Where Will CRISPR Therapeutics Be in 3 Years?

CRISPR Therapeutics (NASDAQ: CRSP) made a name for itself by pioneering advanced gene therapies made with technologies that didn't exist a generation ago. Now, its challenge is to build on its prior successes to become a biotech powerhouse and prove to investors that it isn't a one-trick pony.

The next three years will be critical for both of those things. Here's what to expect.

This bird is leaving the nest

By late 2027, CRISPR will be a larger biotech, with much more revenue, more collaborators, and a much bigger pipeline -- but still probably not any profits.

Management's plan for the long term is to initiate one or two investigational new drug programs per year. That means it aims to start that many phase 1 trials of candidates that aren't already in its clinical-stage pipeline. In other words, the goal is not just to expand the set of approved indications for its existing therapies, but rather to pioneer wholly new treatments, likely for different diseases or targets each time.

Pursuing such a strategy is ambitious, but it's a natural evolution for a business like CRISPR. With the ongoing successful rollout of its first approved medicine, the gene therapy Casgevy, it likely now has enough financial muscle to spread out beyond the therapeutic areas that have been its focus.

So, while it won't be abandoning its two main wheelhouses of hereditary blood disorders and immuno-oncology, expect it to push a bit harder on initiating new programs in other areas of its pipeline that are starting to emerge as big potential moneymakers, like its gene-editing therapies for cardiovascular disease, and its early-stage programs for type 1 diabetes.

But all of these big research and development (R&D) projects will require funding. As of the end of the third quarter, CRISPR had around $1.9 billion in cash, cash equivalents, and marketable securities on its books. It has no debt although it does have $210.6 million in operating lease liabilities. However, management expects that the company will continue to incur losses for at least the next few years, meaning that it'll eventually need to raise more capital, either by issuing debt or through secondary stock sales.

It'll also probably be signing more collaboration agreements like the one that it has with Vertex Pharmaceuticals, which enabled it to create and commercialize Casgevy. Such deals allow CRISPR to focus on the activity that it's the most competent in -- the development of advanced genetic medicines -- and hand off the parts of the process that it isn't as well equipped for -- running large clinical trials, handling distribution, etc. -- to a larger partner. But don't expect CRISPR to try to offload all of its commercialization activities anymore.

Within the next three years, expect it to continue to build on its manufacturing capabilities, especially in cell therapies for immuno-oncology applications. Management claims that keeping manufacturing in-house will help to cut down on its cost of goods sold, and streamline any future rollouts of its much-hyped "plug and play" gene-editing therapies, which could treat, prevent, or functionally cure cardiovascular illnesses caused by genetic factors. Of course, building those manufacturing resources will require significant additional outlays of capital.

Risks will rise in the medium term

As favorable as CRISPR's next three years could be for shareholders, it's hard to escape the conclusion that the degree of risk involved in an investment in the company is going to rise a bit. With so many new programs headed toward human trials, so many clinical-stage programs advancing toward costly late-stage trials, and with major investments in manufacturing on the agenda as well, this company's capital requirements are ballooning.

And that's before even getting into the ongoing outlays associated with its authorized treatment centers, which are necessary for treating patients with Casgevy. The chance that shareholders will see their stakes diluted by new stock issuance is rising markedly although precisely when that might occur is difficult to predict.

There are also the risks that some or all of its pipeline candidates will fail to demonstrate the desired effects in clinical trials, or that they will not prove their safety. Furthermore, regulators are guaranteed to take a fastidious approach in evaluating safety and efficacy factors -- particularly for gene-editing programs that are intended to permanently alter the genes of living people.

As such, there is a higher chance of regulators calling out even largely innocuous issues, as well as subtle but real issues with the biotech's candidates or its regulatory filings. Regulators are also likely to require the company to produce more exhaustive documentation of its data than it might have initially anticipated.

So, within the next three years, expect a couple of delays in CRISPR's treatment approval processes stemming from medical regulators taking a meticulous approach to its cutting-edge therapies. And if and when those events occur, the stock price could slide in response. But don't get too bearish; over the longer term, this biotech is more likely to soar than to sink.

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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CRISPR Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.