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With her ARK Innovation ETF (ARKK: NYSE Arca), Cathie Wood bets large amounts on biotech companies that are leaders in scientific and technical innovation. Although these high-potential companies exhibit high stock volatility, their appeal comes from the possibility of big returns.
Cathie Wood recently bought two biotech stocks, demonstrating her optimism. Should you buy them too? Let’s explore whether following her example is a wise decision.
CRISPR therapies
Investors looking to buy the dip have a strong candidate in CRISPR Therapeutics (NASDAQ:CRSP). This year, shares are down 13%. Following her most recent purchase on May 30, Cathie Wood has steadily increased her stake in CRISPR Therapeutics. With 3.6% of the ARK Invest portfolio, the share ranks tenth among all affiliated funds.
This investment aligns with Wood’s strategy, which focuses on companies developing breakthrough technologies that can drive significant industry change and remarkable growth. CRISPR Therapeutics is known for its expertise in gene therapy and has solidified its presence in the market with the recent commercialization of its Casgevy gene therapy product.
Developed by CRISPR Therapeutics, Casgevy aims to functionally cure inherited blood disorders such as sickle cell disease (SCD) and beta-thalassemia.
Although Casgevy has not yet generated revenue, it was recently approved for these indications in late 2023 and early 2024. Vertex Pharmaceuticals is leading the commercialization efforts and is expected to achieve significant gains from partnering with CRISPR.
As sales begin, shares of CRISPR Therapeutics will rise significantly given the potential for a substantial increase in earnings from a zero baseline.
Most Wall Street analysts believe that earnings growth won’t happen until at least 2025. This gives investors multiple opportunities to buy the dip and use a dollar-cost averaging (DCA) strategy to build a substantial position before the expected rise.
Intellia Therapeutica
Similar to her strategy at CRISPR Therapeutics, Cathie Wood has been purchasing shares of Intellia Therapeutics (NASDAQ:NTLA) throughout May, with her most recent purchase on May 30th. Intellia now makes up just under 2% of the ARK Invest portfolio, and Wood owns 10.4% of the company’s outstanding shares.
Shares of Intellia are down 27% versus the market this year. Because the company is still developing its first drug, an increase in sales is not expected anytime soon. Intellia is therefore considered a high-risk investment, with significant financial gains unlikely in the coming years.
Intellia Therapeutics’ (NTLA) most advanced project targets a rare genetic disease, with an emphasis on transthyretin (ATTR). Management plans to initiate a Phase 3 clinical trial for this drug by the end of the year. If approved, the treatment could provide access to a market that GlobalData estimates will be worth $11 billion by 2029.
Intellia’s timeline to market is significantly longer than CRISPR Therapeutics; So the company may run out of money before launching a product. With total operating expenses of $142.9 million in the first quarter, Intellia now has $553.3 million in cash, equivalents and short-term investments.
At this pace of spending, Intellia’s financial runway lasts just over 1.5 years until it becomes necessary to seek further funding. With modest capital lease obligations and 0% long-term debt, the company is in a stable position to obtain more financing if necessary.
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This article Cathie Wood invests in two biotech stocks: are they worth buying? originally appeared on Benzinga.com
