Over the last six years, a small group of scientists working at different institutes have made incredible progress in a revolutionary new field called gene editing.
Gene editing is just what it sounds like. It’s the changing — or “editing” — of an organism’s genes to produce a desired outcome. And while humans have tinkered with this idea for decades, it’s only in the past six years or so that a new technology called CRISPR/Cas9 has radically changed what we can do in this field.
CRISPR is an acronym for “Clustered Regularly Interspaced Short Palindromic Repeats,” although I am more than happy to stick with the abbreviation. The therapy is a gene editing technique that allows for the modification of any region of a genome. It can be performed on any species with accuracy and without causing harm to other genes.
But the most exciting aspect of CRISPR is the potential to wipe out thousands of diseases that currently do not have a cure, while in the process also saving millions of lives.
The first step in the process is to have the genome mapped, and the next step is to search for the mutated gene(s). Once mutations are found, Cas9 — a protein used to essentially cut and edit the DNA — is used to identify the sequence where the mutated gene will either be edited, deleted or replaced.
Here’s one way to think about it that we can all relate to. Picture the “find and replace” function in word processing software. Once the word is found in the document, you have the option to either delete, edit or replace it – the same options available with CRISPR.
It’s really amazing stuff. The technology allows the scientist to cut the mutation, edit it and place it back into the genome. Another option is to cut out the bad gene and thus remove the mutated part of the genome. Or, the mutated part of the gene could be cut and replaced with healthy genetic code, removing the mutation altogether.
The Time to Buy CRISPR Stocks Is Now
Outside of the fact that gene editing is on track to save lives, there is also an exciting investment angle to the technology. Not only are you supporting the companies by investing in them, you are setting yourself up for what could be some of the biggest winners of your lifetime.
To show you what I mean, take a look at this chart showing the total addressable market of monogenic diseases — those caused by a mutation of just one gene — in the United States and abroad.
The $75 billion number on the left is based on new diagnoses each year. What is even more astounding is the $2 trillion market of one-time addressable opportunities in people who are currently living with a diagnosed disease.
Let’s do a little valuation analysis to put this into context. If a single gene editing company is able to capture just 10% of the new diagnoses each year and only 1% of the one-time cures for already diagnosed patients, it would lead to $27.5 billion in annual sales.
Biogen (NASDAQ:BIIB), one of the largest biotech companies in the world, trades at a price-to-sales ratio of about 6, so let’s give these earlier-stage companies a conservative price-to-sales ratio of 4. That puts the market cap at $110 billion.
The average market cap of the Big Three CRISPR stocks right now — Editas Medicine (NASDAQ:EDIT), Intellia Therapeutics (NASDAQ:NTLA) and CRISPR Therapeutics (NASDAQ:CRSP) — is approximately $2 billion. Simple math tells us that it would be a 55-bagger to get to a $110 billion market cap!
To be clear, we are still years away from being able to fully cure diseases using CRISPR, but from an investment viewpoint, today is the time to buy. By the time every magazine and newspaper is touting the life altering ability of this new technology, it will be too late.
We don’t get many chances to invest in a once-in-a-lifetime, game-changing medical breakthrough. We need to take full advantage.
Matthew McCall is the founder and president of Penn Financial Group, an investment advisory firm, as well as the editor of FUTR Stocks and the ETF Bulletin. Matt just launched two new investment advisories focused around the “next” generation investing theme. His trademark three-prong investing approach targets the mega-trends old Wall Street is missing out on. Click here for more information on the “NexGen” Experience.