If the consensus price target set by Wall Street analysts is to be believed, CRISPR Therapeutics (CRSP +1.43%) stock is going to rise by 49% within the next 12 months. And while there's no telling precisely where its share price will end up next June, the analysts aren't getting caught up in hype or being overly optimistic with their forecasts -- they're probably pretty close to being on the money. Here's why.
NASDAQ: CRSP
Key Data Points
Major catalysts are approaching quickly
To state the obvious, biotech stocks tend to fly when a company commercializes its first medicine. When a company makes money from drug sales for the first time, the market gains a lot of clarity regarding a stock's valuation. Likewise, if a player succeeds with moving one medicine to the market after years of research and development (R&D), its management team is sure to have gained a tremendous amount of relevant experience that'll make the process slightly less risky the next time around.
Before the end of the second quarter of 2024, CRISPR Therapeutics could have its gene therapy exa-cel approved and on the market for two different indications for rare blood disorders. Its requests for the go-ahead to commercialize exa-cel have already been submitted to the Food and Drug Administration (FDA) as well as authorities in the U.K. and European Union. On Dec. 8, the FDA will rule on whether exa-cel can be used to treat sickle cell disease (SCD), and on March 30, 2024, it will pass down a verdict for its transfusion-dependent beta thalassemia (TDT) indication.
To be clear, based on the moderate level of excitement surrounding the business, it is entirely possible that a positive ruling by the FDA on either of the two indications could make the stock jump by as much as analysts estimate. If the company nails the approvals for both indications, its stock could easily go even higher than the current average price target of around $85. Granted, per the terms of its collaboration partner, Vertex Pharmaceuticals, CRISPR Therapeutics will split both the costs and profits from the exa-cel program 60/40, with Vertex receiving the larger portion -- so the smaller company's upside is somewhat constrained.
However, there are still a few more minor catalysts in the works, too. Before the end of the year, CRISPR plans to launch at least a couple of gene-editing therapy programs into early-stage clinical trials, which should give the stock a little boost. Those programs have the potential to have a huge impact, as they're intended to work by editing a patient's genes so as to treat or even permanently cure hereditary conditions, among other illnesses.
Of particular interest is its CTX310 project, which may seek indications to treat cardiovascular disease, and which is likely to start its phase 1 trials before 2024.
No such thing as a risk-free catalyst event
So Wall Street's price targets for CRISPR Therapeutics are quite reasonable. That doesn't necessarily mean that investors should be scrambling to buy shares of it. This is a risky stock, even now, when it's approaching what will probably be a triumphant period.
With the possibility of a big price movement upward comes the risk of a sharp tumble. If the FDA or E.U. regulators say that exa-cel isn't fit for commercialization for one or both of the indications it's seeking, it'll cause serious damage to the stock. But that isn't too likely as most of the performance and safety data has been well-received so far. A more likely bump in the road is that the FDA requests that the company provide more information or conduct additional trials to address their concerns.
In that case, it'd likely be nearly impossible for it to organize and complete fresh studies in time to meet the analysts' price targets as of today, but it could still eventually manage a victory for shareholders. With trailing-12-month operating expenses of $563 million and nearly $1.9 billion in cash, equivalents, and short-term investments, CRISPR will have plenty of time to figure out any issues.
Therefore, if the prospect of your shares being at a loss for a while doesn't frighten you, it's a good time to invest. By this time next year, Wall Street's estimates will be factoring in the expected sales of exa-cel based on early figures, and there's a very solid chance that its price will be a fair bit higher than it is today.
