John McCamant has issued 3 short sale recommendations for stocks in the CRISPR space. The editor of The Medical Technology Stock Letter explains his concerns about this specialized group while also reiterating a strong buy rating for one gene-editing play which does not rely on CRISPR technology.
CRISPR is a relatively new gene editing technology that has generated a significant amount of publicity in both the lay and scientific media. Recently published research points out the potential for off-target CRISPR gene edits that could cause severe, and possibly irreversible side effects in humans.
On July 12, the FDA released highly anticipated gene therapy guidance documents. After reviewing the draft guidelines, while the FDA is no doubt optimistic of the future of gene therapy, in our view, the proposals suggest that there is a lot to prove before a company even begins human gene editing studies.
Right after the FDA guidelines were released, Nature Biotechnology published what we believe is the most negative, objective research study on CRISPR to date, calling into question the viability of that technology as a therapeutic option in the near-term.
As a result, we are reiterating our buy recommendation on Sangamo Therapeutics (SGMO). The company is a leader in gene therapy and gene editing, with by par the most advanced clinical programs in the field. Importantly, however, the company does not rely on CRSPR-based technologies.
We are also initiating short sale recommendations on three CRISPR-related gene-editing stocks — Crispr Therapeutics AG (CRSP), Editas Medicine (EDIT) and Intellia Therapeutics (NTLA).
The FDA requirements for beginning a study in gene editing are, we believe, much more stringent than companies are prepared for and/or may not have or not be able to accomplish that easily now that the official guidelines are out.
After reviewing the documents, in our view the greatest challenge is the current unknown result of editing genes — off-target toxicities that may occur long after the initial single gene insertion or deletion. Unexpected breaks in double stranded DNA could either turn on/off genes with various permanent consequences.
This is a major potential roadblock for companies that use CRISPR as their primary gene-editing tool and is probably why they have yet to be cleared for human development by the FDA.
On the flipside, it supports the multiple Investigational New Drug application (INDs) that have been granted to Sangamo Therapeutics over the past two years with more to come, and the likely fact that the company’s ZFNs — which are not CRISPR technology -- result in undetectable off-target effects utilizing the most sensitive assays around.
Research published in the prestigious scientific journal Nature Biotechnology suggests that the FDA’s concerns with off-target INDELs is only the tip of a Titanic-sized iceberg for CRISPR-focused stocks; CRISPR-Cas9 can cause significantly greater genetic havoc than experts previously thought, and the study concludes perhaps enough to threaten the health of patients who would one day receive CRISPR-based therapy.
The DNA chaos that CRISPR unleashes has been “seriously underestimated,” said geneticist Allan Bradley of England’s Wellcome Sanger Center, who led the study. “This should be a wake-up call.”
With more negative CRISPR articles already undergoing peer-review, negative scientific publicity for CRISPR will continue (of course, it is expected there will be positive CRISPR studies done, too, but we believe the data will continue to weigh the risk/rewards).
And this is our near-term conclusion with Crispr Therapeutics, Intellia Therapeutics and Editas Medicine –- once they or others begin to look for IDELs and off-target toxicities using even higher sensitive assays at the start and then over time, we believe the odds are growing that they too will find the same negative results as Bradley did.
Sangamo often gets caught up in the negative CRISPR press, despite the fact that SGMO’s ZFNs are not CRISPR-based and more importantly, that the company has had no problems getting INDs granted and clinical trials approved and initiated.
By late summer, Sangamo will release the first in human gene editing safety and efficacy data in MPSII or Hunter Syndrome and also gene therapy initial results in hemophilia A with partner Pfizer (PFE). Either should serve as a significant positive catalyst for Sangamo — and we believe a perceived negative for Crispr Therapeutics, Editas, and Intellia.
In summary, we recommend a short sale of 3 CRISPR stocks and reiterating a strong buy rating on Sangamo:
Crispr Therapeutics is a SHORT SALE up to 65 with a target price of 40
Editas Medicine is a SHORT SALE up to 40 with a target price of 26
Intellia Therapeutics is a SHORT SALE up to 34 with a target price of 21
Sangamo Therapeutics is a BUY under 30 with a target price of 40
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