Time for a gut check: what’s your risk tolerance, and are you a true contrarian? I’m asking you these questions today because CRISPR Therapeutics (NASDAQ:CRSP) is out of favor on Wall Street, yet CRSP stock is a biotechnology bet with turnaround potential.
Just to recap, CRISPR’s mission is to develop “transformative gene-based medicines for serious diseases.” The company’s pipeline of therapeutic candidates address serious conditions such as sickle cell disease and beta thalassemia.
As we’ll see, CRSP stock is on a downtrend. Momentum-focused traders might choose to stay away, but if you’re a dyed-in-the-wool value investor, then you should find a compelling opportunity with CRISPR Therapeutics.
Don’t get me wrong — this isn’t a perfect investment, so don’t pour your entire account into it. That being said, CRISPR Therapeutics should impress the scientific and investing communities with the company’s robust clinical pipeline.
A Closer Look at CRSP Stock
Actually, CRSP stock wasn’t always in a downtrend. From November of last year until January 2021, the stock rallied from $86 to $220.20. Unfortunately, it was all downhill from there. All of those gains and more were coughed up during the ensuing months.
By Dec. 3, 2021, CRSP stock had declined all the way down to around $77. So in effect, you may have a chance to rewind the clock and pick up some shares at mid-2020 prices.
There’s no dividend to speak of, which isn’t unusual with biotech stocks. However, there is a statistic that value seekers should appreciate. Currently, CRISPR Therapeutics’ trailing-12-month price-to-earnings ratio is 14.25.
That’s quite reasonable during a time when many stocks are expensive. Indeed, some biotechnology companies don’t even have P/E ratios because they have no earnings.
As I alluded to earlier, CRISPR Therapeutics has a high-conviction pipeline of medical treatments. For example, CTX001 is CRISPR’s investigational gene-editing therapy that’s being evaluated for patients suffering from transfusion-dependent beta thalassemia or severe sickle cell disease.
Then there’s CTX110, which is an allogeneic chimeric antigen receptor T cell investigational therapy targeting CD19, for the treatment of relapsed or refractory B-cell malignancies.
CRISPR Therapeutics just announced some great news regarding CTX110. The U.S. Food and Drug Administration (FDA) has granted Regenerative Medicine Advanced Therapy (RMAT) designation to this cell therapy.
CRISPR Therapeutics CEO Samarth Kulkarni stated that this RMAT designation “is based on the encouraging clinical data we have presented thus far.”
Also, CRISPR is developing VCTX210 with regenerative-medicine company ViaCyte. VCTX210 is a stem-cell-derived therapy for the treatment of type 1 diabetes. According to a press release, Health Canada has approved the companies’ Clinical Trial Application (CTA) for VCTX210. Kulkarni asserted that this event represents “an important milestone in enabling a whole new class of gene-edited stem cell-derived medicines.”
Checking on the Financials
I already acknowledged that CRSP stock isn’t a perfect investment. On the financial front, the company presents a mixed picture.
The good news is that, at the end of 2021’s third quarter, CRISPR Therapeutics had cash, cash equivalents, and marketable securities valued at around $2.48 billion. That’s a pretty impressive capital position for a mid-sized biotechnology company.
On the other hand, CRISPR’s bottom-line results aren’t encouraging. In the third quarter of 2021, CRISPR Therapeutics sustained a net earnings loss of $127.2 million. That’s worse than the $92.2 million net loss recorded during 2020’s third quarter.
Perhaps the company should consider finding ways to curb its research and development expenses, which totaled $105.3 million for the third quarter of 2021.
The Bottom Line
CRISPR Therapeutics is demonstrating excellent progress on the regulatory front. That’s important, but prospective investors should keep an eye on CRISPR’s expenditures and bottom line, as there’s room for improvement. Still, CRSP stock appears to be underappreciated and undervalued.
In time, the stock could return to its peak from January, so feel free to consider a small long position now.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.