Despite a large 3x rise since the March 23 lows of this year, at the current price of around $107 per share we believe CRISPR Therapeutics stock (NASDAQ: CRSP), a biotechnology gene editing company focused on developing gene-based medicines for human diseases, has more room for growth in the near term. CRSP stock has rallied from $34 to $107 off the recent bottom compared to the S&P which moved 60% over the same period, with the resumption of economic activities as lockdowns are gradually lifted. CRSP stock is also up 4.5x from levels seen in early 2018, over two years ago.
Some of the 4x rise of the last 2 years is justified by the roughly 7x growth seen in CRISPR’s revenues from 2017 to 2019, while its revenue per share (RPS) grew 5x to $5.32 in 2019, compared to $1.02 in 2017. This mismatch can be attributed to a 36% uptick in total shares outstanding due to share issuances. Despite the growth in RPS, the company’s P/S Multiple saw a contraction. We believe the stock is likely to see upside despite the recent uptick and the potential weakness from a recession-driven by the Covid outbreak. Our dashboard, ‘What Factors Drove 350% CRISPR Therapeutics Stock between 2017 and now?‘, has the underlying numbers.
CRISPR’s P/S multiple changed from 23x in 2017 to 11x in 2019. While the company’s P/S is 20x now (based on trailing RPS), there is a potential upside given the expected growth in RPS over the coming years, as we discuss below.
So what’s the likely trigger and timing for upside?
There’s not much to look at CRISPR’s Q3 sales of $0.2 million, which compares with $212 million in the prior year quarter, which included collaboration revenues from Vertex Pharmaceuticals in connection with co-development of CTX001, an experimental gene therapy for people with sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TDT). So with barely any revenues this year, what’s the buzz around CRISPR stock, given it has rallied 3x over the recent months? It all boils down to its pipeline. The company is working to mass-produce cell therapies that will work in any person. Currently, cell therapies are manufactured from cells derived from human donors or from a patient’s own cells, making the process lengthy and cumbersome to develop the medication. If CRISPR is successful in its approach, it would mean off-the-shelf cell-based medicines developed using cells from diverse group of donors. The company’s in-house CTX110 therapy for non-Hodgkin’s lymphoma has seen positive results from phase 1 trials. The CTX001, which the company is co-developing with Vertex has received Rare Pediatric Disease designation from the U.S. FDA. Overall, CRISPR stock’s value is something to be looked at purely from its potential pipeline. CTX110 alone if approved could garner sales over $1.5 billion. The estimated revenues for 2020 and 2021 are $2.5 million and $12.7 million.
CRISPR is a high growth stock and it comes with a high risk as well. There could be a case where the therapies in CRISPR’s pipeline aren’t found effective. Also, we don’t know the timeline of when the products will be ready to be sold. That said, investors willing to be patient will likely be rewarded with any positive data from clinical trials for these therapies.