StockWatch: ARK Mostly Bullish on CRISPR Therapeutics

Cathie Wood says a "cure" can generate up to 20x more value than traditional drugs, which appears to explain why two of her firm's funds snapped up shares of the Casgevy co-developer until this past week.

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By Alex Philippidis | Original Article

CRISPR Therapeutics (NASDAQ: CRSP) made history a year ago this month when the FDA approved Casgevy® (exagamglogene autotemcel), the CRISPR-edited therapy it co-developed with Vertex Pharmaceuticals (NASDAQ: VRTX), to treat sickle cell disease (SCD). A month later, the agency authorized Casgevy to treat transfusion-dependent beta thalassemia in patients 12 years and older.

Yet CRISPR Therapeutics’ stock has failed to sustain the momentum it built when it reached its 52-week high of $91.10 on February 22, a day after the company reported positive fourth-quarter and full-year 2023 results.

Since then, Casgevy’s patient uptake has progressed slower than analysts expected. While some have cited Casgevy’s list price of $2.2 million per course of treatment as a cost that insurers have balked at bearing, Kevin Niehoff, associate director at IPD Analytics told Managed Healthcare Executive (MHE) he believed price was less a barrier than the fact that SCD patients have many other treatment alternatives, such as stem cell or bone marrow transplants, as well as hydroxyurea.

From a 52-week high of $91.10 on February 22, CRISPR Therapeutics shares have nosedived 46% to $49.51 as of Thursday, though they rebounded 6% Friday to $52.33 at the closing bell.

Over the past month, two electronic transfer funds (ETFs) of ARK Investment Management (ARK Invest)—the high-profile firm led by chief investment officer and portfolio manager Catherine D. (Cathie) Wood—have largely been swimming against the investor tide by snapping up more than 1 million shares of CRISPR Therapeutics shares, mostly raising its stake in the company in recent weeks. From a reported market value of $352,285,403 at the end of the third quarter, ARK’s holdings in CRISPR Therapeutics climbed 16% to $409,634,402.21 as of Friday, based on its holdings of 8,273,771 shares.

Most of ARK’s stake in CRISPR Therapeutics consists of the 6,453,394 shares held by Ark Invest’s ARK Innovation ETF (NYSE Arca: ARKK), with a market value of $319,507,536.94—the seventh highest market value among the 33 companies in which ARKG holds shares—and a portfolio weight of 4.56%

The remaining 1,820,377 shares valued at $90,126,865.27 are held by the firm’s ARK Genomic Revolution ETF (NYSE Arca: ARKG). CRISPR Therapeutics holds the second largest market value among ARKG’s 37 portfolio companies—and a portfolio weight of 7.68%.

“Amazing for humanity”

Without citing CRISPR Therapeutics by name, Wood offered a likely explanation on a recent podcast for why the ARK ETFs have been bullish on the company in recent weeks.

“Many healthcare analysts think that curing a disease is not going to be good business, even though it’s amazing for humanity. They think that a cure is one and done, which it is with gene editing,” Wood observed on the November 25 episode of “The Important Part: Investing with Liz Thomas.”

“The old model is almost like an annuity, a regular payment monthly for that prescription, out for however long the patent lasts. We believe a cure in business terms is going to be worth two to—depending on the indication—20 times more valuable than a traditional medication,” Wood projected. “So, stay tuned for our research. We’re putting out a lot in that area because we believe it is so misunderstood.”

A closer look between Wednesday and Friday, however, shows that the ARK funds followed dips in CRISPR Therapeutics’ share price late last week with selloffs of shares in the company.

On Thursday, when CRSP shares dipped 0.2% from $51.24 to $51.14, ARK trimmed its holdings by 5,864 shares (down 0.1% from Wednesday), reducing its total market value by 0.3% or $1,135,639.78. But by Friday, when the stock fell 3% to $49.51, ARKK and ARKG shrunk their combined holdings by 78,936 shares (down nearly 1% from Thursday), a market value decline of 4% or $17,523,136.05.

So as with other investors, the ARK funds appear to have moved beyond the positive commercial momentum for Casgevy shown in third-quarter results released last month by CRISPR Therapeutics and Vertex. Vertex leads global development, manufacturing, regulatory and commercialization of Casgevy, with support from CRISPR Therapeutics.

