On November 21, shares of CRISPR therapies(NASDAQ: CRSP) fell by 47% from the peak they reached in March. This may be a bit surprising to people who have followed this developer of gene therapies. After all, it was less than a year ago that regulators in the US and EU approved their first therapy, Casgevy, to treat two blood-related conditions.
Casgevy’s initial launch wasn’t as exciting as that of investors and its partner. Vertex Pharmaceutica(NASDAQ: VRTX)had hoped. However, less than a year after its launch, it is still too early to turn our backs on this innovative drug manufacturer. In addition to Casgevy, it has five other therapy candidates that are in the clinical phase.
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To see if it makes sense to add some stocks to your portfolio, let’s take a look at why the stock has been in trouble and what could lift it back up.
The Food and Drug Administration (FDA) approved Casgevy last December for the treatment of sickle cell disease (SCD). In January, the agency followed approval for the treatment of transfusion-dependent beta-thalassemia (TDT).
On the other side of the Atlantic, European regulators approved the treatment of both SCD and TDT in February. Despite regulatory approvals, the launch is slower than investors expected.
CRISPR Therapeutics wisely partnered with Vertex Pharmaceuticals to develop and commercialize Casgevy, but Vertex has struggled to get it off the ground. Despite receiving approval in late 2023, Vertex didn’t make its first sale of Casgevy until the third quarter.
Sales have been slow because it is a complicated therapy made in individual batches from a patient’s stem cells. Once reinfused, the CRISPR-modified stem cells should produce functioning hemoglobin so that SCD and TDT patients no longer require regular blood transfusions. Unfortunately, reinfused Casgevy cells cannot gain a foothold unless patients first deplete their immune systems with a dangerous conditioning regimen.
Recently, a patient with SCD died during a gene therapy trial Beam therapies. Doctors who conducted the investigation did not blame Beam’s candidate for the volunteer’s death; they blamed a conditioning regimen that contained busulfan. Busulfan is also used to condition patients for Casgevy.
A lack of treatment options could work in Casgevy’s favor. Last year, the European Medicines Agency withdrew conditional approval for an SCD drug Novartis called Adakveo, after it failed to outperform a placebo in a confirmatory study. And in September, Pfizer has withdrawn Oxbryta, a daily tablet approved for the treatment of SCD patients, from the market after failing a post-marketing study.
By the end of September, Vertex Pharmaceuticals and CRISPR Therapeutics had administered just one patient with Casgevy, but more are on the way. By mid-October, recognized treatment centers had already collected stem cells from 40 patients. With a list price of $2.2 million, reaching small portions of the SCD and TDT populations could push annual sales above $1 billion.
Five candidates in clinical-stage testing mean that Casgevy likely won’t be the last FDA-approved therapy to emerge from CRISPR Therapeutics’ pipeline. At the upcoming American Society of Hematology meeting in December, the company will present Phase 1 trial results for CTX112, an experimental blood cancer treatment that could potentially reach the commercial stage.
We already know that CTX112 shrunk tumors in six out of nine advanced lymphoma patients. Four of them achieved complete remission. These results would be impressive for a population of relatively healthy patients who have just received their first cancer diagnosis, but this group was heavily pretreated.
Due to the lack of Casgevy revenue so far, CRISPR Therapeutics is still losing money. However, thanks to the collaboration with Vertex, the losses are manageable. It fell short by just $85.9 million in the third quarter.
The company ended September with $1.9 billion in cash. A big cash pile gives CRISPR Therapeutics a long runway to ramp up Casgevy sales. It also gives CTX112 and the rest of the pipeline time to shine before the company has to raise capital with a dilutive secondary offering.
CRISPR Therapeutics has a market cap of $3.9 billion at recent prices, but the stock is less expensive than it might seem at first glance. With a large cash cushion and a lack of debt, the enterprise value at recent prices is just $2.1 billion. That’s not an unreasonable price to pay for a commercial-stage drugmaker with a handful of new candidates in clinical trials.
The stock valuation is not entirely unreasonable, but still high enough to make it a very risky investment. If Casgevy sales don’t rise quickly, or if its clinical-stage pipeline falters, investors buying at recent prices could face heavy losses. Unless you have a very high risk tolerance, it’s best to steer clear of CRISPR Therapeutics stock.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Beam Therapeutics, CRISPR Therapeutics, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
Down 47% Since March: Is CRISPR Therapeutics Stock a Buy on the Dip? was originally published by The Motley Fool
