Here's Why CRISPR Therapeutics AG Fell 14.7% in June

What happened

Shares of CRISPR Therapeutics (NASDAQ:CRSP) dropped almost 15% last month after Wall Street caught wind of results from two studies suggesting that a certain CRISPR tool may be linked to cancer. The gene-editing tool itself doesn't cause the mutation, but instead activates one already present in a cell that can result in genetic instability. Nonetheless, the studies -- one of which was available as a preprint for almost one year -- gave investors pause.

That's hardly surprising, considering CRISPR stocks have been cruising higher in 2018. For instance, from the beginning of the year to the end of May, CRISPR Therapeutics stock gained 360%. Shares are up 290% year to date through the first week of July.

Image source: Getty Images.

So what

While investors shouldn't dismiss the latest CRISPR controversy, it's important to note two things. First, the two studies focused on one of two DNA repair mechanisms (what stitches a genome up after being cut) within cells. The lead drug candidates from CRISPR Therapeutics and those from the other two pioneers of the technology for medical applications don't rely on the DNA repair mechanism studied, so it shouldn't slow them down in the near term. Other, earlier-stage programs may need to navigate the new risk, however.

Second, more research is needed to more fully understand the long-term clinical risk. Will it be impossible to utilize current CRISPR tools leaning on the DNA repair mechanism at the center of the studies? Can they be altered to circumvent the obstacle? Companies and academic researchers will need more time to sort everything out.

Now what

CRISPR Therapeutics has zoomed ahead of its gene-editing peers this year in the stock market and clinic. By the end of 2018 it could have investigational new drug (IND) applications filed for two drug candidates, whereas its next-closest competitor will have just one. That swift progress has earned it a higher market valuation for now, but as events of the last month demonstrated, investors shouldn't forget that it's still very early for the technology.