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Cathie Wood believes in the potential of gene editing. She stated last December that the “biggest upside surprises are going to come from the genomic space.”
It’s not surprising that Wood’s ARK Genomic Revolution ETF (NYSEMKT:ARKG) and ARK Innovation ETF (NYSEMKT:ARKK) have invested heavily in several gene-editing stocks. However, some of those stocks appear to be viewed more favorably than others. Here’s why Wood’s ETFs are buying two gene-editing stocks but selling another.
Selling before the news?
The ARK Innovation ETF recently sold some of its shares of Editas Medicine (NASDAQ:EDIT). Has Editas made a misstep that’s undermined investors’ confidence over the last few weeks? Nope.
There’s an old investing adage to “buy the rumor and sell the news.” In this case, perhaps Wood is doing a little selling before the news. Editas is scheduled to present data on Sept. 29 from its phase 1/2 clinical study evaluating CRISPR gene-editing therapy EDIT-101 in treating rare genetic eye disorder Leber congenital amaurosis 10.
As would be expected, Editas hasn’t given any clear hints about how good its data might be. On the company’s second-quarter conference call, Chief Medical Officer Lisa Michaels said that Editas was “very happy with how this trial [of EDIT-101] has progressed during this year.” In the press release announcing the upcoming presentation, Michaels stated that the company was eager to share its “progress toward developing a transformative gene editing medicine for people living with CEP290-related retinal degeneration.”
It doesn’t seem like Wood is anticipating really bad news with Editas’ data, though. While the ARK Innovation ETF has sold some of its position in the biotech, it still owns more than 4 million shares of Editas. The ARK Genomic Revolution ETF owns more than 9.5 million shares of the gene-editing pioneer.
Buying on great expectations
The ARK Genomic Revolution ETF has been scooping up additional shares of CRISPR Therapeutics (NASDAQ:CRSP) and Beam Therapeutics (NASDAQ:BEAM) in recent weeks. So has the ARK Innovation ETF.
You might say that Wood has gone dumpster diving with these purchases of CRISPR Therapeutics. The stock is more than 40% below its highs from earlier this year. However, Wood wouldn’t buy CRISPR Therapeutics if she didn’t have great expectations for the company’s pipeline.
CRISPR Therapeutics and its big partner, Vertex Pharmaceuticals, are evaluating gene-editing therapy CTX001 in treating rare blood disorders beta-thalassemia and sickle cell disease. The companies think that they could be on track to file for regulatory approvals for CTX001 as soon as the second half of 2023.
In addition, CRISPR Therapeutics is moving forward with early clinical testing of three other gene-editing cancer cell therapy candidates. The biotech plans to report data from an ongoing phase 1 study of CTX110 in treating relapsed or refractory B-cell malignancies later this year.
Beam Therapeutics isn’t nearly as far along in development as CRISPR Therapeutics or Editas Medicine. The company doesn’t have any programs in clinical testing yet. However, that could change soon: Beam expects to file an Investigational New Drug application to begin an early-stage clinical study of BEAM-101 in treating beta-thalassemia and sickle cell disease in 2021.
Wood likes the long-term potential of Beam’s base editing approach. The company’s technology uses a CRISPR protein combined with a base-editing enzyme. This method offers more precise editing of genes than other CRISPR gene-editing therapies.
A gene-editing basket
Is Wood smart to sell some shares of Editas and buy more shares CRISPR Therapeutics and Beam? That remains to be seen. However, there’s one strategy she’s using that does seem to make a lot of sense.
Wood’s ETFs aren’t attempting to pick just one winner in the gene-editing space. Instead, the funds hold positions in several biotechs with promising gene-editing programs. In addition to Editas, CRISPR Therapeutics, and Beam, the ARK Genomic Revolution ETF owns shares in Intellia Therapeutics, Caribou Biosciences, and Cellectis. The ARK Innovation ETF also owns a position in Intellia.
Probably not every gene-editing stock will achieve tremendous commercial success. But there’s a pretty good chance that at least some of them will.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.