Ark Invest chief Cathie Wood is known for scooping up shares of innovators early in their growth stories and holding on for the long term. The idea is to get in on these players for a bargain price, and then benefit as they launch products and revenue gains momentum. This takes time, but patient investors could score a major win by following Wood's strategy -- and by picking up a couple of her favorite stocks.
Over the past several weeks, Wood has added to one of her key positions, a stock that's lost about 20% this year. This particular player is the second-biggest holding in Wood's healthcare fund and among the top 10 positions in her flagship Ark Innovation fund. The company late last year scored its first product approval and proved the efficacy of its potentially game-changing technology.
Meet the beaten-down biotech that Wood loves and Wall Street says may soar more than 65% over the coming 12 months.
Image source: Getty Images.
Cathie Wood's strategy
First, though, let's delve a little farther into Cathie Wood's strategy. As mentioned, this top investor looks for companies developing technologies today that could be transformational down the road.
For example, Ark Innovation's biggest positions are in electric vehicle giant Tesla and cryptocurrency exchange Coinbase Global. These companies already generate major revenue but have much room to run, considering potential growth to come in their industries.
And when it comes to healthcare stocks, Wood goes for those that may revolutionize patients' lives -- from her top holding Twist Bioscience -- a maker of DNA products -- to Recursion Pharmaceuticals -- a company that aims to "industrialize" drug discovery by leveraging hardware, software, and data. These and other healthcare companies, if they reach their goals, could deliver growth over time -- and investors who got in on the story early may benefit the most.
Now, let's meet the biotech stock that both Wood and Wall Street think can soar: gene editing company CRISPR Therapeutics (CRSP -2.56%). This player proved the strength of its technology last year when it won approval for its blood disorders treatment, Casgevy. This was the world's first-ever regulatory nod for a therapy based on CRISPR gene editing. This technique involves the cutting of DNA at a certain location to allow a natural repair process to take over.
The Casgevy launch
CRISPR Therapeutics partnered with big biotech player Vertex Pharmaceuticals on Casgevy, and the companies started rolling out the therapy this year. So far, 45 treatment centers have been activated, and 40 patients have begun the treatment process. Rollout for this therapy to treat beta thalassemia and sickle cell disease is slower than the launch of a pill, for example, because treatment involves several steps -- from collecting stem cells to receiving Casgevy -- and the process takes months.
All this means revenue growth will take time too. And in CRISPR Therapeutics' partnership, Vertex takes 60% of the profit. Still, this is an excellent agreement for the smaller biotech, as it allows the company to leverage Vertex's commercial infrastructure and experience -- a huge plus, especially considering the complexity of a gene-editing product versus a simple pill. And Vertex also is responsible for 60% of the program costs.
But this amount of time to generate revenue, along with CRISPR Therapeutics' 54% gain last year, may be two elements that have made investors think twice before investing in the stock this year. Wood saw this as an opportunity to reinforce her position. And, as mentioned, Wall Street predicts the stock from today's levels will roar higher in the months to come.
Upcoming catalysts for CRISPR Therapeutics
Catalysts may include progress on the Casgevy launch and updates from the company's exciting pipeline -- based on its now-proven gene-editing therapy. The company has clinical trials ongoing for its CAR T candidates -- they involve transforming T cells -- in oncology and systemic lupus erythematosus (SLE), and it's also studying a gene-editing candidate for the treatment of type 1 diabetes.
CRISPR Therapeutics' eventual products could be game changers because the editing of genes results in functional cures for specific diseases. This is the case of Casgevy, which is a one-time treatment for patients.
All this means Casgevy could be just the beginning of CRISPR Therapeutics' growth story, making now a great time to follow Cathie Wood into this exciting biotech stock.
