CRSP - Crispr Therapeutics: Commercial Validation Is The Next Step

2024-01-18 02:34:26 ET

Summary

• CASGEVY is expecting more approvals from various global regulatory bodies, potentially increasing the total addressable patients.
• The management team is attempting to make CASGEVY more accessible through an in-vivo solution.
• The concerns surrounding commercial launch risks are overshadowed by the potential of CRISPR Therapeutics.

Introduction

In multiple quarters leading up to the approval of Casgevy known as CTX001, I have been consistently bullish on CRISPR Therapeutics ( CRSP ). In my previous articles ( previous 1 )( previous 2 ), I continued to emphasize the progress the company has been making toward receiving approval from the FDA. At the time, the company's progress and the reward potential came from a possible approval was attractive. Thus, in anticipation of the possible approval and as a result of the approval, the company's stock price has surged about 61% from the October 2023 low at the time of writing. One may argue that the upside potential has been realized already; however, despite the recent jump in the stock price, I continue to see CRISPR Therapeutics as attractive due to the continuous potential that the company is attempting to achieve. Not only is the company awaiting approval from various other governments for Casgevy and Beta Thalassemia, but CRISPR Therapeutics is attempting to make Casgevy more inclusive to reach a wider patient population. Therefore, I continue to believe that CRISPR Therapeutics is a buy.

Commercial Validation Risk

Starting with the potential risks associated with CRISPR Therapeutics, Casgevy for sickle cell disease has been approved in the UK and the US . While the news itself is great, some investors also started thinking about the commercial validation of Casgevy. Casgevy is expected to cost $2.1 million targeted toward extreme sickle cell disease cases limiting the potential patients in the United States to just 16,000. Not only is the addressable patient pool relatively small, but the expensive cost of Casgevy could hinder numerous patients from receiving care. As such, TD Cowen, on concern of Casgevy not being used as widely as many investors believe, cut the rating of CRISPR Therapeutics to underperform . CRISPR Therapeutics is still a pre-revenue company with numerous risks as the company has not yet proved that its business model is profitable; thus, significant risks and volatility could be associated with investing in CRISPR Therapeutics.

Potential

The risks associated with CRISPR Therapeutics and concerns surrounding the potential commercial success of Casgevy are reasonable; however, I believe this to be overblown for a few reasons. First, over time, more nations are expected to approve Casgevy increasing the potential addressable patients. Second, only sickle cell disease treatment was approved in the US and some other countries, so the B-Thalassemia decision will follow in the first half of 2024 likely increasing the total addressable patients. Third, the company's management team acknowledges that Casgevy is expensive and is targeted to a limited population leading them to work toward expanding the potential addressable patients.

By the end of 2023, as stated earlier, the UK and the US have approved Casgevy for sickle cell disease treatment. Then, on January 9th, 2024, Saudi Arabia approved Casgevy for sickle cell disease and B-Thalassemia treatment expanding the potential of Casgevy. More nations are expected to follow in the coming few months as CRISPR Therapeutics is still awaiting approval from the EU. As such, from 16,000 potential addressable patients in the US and 2,000 potential addressable patients in the UK, the total addressable patients could dramatically increase in the coming months. Further, as the United States has only approved Casgevy for sickle cell disease treatment, the potential approval for B-Thalassemia in the first half of 2024 by the FDA could increase the total addressable patients.

Increasing the addressable patients who have extreme cases and the pockets or aid to receive Casgevy does not fundamentally solve the concerns regarding the lack of demand for the product due to its restrictiveness and pricing. During JPMorgan's ( JPM ) healthcare conference on January 9th, CRISPR Therapeutics' management team addressed this concern.

During the conference, the management team acknowledged that the "unmet need is very high" for sickle cell and B-thalassemia patients, and the company's priority "is to increase the addressable population for CASGEVY." CRISPR Therapeutics is attempting to achieve this in two ways. First, the company plans to develop "a targeted conditioning agent" that is "much gentler than the current transplant conditioning agents." This will be able to "enable 3x to 4x the number of patients to be eligible for CASGEVY than we have right now." Second, the company is "also very focused on in vivo editing," which does not require extensive surgeries. CRISPR Therapeutics said that the in-vivo route is the "only way we can bring this to the 1 million or so sickle cell patients around the world who won't be able to afford CASGEVY in its current form."

Overall, while the risks associated with CRISPR Therapeutics are reasonable, I believe the upside potential surpasses the risks. Not only is the management team directly addressing the risks by attempting to make Casgevy more accessible but the addressable market is expected to grow in the coming months as more nations approve Casgevy.

2024 Outlook

On January 8th, 2024, CRISPR Therapeutics released strategic priorities and 2024 outlook report . Within this report, the company provided insight into the ongoing programs and future pipelines. As mentioned above, Casgevy is expecting future expansion through various regulatory approvals and ongoing efforts for an in-vivo solution. Beyond Casgevy, most programs including CTX112, CTX131, CTX310, and more are ongoing initial or early clinical trial phases. As such, I believe it is hard to determine if the programs in CRISPR Therapeutic's current pipeline will materialize to be beneficial for CRISPR Therapeutics. However, the company's balance sheet is expected to strengthen as CRISPR Therapeutics will receive $200 million from Vertex Pharmaceuticals as agreed since Casgevy has passed the regulatory approval.

Overall, I believe 2024 will be a transformational year for CRISPR Therapeutics. The world is taking the first step to embrace gene therapy, a market CRISPR Therapeutics is leading, and the company is expected to start generating revenue within 2024. However, as monumental as this achievement may be, I think it is too early to take CRISPR Therapeutic's future pipeline in determining the company's near-term potential as it will take years for these to materialize.

Financials

CRISPR Therapeutics has a healthy balance sheet that will likely allow the company to continue pursuing the commercialization of the CRISPR/Cas9 technology. Looking at the balance sheet , the company has $528.7 million in cash and about $1.74 billion in cash and cash equivalents. The total assets stood at about $2.09 billion while the total liability stood at a relatively smaller $359 million bringing the total liability to asset ratio to only about 17.18%. As such, CRISPR Therapeutics boasts a healthy balance sheet, which will likely be able to sustain the company's operations for the foreseeable future.

Conclusion

Throughout 2023, I have been bullish on CRISPR Therapeutics. My main thesis during this time was the progress the company was making on its path to receiving approval from the FDA and other government organizations. Today, the company has received the approval and is on the brink of attempting to commercialize Casgevy. While the concerns regarding this process exist, given the continued progress and efforts the company is making, I continue to believe CRISPR Therapeutics is a buy.

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