At Cathie Wood’s ARK Innovation ETF (ARKK 1.13%) is full of risky companies that (supposedly) have what it takes to disrupt industries and reshape societies with their revolutionary products and services. Of course, betting on these future innovators often means investing in unprofitable or unproven companies, which is part of why the ETF has fallen 68% over the past year.
But bear markets don’t last forever, and in about five years, many of Wood’s picks will make history or disappear. If those odds don’t scare you, read on because there is a pair of growth stocks from Cathie Wood that hold promise for investors willing to take above-average risk.
1. CRISPR therapeutics
As one of the leading biotech companies developing drugs using CRISPR-Cas9 gene-editing technology, discovered about a decade ago, CRISPR therapeutics (CRSP -0.51%) is not an investment for the faint of heart. Its clinical-stage programs are intended to functionally treat or cure diseases like type 1 diabetes and even certain cancers. As if that weren’t enough, he’s also working on a handful of preclinical gene-editing programs that could theoretically cure inherited diseases like hemophilia in living people.
Getting these projects through clinical trials and out of the gate will take at least a few years, if that ever happens. It will also require a boatload of research and development (R&D) spending, which cost the biotech $438.6 million in 2021. But the upside potential for investors is huge as there is currently no way to process the root genetic causes of hereditary diseases. And CRISPR seems to have the resources it will need to accomplish its lofty ambitions.
In early 2023, it will submit a pair of regulatory approval filings to the Food and Drug Administration (FDA) for review. The drugs, developed in collaboration with Vertex Pharmaceuticals, are aimed at treating beta-thalassemia and sickle cell anemia, both of which are inherited blood disorders. If either is approved, it will drive revenue over the next two years. More importantly, the sales will bolster the company’s $1.9 billion in cash and cash equivalents.
Investing today means gaining massive upside exposure via the possibility of two short-term approvals. Yet the real treasure will be further afield, from programs wholly owned by CRISPR, because it won’t need to share the proceeds of its successes with a collaborator. Nevertheless, investors should beware of the high risk of unpredictable clinical trial failures.
2. Intellia Therapeutics
Therapeutic Intellia (NTLA -1.78%) is another gene-editing stock that is a pioneer in drugs made using CRISPR-Cas9 technology, among others. Its pipeline is decidedly early stage, with two clinical programs studying gene editing of living people to permanently cure or dramatically improve their inherited diseases and two clinical programs for drugs made with extensive use of gene editing.
Its pair of potentially curative gene-editing candidates intended to alter the genetic makeup of living patients makes it the world leader in such therapies. It’s also a big part of why Intellia is a bit more risky than even CRISPR Therapeutics; there are no drugs approved for sale that can permanently rewrite people’s genomes.
Regulators are sure to carefully scrutinize its clinical results, especially when it comes to concerns such as safety. Either way, Intellia is aiming to treat or cure a rare condition called transthyretin amyloidosis (ATTR) with one of its candidates, so it’s likely to have the market all to itself if it succeeds in clinical.
Intellia will likely need to raise additional funds or find a collaborator if it wants to launch its programs (or at least close to regulatory submission) within the next five years. Biotech’s $828 million in cash will not be enough to fund several years of spending at the same rate as its past 12-month spending of more than $480 million. To make up for this shortfall, the company raised an additional $300 million with a stock offering at the end of 2022.
An additional risk is that such a sum may not be enough to see the company through the next five years, so shareholders could once again see their shares diluted. Nevertheless, Intellia currently has the resources it needs in the short term to work on its clinical programs and survive long enough to show its potential. Just like with CRISPR Therapeutics, if this company can manage a gain, its value will multiply – so if you’re willing to make a speculative investment, this might be a good fit for you.
Alex Carchidi has no position in the stocks mentioned. The Motley Fool holds positions and recommends CRISPR Therapeutics, Intellia Therapeutics and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.