Key Points
-
CRISPR Therapeutics has developed a cutting-edge gene-editing biotechnology.
-
Unlike many of its peers, CRISPR has plenty of developmental funding for the next few years.
-
As with any young biopharma outfit, this one needs cash to continue funding development of its products.
- 10 stocks we like better than CRISPR Therapeutics ›
Like most other up-and-coming biopharma companies, CRISPR Therapeutics (NASDAQ: CRSP) brings both risk and reward to the table. This particular name, however, may bring less risk than it seems at first blush, and perhaps even more reward.
CRISPR Therapeutics is different from most of its kind
CRISPR Therapeutics is a developer of gene therapies for disease, by the way. Specifically, the company’s founders figured out how to cut a damaged segment out of a DNA strand and replace it with a corrected one. It even has an approved therapy on the market, with more in the works.
As you might imagine, though, such development isn’t cheap. Like other newcomers to the biopharma business, CRISPR Therapeutics is consuming cash at a pretty brisk clip.
However, it’s different from most others of this ilk. Unlike its similarly sized and similarly aged peers, this $5.9 billion outfit is sitting on $2.4 billion worth of cash and marketable securities that can be readily converted into cash if and when the need arises. At its current rate of cash burn, that’s a little over four years’ worth of funding without the need for any additional, dilutive fund-raising.
This essentially means the company’s science, research, and future are currently valued at only about $3.5 billion, or only around $3 billion after factoring in debt.
The stock price reflects too much risk with not enough reward
Granted, CRISPR Therapeutics needs at least some of its current research and development pipeline to result in drug approvals to justify any valuation. And to raise money, the company has issued stock and convertible notes before, which of course was dilutive.
All of this is already priced into the stock, though, and won’t need to happen again anytime soon — if ever. See, CRISPR Therapeutics has the potential to generate its own self-sustaining funding within just a few years. The odds of this happening aren’t reflected in the current share price.
Analysts don’t think so, anyway. Their current consensus price target of $81.10 is 35% above the price right now.
Should you buy stock in CRISPR Therapeutics right now?
Before you buy stock in CRISPR Therapeutics, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and CRISPR Therapeutics wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $409,970!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,200,223!*
Now, it’s worth noting Stock Advisor’s total average return is 916% — a market-crushing outperformance compared to 210% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics. The Motley Fool has a disclosure policy.
