A day after CRISPR Therapeutics said that Vertex Pharmaceuticals would pay it $900 million for an extra 10% of the profits from sales of a gene-editing therapy called CTX001, a Jefferies analyst upgraded the stock to Buy, from Hold.
CRISPR (ticker: CRSP) and Vertex (VRTX) have jointly developed CTX001, which is being tested to treat patients with sickle cell disease and beta thalassemia, under a deal first signed in 2015. Under the new agreement, the 50/50 split under the old deal will now be a 60/40 split in favor of Vertex. In addition to the $900 million up front, Vertex will pay an additional $200 million when the therapy receives regulatory approval.
In a research note published early Wednesday, Jefferies analyst Maury Raycroft wrote that the deal validated the large market opportunity for the therapy, which he said is underappreciated by analysts. What’s more, he said that the CTX001 program “has turned more into execution more for registration + launch [preparation].”
Raycroft upgraded CRISPR to Buy, from Hold, and set a price target of $172, up from $165. The stock closed Tuesday at $121.67.
Shares of CRISPR climbed 5.8% on Tuesday in response to the news, and were up another 1.8% in premarket trading on Wednesday. The stock is down 20.5% so far this year, and up 132.2% over the past 12 months.
In his note, Raycroft wrote that the recent pullback in shares had created a buying opportunity for investors. The stock is down 34.3% since Jan. 20, a period in which the S&P 500 has climbed 7.4%, and the SPDR S&P Biotech ETF (XBI) is down 14.9%.
Raycroft also said that the large amount of capital that CRISPR now has in the bank could help the company accelerate its other programs.
On CTX001, Raycroft wrote that the company will present more data on the therapy in 2021, and will fully enroll both its continuing studies in sickle cell disease and beta thalassemia this year. He also said that the company told him that they had made progress on ongoing discussions with regulators about what data they will need to file for approval for the therapy.
Of the 21 analysts who cover CRISPR tracked by FactSet, 13 rate it a Buy, while six rate it a Hold and two rate it a Sell. Their average target price of $153.44 implies a return of 26.1%.
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