia Therapeutica And Beam therapies are independently moving forward with their versions of gene editing technology that could prove more effective for certain diseases.
It is also uncertain whether CRISPR is superior to alternative biotechnologies, such as monoclonal antibodies or RNA-based therapies, which have provided recent breakthroughs. Ultimately, CRISPR Therapeutics has a lot of promise, but it still has a long road ahead to becoming a global biotech leader.
The short-term financial weakness is reason enough for me to stay on the sidelines and avoid CRISPR Therapeutics stock for the time being. The company could very well be a long-term winner, but investors would be wise to proceed cautiously until there are indications of some revenue and earnings momentum. My expectation is that the share will remain volatile.
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Beam Therapeutics, CRISPR Therapeutics, and Intellia Therapeutics. The Motley Fool has a disclosure policy.
3 Things to Know If You Buy CRISPR Therapeutics Today was originally published by The Motley Fool
