Here's Why CRISPR Stocks Have Gained as Much as 169% in 2018 (So Far)

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What happened

Shares of the three companies pioneering medical applications of CRISPR gene-editing tools have soared higher through the first half of 2018. That's because, after years of only being able to discuss the possibilities of the technology, investors will soon be able to watch it (hopefully) progress through regulated clinical trials.

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According to data from S&P Global Market Intelligence, CRISPR Therapeutics tops the trio with year-to-date gains of 169% and a market cap of nearly $3 billion. Intellia Therapeutics is next with a 63% rise and a market cap of $1.3 billion. Editas Medicine, which has managed a 25% leap since the beginning of the year, is valued at $1.8 billion. It entered January as the most valuable of the three.

So what

All three companies are about to investigate their unique CRISPR tools in the clinic for the first time, and their respective stock performances thus far this year correlate with how close each is to initiating clinical trials.

CRISPR Therapeutics is the furthest along, looking to begin clinical trials for its lead drug candidate, CTX001, as a treatment for blood diseases such as sickle cell by the end of this year. While it was placed on a clinical hold by the U.S. Food and Drug Administration at the end of May, the company and its partner Vertex will proceed with a phase 1/2 trial in Europe as planned. Not wanting to rest on its lead, the company is looking to file its second investigational new drug (IND) application by the end of 2018.

Meanwhile, Editas Medicine told investors it would file an IND for its lead drug candidate in mid-2018, so investors should expect that news any day now. The company will first take aim at LCA10, a rare eye disease.

Intellia Therapeutics is furthest behind, as it doesn't expect to file an IND until the end of 2019. That could work out in the company's favor in the long run, however, as it's working on a novel delivery system (one of the biggest question marks for all three companies) to increase the efficacy and safety of its therapeutics, the first of which will be evaluated to treat a rare metabolic disease called transthyretin amyloidosis.

All three stocks have largely brushed off concerns raised in June that CRISPR tools could potentially set off existing and potentially cancerous mutations within cells. While none of the lead drug candidates would be affected by the approaches being used, all three pipelines will have to navigate that obstacle eventually.

Now what

Investors are betting that gene editing will become a game changer in medicine -- and they might be right. However, it's important to remember that CRISPR tools are still in their infancy in the clinic. There are still questions about optimal delivery of the therapeutic payload into human cells in a patient, the best cutting enzyme, and the triggering of DNA repair mechanisms being relied on to finish the genetic surgery procedure. Each has implications for the efficacy and safety of the technology.

Considering these questions (and more) will find their first answers in clinical trials that have yet to begin, and the fact these companies are valued at up to $3 billion, investors should understand the high level of risk involved with CRISPR stocks at this point in development. There could be a long way to go before reality matches the hype.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of CRISPR Therapeutics. The Motley Fool recommends Editas Medicine. The Motley Fool has a disclosure policy.