CRISPR Therapeutics is trading around multiyear lows.
Finding an undervalued growth stock can lead to some oversize returns in the long run. In some cases, it can be as simple as focusing on sectors of the market that might not be getting much attention of late, and thus could make for attractive under-the-radar investments right now.
One stock that has been struggling and that arguably should be doing a lot better these days is CRISPR Therapeutics (CRSP 1.05%). There was a lot of excitement around the healthcare company early on in the year, but over the past six months, its shares have crashed by more than 30%. Here’s why I think it could be a bargain right now.
CRISPR’s future looks more promising than ever
Last year, the Food and Drug Administration (FDA) granted approval for CRISPR’s gene therapy for sickle cell disease for patients who are 12 years and older. Casgevy is a one-time treatment that, even priced at more than $2 million, is cost-effective for the patient and their insurer, according to the Institute for Clinical and Economic Review.
CRISPR has been developing the treatment along with its partner Vertex Pharmaceuticals, with CRISPR taking a 40% share of profits on the treatment. In January, the FDA also approved Casgevy for transfusion-dependent beta thalassemia, also in patients who are 12 and older.
As a result of the approvals, optimism was high around CRISPR at the beginning of the year, only for that bullishness to eventually wane. The two companies, CRISPR and Vertex, are still in the early stages of rolling out Casgevy, however, so it will take time before investors start to see a financial boost from the approvals.
At its peak, Casgevy could generate $3.6 billion in revenue. CRISPR will only share in the profits on that, but given the high price tag, it could still represent a significant amount for the company, and it might be enough for it to get out of the red. In its most recent quarter, which ended on June 30, the company incurred a net loss of $126.4 million. Now that Casgevy is approved for not just one but two indications, there could at least be a path to profitability in the future.
CRISPR is also working on developing other therapies to bolster its portfolio even further, including CTX211 as a possible treatment for type 1 diabetes.
The stock could be overdue for a big rally
According to analyst price targets, the upside for CRISPR’s stock could be as high as 66%. And those targets are just based on where analysts think the stock can go in the short term (i.e., 12 months). In the long run, there could be even more room for the share price to go higher.
Given that CRISPR has a couple of approvals and is a well-funded company with over $2 billion in cash and marketable securities on its books as of the end of June, this isn’t nearly as risky as other biotech stocks.
What I suspect has happened is that investors have truly just forgotten and overlooked CRISPR because the focus for much of the year has been on companies involved in artificial intelligence. Although CRISPR did have some positive news at the beginning of the year, that might not have been enough to keep investors’ attention, and that’s evident with a sharp reduction in trading volume.
CRSP 30-day average daily volume; data by YCharts.
As CRISPR starts to post some stronger financials resulting from Casgevy, I would expect to see some excitement and bullishness return to the stock, and I think that’s simply a question of when it will happen — and not if.
Should you buy CRISPR Therapeutics stock?
CRISPR is trading around the levels it was at five years ago, and yet the business is in much better shape than it was back then. Although it could take some time for its financials to benefit from Casgevy’s rollout, the company seems to be on a much better path today than it was five years ago. For the stock to be trading at these levels looks to be a great opportunity to lock in a good price for one of the safer, more promising biotechs in the market today.
As long as you’re willing to be patient, CRISPR Therapeutics could make for a fantastic buy right now.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.
