Compared to the healthcare sector, which has fallen more than 10% so far this year, shares of CRISPR Therapeutics AG (CRSP) have performed relatively well, up 4% on the year. While shares have the potential of dropping in the short term due to technical and macroeconomic factors, I am bullish on CRISPR Therapeutics in the long term.
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The Federal Reserve’s aggressive stance on slowing down runaway inflation could help eventually restore a supportive environment for U.S.-listed equities, where shares of CRISPR Therapeutics could see a strong recovery supported by expected major developments in its pipeline of treatments.
Where the Strong Upside Potential Could Lie
The Swiss biotechnology developer of innovative gene therapies will update the market in the coming weeks with important news about its flagship product, CTX001, which could significantly boost the share price.
With headwinds likely to continue to weigh on healthcare stocks, CRISPR Therapeutics AG shares could fall from current levels. As such, I would personally wait for another reduction, bringing the stock price down to around $65-$70 per share, before purchasing the stock.
About the Company’s Flagship Therapy Candidate
The flagship product the company is developing, CTX001, consists of a therapy being developed in collaboration with Vertex Pharmaceuticals Incorporated (VRTX) for the treatment of patients with either transfusion-dependent beta-thalassemia (TDT) or severe sickle cell disease (SCD).
Beta thalassemia is a blood disorder that reduces the production of hemoglobin, a protein found in red blood cells whose low levels due to the condition are responsible for oxygen starvation in many parts of the body. TDT is the most severe form of beta thalassemia, requiring lifelong regular transfusions of red blood cells and, if left untreated, it can cause serious organ damage, potentially leading to patient death.
SCD is a disease that impairs blood flow to organs, depriving the affected organs of blood and oxygen. After the disease damages the nerves, kidneys, liver, and spleen, it can lead to death.
Although TDT and SCD are not very common in the general population, they still receive a lot of attention in the global health system, as certain lifestyles of modern society, such as obesity, overweight, alcohol consumption, and cigarette smoking, can negatively influence the course of these two diseases.
CRISPR Therapeutics’ CTX001 promises to be revolutionary as a treatment because by producing stem cells that produce high levels of hemoglobin in red blood cells, it should succeed where many conventional treatments generally fail.
That is, CTX001 is aimed at reducing or eliminating transfusion requirements in TDT patients and reducing or alleviating painful and debilitating sickle crises in SCD patients. This will greatly improve the patient’s quality of life.
Together with Vertex, CRISPR Therapeutics AG is expected to file global regulatory filings for CTX001 sometime in the last quarter of 2022. Amid strong market interest in stem cell-based therapies, including for severe hemoglobinopathies, this could also spark strong interest in CRSP stock.
Q1 2022: No Profitability, but Revenue from Collaborations Increased
In the first quarter of 2022, CRISPR Therapeutics again failed to generate a positive net income as, apart from some revenues from collaborations, no treatment has left the development pipeline yet for sale.
So, the quarter ended with EPS of -$2.32 compared to the consensus of -$1.94 on sales of $0.94 million, up 74% year-over-year.
CRISPR’s Pipeline Receives Robust Financial Support
Despite its lack of profitability, CRSP’s balance sheet remains robust to fund the continued development of its CTX001 treatment and other products in the company’s pipeline.
As of March 31, 2022, CRISPR Therapeutics’ total assets were $2.61 billion, while its total liabilities were $361.26 million. Total assets were down 5.3% from December 31, 2021, while total liabilities were up 2.5% from the same period.
Notably, the company is collaborating with ViaCyte, Inc., a privately held regenerative medicine company, to advance an innovative therapy candidate called VCTX210 to treat type 1 diabetes.
Wall Street’s Take on CRSP Stock
In the past three months, 17 Wall Street analysts have issued a 12-month price target for CRSP. The stock has a Moderate Buy consensus rating based on 11 Buys and six Holds.
The average CRISPR Therapeutics AG price target is $98.94, implying 25.4% upside potential.
Technical Analysis: CRISPR Therapeutics’ Share Price Could Fall
CRISPR Therapeutics AG shares are currently trading at $78.93. The stock price looks appealing as it is about 15% below the midpoint of its 52-week range of $42.51 to $142.64.
However, it could become more attractive if it breaks below its 200-day moving average of $69.52. This is possible as headwinds could continue to negatively impact its share price, which could potentially drag the stock under its 50-day moving average.
Its 14-day relative strength index of 57 means there is plenty of room for further declines in the stock price. The indicator ranges between 30 and 70. A reading of around 30 means the stock is oversold, while a reading of 70 means the stock is overbought.
Conclusion: CRSP Has Strong Long-Term Upside Potential
Strong upside potential for the share price is embedded in CRISPR Therapeutics AG’s pipeline, but this is likely not to play out before the last quarter of 2022. Until then, I personally would wait for a significant drop of about 10% before buying.
