Is the Newest Gene Editing Stock a Buy?

Investors have clamored over the arrival of CRISPR gene editing stocks on the public markets, but the DNA engineering approach is not without problems. It's also not without competition. While prior-generation techniques such as TALENs and zinc finger nucleases have likely crossed the radars of investors, several next-generation techniques are being developed in academia that promise to avoid the shortcomings of the well-known tools.

But investors don't necessarily have to wait to diversify their gene-editing investing strategy. Precision BioSciences (NASDAQ: DTIL) closed a successful initial public offering (IPO) in late March, raising over $170 million in net proceeds. It began enrolling patients in a phase 1/2 clinical trial for an allogeneic CAR-T therapy -- beating investor favorite Crispr Therapeutics (NASDAQ: CRSP) to the punch -- in mid-April. And it uses a novel gene-editing technique that could avoid some of the notable drawbacks of CRISPR.

Is the newest gene editing stock a buy?

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The ARCUS gene editing platform

Precision BioSciences is developing the ARCUS gene editing platform. Whereas CRISPR systems typically rely on Cas enzymes (such as Cas9) to cut a genome at a precise location, the ARCUS system relies on an enzyme called I-Crel, originally discovered in a species of algae. The company had to engineer I-Crel for it to work in non-algae organisms such as humans, and it calls those engineered cutting enzymes ARCUS nucleases.

Turns out I-Crel might prove to be a pretty good starting point for a gene editing platform. The nuclease is smaller than with Cas enzymes, which could provide an advantage for delivering the system into cells. That small size is likely related to the ARCUS platform's high specificity (it's less likely to make off-target cuts) and high efficiency (it makes the intended cut frequently).

Investors should also know that the ARCUS platform shares one significant drawback with CRISPR systems: it works by cutting DNA. While that's kind of the point behind first-generation gene editing, making it possible to cut out faulty DNA and even insert new genetic material, it also triggers natural DNA repair mechanisms that can lead to complex side effects. Researchers are beginning to think that will make cutting tools poor options for directly editing cells in the body (called "in vivo"), which is why next-generation gene editing platforms avoid cutting altogether.

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Diversity is a key advantage

Although cutting DNA could turn out to be a dealbreaker for the ARCUS gene editing platform (and CRISPR) for in vivo applications, Precision BioSciences is targeting diverse uses for the tool. That strategic advantage over peers stems from the fact that it owns all the technology related to ARCUS, whereas intellectual property related to CRISPR is licensed in a dizzying web of agreements.

It's a subtle but important difference. Consider that Precision BioSciences has three unique product pipelines: one for in vivo tools, one for gene-edited immunotherapies in the lab, and one for agriculture. The latter opportunity provides a refreshing amount of diversification from human therapeutic markets. The company targets agricultural applications with its Elo Life Sciences subsidiary, which is developing ARCUS-engineered canola (with Cargill), watermelon, stevia, chickpeas, and clary sage (with Ashland subsidiary Avoca).  

Precision BioSciences might also have an advantage over its CRISPR counterparts in human therapeutics -- when it comes to timing, at least. While Crispr Therapeutics and Editas Medicine (NASDAQ: EDIT) are both developing gene-edited immunotherapy platforms, neither focused on that part of their pipeline for their initial clinical trial. Not so with ARCUS.

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The gene-editing upstart began enrolling patients in mid-April in a phase 1/2 trial for PBCAR0191 as a treatment for two cancers affecting white blood cells. The drug candidate is a CAR-T cocktail engineered to both recognize CD19, a protein on the surface of certain white blood cells, and avoid triggering graft-versus-host disease. The latter feature makes it an allogeneic, or "off-the-shelf," tool. That means immune cells can come from a donor who isn't the patient, which should significantly lower manufacturing obstacles and reduce costs.

The enrollment timing also gives Precision BioSciences a several-month lead over Crispr Therapeutics, which expects to enroll the first patient in a phase 1/2 clinical trial for the same indication in the first half of 2019. Meanwhile, Editas Medicine recently partnered with BlueRock Therapeutics to build an allogeneic immunotherapy platform, but it's far from the clinic.

Precision BioSciences expects to file an investigational new drug (IND) application for a second allogeneic CAR-T drug candidate in late 2019 (Crispr Therapeutics has an identical program in the wings), followed by applications for two more programs in the same pipeline in 2020. The business also expects to file an IND for its first in vivo program, for hepatitis B, with partner Gilead Sciences in 2020.

A gene-editing stock to watch

Investors interested in the potential of gene editing to significantly affect human healthcare might want to give Precision BioSciences a closer look. The business owns a proprietary platform that avoids some of the primary concerns with CRISPR gene editing. And although ARCUS gene editing shares one key disadvantage with CRISPR, the company strategically focused initial clinical programs on allogeneic immunotherapies, which should give it a leg up in the competitive -- and potentially lucrative -- race. Throw in a unique pipeline in agricultural applications and sprinkle in the fact the company is flush with cash, and the $680 million gene-editing upstart might be worth the wait for long-term investors.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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