CRISPR Therapeutics: Gene Editing Pipeline Continues to Make Progress; Shares Very Undervalued

CRISPR Therapeutics CRSP reported third-quarter results in line with our expectations, and its pipeline candidates are continuing to make progress. We maintain our positive outlook and fair value estimate of $119 per share. We view the stock as very undervalued, currently trading about 53% below our fair value estimate.

CRISPR ended the quarter in a healthy financial position with over $1.7 billion in cash and marketable securities, which will help fund its research and development expenses. Investors reacted favorably to the quarter’s results and pipeline progress, sending the stock up 9%. The company’s net loss was $112 million in the quarter, an improvement from a net loss of $174 million in the prior-year period.

CRISPR provides long-term investors who possess a high degree of risk tolerance with pure-play exposure to novel gene editing technology. As an emerging biotech company with no approved drugs, we do not assign it an economic moat. We think the company has the funding and technological capabilities to potentially bring several of its pipeline programs to market. Nevertheless, we assign the company a very high level of uncertainty related to regulatory approvals for its early-stage portfolio and a range of potential outcomes.

We continue to have a positive outlook for CRISPR’s gene-editing candidate, exa-cel, which is being developed in partnership with narrow-moat Vertex Pharmaceuticals for two blood diseases: transfusion-dependent beta thalassemia and sickle cell disease. We assign a 60% probability of approval to exa-cel and anticipate it could reach the market as early as 2024. We forecast exa-cel could hold strong pricing power and become a blockbuster opportunity. In CRISPR’s agreement with Vertex, CRISPR would have a 40% share of exa-cel’s sales. Exa-cel has an FDA regulatory action date in December for the sickle cell disease indication and a target action date in March 2024 for the beta thalassemia indication.