Citi Sees 60% Upside in CRISPR Therapeutics. Here's What Has to Go Right.

It's been a disappointing past few years for patient shareholders of CRISPR Therapeutics (NASDAQ: CRSP). Despite the company passing multiple major milestones during this stretch, this biopharma/biotechnology stock's gone nowhere since falling back from its early 2021 peak.

Namely, in late 2023, the U.S. Food and Drug Administration approved CRISPR's Casgevy as a treatment for sickle cell disease, making it one of the nation's very first gene-editing-based therapies approved for any use. Patient uptake began shortly thereafter.

Analysts aren't deterred though, including Citi's Yigal Nochomovitz, who recently raised his price target on CRSPR from $82 to $88 per share on growing demand for the aforementioned Casgevy. That's 60% above the stock's present price.

The thing is, what needs to happen to pump this stock's price up to that lofty level is certainly possible. Here's a closer look.

It's in the name

CRISPR Therapeutics' claim to fame -- as well as its drug pipeline and portfolio -- is rooted in the ability to repair damaged DNA by replacing it with a correct sequence of genetic information -- a discovery for which co-founder Emmanuelle Charpentier was awarded a Nobel Prize in Chemistry in 2020.

The underlying science is in the name, in fact. CRISPR -- an acronym for "clustered regularly interspaced short palindromic repeats" -- is a genetic sequence that can be identified and then spliced into by an RNA-guided DNA endonuclease protein called Cas9, allowing for the replacement of faulty genetic code in a strand of DNA.

Although the company's initial target was the relatively low-hanging fruit of sickle cell disease, the idea holds promise as a treatment for any number of genetics-driven disease. To this end, the company is working on several other therapies.

Right now, however, the market's pricing CRSPR shares based on a relatively small but important number of inputs.

Three things that must go right for Citi's CRISPR Therapeutics price target

It's not all that matters, to be clear. But, for the time being anyway, investors are expectantly looking at these three factors.

1. Reported Casgevy revenue must be satisfactory

CRISPR Therapeutics hasn't reported much Casgevy revenue yet, but it is accruing. It's just going to take time for it to make it to the company's top line in earnest. That's because Casgevy treatments are complex, and it can take a long while to administer and complete a treatment regimen.

Indeed, since each patient's treatment is custom-created from a sample of their own blood, it can take up to a year to deliver the final dosing administered at an authorized treatment center operated by CRISPR Therapeutics' treatment partner, Vertex Pharmaceuticals (NASDAQ: VRTX). Never even mind the length of time it might take an insurer to authorize the $2.2 million cost per Casgevy treatment. And even beyond that, any payments and insurance reimbursements are first processed by Vertex, which takes a cut.

Meaningful revenue is coming, though. In its second-quarter investor update posted in early August, CRISPR Therapeutics confirmed that the custom-created drug generated $76 million in total revenue over three months, a chunk of which is eventually headed to CRISPR's actual top line.

The exact amounts and time frames are still in question; both are moving targets. For what it's worth, though, the analyst community is looking for this year's collaboration and grant-led top line of $40.8 million to soar to $156.6 million next year, once Casgevy is finally driving real, tangible revenue for the company. Anything that puts the company anywhere on track for anything near that projected 2027 number will be just fine.

2. Encouraging progress from CTX310

Casgevy isn't the only drug under CRISPR's umbrella, even if it's the only one approved and on the market right now. CTX340 is a promising answer to refractory hypertension, for instance, while CTX460 showed efficacy as a potential treatment for problematic liver proteins, a condition known as alpha-1 antitrypsin deficiency, or AATD.

Image source: Getty Images.

Perhaps the one drug currently in the company's developmental pipeline with the potential to really move the needle, though, is CTX310, for the treatment of the cardiovascular disease linked to liver-made proteins that help regulate blood lipid levels. Using the same gene-editing science that helped create Casgevy, CRISPR Therapeutics hopes the treatment will help reduce patients' genetically high cholesterol.

Although no specific update date has been set, CRISPR reported in August that it expects to post an update of CTX310's phase 1 clinical trials currently underway sometime before the end of the year. Given the obvious need for such a treatment (the global lipid-lowering drug market will be worth nearly $50 billion per year by 2035, according to Precedence Research), encouraging developmental progress on this front could help drive shares toward Citi's recently raised price target.

3. Proving a drug like zugo-cel can work

Finally, while an update on CTX310's progress could help make or break CRSPR stock in the foreseeable future, it's not the only drug in CRISPR Therapeutics' pipeline with the potential to spark bullish interest in this ticker. A chimeric antigen receptor T-cell-based investigational cancer therapy called zugocabtagene geleucel -- or Zugo-cel, for short (formerly CTX112) -- is a prospective game changer for the company as well. Just not for the reason you might think.

While effective oncology drugs' value is clear, that's not what makes zugo-cel so interesting. Rather, what merits attention here is the fact that this therapy is an allogeneic treatment. That just means while it's technically a gene-editing drug, it doesn't require a patient-specific sample to create a custom-built therapy. It simply needs a healthy starting sample from anyone to turn into a medicine that can be administered to everyone. This simpler process costs dramatically less to utilize than Casgevy's patient-specific treatment approach.

It's not just for cancer either. Although the company's using zugo-cel to address hematologic malignancies, it may hold even more promise as a treatment for a range of autoimmune diseases, including lupus, anemia, and systemic sclerosis.

The resulting upshot for the stock will largely depend on how well the market understands this allogeneic gene therapy approach is more flexible and cost-effective than Casgevy's ex-vivo approach that requires the extraction of a specific patient's stem cells.

Citigroup is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vertex Pharmaceuticals. The Motley Fool recommends CRISPR Therapeutics. The Motley Fool has a disclosure policy.