CRISPR Earnings: Gene Editing Pipeline Continues To Make Progress, Shares Very Undervalued

CRISPR CRSP Therapeutics reported first-quarter results in line with our expectations, and its pipeline candidates are continuing to progress in development. We maintain our positive outlook and fair value estimate of $119 per share, and we view the stock as very undervalued. Collaboration revenue totaled $100 million in the quarter, which was largely attributable to an upfront payment from narrow-moat Vertex Pharmaceuticals. CRISPR ended the quarter in a healthy financial position with about $1.89 billion in cash, which will help fund its research and development expenses as it develops its pipeline candidates. Investors reacted favorably, sending the stock up 13%.

CRISPR provides long-term investors who possess a high degree of risk tolerance with pure play exposure to novel gene editing technology to treat severe, genetic diseases. Given its early stage, we do not assign it an economic moat. We maintain our positive moat trend as its pipeline is continuing to make progress and the company has the funding and technological capabilities to potentially bring several of its pipeline programs to market.

CRISPR’s most advanced pipeline candidate is its gene-editing drug, exa-cel, which is being developed in partnership with Vertex for two blood diseases: transfusion-dependent beta thalassemia and sickle cell disease. Exa-cel’s regulatory submissions were completed in the EU, the U.K., and the U.S., and the companies await a regulatory decision.

CRISPR and Vertex have presented promising phase 3 data for exa-cel demonstrating that the drug has the potential to be a durable, one-time functional cure. 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. We like that two additional phase 3 studies have been initiated to evaluate exa-cel in pediatric patients, which would broaden the addressable patient population, if approved.