We’re calling it: 2016 will be remembered as the year gene therapy companies finally went public. Sure, there were a few notable investment options in this sector before—bluebird bio (NASDAQ:BLUE) listed in 2013; Spark Therapeutics (NASDAQ:ONCE) and Regenxbio (NASDAQ:RGNX) filed IPOs in 2015. But this year marked a new era for gene therapy stocks, with five significant players hitting the market—three of them based on novel gene editing technology CRISPR-Cas9.
These newly public companies are gene therapy stocks to watch in 2017. Will their successful IPOs mark the start of a prosperous trend? Or could legal and development hurdles cause some to stumble?
Editas Medicine (NASDAQ:EDIT)
IPO: January 4, 2016
Editas Medicine was the very first American IPO of 2016, and investors were excited about it. After all, this gene-editing company is backed by some big names, including Bill Gates, Fidelity Investments and Google Ventures. Shares sold fast and the stock soared 130 percent, bearing out the optimism of those high profile investors—until March, when it all abruptly came crashing down.
The reason for that plummet? Experts pointed to court proceedings over CRISPR-Cas9 technology, the gene-editing tool Editas has built their pipeline around. At stake? The patent for CRISPR-Cas9—specifically, whether it should be awarded to Feng Zhang at The Broad Institute of MIT or Jennifer Doudna of UC Berkeley.
Editas, of course, has to license this technology from the patent holder. Here’s the issue: the company was cofounded by Zhang. It shouldn’t be a problem for Editas to obtain a license from Doudna, should she win—but questions over intellectual property can make raising capital more challenging in the interim.
It seems in March, some investors felt uncomfortable with this uncertainty—and elected to abandon ship.
Audentes Therapeutics (NASDAQ:BOLD)
IPO: January 4, 2016
Audentes Therapeutics filed an IPO on the same day as Editas—but that story was lost in the buzz around the other gene-editing company. Perhaps that’s because Audentes works with adeno-associated viruses, rather than the more novel (and therefore newsworthy) CRISPR-Cas9 technology to alter genetic material.
Of course, that also means Audentes’ stock has been comparatively more stable. While it didn’t skyrocket early on, it also didn’t plummet due to a patent war.
So what should investors watch for in 2017? Audentes expects to bring a new therapy to clinical trial in the year ahead, one that will treat x-linked myotubular myopathy. In August 2016, the company launched an assessment study to form the groundwork for that clinical trial. According to the press release, they expect to file an investigational new drug application in early 2017 and collect preliminary data by year-end.
IPO: February 11, 2016
Next up: AveXis. This gene therapy company focuses on neurological diseases and it has seen a fair amount of success since going public early in 2016.
Most notably, the company received breakthrough therapy designation for its clinical candidate AVXS-101, which will treat spinal muscular atrophy. When that news was announced on July 20, 2016, shares rose over ten percent, bringing stock price to almost double what it was initially.
2017 should see AveXis begin European and American testing of AVXS-101. Results from that clinical trial, whether positive or negative, will undoubtedly trigger significant stock movement.
Intellia Therapeutics (NASDAQ:NTLA)
IPO: April 11, 2016
Another CRISPR-based biotech, Intellia Therapeutics went public in April 2016, selling shares at the top range of its IPO: $18 each. Their multi-million dollar deal with Regeneron (NASDAQ:REGN) seemed to make investors bullish on the stock, and the company raised $108 million through its IPO.
Its performance since has been volatile—and there’s more uncertainty going forward. Like Editas, Intellia Therapeutics is caught up in the patent war over CRISPR-Cas9 technology. It, however, is connected to the other side—that is, the Berkeley team, headed by Doudna.
Should Zhang win the case, Intellia will have to obtain another license in order to continue its research.
CRISPR Therapeutics (NASDAQ:CRSP)
IPO: September 9, 2016
The latest gene-editing company to be listed, CRISPR Therapeutics did not perform as well as other CRISPR-Cas9 based biotechs in its IPO. It raised just $56 million—respectable enough, but paltry compared to Editas’ $94.4 million and Intellia’s $108 million.
Bayer kicked in an additional $35 million for CRISPR Therapeutics, buying 2.5 million shares of common stock.
But once again, CRISPR Therapeutics’ performance in 2017 depends, in part, on the resolution of the CRISPR-Cas9 patent war. This biotech obtained its license from the Berkeley team, like Intellia. That means their research is contingent on Doudna winning the patent war or, barring that, getting a license from The Broad Institute of MIT.
This continued legal uncertainty seems to have made investors more skittish, and CRISPR Therapeutics was unable to replicate the wildly successful IPOs of its predecessors, Editas Medicine and Intellia Therapeutics.
We’ll conclude with a bonus stock to watch: Caribou Biosciences. It’s another big CRISPR-based biotech and one of the few that remains private. Will 2017 see this company file an IPO? Or might they hold off until the patent war over CRISPR-Cas9 is decided?
Certainly, this ongoing legal saga is something investors will want to pay close attention to in 2017. The outcome will majorly affect three of the above gene therapy stocks—and at least one is bound to come out on the losing side, forced to obtain a new license in order to continue its research.
AveXis and Audentes Technologies are not part of this legal fray, since their gene therapy candidates use adeno-associated viruses, rather than CRISPR-Cas9 technology. Nevertheless, there’s plenty to watch with these companies, too. Both are embarking on significant studies to determine the efficacy of their proposed therapies—and the results will surely impact share value.
Long story short? 2016 might be the year of gene therapy company IPOs … but 2017 looks to be when we’ll find out which of those biotechs sink or swim.
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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.