It's easy to see why investors might assume that early-stage gene-editing companies like CRISPR Therapeutics (CRSP -4.14%) are too inscrutable to approach. But you don't need to understand a bunch of complicated biotechnology concepts to appreciate some of the finer points that impact this company's chances of being a good investment.
In fact, smart investors know (at least) three key things about this business, and you should too -- especially if you're considering purchasing shares sometime soon. Let's jump in and examine each of these high-impact factors in detail.
1. It has a well-heeled ally in its corner
Well-informed biopharma investors understand that drug development collaborations are one of the industry's most important mechanisms for improving the odds that pre-revenue companies will succeed. CRISPR has a few partners, but its most important one by far is Vertex Pharmaceuticals (VRTX -0.27%). Under the pair's collaboration agreements, Vertex has control over CRISPR's exa-cel program.
This is a gene therapy that's intended to functionally cure both beta-thalassemia and sickle cell disease -- and Vertex gets 60% of the profits or losses from sales of the treatment. CRISPR will get a $200 million milestone payment if the Food and Drug Administration (FDA) approves the treatment, on top of the $900 million payment it already got from the deal as a result of exa-cel reaching previous development milestones.
In short, the collaboration deal with Vertex gives CRISPR opportunities to earn revenue from progress in its pipeline even if that progress doesn't result in the commercialization of a new treatment in the near term. It also means that the biotech is unlikely to need to take on much additional debt once it spends down its cash hoard, which currently totals $1.9 billion. And that's a reason to be a bit optimistic about its ability to eventually roll out a new treatment.
2. A massive catalyst is drawing near
Savvy investors took notice in September 2022 when CRISPR and Vertex started to submit materials pursuant to gaining regulatory approval for exa-cel. And they doubtless recognized the implications of those submissions. By the end of the current quarter, that rolling application will be finished, which could lead to an approval of a new therapy before the end of 2023. FDA approval would be a massive win for sharehold as the stock would almost certainly soar.
The speedy timeline for exa-cel's hoped-for approval is a result of the companies securing multiple special designations for the candidate treatment from the FDA and the European Medicines Agency. Aside from the fast track and orphan drug designations, the program also has a rare pediatric disease designation and a regenerative medicine advanced therapy designation. Those categorizations should help CRISPR to save on development costs as well as receive special tax treatment, more favorable intellectual property protection terms, and a bevy of other benefits like priority access to regulators.
Smart investors appreciate that having special regulatory treatment is a green flag though there is still no guarantee that regulators will approve exa-cel -- or any other candidate.
3. Its leadership got a small shakeup in 2022
The last thing that smart investors likely noticed is that 2022 saw a few changes to the biotech's management team that should have implications in 2023 and beyond if CRISPR commercializes new treatments.
At its annual meeting, it elected a new board member, Maria Fardis, who previously was the CEO of another biopharma company. In late October, its chief operating officer stepped down to pursue other opportunities. Then, in December, CRISPR appointed a new senior vice president of business development.
The pattern established by these changes is quite clear. The management team is gearing up for commercial operations by organizing the best possible talent for the job. And that's a bullish sign as it means there's a greater chance of the company navigating successfully at a critical moment in its future.
