Clinical Progress And Depressed Prices Make This Biotech Theme Worth A Look

NTLA: Intellia Therapeutics logo
Intellia Therapeutics

Our theme on Gene Editing stocks remains down by 30% year-to-date, as rising interest rates have made investors prioritize value stocks and companies with strong cash flows over loss-making futuristic themes. However, digging a bit deeper, many of the companies in the theme have actually made decent progress with their development pipelines this year. For instance, the U.S. FDA recently approved Bluebird Bio’s (NASDAQ:BLUE) one-time beta-thalassemia treatment, Zynteglo, also known as betibeglogene autotemcel (beti-cel). Although the $2.8 million per treatment therapy is unlikely to become a big money maker for Bluebird, it serves to validate the effectiveness of gene therapy as a cure for rare diseases boding well for the prospects of other gene-editing players’ pipelines. Similarly, Intellia Therapeutics (NASDAQ:NTLA) also provided positive data for its therapeutic candidate NTLA-2002 from a Phase 1/2 trial for hereditary angioedema, a genetic condition that causes severe swelling throughout the body. Separately, CRISPR Therapeutics and its partner Vertex Pharmaceuticals are also on track to submit late-stage trial data to for a medicine CTX001 that treats sickle cell anemia and beta-thalassemia.

So does the theme look attractive at current levels? Market capitalizations of gene editing stocks remain depressed following the sell-off over the last two years (the theme was down by roughly 22% over 2021 as well) and with the Fed likely to continue with its path of rate hikes, the theme could remain under some pressure in the near-term. That said, the fundamentals should eventually get better as companies continue to see positive clinical outcomes, enabling them to monetize their drugs and potentially scale back on big R&D spending and cash burn. Moreover, gene editing players could be targets of acquisition by big pharma companies who want to build expertise and pipelines in the gene-editing space, adapting the technology to tackle cancer and chronic disease. This could make the theme worth a look at current levels. Within our theme, Intellia Therapeutics (NASDAQ:NTLA) has been the worst performer with its stock down by about 58% year-to-date. On the other side, Vertex Pharmaceuticals stock (NASDAQ:VRTX) has been the best performer, with its stock up by around 42% year-to-date.

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 Returns Nov 2022
MTD [1]
YTD [1]
Total [2]
 NTLA Return -5% -58% 281%
 S&P 500 Return 4% -16% 80%
 Trefis Multi-Strategy Portfolio 4% -19% 221%
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[1] Month-to-date and year-to-date as of 11/25/2022
[2] Cumulative total returns since the end of 2016

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