A Third Gene Editing IPO from CRISPR Therapeutics
We’ve talked before about an exciting new technology called “gene editing” which is a tool that enables synthetic biology. Out of all the disruptive technologies out there, gene editing is perhaps the most mysterious at the moment. We’re not really sure what cool things we can do with gene editing and (listen up investors) we’re not really sure who owns this technology. That’s right. We’re in the midst of a patent dispute and it’s anybody’s guess as to who the winners will be. There could be more than one winner but there most likely will be at least one loser whose share price will suffer as the result of the eventual outcome.
Prior to this past week’s news, there were 2 stocks you could buy as a pure-play on the gene editing theme; Editas Medicine (NASDAQ:EDIT) and Intellia Therapeutic (NASDAQ:NTLA). Here’s a look at how those share prices have performed since their respective IPOs:
So not the best post-IPO performance for these two stocks with EDIT losing -17% since IPO and NTLA losing -7% since IPO. Nonetheless, now we have a third gene editing company looking to IPO. Let’s take a closer look at CRISPR Therapeutics (CRSP).
CRISPR Therapeutics was founded by the co-inventor of the CRISPR/Cas9 technology, Emmanuelle Charpentier, who took her stake in the key CRISPR patent and co-founded CRISPR Therapeutics in Switzerland. In order to understand how convoluted the whole space is, it’s best to start by reading our past article on 7 gene editing companies first before proceeding.
Since being founded in 2013, CRISPR has raised $293.4 million, of which $125.2 million was from private placements of preferred shares, $73.2 million was from convertible loans, $75.0 million from an upfront payment with Vertex Pharmaceuticals, and $20.0 million from a technology access fee paid by German pharma giant Bayer HealthCare.
It seems like CRISPR is looking to IPO in order to provide the liquidation event that some of their original investors are probably clamoring for given that two of their competitors have already had successful IPOs. It’s not like the Company is hurting for cash since as of June 2016, they had cash of approximately $246.8 million and an accumulated deficit of just $59.5 million. In 2015 they burnt through just $25 million, so at that burn rate they are set for almost 10 years. Nonetheless, CRISPR is looking to raise around $90 million with their planed IPO. Bayer has shown a huge vote of confidence by agreeing to purchase a private placement of $35 million in CRISPR shares at the IPO price.
In October 2015, CRISPR entered into a strategic research collaboration agreement with $22 billion pharma company Vertex. In December 2015, they entered into a 50/50 ownership agreement with an $85 billion German life sciences company, Bayer, to create a joint venture called Casebia Therapeutics. Bayer HealthCare will provide up to $300.0 million for R&D to Casebia over the first five years. Here is what CRISPR’s pipeline currently looks like:
While everyone is on the edge of their seats at the moment, we don’t want to treat this like a casino game. There are geniuses out there who have no idea what the outcome will be so don’t pretend like you’ll be able to safely bet on who the winner(s) will be. The best thing to do is place equal bets across the board in Editas Medicine (NASDAQ:EDIT), Intellia Therapeutics (NASDAQ:NTLA), and CRISPR Therapeutics (CRSP). Open up yourself an account at Motif Investing and create a basket of all 3 stocks that you an trade for just $9.95. We created such a portfolio like the one below for two of these stocks:
We’ll add the third after the IPO and have a nice little pure-play portfolio on the exciting investment theme of gene editing. We’ll also have a benchmark of sorts that we can use to monitor performance of gene editing over time while we wait and see how this whole thing pans out.
Are you paying too much in transaction fees to your broker? Check out a brokerage firm called Zacks Trade that's offering $1 trades on U.S. stocks and options until 2019. After that, you'll pay just $3 a trade or a penny a share, whichever is greater. It's one of the cheapest brokers out there and you can also trade stocks on 91 foreign stock exchanges. Click here to trade US stocks and options for as low as $1 per order until July 4, 2019.