CRISPR Gene-Editing Stocks Going Down the Tubes? Think Again

To paraphrase Mark Twain, the reports of the deaths of CRISPR gene-editing stocks are greatly exaggerated.

The biotech world was abuzz a little over a week ago with news that the human immune system has built-in defense systems against the Cas9 enzyme used in the CRISPR-Cas9 approach to gene editing. The CRISPR-Cas9 method has revolutionized gene editing with its convenience and speed. Several biotechs are using the technique to develop therapies for treating genetic diseases, especially CRISPR Therapeutics (NASDAQ: CRSP), Editas Medicine (NASDAQ: EDIT), and Intellia Therapeutics (NASDAQ: NTLA).

With the possibility that CRISPR-Cas9 could prove ineffective in humans, there was talk that the stocks of these biotechs that focus on the gene-editing approach could turn out to be worthless. But the cart got before the horse -- by a few miles.

Much ado about nothing?

All the commotion initially stemmed from a paper posted on bioRxiv (pronounced "bio-archive"), a website that provides access to preprint versions of biology papers. The papers on bioRxiv aren't peer-reviewed, so they aren't at a stage yet to be published by a scientific journal.

The researchers who posted the paper knew that the two most widely used Cas9 enzymes come from Staphylococcus aureus (S. aureus) and Streptococcus pyogenes (S. pyogenes) bacteria. They also knew that humans have been infected by these particular bacterial species for a long time. Their thought was that many people could have immune responses to Cas9, which could interfere with use of CRISPR-Cas9 in humans.

As it turned out, the researchers were right. The team obtained blood samples from 12 adults and 22 newborn babies. Out of this sample population, 79% had antibodies for the S. aureus Cas9 and 65% had antibodies for the S. pyogenes Cas9. Did that spell the end of the road for CRISPR-Cas9 in humans? Not at all.

The paper itself noted that the potential immune response to Cas9 "must be taken into account as the CRISPR-Cas9 system moves forward into clinical trials." Even after their findings, the research team assumed that CRISPR-Cas9 would still be tested in humans.

One of the lead authors of the paper, Stanford University's Matthew Porteus, is also one of the scientific founders of CRISPR Therapeutics. In an interview with Gizmodo, Porteus said, "This isn't a roadblock. I think it's a bump."

Some of the reaction wasn't much ado about nothing, but it was too much ado for sure. It's not known, for example, if the immune responses would even interfere with the CRISPR-Cas9 editing of genes. Even if it did, there are several ways around the potential problem of immune response to Cas9.

One is to develop Cas9 from bacteria that don't infect humans. Another is to slightly modify Cas9 so that the human body's immune system won't immediately attack the enzomes. CRISPR Therapeutics, Editas, and Intellia are all working on therapies that edit cells outside of the body, which means the immune responses wouldn't be an issue.

Dr. Market

Warren Buffett's mentor, Benjamin Graham, wrote about the fictional Mr. Market. Graham used Mr. Market as an allegorical description of how the stock market acts. Sometimes it's rational, and at other times, it's emotional and irrational. After the release of the paper about potential issues for CRISPR-Cas9, Mr. Market at first was emotional, but I think he quickly became Dr. Market, genetic scientist.

Here's what I mean. Take a look at how the key biotech stocks involved in CRISPR-Cas9 research performed in the aftermath of the posting of the scientific paper on Jan. 5. I have also included on the chart another biotech, Sangamo Therapeutics (NASDAQ: SGMO), that uses a different approach to gene editing called zinc finger nuclease (ZFN) technology.

What do you think would have happened on Jan. 5 and the following days if the scientific paper had really implied that CRISPR-Cas9 gene-editing stocks could be worthless? You can bet the stock prices of CRISPR Therapeutics, Editas, and Intellia would have plunged a lot more than the 12% or so drop that Intellia experienced. You would also have expected Sangamo stock to shoot up, since it's the farthest along with an alternative approach to CRISPR-Cas9.

But that's not what happened. Actually, all of these gene-editing stocks fell, including Sangamo, with Intellia and Editas dropping the most. However, it didn't take very long for all of them to rebound. CRISPR Therapeutics, a company whose name gives away its focus, not only regained its initial losses but added more gains in the following days.

In my view, Mr. Market became the genetic scientist Dr. Market. And Dr. Market realized that the latest scientific news was, as Matthew Porteus said, just a bump and not a roadblock. There could be some delays in beginning clinical trials, but that's certainly not a reason for the stocks to collapse. And they didn't.

No exaggeration

I have stated in the past that gene editing is a technology that could make investors rich and change the world. I don't think that's an exaggeration.

As for making investors rich, just imagine if a biotech uses gene editing to cure cystic fibrosis, genetic blindness, or sickle cell disease. How much would a company be worth if it were able to achieve such a tremendous feat? I can guarantee you it would much more than the $775 million to $1.5 billion these biotech stocks are valued at now.

And what if gene editing could be used to completely eliminate these and other genetic diseases? It's no stretch to say that would change the world, at least for many.

Yes, there will be bumps along the way. There always are with promising new technologies. But CRISPR-Cas9 is alive and well -- as are the stocks of the biotechs pioneering the gene-editing approach.

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Keith Speights owns shares of Editas Medicine. The Motley Fool recommends Editas Medicine. The Motley Fool has a disclosure policy.