CRISPR Therapeutics

CRISPR Therapeutics is a leading gene editing company focused on CRISPR-CAS9. The company is on track to have the first ever FDA approve CRISPR-CAS9 therapy (targeting sickle cell disease + beta-thalassemia) with a target approval/denial date of December 9, 2023. Given the fatality of sickle cell disease, lack of an existing cure, and population size + duration of their trials, we confidently expect an FDA approval. They are working with Vertex Pharmaceuticals, which will significantly aid in the distribution of their therapy. The company has 3 other therapies undergoing clinical trials. They also have tested their therapies on more patients than most other gene editing companies combined. The company has a strong balance sheet, giving them breathing room to scale operations and weather a prolonged recession.

The company's immediate value will come from having first mover advantage on CRISPR-CAS9 gene editing with the (soon to be) world's first FDA approved therapy. As they prove out their editing platform, they may generate significant cash-flows not just from in-house therapies, but also through licensed work.

As mentioned in the thesis, CRISPR Therapeutics has a strong pipeline of drugs in early + late stage clinical trials. Perhaps the most compelling datapoint from these trials is the number of patients enrolled and duration of trials (several hundred over several years), which is more than all other major gene editing companies combined.

Given the early stage of the company's pipeline, we only focus on two of their leading therapies: CTX-001 (sickle cell disease + beta-thalassemia) and CTX-110 (CD19+ malignancies).

CTX-001 - Sickle Cell Disease

There are roughly 10,000 patients in the US with SCD. The lifetime cost to treat a patient with SCD is approximately $2.5M. While it is hard to price a one-shot therapy, we can make some assumptions. We can assume they will be willing to charge close to the current lifetime treatment cost, plus a cure + convenience premium. However, since I prefer to be conservative with my forecasts, we will assume a price of $2M per dose. We will also assume a 1% adoption rate per year amongst the US TAM. After factoring in a 60/40 revenue share with Vertex, we forecast $1.2B per year in revenue for CTX-001. They also received $300M upfront from Vertex and stand to make $1B+ if they hit milestones, as well as royalties.

CTX-110 - CD19 + malignancies

In 2012, approximately 84,000 patients were diagnosed with CD-19 malignancies in the US. The cost to treat it has a wide range between $100K to $300K. Similar to CTX-001, we will take a conservative approach and assume a price of $200K. Given the much higher mortality rate compared to SCD, we will assume a 5% adoption rate per year amongst the US TAM. This gives us a forecast of $850M per year in revenue for CTX-110.

Most biotech companies have absolutely awful fundaments, particularly when it comes to income statements. This is because they are pre-revenue for many years until they have a breakthrough therapy + FDA approval. Regardless, it is important to take a close look at current and potential future fundamentals to ensure our investments can sustain growth during the hard times ahead.

CRISPR Therapeutics is in a strong position with one of the largest balance sheets of all the gene editing companies - $2.24B in assets and $390M in liabilities. In 2022, they lost a total of $625M with a historical record of tripling or quadrupling the loss each year. If we ignore this and assume they keep spend relatively the same, they have approximately 3.5 years of runway. In reality, we expect them to continue to ramp up spend in anticipation of an FDA approval later this year, which will increase stock price and position them to raise more money by selling new shares into the market. Overall, they are in one of the strongest fiscal positions and are closest to generating cash-flow from a therapy.

While many people will just invest based on fundaments, given the autists we are, we could not help but dive deep into the charts. After spending a while understanding CRSP's price behavior, I realized that the long-term price action looks pretty similar to the famous "Wall St. Cheat Sheet - Psychology of a Market Cycle" chart. This helps investors better understand typical trends in booms + busts / expansions + contractions of stock price. Below you can see an overlay of the two--I believe we are potentially in the "disbelief" stage.

Zooming in to take a closer look, we can see that price appears to be bottoming out, but it is still to early to tell. Ideally, we can reclaim the $73.85 level and turn it into support. In the very short term, I thought we were maybe in a bull flag, but after the fed meeting dump I think we may be rolling over into the long-term trend line support, shown by the green angled line. Our target to start buying is in the green oval, just above that support.

It is impossible to predict future prices on such early stage biotech companies, but we do expect significant price appreciation (2-3x) over the next 2-3 years.