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Quite often in stock markets, companies that offer something novel and unique attract speculators. So, when Crispr Therapeutics AG (NASDAQ:CRSP) quadrupled from 52-week lows, investors naturally questioned its valuation against its prospects.
CRSP stock has two positive catalysts at this time. First, the government has a “Right to Try” bill that will make unproven drugs more accessible to the terminally ill seeking novel treatments. Second, Crispr is leading the gene-based medicines for serious disease.
Fundamentally, the company’s high valuation could limit any more near-term upside, though. The company is still developing drugs in the lab, but it doesn’t have a product ready for treating people.
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What Does Crispr Do?
Crispr has a technology that disrupts, deletes, and corrects faulty drugs. The company posted a few positive studies in non-human subjects that show promise. The company will start testing CTCX001 in hemoglobinopathies this year. The CAR-T platform will advance gene editing in a clinical setting.
Financially, Crispr has plenty of cash ($341.8 million) that, if combined with revenue from its intellectual property, assures the company won’t need to sell shares to raise cash.
Crispr broadened its pipeline potential by partnering with Bayer through a 50% ownership in Casebia, which brings in $265 million funding from Bayer. In all, the company has $341.8 million in cash (as of March 31, 2018). Yet the price multiple on CRSP stock could scare investors away.
Trading at over six times its book value, CRSP stock will lose money this year ($1.63 a share) and next (negative $3.04 EPS). Investors grew more nervous after the company, along with its partner Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), disclosed that the FDA placed a clinical hold on its IND (Investigational New Drug) application for CTX001.
Until the two companies answer certain FDA questions, the trial start date for the drug designed to treat sickle cell disease will be pushed to the second half of 2018. With more volatility coming to CRSP stock, fundamental investors may debate the long-term merits of the company’s potential in treating diseases against its sky-high valuations.
As markets tug the stock in all directions, investors may consider Sangamo Therapeutics, Inc. (NASDAQ:SGMO) instead. SGMO stock is valued at just two times book. The company also has plenty of cash for the next few years, with approximately $600 million in its coffers. Sangamo also has strong partnerships. For example, Kite, the oncology unit of Gilead Sciences, Inc. (NASDAQ:GILD), brought in $150 million and around $216 million in net proceeds through its follow-on equity offering in April.