On Nov. 21, shares of CRISPR Therapeutics(NASDAQ: CRSP) were down 47% from a peak they reached in March. This might be a little surprising to folks who have been following this developer of gene therapies. After all, it’s been less than a year since regulators in the U.S. and E.U. approved its first therapy, Casgevy, to treat two blood-based disorders.
Casgevy’s initial launch hasn’t been as exciting as investors and its partner, Vertex Pharmaceuticals(NASDAQ: VRTX), had hoped. Less than a year into the launch, though, it’s still too early to turn our backs on this innovative drugmaker. After all, in addition to Casgevy, it has five other therapy candidates in clinical-stage testing.
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To see if adding some shares to your portfolio now makes sense, let’s look at why the stock’s been beaten down, and what could lift it back up.
The Food and Drug Administration (FDA) approved Casgevy for the treatment of sickle cell disease (SCD) last December. In January the agency followed up with approval to treat transfusion-dependent beta thalassemia (TDT).
Across the Atlantic, European regulators approved Casgevy to treat both SCD and TDT in February. Despite regulatory approvals, the launch is progressing more slowly than investors had expected.
CRISPR Therapeutics wisely partnered with Vertex Pharmaceuticals to develop and market Casgevy, but Vertex is having a hard time getting it off the ground. Despite earning approval in late 2023, Vertex didn’t record its first sale of Casgevy until the third quarter.
Sales have been slow because it’s a complicated therapy made in single batches from a patient’s stem cells. Once reinfused, the CRISPR-altered stem cells should produce functioning hemoglobin, so SCD and TDT patients no longer need regular blood transfusions. Unfortunately, reinfused Casgevy cells can’t 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 run by Beam Therapeutics. Physicians running the study didn’t fault Beam’s candidate for the volunteer’s death; they blamed a conditioning regimen containing 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 revoked conditional approval for an SCD drug from Novartis called Adakveo, after it failed to outperform a placebo in a confirmatory trial. And in September, Pfizer pulled Oxbryta, a daily tablet approved to treat SCD patients, from the market after it failed a postmarketing study.
At the end of September, Vertex Pharmaceuticals and CRISPR Therapeutics had infused just one patient with Casgevy, but more are on the way. As of mid-October, authorized treatment centers had already collected stem cells from 40 patients. With a list price of $2.2 million, reaching tiny slivers of the SCD and TDT populations could drive annual sales above $1 billion.
Five candidates in clinical-stage testing mean Casgevy probably 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 be next to reach the commercial stage.
We already know CTX112 shrank tumors for six out of nine advanced-stage lymphoma patients. Four of them achieved complete remission. These results would be impressive for a population of relatively healthy patients who just received their first cancer diagnosis, but this group was heavily pretreated.
With a lack of Casgevy revenue to date, CRISPR Therapeutics is still losing money. Thanks to its partnership with Vertex, though, the losses are manageable. It came up short by just $85.9 million during the third quarter.
The company finished September with $1.9 billion in cash. A big cash pile gives CRISPR Therapeutics a long runway to ramp up sales of Casgevy. It also gives CTX112 and the rest of the pipeline time to shine before the company needs to raise capital with a dilutive secondary offering.
CRISPR Therapeutics has a $3.9 billion market cap at recent prices, but the stock is less expensive than it looks on the surface. With a big cash cushion and a lack of debt, its enterprise value is just $2.1 billion at recent prices. 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 isn’t entirely unreasonable, but it’s still high enough to make it a very risky investment. If Casgevy sales don’t ramp up soon, or the clinical-stage pipeline falters, investors who buy at recent prices could suffer heavy losses. Unless you have a very high risk tolerance, it’s best to keep your distance from CRISPR Therapeutics stock.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Beam Therapeutics, CRISPR Therapeutics, Pfizer, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
