CRISPR Therapeutics [CRSP] may not have been a pandemic stock, but the health crisis has shone a spotlight on using gene-editing. The CRISPR share price is up around 32% in the past year, representing the increasing focus on the segment.
Since June, the Crispr share price has been moving in a triangle, indicating it might be on the verge of breaking out.
What is gene editing?
Gene editing involves rewriting our biological code by targeting and disabling particular genes and correcting mutations. Researchers have used gene therapy to try to treat people with HIV and metastatic cancer.
The hype around gene-editing is fuelled by the potential to prevent and even eliminate debilitating illnesses and diseases that can shorten expectancy. There are, however, worrying ethical issues at play, such as fixing ‘defective’ DNA in embryos.
How big is the opportunity?
Controversy aside, the global CRISPR market size was valued at around $1.5bn in 2020 and is expected to be worth $2.1bn by the end of this year, according to Grand View Research. The firm forecast market size to grow at a compounded average of 21.7% over the following seven years, to reach $7.4bn by 2028.
There remains a dispute over who owns the patent to the technology, but for now, the market is dominated by the Crispr/Cas9 system, which was pioneered by Emmanuelle Charpentier and Jennifer Doudna. Charpentier has gone on to use the proprietary technology to research and commercialise applications under Crispr Therapeutics.
Vertex Pharmaceutical [VRTX] pledged $900m towards a partnership with Crispr Therapeutics to developed a sickle cell treatment.
Doudna co-founded Intellia Therapeutics [NTLA], whose stock price is up 630.50% in the past 52 weeks and 183.09% since the start of the year. Intellia has a partnership with Regeneron [REGN], which grants the pharmaceutical giant with rights to develop CRISPR/Cas9-based products.
Estimated valuation of the global CRISPR market by end of 2021
What are the risks for investors?
Gene-editing stocks will fluctuate depending on the outcome of trials and in response to news of clinical breakthroughs.
Take Bluebird Bio [BLUE] share price, for example. The company has been in a race with Crispr to cure sickle cell for years. In February, trials were suspended after participants of one of its trials developed a rare type of leukaemia. The Bluebird Bio share price fell by more than a third the following day.
Although the company reported a month later that it had found no evidence linking its trials to cancer, the Bluebird Bio share price has struggled to recover – it’s down about 57% year-to-date.
What about Crispr’s pipeline?
Crispr and Vertex are hoping for regulatory approval for their CTX001 treatment by mid-2023.
In a note to clients seen by Genetic Engineering and Biotechnology News, Michael J. Yee, managing director and equity analyst at Jefferies, argued the Bluebird Bio situation “may be a positive for VRTX/CRSP because it may open up a broader commercial opportunity based on better efficacy, durability and safety for gene-editing versus lentivirus approaches.”
Crispr’s pipeline includes three other cancer-targeting treatments, as well as a programme for reversing diabetes through pancreas regeneration.
Speaking at the William Blair & Company 41st Annual Growth Stock Conference held in June, CEO Samarth Kulkarni described it as “a very rich pipeline… we’re very excited with everything that’s going on,” reports Seeking Alpha.
Is the CRISPR share price fairly valued?
The gene-editing market is still in a nascent phase and companies such as Crispr are only just starting out on their biotech journey. This means further clinical breakthroughs will no doubt boost the Crispr share price in the future.
As it stands, however, many gene-editing stocks trade on the hope that medical research and clinical trials are a success. For this reason, Crispr could be considered a risky stock.
As of 23 September, Crispr was trading at around 188 times its estimated FY22 sales of $49.98m, according to Zacks data.
A way to reduce the risk is to invest in ETFs with exposure to the industry, such as the Ark Genomic Revolution ETF [ARKG] and the Direxion Moonshot ETF [MOON] which broad base the risk across several such companies at least one of whom will have a successful outcome in trials.
Disclaimer Past performance is not a reliable indicator of future results.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.
*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.