In a 47% decrease since March, is CRISPR Therapeutics' stock an investment opportunity in its current price drop?
On November 21, CRISPR Therapeutics' (CRSP -2.33%) shares experienced a significant drop, decreasing by 47% from their peak achieved in March. This could come as a shock to those closely following this gene therapy innovator, considering it's barely been a year since regulatory bodies in the US and EU approved its first therapy, Casgevy, to treat two blood-related disorders.
Unfortunately, Casgevy's market debut hasn't been as triumphant as anticipated. Despite regulatory approvals in late 2022 and early 2023, the rollout has progressed at a slower pace than predicted. This could be due to Vertex Pharmaceuticals, CRISPR Therapeutics' partner, finding it challenging to promote Casgevy effectively.
Despite its initial struggles, it's essential not to disregard this groundbreaking drugmaker. Apart from Casgevy, it has five other therapeutic projects in the clinical trial phase.
To determine if investing in CRISPR Therapeutics is a wise move now, let's examine the reasons behind its stock's descent and what might bring about its resurgence.
Reasons for CRISPR Therapeutics' falling stock price
Regulatory bodies granted approval for Casgevy to treat sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT) in December 2022 and January 2023, respectively. On the European side, approval was granted in February for both SCD and TDT. However, the launch has been slower than anticipated.
Vertex Pharmaceuticals, in charge of marketing and developing Casgevy in partnership with CRISPR Therapeutics, has faced difficulties in gaining traction. Despite obtaining approval in late 2023, the first sale of Casgevy didn't occur until the third quarter.
Slow sales can be attributed to Casgevy's complex nature. The therapy is made in batches from patients' stem cells. Once administered, the CRISPR-modified stem cells should generate functional hemoglobin, reducing the need for regular blood transfusions for patients with SCD and TDT. However, the Casgevy cells struggle to establish a stronghold unless patients undergo a potentially dangerous conditioning regimen to deplete their immune system first.
Recently, a patient with SCD passed away while participating in a gene-therapy trial conducted by Beam Therapeutics. The death was linked to a conditioning regimen containing busulfan, a substance also used to prepare patients for Casgevy treatment.
Reasons to invest in CRISPR Therapeutics now
The absence of effective treatment options could be an advantage for Casgevy. Last year, the European Medicines Agency rescinded provisional approval for a Novartis SCD drug called Adakveo due to failure in outperforming a placebo in confirmatory trials. Later in September, Pfizer withdrew Oxbryta, a daily pill approved to treat SCD patients, from the market following unfavorable results from a postmarketing study.
As of late September, Vertex Pharmaceuticals and CRISPR Therapeutics had administered Casgevy to one patient, with more treatments planned. By mid-October, authorized treatment centers had already collected stem cells from 40 patients. Given the high price of $2.2 million per patient, generating revenue from even a small fraction of the SCD and TDT populations could lead to annual sales exceeding $1 billion.
Furthermore, CRISPR Therapeutics has five other therapeutic initiatives in the clinical trials phase, suggesting Casgevy might not be the last FDA-approved therapy to emerge from CRISPR Therapeutics' pipeline. In December, the company will present the phase 1 trial results for CTX112, a potential blood cancer treatment that could join the commercial market soon.
Should you invest now?
With no Casgevy revenue reported, CRISPR Therapeutics continues to incur losses. Nevertheless, thanks to its partnership with Vertex, the losses are manageable. The company's Q3 loss came out to $85.9 million.
CRISPR Therapeutics boasts a substantial cash reserve of $1.9 billion, offering a long runway for boosting Casgevy sales and allowing time for CTX112 and the rest of the pipeline to shine before the company needs to consider a secondary offering to raise capital.
At current prices, CRISPR Therapeutics has a market cap of $3.9 billion. However, its enterprise value is only $2.1 billion due to its significant cash reserves and minimal debt. A price tag of this magnitude appears reasonable for a commercial-stage company with promising pipeline projects.
The stock's valuation is not totally unreasonable, but at its current level, it remains a high-risk investment. If Casgevy sales struggle to grow or the pipeline falters, investors may face substantial losses. Prospective buyers with a high-risk tolerance should consider this stock, but for those with less risk appetite, it's best to stay on the sidelines.
Considering the regulatory approvals and promising pipeline of CRISPR Therapeutics, investors might find interest in the company's finance sector. Despite the recent drop in CRISPR Therapeutics' stock price, the company has invested significantly in research and development, particularly in its five other therapeutic projects beyond Casgevy. Investors who are willing to take risks and see the potential in groundbreaking gene therapy companies may find this an attractive opportunity for their investing portfolio.
