There are hundreds of publicly traded companies out there, but few of them manage to consistently outperform the broader market. Fewer still manage to turn a relatively modest starting investment (say, $10,000) into $1,000,000 or more. Of course, finding securities capable of pulling that off is what most investors want.
Today, let's turn our attention to gene-editing specialist CRISPR Therapeutics (NASDAQ:CRSP). This company has performed splendidly since its IPO in late 2016, returning 792.5% since then, compared with 100.3% for the S&P 500 in the same period. But can it make you a millionaire from here on out?
The case for CRISPR Therapeutics
The stock market performance of a clinical-stage biotech like CRISPR Therapeutics is largely tied to the perceived successes (or potential failures) of its pipeline candidates. This explains why the company's shares have performed so well in recent years. CRISPR Therapeutics focuses on developing treatments for rare diseases with few effective therapy options. The company's approach centers on gene editing, which refers to a set of techniques that allow scientists to modify an organism's DNA.
Gene editing can help unlock innovative treatments for illnesses that have thus far stymied the best researchers. How promising are CRISPR Therapeutics' programs? The most advanced of the bunch is CTX001, a potential treatment for transfusion-dependent beta-thalassemia (TDT) and sickle cell disease (SCD), both of which are rare blood disorders. CRISPR Therapeutics is developing CTX001 in collaboration with Vertex Pharmaceuticals.
Therapy options for both TDT and SCD include regular blood transfusions and stem cell transplants. However, these options are risky. There's no denying the need for a one-time curative treatment for both illnesses, which is what CRISPR Therapeutics is looking to develop with this program. CTX001 has already produced solid results in clinical trials. For instance, in a trial involving more than 40 people, 15 TDT patients were transfusion-free at four to 26 months following treatment. Prior to receiving treatment, these patients typically required anywhere between 20 to 61 blood transfusions per year. These patients also showed improvement in hemoglobin levels. Hemoglobin is a protein in red blood cells that carries oxygen around the body; patients with TDT tend to have reduced hemoglobin levels.
Meanwhile, seven SCD patients treated with CTX001 were free of vaso-occlusive crises (a painful side effect of the disease) five to 22 months after treatment. During Vertex's first-quarter earnings conference call, CEO Reshma Kewalramani said that regulatory submission for CTX001 may be possible within 18 to 24 months.
CRISPR Therapeutics also has a trio of pipeline candidates -- CTX110, CTX120, and CTX130 -- being investigated for the treatment of different forms of cancer. These potential therapies are undergoing phase 1 clinical trials, and the company expects to report data from them sometime this year.
To further all this exciting research, CRISPR Therapeutics is well funded, largely thanks to its collaboration with Vertex Pharmaceuticals. As of the first quarter ending March 31, the company had $1.8 billion in cash and cash equivalents, which isn't bad at all for a clinical-stage biotech. Developing innovative treatments isn't cheap, and funding can be hard to come by for companies attempting to do that. Ensuring that a biotech has the capital necessary to continue running its operations is imperative.
In its first-quarter earnings report, CRISPR Therapeutics said it expects its current pile of cash to sustain its operations for at least 24 months. If the company's CTX001 continues to produce positive results from clinical trials and eventually earns regulatory approval -- and its other programs also pan out -- CRISPR Therapeutics' stock could go to the moon.
A millionaire-maker stock?
Many of CRISPR Therapeutics' candidates still have a long way to go before they can even hope to be launched on the market, and a lot could happen in the meantime. Failure from clinical trials and regulatory setbacks are always things to consider before investing in any biotech. It is also worth noting that there are other companies focused on gene editing, some of which are going after some of the same targets as CRISPR Therapeutics. For instance, Bluebird Bio is currently developing a treatment for TDT and SCD. Fierce competition in these markets could also hinder CRISPR Therapeutics' performance.
It's hard to imagine that CRISPR Therapeutics will not encounter any such headwinds. Further, the company has already benefited a great deal from the progress of its programs. While I do believe there is significant upside left, in my view, too much would have to go right for the biotech to be a millionaire-maker stock from here on out. However, that doesn't mean CRISPR Therapeutics isn't a buy. Indeed, for investors willing to be patient, this biotech stock would be a fine addition to a growth-focused portfolio.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.