Crispr Therapeutics' Continued Progress Warrants A Buy

Summary

• Crispr Therapeutics continues to make progress toward submitting a global regulatory filing for CTX001.
• CTX130 preliminary data shows the power of Crispr Cas-9 technology.
• Some valuation risks are present; however, I continue to believe the future opportunity far outweighs the risks seen today.

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Introduction

In my initial coverage of Crispr Therapeutics (NASDAQ:CRSP) in January of 2022, I gave the company a hold rating. At the time, I believed the progress of Crispr Therapeutics did not warrant the company's valuation. Further, the future potential of the company given the ambiguity seemed too risky. However, in my last coverage of the company, I rated the company a cautious buy. My reasoning for such a rating resulted from a faster than expected progress along with significantly lowered valuation multiples. Despite risks and ambiguity, I believed that the pace of progress and low valuation multiples warranted a cautious buy rating. Today, Crispr Therapeutics' valuation has risen exponentially since my last coverage, but I continue to believe Crispr Therapeutics is a buy on continued strong progress toward bringing the Crispr Cas-9 technology into the world. Being a pre-revenue company, making progress towards its opportunistic future is the key metric to track a company, and Crispr Therapeutics has been showing exactly the results I believe to be most relevant. Therefore, despite increased valuation risks, I continue to believe Crispr Therapeutics is a buy.

Progress

Crispr Therapeutics is a pre-revenue company. The excitement around the company, therefore, comes from the future promise of the treatments for diseases that were once thought to be incurable using the new technology called CRISPR CAS-9, a tool for genetic modification. As such, the progress the company makes toward the goal of getting its products approved for use is the single most important factor when looking at Crispr Therapeutics.

CTX001

As the management team has continually guided, CTX001, which aims to treat sickle cell disease and beta-thalassemia, is on track to a global regulatory filing by the end of 2022. Further, CTX001 has the potential to become a one-time cure for sickle cell disease and beta-thalassemia, which may be able to widen the availability of CTX001 upon approval.

With a study lasting about 37.2 months, the company is already expected to file a global regulatory filing in the coming months for CTX001, which is expected to provide immense opportunities for the company. CDC approximates that about 100,000 Americans suffer from sickle cell disease with its mortality rate reaching up to 68% for 0-4-year-old babies. Beta-Thalassemia affects about 60,000 individuals around the world each year. With an estimated cost of CTX001 reaching about $2 million, the opportunity for Crispr Therapeutics is massive.

CTX130

Since my previous article, Crispr Therapeutics made the most advancements in its CTX130 program. CTX130 is a program that aims to target CD70 to treat solid tumors and hematologic malignancies. In the results shown in the company's most recent trial, CTX130 had a clinical benefit rate among 90% of the patients with a 70% overall response rate and a 30% complete response rate among patients. Further, no DLTs or no significant abnormal reactions among patients were recorded. Crispr Therapeutics' use of the Crispr Cas-9 technology continues to show that it is efficient and effective.

CTX130 holds massive opportunities as well. Every 3 minutes, someone in the United States is diagnosed with one of the hematologic malignancies, which are leukemia, lymphoma, or myeloma. In a year, about 186,000 patients are diagnosed with this disease, and about 56,000 Americans die each year. CTX130, therefore, has immense opportunities for both the significant number of patients and Crispr Therapeutics.

The preliminary results from the trial 1 testing of CTX130 solidified Crispr Therapeutic's belief that the future of treating cancer may come from engineered cell therapy. The strong response rate, efficacy, safety, and fast development time warrant this argument. Therefore, I believe the company is on track to capture the massive future market.

CTX120

The only negative news regarding the company's progress has been the termination of the CTX120 program due to the high threshold created by the approval of Johnson and Johnson (JNJ) and Legend's CAR-T CARVIKTi, which also target multiple myeloma like CTX120.

Given the pre-revenue nature of the company and the continued progress and promise surrounding the existing programs, I do not believe the termination of CTX120 creates a significant risk for shareholders. Crispr Therapeutics existing new pipelines including CTX110 and in-vivo programs can take CTX120's place since the revenue recognition for CTX120 would have taken place years into the future. The company can focus more time and capital on its existing pipelines.

Overall, Crispr Therapeutics, to date, continues to show that the revolutionary gene editing technology may be the future in treating diseases that once were impossible, expensive, or too dangerous to treat.

Valuation Risk

Despite the strong progress Crispr Therapeutics is making in the scientific field, the company is still in a pre-revenue state with an expectation of starting to generate revenue in 2023 or even 2024. As of today, profitability is not even thought of for Crispr. Therefore, significant risks follow with an investment in the company, especially in times when the Federal Reserve is raising interest rates aggressively. Since the publication of my previous article, Crispr Therapeutic's stock price has risen, at the time of writing, about 46% to a market capitalization of about $5.9 billion increasing concerns regarding the valuation.

It is true that the valuation is a big risk factor for a pre-revenue company; however, given the magnitude of the opportunity Crispr Therapeutics is in for the coming decade, I believe the risk may be warranted. Hundreds of thousands of people suffering from diseases that were once believed to be incurable will be treatable in the coming years potentially allowing Crispr Therapeutics to capture the fast-growing genome editing market. For investors eyeing fruition in the multiple years to come, I believe the continued strong progress towards Crispr Therapeutics' future far outweighs the price volatility seen today. Therefore, the company's strong progress and development pipeline warrant the higher valuation seen today.

Conclusion

Crispr Therapeutics is at the center of bringing genome editing through Crispr Cas-9 technology into the daily lives of hundreds of thousands of patients worldwide. As such, given the current rate of progress and promises, I believe the opportunities Crispr Therapeutics provides far outweigh the current volatility and valuation risks involved with the company's stock. Therefore, I continue to rate Crispr Therapeutics as a cautious buy.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.