With Rare Speed, Gene Editing Emerges as Biotech’s New Cutting Edge

Barron’s, 1.14.21 – The Nobel Prize got Wall Street’s attention. On Oct. 7, the Swedish Academy awarded 2020’s Nobel in chemistry to two scientists for the development of Crispr-Cas9—a molecular scissors that can find and edit almost any sequence in a cell’s DNA. The 2012 discovery by Emmanuelle Charpentier and Jennifer Doudna had been commercialized with rare speed, and the Nobel was a boost for three companies founded to develop Crispr gene-editing therapies: Crispr Therapeutics, Intellia Therapeutics, and Editas Medicine. The three gene-editing stocks have more than doubled in the past few months, reaching a total market value above $23 billion.

Crispr-Cas9 is the second generation of technologies that seek to repair thousands of inherited genetic disorders and battle cancer in new ways. Gene editing is advancing so quickly that next-generation technologies are already on the heels of Crispr-Cas9, including a more-precise tool called base editing, which has lifted the stock of Beam Therapeutics (ticker: BEAM) sixfold since its February 2020 initial public offering.

While gene-editing start-ups will lose money during years of clinical trials, it’s hard to say the stocks are overvalued. If their one-time interventions can cure diseases that otherwise require chronic treatment—or lack any treatment at all—then the stocks will fly. Patent rights and knowhow also make them desirable partners or acquisition targets for Big Pharma. Premiums of 100% were paid in deals for first-generation gene-therapy start-ups, like the Novartis (NVS) purchase of AveXis in 2018 and Roche Holding’s (RHHBY) 2019 acquisition of Spark Therapeutics.

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