If I had to buy one share of any biotech with no price restriction, I'd naturally gravitate toward the most successful companies in the industry. However, the exercise becomes more complicated if you stipulate a limit of $50 per share; most of the prominent biotech stocks are trading well above that amount.
Those around that level are, disproportionately, relatively small and risky companies whose prospects don't look all that strong. Still, at least one biotech company whose shares are below $50 looks like a great buy: CRISPR Therapeutics (NASDAQ: CRSP).
CRISPR Therapeutics simply hasn't been a favorite among investors in the past three-and-a-half years. Its stock is down by 77% since mid-January 2021:
At least two factors have led to CRISPR Therapeutics' poor performance.
First, the company isn't profitable. That's pretty normal for a mid-cap biotech, but with rising interest rates, investors wanted to put their money into safer, profitable investments. Plenty of profitable companies have been moving in the wrong direction over the past few years.
Second, CRISPR focuses on gene editing. Although the technology has the potential to unlock treatments for diseases we previously couldn't cure, it has one major drawback. Ex vivo gene-editing medicines are complex to administer -- the process takes a while and can only be done in specialized treatment centers.
Basic finance tells us that the more we lengthen the timing of future cash flow we'll receive for an asset, the less it's worth today, all else being equal. The process involved in administering the kinds of therapies developed by CRISPR Therapeutics lengthens the timing of their future cash flow compared to simple oral pills.
Many investors see significant risks in investing in the company because of its gene-editing focus. Case in point: Bluebird Bio is a biotech company with three approved gene-editing treatments, but its stock continues to perform terribly. Revenue isn't coming fast enough for investors to change their opinion of Bluebird. Is the same fate awaiting CRISPR Therapeutics?
The challenge for CRISPR Therapeutics is threefold. First, it needs to develop successful therapies; that's hard enough, but especially so in gene editing. Second, the biotech has to fund commercialization efforts until the revenue from its treatments covers -- and exceeds -- the associated expenses. Third, it has to pour more money into research and development to create newer medicines.