Meet the Beaten-Down Biotech Stock Cathie Wood Loves That Wall Street Says May Soar 50%

Cathie Wood and Wall Street don’t always agree. The chief executive officer of Ark Invest has been more bullish on Tesla, for example, than the general analyst community and has taken advantage of declines when they occur to add to her position — and the stock remains the biggest position in her flagship Ark Innovation ETF. Wood identifies possible game-changing companies and technologies early on and sticks with them throughout their stories, and sometimes this involves experiencing bumps along the road.

The famous investor buys these players when they’re cheap, aiming to reap the rewards of explosive growth once they’ve reached their goals. This strategy has helped Ark Innovation to climb more than 100% over the past three years, outpacing the S&P 500.

But sometimes, this top investor who focuses on innovation does see eye-to-eye with analysts, and the perfect example of this involves a beaten-down biotech stock that Wood has been buying regularly these days. Wall Street expects this player to soar 50% within the coming 12 months. Let’s meet this stock with potential for enormous gains.

Adding to the position over time

Wood most recently added to her holdings of this company, in both Ark Innovation and her healthcare fund, on Nov. 26, but she’s purchased shares on many occasions over the past several months. This biotech is CRISPR Therapeutics (CRSP +0.32%), a specialist in the field of gene editing.

The famous investor purchased 1,964 shares for Ark Innovation and 649 shares for Ark Genomic Revolution ETF. In the Innovation fund, CRISPR Therapeutics now has a 5.3% weight and is the fifth-biggest position out of 49 holdings. It’s the second-biggest position in the Genomic fund, with an 8.1% weight. So, clearly, this is an important bet for Wood.

Why are Wood and Wall Street so excited about this biotech company? CRISPR Therapeutics reached a key milestone a couple of years ago when it won approval for its very first product — blood disorder treatment, Casgevy.

The moment was significant because it showed that CRISPR Therapeutics’ cutting-edge technology works, and the approval suggested that regulators were amenable to approving this sort of product. The biotech corrects faulty genes responsible for disease through CRISPR gene editing — this involves cutting DNA at a particular spot and triggering a natural repair process.

Why this is a game changer

What makes this technique game-changing is that repairing faulty genes may represent a functional cure — so one treatment could result in a patient remaining disease-free.

The rollout of such a technology, however, takes time as it involves several steps that unfold over a period of months — from cell collection to the delivery of treatment designed specifically for each patient. And this means revenue generation requires time, too. But bigger biotech partner Vertex Pharmaceuticals recently said it expects Casgevy to generate more than $100 million this year and post “significant growth” next year. Though CRISPR Therapeutics takes a smaller portion of profit — 40% — than Vertex, this represents a major step for the company and a route to growth.

Meanwhile, CRISPR Therapeutics is advancing other candidates, based on this proven gene editing technique, through clinical trials in areas from oncology to cardiovascular health. The company recently announced positive phase 1 data for CTX310, with the investigational treatment meaningfully lowering triglycerides and low-density lipoprotein (LDL) levels. (High levels of these increase the risk of heart attack and stroke.) The candidate now will enter a phase 1b study in severe hypertriglyceridemia and mixed dyslipidemia, conditions involving high triglyceride and LDL levels.

Double-digit declines

Now, let’s consider CRISPR Therapeutics’ stock price. The stock has dropped 17% since the approval of Casgevy in late 2023, and it’s plummeted more than 55% over the past five years. Prior to those declines, investors may have been betting on the success of the company’s technology, then locked in profits early without staying around for the next chapters of the story.

But, considering the Casgevy approval, revenue on the way, and positive study results from other candidates, the CRISPR Therapeutics story is likely far from over — and the best parts, involving earnings growth, should be ahead. Cathie Wood has increased her bet on this, taking advantage of the dip, and growth investors looking for biotech innovators may want to follow.