Crispr Therapeutics: Get Ready To Bail Out
Jul. 05, 2021
Summary
The company is lagging behind established pharmaceutical companies.
Other cheaper alternatives are on the way.
The company’s valuation is excessive.
Preamble
CRISPR Therapeutics (NASDAQ:CRSP) is a company that has the kind of valuation that investors in pets.com could only have dreamed about, even at the peak of the “dot.com” hysteria. For many owners of CRSP stock, the rich valuation for the company is more than justified since they believe that CRISPR has the “silver bullet” for malignant tumors and will therefore turn stock holders into gazillionaires in due course. I’m afraid, I’m not so sure. My primary reason for being doubtful is that there are already established companies providing CAR-T treatments and there is a plethora of equally effective and relatively low-cost remedies on the horizon. Whilst it is true that CRISPR is developing treatments for a number of disease areas, my focus in this article is their anti-cancer product line.
An overview of current cancer research
To fully explain my perspective, I believe it would be helpful to give a brief synopsis of the state-of-the-art advances. Broadly speaking, investigators in cancer research are developing therapies that can be categorized as small molecules, large molecules or CAR-T treatments.
Over decades of research, many of the cellular mechanisms that lead to cancer have become understood and drugs that target these processes have been made available. For instance, it has been known for quite some time that tyrosine kinase, an enzyme necessary for cell division, cannot switch off in some cancers due to a faulty structure. In recent years, a number of novel compounds have been approved that can inhibit these defective enzymes. One such compound is gilteritinib, which sells under the trade name Xospata and is produced by the Japanese biotechnology company Astellas Pharma (OTCPK:ALPMF). This product would be called a small molecule since it can enter a cancerous cell to perform its action. As you may imagine, the problem with small molecules is that they can enter healthy as well as abnormal cells, and this is the primary reason for the side effects often associated with cancer treatments. Additionally, these small molecules cannot cure the underlying problem, but merely slow its progress, and so must be taken for an extended period of time; often for life. For those unfortunates that have to be prescribed this medication, the cost is quite steep at around $25,000 a month.
The mode of action of large molecules is quite different, they attempt to activate a person’s own immune system to destroy the cancer. These large molecules consist of two parts, a component that locks onto the malignant cell and another that activates the immune response.
The majority of readers may be familiar with the idea that cancer is caused by flawed genes that then leads to uncontrolled reproduction of cells. Coincidentally, each flaw is often represented by a unique lipid or protein or polysaccharide on the surface of a cancerous cell known as a tumor-specific antigen. In fact, researchers can typically determine which gene is defective according to the antigen on the outside of a cell.
So, scientists are trying to produce large molecules (antibodies) that can bind to these specific antigens and then cause the immune system to destroy those cells. There are several methods being explored to introduce these tumor-specific antibodies into patients.
One such method is by the use of mRNA that is coded to enable cells within the patient to manufacture the antibody. I guess by now many readers have heard of mRNA given the extensive coverage that has been given to mRNA-based COVID 19 vaccines. For those who are unsure of the mechanism of action, put simply, mRNA vaccines induce cells to produce the “spike” protein of the virus and so coax an effective immune response to the actual virus. One company investigating the use of mRNA to fight cancer is BioNTech (NASDAQ:BNTX), the COVID 19 vaccine partner of Pfizer (NYSE:PFE). Initial results are more than encouraging; fewer adverse reactions and impressive improvements in patient outcomes. According to the company, it is envisaged that the costs associated with the treatment are expected to be relatively low, although this is difficult to tell given the company do not, as yet, have a product on the market.
Other biotech companies are synthesizing specific antibodies directly and then administering them to patients. There is a “penny stock” British biotechnology company called Scancell (OTC:SCNLF) that has demonstrated extremely encouraging conclusions following their phase 1/2 study for their lead melanoma product, SCIB1. Using their proprietary technology, “T cell responses were induced in nearly 90% of patients with no serious adverse events or dose limiting toxicities." Even though patients had stage III and IV cancer, around half were still breathing 5 years after the study had started.
Finally, there is CAR-T research that involves editing the genes of cells within the immune system so that these cells can recognize cancer cells and then attack them. You might be forgiven for thinking that this research is so sophisticated that very few companies have the capability to employ such technology to develop this kind of treatment. However, in actual fact there are around a hundred such companies around the world doing similar work to CRISPR.
On a recent conference call, CEO Samarth Kulkarni described progress thus far with their lead immuno oncology products. At the time of writing, the company’s principal oncology products are only in phase 1 testing. Needless to say, it will be several years before these products will be generating any income for the company.
Competitive CAR-T products
Let us consider one of CRISPR's blockbuster hopes, CTX110, which, as I mentioned, is several years away from being available for doctors to recommend to their patients. This is assuming that efficacy and safety can be confirmed, which is not a forgone conclusion. For those who are unfamiliar with CTX110, it is envisaged that it will be a one-treatment-only fix for B-cell blood plasma cell cancer.
Sounds great, right? A once-only treatment for blood cancer a few short years away. The only problem is that there are already two enormous companies manufacturing approved CAR-T therapies for B-cell blood cancer; Novartis (NYSE:NVS) and Gilead (NASDAQ:GILD). Furthermore, way back in 2018, it was reported that there were more than 200 ongoing clinical trials on CAR-T therapies, chiefly to tackle hematological cancers (lymphoma, leukemia, and myeloma).
It was announced in June 2020 that Gilead had received the European Medicines Agency approval for their CAR-T product, Yescarta. Since then, they have built treatment and production centers all around the world. On the market for only a short period of time, growth for the Gilead therapy has been an impressive 36% Y-O-Y. Originally brought to market by Novartis in 2018, Kymriah is now manufactured in across 5 sites globally, including Japan.
Compared to mRNA cancer vaccines and directly administered antibodies, the cost of manufacturing CAR-T cells is huge. For instance, a single treatment with Kymriah can cost around half a million dollars, then there may be further costs associated with continuing care.
To sum up
CRISPR Therapeutics is a company researching in the field of CAR-T medication with around $2 billion in the bank and almost zero revenue. On top of that, the company is burning through approximately $400 million a year in research costs. Despite this, its market cap is at $12.5 bn.
Competition for the company’s lead oncology target is already established globally in the shape of recognized pharmaceutical giants. If this were not bad enough, alternatives to the pricey CAR-T treatments are under development.
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