CRISPR Therapeutics (NASDAQ:CRSP) Boasts Solid Potential and Limited Risk

CRISPR Therapeutics (CRSP) has endured a tough year since gaining several important regulatory approvals for its gene-editing treatment in late 2023 and early 2024. Despite these challenges, the company boasts solid potential and limited risk, as the focus has shifted to commercialization and rollout, which may have been slower than many investors anticipated. However, I remain bullish on this Swiss firm, noting its strong foundations, solid partnerships, and impressive pipeline.

CRISPR Is Built on Strong Foundations

Central to my bull case is the fact that CRISPR Therapeutics stands on solid financial ground, unlike many pre-sales or early sales companies. With a strong cash position of $1.94 billion, recently bolstered by a $280 million public offering and a $200 million milestone payment from Vertex Pharmaceuticals (VRTX), the company has ample resources to fund its ongoing research and development efforts.

The company’s financial prudence is evident in its reduced R&D expenses and narrowed net loss compared to the previous year. While the lack of immediate Casgevy revenues and the absence of late-stage approval candidates may concern some investors, the company appears to have very strong foundations for long-term growth. CRISPR Therapeutics’ key strengths include:

• Approved Product: Casgevy, the first CRISPR-based therapy approved in multiple countries, with reimbursement deals agreed upon by health providers like the NHS.
• Strategic Partnership: Collaboration with Vertex Pharmaceuticals, a pharmaceutical giant, for Casgevy’s commercialization. Vertex handles marketing — a costly activity.
• Diverse Pipeline: Advancing multiple “one and done” CRISPR/Cas9 therapies in autoimmune disorders, oncology, and heart disease.
• Innovative Approach: Pioneering in-vivo gene therapies, potentially opening new treatment avenues.

With its strong financial position, approved product, strategic partnerships, and innovative pipeline, CRISPR Therapeutics is well-positioned to navigate the challenges of biotechnology development and potentially deliver transformative therapies to patients while delivering for shareholders.

Don’t Expect a Fast Start on CRSP Stock

I’m bullish on CRISPR Therapeutics but accept the stock’s momentum might not return immediately. The groundbreaking nature of Casgevy as a CRISPR-based gene therapy for sickle cell disease and beta-thalassemia is impressive and undeniable, but its adoption and revenue generation are likely to be gradual due to several factors.

First, Casgevy’s treatment journey is extensive and intensive, consisting of six stages that can span up to a year or more. These include benefit assessment, pre-mobilization, apheresis (cell collection), cell engineering, myeloablative conditioning, and follow-up consultations.

This ex-vivo therapy involves extracting a patient’s cells, transporting them to a lab for CRISPR editing, reinfusing them, and monitoring progress. The complexity and duration of this process will likely deter some patients unless their condition is particularly acute.

This contrasts with some initial reports that demand for Casgevy would outstrip supply. Dr. Anu Agrawal, a hematologist at UCSF, said in late 2023 that his center alone had a waiting list of 15–20 patients, and he expects to treat only 1–2 sickle cell disease patients in the first year.

However, the slow start we’ve seen in 2024 is arguably reflective of several factors, including the complexities of administering the treatment coupled with the price tag of $2.2 million. Positive moves on reimbursement have alleviated some concerns, but more insurance and healthcare coverage will be needed to facilitate a global rollout.

While these factors may lead to a slower start for Casgevy, they do not diminish the long-term potential of the treatment. As manufacturing processes are improved, healthcare systems adapt, and more real-world data becomes available, the adoption rate is likely to accelerate.

There’s More to CRISPR Therapeutics than Casgevy

I’m also bullish on CRISPR Therapeutics because there’s more to the company than Casgevy. I believe Casgevy is an excellent treatment, and even modest forecasts—around 1,000 Casgevy patients per year—would be enough to justify the current valuation.

However, CRISPR Therapeutics’ potential extends to areas such as autoimmune disease, with CTX112, a CD19-directed CAR T therapy for systemic lupus erythematosus (SLE), in development. This “one and done” approach could revolutionize autoimmune disease treatment, potentially tapping into a market worth over $100 billion. Early research in this segment has shown promising results, with CAR T therapies producing complete symptom resolution in some autoimmune diseases.

The Swiss firm is also making progress with CTX131, an allogeneic CAR T therapy targeting T-cell lymphoma and solid tumors. This off-the-shelf approach could offer faster, safer treatments compared to autologous therapies, provided cell rejection issues are addressed. Phase 1 data for kidney cancer is expected in 2025.

Other programs with immense potential include CTX320, CTX340, and CTX450. These programs aim to provide permanent cures for chronic conditions through single injections, a truly transformative approach to medicine:

• CTX320 targets LPA for cardiovascular disease treatment.
• CTX340 targets AGT for refractory hypertension.
• CTX450 targets ALAS1 for acute hepatic porphyrias.

While the timeline for a second drug approval may be years away, the potential of CRISPR Therapeutics’ pipeline presents significant long-term value. What’s more, it has the cash, the partnerships, and, hopefully, the recurring revenue from Casgevy to take these products through the development cycle to market.

CRISPR Therapeutics’ Valuation Isn’t a Problem

As essentially a pre-sales company, the valuation metrics don’t tell us too much. The company’s market capitalization is approximately $4.4 billion, supported by a robust cash reserve of $1.9 billion and no debt, leading to an enterprise value of about $2.1 billion. As such, the company is currently trading at 12.3x TTM EV-to-sales — a 230% premium to the sector — but has a price-to-book ratio of 2.28x — a 17% discount to the sector.

I don’t think these figures tell us too much. However, with the potential for 1,000 Casgevy patients a year generating approximately $2.2 billion in revenue, CRISPR Therapeutics’ stock would currently be trading at about 5x forward sales (Vertex takes 60% of sales), suggesting a more favorable valuation outlook despite the limitations of traditional metrics.

Is CRISPR a Buy, Hold or Sell?

On TipRanks, CRSP comes in as a Hold based on nine Buys, six Holds, and two Sell ratings assigned by analysts in the past three months. The average CRSP stock price target is $67.07, implying 32% upside potential. 

See more CRSP analyst ratings

The Bottom Line on CRISPR Therapeutics

I’m bullish on CRISPR Therapeutics due to its strong financial position, innovative pipeline, and strategic partnerships. Despite the slow start in commercialization, the potential of Casgevy and other therapies like CTX112 and CTX131 could truly be revolutionary for treatment outcomes.

The Swiss company’s has strong cash reserves and modest R&D expenses that provide a stable foundation for future growth. Coupled with its Vertex partnership, I’m impressed my the company’s foundations and buoyed by its technology.

Disclosure