According to Vertex:

• As of mid-October, 45 of the planned 75 authorized treatment centers (ATCs) have been activated in all regions of the world where Casgevy has been approved—the U.S., the European Union, Great Britain, Saudi Arabia, Bahrain, Canada, and Switzerland.

• Cell collection had begun in about 40 patients, double the approximately 20 reported after the second quarter, while additional patients have received infusions.

• The first $2 million in revenue has been generated from the first commercial patient dosed with Casgevy during Q3. That revenue was included within the $2.772 billion in product revenue that Vertex reported for the quarter.

“Positive” progress

“We view the Casgevy progress as a (+)ve [positive] indicator of getting pts [patients] in the funnel, and expect a majority of ~40 pts will get tx’d [treated] w/in 1–2 quarters,” Maury Raycroft, PhD, equity analyst with Jefferies, projected in a November 5 research note. “It can take ~5–6mos from cell collection to tx. Pt demand is high, and VRTX is adding a 3rd manuf[acturing] facility w/ Lonza.”

Raycroft added that Casgevy’s opportunity to attract patients in the Middle East region was “underappreciated and appealing,” with about 23,000 patients eligible.

Following a meeting between CRISPR Therapeutics executives and Jefferies analysts at the firm’s London Healthcare Conference late last month, Raycroft reported that management “is pleased w/ how the ‘funnel’ trajectory is playing out commercially as underlying demand/interest has been very strong WW [worldwide] along w/ payer support. It’s only a mechanics question now as more centers get activated.”

Writing in a November 20 research note, Raycroft and four Jefferies colleagues reported CRISPR Therapeutics executives expect momentum to build up in coming months, referring to the slow but steady and gradually progressing launch of Yescarta® (axicabtagene ciloleucel), the chimeric antigen receptor T-cell (CAR-T) cancer treatment marketed by the Kite subsidiary of Gilead Sciences (NASDAQ: GILD) following FDA approval in 2017.

CRISPR Therapeutics executives told Jefferies analysts the market potential for Casgevy stems from the presence of some 25,000 severe SCD patients in the U.S., another roughly 30,000 in the Middle East, and unspecified growing numbers in the U.K. & France than originally envisioned. In its third-quarter investor presentation, CRISPR Therapeutics pinpointed about 23,000 patients in Saudi Arabia and Bahrain alone, plus about 35,000 patients in the U.S. and Europe combined.

“Mgmt [management] noted two areas, where they continue to invest are on global extension and capacity expansion, anticipating the demand,” Raycroft wrote adding that 2024 Casgevy-related expenses have been trending around ~$0.5 billion. Vertex shoulders 60% of costs and enjoys that percentage of profits, with the remaining 40% of costs and profits going to CRISPR Therapeutics.

Also positive on Vertex’s commercial progress with Casgevy has been analyst Sami Corwin, PhD, and two colleagues at William Blair.

“We view the treatment of the first commercial Casgevy patient as a milestone for the companies and believe they have established the infrastructure to support significant revenue generation in 2025 as more cell collections are converted into cell infusions,” Corwin and colleagues wrote November 5 in a research note.

Leaders and laggards

• BioAge Labs (NASDAQ: BIOA) shares plunged 67% Friday in after-hours trading after the company said it will end the ongoing Phase II STRIDES trial (NCT06515418) assessing its lead pipeline candidate, the oral apelin receptor (APJ) agonist azelaprag, as monotherapy and in combination with Eli Lilly’s Zepbound® (tirzepatide) after liver transaminitis without clinically significant symptoms was seen in some subjects receiving azelaprag. The company said no transaminase elevations were seen in the tirzepatide-only treatment group. BioAge added that it will continue to advance its NLRP3 inhibitor program, including the submission of an Investigational New Drug (IND) application expected in the second half of 2025, as well as additional research programs with novel mechanisms emerging from its platform. The trial halt capped a busy year in which BioAge completed an oversubscribed $170 million Series D financing in February, launched STRIDES, and went public in September, raising approximately $189.5 million in net proceeds.

