Biotechnology is an industry that is equal parts fascinating and risky. Yet, despite that, the possibility for reward is high as new technology advances are implemented and life-saving drugs are brought to the market. For investors, this industry is often overlooked as the businesses themselves are often difficult to understand. Furthermore, the need to make a successful commercial product alongside the valuable research that the majority of companies in this sector undertake, can either make or break the business.
With this in mind and the potential for high rewards in the future, we look at 2 stocks that have been making headlines over the past few years, CRISPR Therapeutics (NASDAQ: CRSP) and Invitae (NYSE: NVTA). But which one is the better investment?
CRISPR: Bull vs Bear arguments
CRISPR Therapeutics is a biotechnology company that uses gene-editing technology to pioneer biotech therapies for numerous diseases. The company is currently up 85% over the past year. Although the stock is down 43% since its peak in February.
Whilst CRISPR is admittedly a risky stock, due to the fact that it is a biotech stock, it is attracting big-name attention. The likes of Cathie Woods regularly scooping up CRISPR stock, in mid-May, she bought 55,894 shares for her ARK Invest.
Furthermore, other biotech companies are impressed with that CRISPR is trying to achieve and its extensive data regarding gene therapies is invaluable for the development of new drugs. Vertex Pharmaceuticals has been collaborating with CRISPR since 2015 and together they are developing a potentially curative drug to treat sickle cell and transfusion-dependent beta-thalassemia. If approved, CRISPR will receive 40% of the profits.
CRISPR, despite its brilliant innovation for the world of health, is a company that does not make money. It funds its operations through public and private offerings, thus whenever the company needs to finance future operations there is a risk of diluting the holdings that investors in the company own. This is the risk of investing in a research-based company such as CRISPR. The upside, however, is that its collaboration with Vertex could bring in profits should the trials all prove successful and the drug if it is taken to the market.
Invitae: Bull vs Bear arguments
Invitae is a leading medical genetics company that focuses on research and diagnostics. The company provides tests for multiple genes associated with hereditary cancer, as well as neurological disorders, cardiovascular disorders, and other hereditary conditions.
Invitae’s stock is up 69% year-over-year, although it is down 48% since its peak in December. In Q1 this year, the pharmaceutical company reported a gross profit of $28 million on revenue of $103.6 million. Year-over-year, this is up 18% and 61% respectively.
Unfortunately, in a similar thread to CRISPR, this is a company carrying out research in the biotech industry, thus, it does incur losses. With a Net loss of $122.2 million for Q1, this is up 53% from the year prior. Furthermore, its cash burn came in at $112 million, although this includes its acquisitions that it has made over the quarter.
CEO, Sean, E. George, has sold a total of 42,117 of his own shares in the last 2 months. Whilst this doesn’t necessarily mean anything negative just yet if the continual sale of his stock continues, this might shoot up red flags causing many investors to jump ship, bringing the share price down as a result.
However, with Cathie Woods also taking a liking to this stock and calling it one of her most ‘underappreciated holdings’ you can make a bet that within the next few years, Invitae will be a company that you wish you had bought now, rather than later.
So, which stock is a better buy right now?
Currently, both are a good option for anyone looking for a stock that they can buy now and hold for the next 10 years. Biotech is constantly evolving and with new research and developments, and whilst both these stocks are going to incur losses for the next few years, it might be worth taking a chance on them.
Out of the two, CRISPR is the most viable as it has been at the top of Cathie Wood’s list for many months now. With its development of a new drug with Vertex Pharmaceuticals, CRISPR might even be on the way to earning some real revenue.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Poppy’s favorite stock is Nvidia as she loves innovation and this stock has bags of it. Nvidia invented the GPU in 1999 and even today its immersive graphics give life to the gaming world. Poppy is also inspired by Nvidia’s ability to imagine and create positive change for the world, with its AI technology fuelling new developments in the automotive industry, the medical industry, as well as powering data centers around the world.