Over the last two sessions, CRISPR Therapeutics (NASDAQ:CRSP) stock has dropped 13%. It’s difficult to see why.
To be sure, stocks sold off on Thursday, when CRSP declined 8.7%. But markets showed some strength in the second half of trading on Friday — yet CRSP stock dropped another 4.3% that day.
Meanwhile, the selling toward the end of the week was heaviest in dearly-valued tech names. CRISPR stock certainly isn’t cheap — the company isn’t profitable yet — nor has it posted the enormous gains seen elsewhere in the market. Shares are up a solid 37% year-to-date, while many of the names dumped on Thursday have risen by 100% or more.
There hasn’t been any news from CRISPR itself, either. All told, it simply looks like CRSP stock got caught up in a wave of selling that hit the market.
That selling pushed the stock to a two-month low. And it set up a nice opportunity in one of biotech’s most attractive names.
The Case for CRSP Stock
CRISPR Therapeutics isn’t your standard biotech that has one or two products on which its ultimate success rests. It’s one of the companies pushing a broader technology known as CRISPR, or colloquially as “gene editing.”
It’s not as dystopian as it sounds. CRISPR Therapeutics isn’t using CRISPR to change a baby’s eye color or manipulate human intelligence. Ethical concerns surrounding the technology are real, but the company’s focus is on tackling serious diseases.
Some of those diseases are genetic in origin: β-thalassemia and sickle cell disease are two of the conditions CRISPR Therapeutics aims to treat. But the technology also has promise in cancers, through a method known as ‘CAR-T’ (chimeric antigen receptor T cells) therapy.
In CAR-T, immune cells are engineered to fight the specific kind of cancer at work. It’s a promising approach, and one that would be far less barbaric than current regimens of chemotherapy (which literally involve poisoning the patient).
There is massive potential to CRISPR Therapeutics’ approach. The company has made progress since going public a little less than four years ago. CRSP stock is up more than 400% from its initial public offering price — even with the weakness of the last two sessions.
A Coronavirus Victim?
Even before last week’s sell-off, CRSP stock had struggled. After roaring back from March lows with the rest of the market, the stock stalled out in early July.
It’s possible that one of the factors is the amount of investor attention in, and capital rushing toward, biotechs and pharma stocks with direct exposure to a vaccine and/or treatment toward the coronavirus. Gene editing is being used to fight Covid-19 at institutions like Stanford University, but CRISPR Therapeutics itself is not involved.
In fact, CRISPR seems to be a potential victim of the pandemic, at least in the near-term. According to its Form 10-Q filed with the U.S. Securities and Exchange Commission, Phase 1/2 trials for both β-thalassemia and sickle cell disease were paused due to the pandemic.
That isn’t a good thing for CRSP stock, of course. But it’s hardly a deal-breaker, either. Trials already have resumed. A few months’ delay doesn’t impact the potential success of the technology or the company’s pipeline. In fact, it has a basically immaterial (and largely theoretical) effect on the stock’s fair value.
Going forward, investor attention will turn away from some of the ‘hot’ Covid-19 plays (some of which look overvalued, and some of which will outright fail). In that sense, a return to normalcy might be a potential catalyst for CRSP shares.
Buy the Dip
Whatever the cause, the recent weakness in CRSP stock simply looks like an attractive buying opportunity.
This, after all, is one of the leaders in a field that literally could revolutionize medicine. The pipeline is both broad and deep. The potential applications are myriad.
Yet after the pullback, CRISPR only has a market capitalization around $6 billion. That’s too low given the opportunity in front of the company.
I’ve long been a believer in the potential of gene editing, and I’ve long recommended CRSP to my subscribers as a result. I’m still just as bullish. And with the stock off 22% from last month’s highs, investors don’t need to worry about being too late to the attractive story here.
On the date of publication, neither Matt McCall nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in the article.
Matt McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. Click here to see what Matt has up his sleeve now. As of this writing, Matt did not hold a position in any of the aforementioned securities.