  
  

• Bluebird Bio (NASDAQ: BLUE) shares tumbled 33% from 74 cents to 49 cents in after-hours trading Wednesday after the company said it will carry out a 1-for-20 reverse stock split following approval by both its board and stockholders at a reconvened annual meeting held that day. Bluebird acknowledged that its primary goal is to increase the per share market price of its common stock to regain compliance with NASDAQ’s minimum bid price requirement for continued listing. The reverse stock split is expected to become effective at 5 p.m. ET on December 12, and the first reverse-split shares will start trading the following day. The drop partially wiped out a 105% gain earlier that day, from 36 cents to 74 cents, after the company announced that it reached agreement with the Center for Medicare and Medicaid Innovation(also called the CMS Innovation Center) to offer an outcomes-based agreement for the gene therapy Lyfgenia™ (lovotibeglogene autotemcel) under the Cell and Gene Therapy Access Model.

  
  

• Novocure (NASDAQ: NVCR) shares soared 49% from $20.04 to $29.85 on December 2, after the company joined Zai Lab (NASDAQ: ZLAB; HKEX: 9688) to announce positive topline results from the pivotal Phase III PANOVA-3 trial (NCT03377491) assessing its Tumor Treating Fields (TTFields) therapy as a first-line treatment for unresectable, locally advanced pancreatic adenocarcinoma. TTFields met the study’s primary endpoint by showing a statistically significant improvement in median overall survival (mOS) versus gemcitabine and nab-paclitaxel alone, Novocure said. In the intent-to-treat population, patients treated with TTFields plus gemcitabine and nab-paclitaxel had an mOS of 16.20 months vs. 14.16 months in patients treated with gemcitabine and nab-paclitaxel alone.

  
  

• Purple Biotech (NASDAQ: PPBT) shares more than doubled, rising 150% from $3.36 to $8.40 on December 2 after the company reported positive final results from the randomized Phase II trial (NCT04731467) evaluating its lead oncology drug CM24 in patients with pancreatic ductal adenocarcinoma (PDAC). Those results showed a consistent and continuous decrease of the PDAC biomarker CA19-9 in the experimental arm reaching a median percentage reduction from baseline of approximately 80%, vs. a 40% increase in the control arm. The trial assessed CM24—a humanized monoclonal antibody designed to block CEACAM1—in combination with Bristol Myers Squibb’s immune checkpoint inhibitor Opdivo® (nivolumab) plus standard-of-care (SoC) chemotherapy in second-line metastatic PDAC patients vs. SoC chemotherapy alone.

  
  

• Relmada Therapeutics (RLMD) shares cratered 84% over two days after the company said it will evaluate potential next steps for REL-1017 after acknowledging that the NMDA inhibitor was unlikely to meet with statistical significance the primary efficacy endpoint of the Phase III Reliance II trial (NCT06011577), which is assessing the drug for use in combination with other approved anti-depressants for major depressive disorder (MDD). The trial’s Independent Data Monitoring Committee (DMC) concluded during a pre-planned interim analysis that continuing Reliance II would be futile. Shares plunged 77% from $2.77 to 63 cents Wednesday, then skidded another 29% Thursday to 45 cents after Mizuho Securities analyst Uy Ear downgraded the stock from “Outperform” to “Neutral” and slashed the firm’s 12-month price target 96% from $23 to $1.

  
  

• Revelation Biosciences (NASDAQ: REVB) shares nosedived 47% from 95 cents to 51 cents Tuesday after the company said it entered into a definitive agreement to immediately exercise warrants to purchase up to 4,064,040 shares of common stock issued by the company on August 22, at $1 per share. The sale is designed to generate more than $4 million in gross proceeds—about double the company’s $2.168 million market capitalization. A day earlier, Revelation shares rose 25% after the FDA accepted the company’s investigational new drug (IND) application for Gemini, a proprietary formulation of phosphorylated hexaacyl disaccharide (PHAD®). The decision allowed Revelation to launch a U.S.-based Phase Ib trial assessing Gemini as a preconditioning treatment in patients with chronic kidney disease. Revelation shares have cratered 98% over the past year, from $22.95 on December 4, 2023.