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On the SPOT blog (06/03/2022) [C..]

Updated: Aug 31

Jobs report data suggests that Feds will continue to have free hand in controlling inflation using rate hikes and QT. That seems to have added fear of recession for some investors and so the US indices finished the week in solid red. Volatility is the norm so far this year and is likely to stay that way. In the mean time, let's discuss a stock that appears to have a very long-term potential.

Let's discuss Crispr Therapeutics (ticker CRSP). This Swiss gene-editing company develops gene-based medicines for treating difficult and rare disease. I like this company for very long-term prospects. Gene editing is cutting-edge technology. One of CRSP's co-founder, Emmanuelle Charpentier (along with Jennifer Doudna who has her own startup named Scribe Therapeutics here in California) was awarded 2020's Nobel prize in Chemistry for their discovery of gene editing ("genetic scissors" as they call it) that has revolutionized gene-based treatment. CRISPR/Cas9 platform allows CRSP to make precise changes to genomic DNA. They can delete, modify specific DNA segment to correct a disease-causing abnormality. Cas9 enzyme is used for delivering CRISPR components to affected cells. I have been excited about this technology ever since I read the book "The Gene: An Intimate History" by Siddhartha Mukherjee. [This is one of the best books that I have read]. So, when I saw a publicly listed company that is doing ground-breaking work, I couldn't resist but put it on my watchlist. CRSP has a portfolio of therapeutics programs across a range of disease. Their lead product (CTX001) for treating sever Sickle Cell Disease (SCD) and transfusion-dependent Beta-Thalaseemia is being developed in collaboration with Vertex Pharmaceuticals. It is still not past Phase 3 study so commercialization of it is at least a year or two away (if not more, that too if it gets regulatory authority's [e.g. US FDA] approval. CRSP's next regulatory submission to FDA is anticipated to be in late 2022. Their past data seems promising and has huge potential as it addresses specific medical need. Crispr also collaborates with other big pharmaceutical companies like Bayer. They have many products in their pipeline (early stage Phase 1/2) that are targeted to immune-oncology.

CRSP also is in the process of developing (still in early stage) therapies derived from stem cells to repair tissues and/or organs. They are collaborating with ViaCyte for gene-edited stem cell therapies for the treatment of diabetes.

CRSP's balance sheet is outstanding. They seem to have > $2B in cash/cash equivalents and little to no debt. Lot of their development costs might be shared with collaborators so I think they have a very good management of their resources. With such strong technology, balance sheet, management, expertise, collaboration and incredible scientists (one of them a Nobel laureate and "founding pioneer" of this technology), I feel reasonably certain about its long-term prospect. I keep mentioning "long-term" so let me clarify on that.

Drugs/treatment pipelines can have setbacks. It is a very lengthy process from discovery to commercialization and there can be failures along the way that are generally visible when companies publish their Phase 1/2/3 trial data. Many key hurdles need to be crossed to gain FDA approval. As promising as CRSP team is, they are yet to get an FDA approval. There is that risk of failure. That said, they multiple candidates at different stages of development so there can be multiple successes or multiple failures or somewhere in-between. Given that they don't have any product in the market yet, their revenue source is mostly coming from their collaboration.

Competition landscape is also starting to grow with companies like Editas, Intellia etc. who are also developing treatment using gene-editing technologies. Jennifer Doudna's company is also working on developing therapies using gene-editing. That said, they can target different disease so having more players isn't necessarily a problem. There might also be some existing treatment options for Sickle Cell Disease from established companies like Bristol Myers, Novartis etc.

In their last reported quarter, CRSP missed on both earnings and revenue estimates. I don't really expect much until/if they get FDA approval of CTX001. Now let's see what gScores tell us about their stock.

CRSP's overall gScore today is -0.48 and micro-gScores are as follows:

Price

5/10

RSI

-4/10

Bollinger bands

-10/10

MACD

-8/10

KF

-10/10

OLS

-10/10

MFI

-3/10

Stochastic

-5/5

Options data

6/10

Analysts' recommendations

-4/10

Sentiment score

-5/5

  • Price micro-gScore is reasonably good. Price rose today and the number of consecutive days that it has been rising is still in the bottom quantile. Current price also happens to be in the bottom quantile of its 52-week range

  • RSI is above average level and rising

  • Current price is near the upper Bollinger band

  • MACD showed by signal when the price was $51.54 and the number of days that it has been in this +ve trend happens to be in the middle quantile

  • Kalman Filter based analysis is showing that current price is significantly higher than the "filtered" average

  • OLS model fits this stock's chart well. Its 1-year Least Squares line has a -ve slope and 5-year Least Squares line has a +ve slope. Current price is significantly below the 5-year "expected" average and significantly above the 1-year "expected" average

  • MFI is showing above average level and rising

  • Stochastic is showing overbought level

  • Analysts' recommendations seem to be quite -ve. I noticed -ve price revisions

  • Sentiment score is -ve

Many pharmaceutical stocks are speculative and their prices rise and fall a lot depending on the news related to drug candidates in their pipeline. I think they have an investors event and they are presenting some data related to CTX001 so I think the stock is moving with that sentiment. That said, this is still far from revenue so still mostly based on "potential". That said, if I'm in it for the short-term then I'd be looking to sell when the price starts falling (it has had a reasonable run since it visited the discounted zone). If I'm in it for the long-term then I'd be looking to add to my position in small quantities over time when the gScore is back in the +ve territory. For me, this is a very long-term potential stock and anything in the short-term is speculative so I think there might be multiple exit points and entry points until it becomes a numbers game. You would obviously decide for yourself.

Here are the technical analysis charts for CRSP as generated by Gammath™ SPOT for your convenient reference.



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