If you haven’t heard of CRISPR technology before, listen up. This potentially revolutionary technology enables scientists to essentially fix faulty genes. Such technology has been described as a medical miracle with transformative effects for countless diseases from blood diseases, genetic deafness, genetic blindness to neurological disorders.

However, to achieve this goal, companies have to fulfill multiple complex requirements. This includes: efficiently editing a wide range of mutations, reaching the site of the disease, precisely cutting the DNA, and achieving the right to repair. So which biotechs are paving the way?

Vertex Pharmaceuticals (VRTX)

For exposure to the CRISPR space without the risk, it’s worth checking out large-cap biotech Vertex. Symdeko, Vertex’s new-and-improved cystic fibrosis combo, is the company’s big money generator. But Vertex has also partnered with small-cap CRISPR Therapeutics (covered below) in the development of the promising CTX001 gene-editing therapy for β Thalassemia and Sickle Cell Disease. Given that this is a market of 360,000 births/ year, and the treatment could cost $450,000-$700,000 per patient, this could be a serious money-maker for both companies.

Currently CRSP and VRTX are splitting the R&D costs involved to develop this drug. The four-year deal involves Vertex paying CRSP $105 million—$75 million in cash, and $30 million via an equity investment. So where are we now? According to the company’s recent presentation, it expects to initiate Phase 1/2 clinical studies of CTX001 this year. This is from CRSP’s website:

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“As a company founded on innovative science, we’re excited to begin this collaboration with CRISPR, as it puts us at the forefront of what we believe may be a fundamental change in the future treatment of disease—using gene editing technologies to address the underlying genetic causes of many diseases,” Vertex’s CSO David Altshuler said in a statement back in 2015 when the deal began.

But this is just one pipeline in Vertex’s roster of robust offerings. And as far as Vertex is concerned, we could be just at the beginning of the upside story. This is according to top Oppenheimer analyst. He concedes that the stock looks expensive on various measures. But that’s missing the point. This is a company with immense potential.

Singh wrote: “We believe VRTX has the best sales/earnings momentum profile in large-cap biotechnology in 2017/20E and beyond. By 2020E, we should see a doubling of FY17 sales and a tripling of NON-GAAP EPS. By 2023E—depending on speed of triplet uptake—sales could quadruple and earnings sextuple.”

As a result, Singh reiterates his $190 price target (28% upside potential) on VRTX. But with his bullish analysis in mind, he adds “VRTX has potentially 30-50% upside to our current price target.” Note that our data ranks this analyst as an impressive #332 out of over 4,700 tracked analysts.

Overall, the Street shares Singh’s upbeat take on Vertex. This “Strong Buy” stock has received 10 recent bullish calls from the Street vs just 2 hold ratings. Given VRTX is currently trading at $149, the average analyst price target indicates 27% upside potential. You can click on the screenshot for further insights into the latest market activity on VRTX.

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CRISPR Therapeutics AG (CRSP)

Switzerland-based biotech CRISPR Therapeutics is focused on developing transformative medicines using its proprietary CRISPR/Cas9 gene-editing platform. This revolutionary platform allows for precise, direct changes to genomic DNA. According to the company “CRSP has licensed the foundational CRISPR/Cas9 patent estate for human therapeutic use from their scientific founder, Dr. Emmanuelle Charpentier, who co-invented the application of CRISPR/Cas9 for gene editing.”

Like Vertex, our data shows that CRSP boasts a ‘Strong Buy’ rating from the Street. In the last three months, this gene-editing pioneer has received five buy ratings and only 1 hold rating. Meanwhile the average analyst price target of $69 indicates big upside potential of 44%. Indeed, on May 8 Piper Jaffray’s reiterated his buy rating with a $60 price target. He is bullish on the stock as CRSP ended Q1 with $342 million in cash and critical clinical trials are on track for this year.

However top Oppenheimer analyst Leah R Cann is staying on the sidelines for now. She is taking a wait-and-see approach as “We do not anticipate CRISPR Therapeutics will have a commercial product prior to 2022 and therefore estimate that collaborative agreement payments will continue to be the primary contributor to revenue through 2022.” Note that Cann also concedes, “we acknowledge the possibility of upside to our estimates. CRISPR Therapeutics may also advance its programs more quickly than we have estimated.”

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Editas Medicine Inc (EDIT)

Outside the Vertex-CRISPR Therapeutics duo, we have another cutting-edge biotech, Editas Medicine. Editas, also still in the discovery phase, says, “We are working to translate the promise of genome editing into a broad class of genomic medicine that have the potential to transform lives.”

At the moment that translates into a diverse range of pipeline medicines including for eye diseases. Indeed, its LCA10 program (to treat a rare inherited eye disease) remains on track to file an IND (investigational new drug application) as soon as mid-2018.

Most notably, Editas has partnered with Celgene’s (CELG) Juno Therapeutics in gene editing T cells to treat cancer. The two biotechs billed this collaboration as a way to team up on CAR-T and gene technology. Juno is reengineering T cells into weapons to attack cancer while Editas’ CRISPR/Cas 9 technology performs the genetic surgery to redesign DNA.

“Editas’ disruptive genome editing technology may unlock the ability of CAR T and TCR technologies to address a much wider range of cancers,” said Juno CEO Hans Bishop in a statement. The collaboration, which started in 2015, saw Juno pay Editas $47 million upfront, with a further $690 million in milestone payments.

Five analysts in total have published ratings on the stock in the last three months, breaking down into 4 bullish and 1 neutral rating. These analysts are (on average) forecasting huge upside potential of 89%.

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