Life in the biotech fast lane
01/10/18

The seemingly never-ending stream of stories about our species’ technological advances and innovations can stir the imagination—not to mention the fingers of stock traders looking for market opportunities.

But dazzling technological breakthroughs first have to transition into successful products, and then into successful businesses and rising stock prices. Biotech—despite its many successful stories—has long been an area of the market that highlights the gap between technological potential and achievement, and between business goals and stock market performance. Over the past 12 months, for example, S&P 500 biotech stocks have been toward the bottom of a so-so health care sector, gaining roughly 15% compared the S&P 500’s nearly 22% return.

Consider gene-editing—specifically the CRISPR technology. Few biotech stories in recent years have had more “oomph” than the possibility of curing any number of human ailments at the source—that is, at the DNA level. That’s a game-changer. But translating lab experiments into marketable treatments has always been a hit-or-miss proposition in biotech, and it frequently takes longer than everyone involved expects.

CRSPR Therapeutics (CRSP) is a Switzerland-based gene-editing startup that began trading in October 2016. The stock, which had been stuck in a range since September (mostly between $17.50-$20), rallied more than 60% between December 12 and January 5—initially jumping on news the company was partnering with Vertex Pharmaceuticals.1 In just nine days it rocketed from $19.58 to $28.50, posting a string of wide-range days as 2017 ended and 2018 began.

CRSPR Therapeutics (CRSPR), 8/7/17 – 1/9/18

Source: OptionsHouse

But the gene-editing universe got a bit of a shock on January 5 when a report came out that the CRSPR technology may not work on people because we may have a built-in immunity to the protein that actually does the “cutting” in the gene-splicing process.2  That’s pretty much a potential game-stopper—if it’s true.

While CRSP Therapeutics’ recent breakout could be the beginning of what might be a long and happy uptrend, there’s reason to be cautious. CRSP’s stock price initially weathered the bad-news storm better than some other gene-editing companies, but it pulled back sharply yesterday.

The report casting doubt on the practicality of gene-editing technology hasn’t yet been peer reviewed, so it’s hardly the final word on the subject, but the recent run-up in CRSP’s stock’s price—and it’s increased volatility (and a longer-term stagnation in biotech)—suggest the potential for some retrenchment. Even after yesterday’s decline, the stock was still around 19% higher than it was on December 28—a long way from its closest support level.

It’s been a bit of a wild ride so far, but that’s life in the biotech fast lane.

 

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1 BusinessWire. Vertex and CRISPR Therapeutics to Co-Develop and Co-Commercialize CTX001 as CRISPR/Cas9 Gene Edited Treatment for Sickle Cell Disease and β-Thalassemia. 12/12/17

2 MIT Technology Review. Uh Oh—CRISPR Might Not Work in People. 1/5/18.