Writing prompt for this Perspective: “What is one wildly-speculative, investing-related prediction that you have for 2022?”

My prediction: No CRISPR gene editing or CRISPR base editing company will end 2022 with a market valuation above $3 billion.

As I write this on January 21, 2022, the Nasdaq has shed value for four consecutive weeks. That marks the worst stretch since the coronavirus pandemic forced lockdowns in the United States in March 2020. Not even “buy the dip” is rescuing the market this time.

Although valuations of many trendy names have declined significantly, investors should resist the urge to anchor their expectations to 52-week (or pandemic) highs. Free rides are over. Companies must earn higher valuations now. Unfortunately, that’s bad news for companies that remain significantly overvalued, such as many CRISPR gene editing and CRISPR base editing stocks.

For my wild prediction to come true, Intellia Therapeutics (NASDAQ: NTLA), CRISPR Therapeutics (NASDAQ: CRSP), and Beam Therapeutics (NASDAQ: BEAM) must lose between 30% and 50% of their current market valuations. Meanwhile, companies within striking distance of my arbitrary $3 billion level — Verve Therapeutics (NASDAQ: VERV) and Editas Medicine (NASDAQ: EDIT) — cannot double in value.

Why should investors expect these companies to become mortal again, and therefore exposed to the trials and tribulations of precommercial drug developers?

At a high level, most CRISPR stocks are wildly overvalued given their level of maturity. Unlike software companies, it’s very difficult for a drug developer to reach a market valuation of $10 billion. That milestone usually requires multiple approved drug products with the potential to generate over $1 billion in annual revenue.

Consider the exuberance that investors have recently witnessed:

• CRISPR Therapeutics leapt to a $15 billion market valuation in early 2021.
• Intellia Therapeutics rose to a $12 billion market valuation on data from just six patients from just 28 days of observation.
• Beam Therapeutics ascended to a nearly $9 billion market valuation over one year before enrolling the first patient in its first clinical trial. It’s currently a $4.3 billion preclinical drug developer!

Investors may argue that gene editing and base editing technologies are so disruptive that they require new valuation models, but it’s important to pinch ourselves.

• Using DNA editors in an ex vivo setting (outside the body) to create cell therapies holds promise, but it’s not the technological endgame. Emerging tools are attempting to engineer and edit cells directly within patents, which would make many cell therapies for cancers and blood disorders obsolete. The unheralded therapeutic modality of bispecific antibodies could disrupt cell therapy – and an avalanche of drug candidates are nearing approvals.
• Using DNA editors in an in vivo setting (inside the body) holds promise, but existing tools are far from perfect. First-generation tools (Intellia Therapeutics, CRISPR Therapeutics) aren’t precise, bludgeon a patient’s genome by making a double-stranded break, and currently cannot be delivered systemically to tissues outside of the liver. Second-generation tools (Beam Therapeutics) don’t make double-stranded breaks, but suffer from an alarmingly high rate of bystander edits that result in on- and off-target errors.
• Many of the first targets of CRISPR pipelines have safe, effective, and convenient treatments available. For example, Intellia Therapeutics is targeting transthyretin-mediated (ATTR) amyloidosis with its lead drug candidate, but Alnylam Pharmaceuticals is nearing regulatory approval of vutrisiran. It has almost no side effects, can reverse disease, would be dosed once every three months, and might be dosed once every six months in the future. That significantly complicates the commercial landscape and revenue potential for Intellia Therapeutics.
• There’s an alarmingly high level of overlap among CRISPR pipelines. Almost every company is developing ex vivo cell therapies to treat the same handful of blood cancers. Multiple companies are developing ex vivo cell therapies for sickle cell disease and beta thalassemia. Similarly, the same handful of rare diseases appear again and again. Each company is valued as if it will emerge as the clear winner (against other therapeutic modalities, too!), but that’s simply not possible. Even if multiple drug candidates prove successful, the field appears likely to cannibalize itself.

Here’s an alternative scenario for investors to consider. In a few years, it’s quite possible that we look back at CRISPR gene editing and CRISPR base editing as the catalyst for developing tools capable of precisely correcting errors in DNA. Although these hyped up therapeutic modalities will still have therapeutic value, the DNA editing tools that rise to the top might look more like transposons (gene writing) and peptide nucleic acids (gene silencing, mis-splice correction, non-enzymatic base editing), which face significantly fewer limitations than existing tools.

My wild prediction is that no CRISPR gene editing or CRISPR base editing company ends 2022 with a market valuation above $3 billion. As crazy as that sounds, Editas Medicine shows what happens when CRISPR stocks begin to look mortal again. When perfect data, not merely great data, are the expectation. When every metric in a clinical trial is picked apart by analysts. When less-than-sexy therapeutic modalities begin to look like safer and more effective treatments for patients. With a handful of data readouts expected in 2022, investors will get these answers relatively soon.

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