We’ll often see people leave comments on our articles like “I’m up +420% on stock X.” Without a timeframe and a benchmark, it’s impossible to know if that’s good or bad, but most people don’t recognize that paper returns mean nothing unless you sell and take profits. Plenty of investors watch their stocks rack up massive gains, only to then hold them until they fall below their cost basis. Human psychology makes it very difficult for people to figure out the best time to sell a stock. It’s a tough decision to make even with emotion removed, which is why you need to enter any given thesis with a great deal of conviction.
This past week, Intellia Therapeutics (NTLA) announced some positive news from their clinical trial in the form of a paper titled CRISPR-Cas9 In Vivo Gene Editing for Transthyretin Amyloidosis. Long story short, they tested their gene editing therapy on six patients and it worked really well – so far. As a result, gene editing stocks soared across the board. When our position in Intellia crested a +1,250% return, we trimmed it a bit. That’s because the next news from Intellia could be that their therapy harms patients, and the stock could plummet as quickly as it soared. BioPharma Dive talks about the remaining uncertainty surrounding gene editing therapies:
While encouraging and powerful proof of concept, the initial data from Intellia’s study don’t yet answer many of the most pressing questions facing CRISPR. It’s unclear how long the effects researchers observed will last, or whether they’ll vary as more patients are treated. The long-term safety consequences of gene editing are also unknown.
Credit: BioPharma Dive
In other words, it’s still early days for gene editing drug developers. While the excitement is in the air, another OG gene editing company has decided to go public – Caribou Biosciences.
About Caribou Biosciences
It’s been more than six years since we wrote about 7 Gene Editing Companies Investors Should Watch. All the companies in that list are now publicly traded except Caribou Biosciences, a startup that raised $167.5 million in disclosed funding before recently announcing their intentions to have an initial public offering (IPO). The founder of Caribou is a name that’s well known in the gene editing community – Jennifer Doudna. If society celebrated scientists in the same way it idolizes athletes and movie stars, this woman would be a household name. Ms. Doudna was awarded the Nobel Prize in Chemistry 2020 for her work on gene editing along with Emmanuel Charpentier who co-founded CRISPR Therapeutics (CRSP).
Ms. Doudna was also one of the co-founders of Editas (EDIT), but left the firm with her intellectual property to stake her own claim. The end result is a novel CRISPR platform called CRISPR hybrid RNA-DNA, or chRDNA (pronounced “chardonnay”) which enables multiple genome edits, including multiplex gene insertions, with a high degree of specificity. Queue the usual drug pipeline graphic which – like all gene editing companies – is in the earliest stages of clinical trials.
Getting into the technical details of their lead candidate C-010 is pointless because it doesn’t provide much insight for the average retail investor. Basically, they’ve developed a therapy for adults with non-Hodgkin lymphoma, a cancer that starts in the lymphatic system and affects over 200,000 people a year. The proposed therapy sorts people out by performing three gene edits, and the first clinical trial began at the end of 2020 – Phase 1 ANTLER. The study involves 50 patients and initial data is expected next year. More specifics around when we might expect these findings would be great because then we can mark our calendars for the inevitable volatility that will affect all gene editing stocks.
To Buy or Not to Buy
Our approach to tech investing has always been to try and identify the leaders in any given space and place our bets accordingly. While gene editing has tremendous potential, it’s also extremely complex. With all the intellectual property battles taking place, it’s anyone’s guess who may come out ahead. There’s plenty of room for multiple winners and multiple gene editing techiques, the best of which may not even have been invented yet. That’s why we placed our bets on three of the original gene editing stocks to debut. The last time gene editing stocks soared collectively, we trimmed our positions so that we’ve now recouped 66% of our cost basis. Once we reach 100%, we’re playing with the house’s money.
Three gene editing drug developers make up 6% of our tech stock portfolio at the moment, and we don’t see the need to add a fourth. Trying to pick which of these will outperform the rest is nearly impossible, regardless of how much subject matter expertise you have. Investors looking for exposure to the potential of gene editing therapies should invest in a handful of stocks and hope that at least one succeeds. And how do we measure “success?” Experts we spoke with said that when a drug developer achieves a certain degree of success, they’re usually acquired by a big pharma company. Rarely is it the case that a “small” company will try to go the entire way themselves.
Consequently, we’re looking at a binary outcome for these gene editing drug developers – hero or zero. That’s much riskier than a company that uses the power of gene editing as one tool in an arsenal of technologies – like Ginkgo Bioworks. Our ideal gene editing stock is one with a software-as-a–service or SaaS-like platform with thousands of clients, not one that’s risking it all on the outcome of a single clinical trial.
While tech stocks are inherently risky, those companies that engage in drug development – any company that’s hanging their hat on a drug pipeline – are perhaps the most risky. That’s because there are so many unknown unknowns, so many external risk factors – regulatory being the biggest – that a drug developer cannot control. Investors considering a play on gene editing drug development might consider investing in a handful of pioneers, and Caribou Biosciences seems like a worthy addition.
Should the IPO proceed as planned, shares of Caribou Biosciences will trade under the ticker CRBU.
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