Can This Healthcare Stock Beat the Market?
While the broader market is struggling, Crystal Biotech (NASDAQ:KRYS) is performing relatively well. Shares of the gene-editing specialist are in the green this year. However, it’s been a shaky ride, and the next 10 months could lead to more twists and turns for Crystal Biotech. On the other hand, there are good reasons why the biotech can continue to deliver market-beating returns. Should investors bet on Crystal Biotech right now?
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Vyjuvek is moving forward
Crystal Biotech is currently a clinical-stage company with a focus on rare skin diseases. However, it has recently moved closer to launching a product in the market. In June, Crystal Biotech submitted an application to the US Food and Drug Administration (FDA) for VyjuVac, a potential gene-editing therapy for dystrophic epidermolysis bullosa (DEB).
This rare condition makes the skin fragile and makes it more vulnerable to injuries. A faulty gene causes DEB, and visualization addresses the cause of the disease at the genetic level. Vyjuvec produced strong results in clinical trials. In a study that enrolled 31 DEB patients with lesions treated by Vyjuvec, 71% and 67% achieved complete wound healing at three months and six months after treatment, respectively.
By comparison, only 20% of lesions treated with placebo achieved the same feat at three months and 22% at six months. In addition, investigators observed no serious adverse reactions during the trial and only a mild reaction. In other words, Vyjuvec has a solid safety and efficacy profile. According to Crystal Biotech, there may be a total of 9,000 DEB patients in the world based on its genetic prevalence.
This includes about 3,000 in the Americas and 3,000 in Europe. While this may not seem like a huge patient population, gene treatments are not known to be cheap. Crystal Biotech estimates that the DEB market represents an opportunity of over $500 million worldwide. The company plans to submit an application for Vyjuvac in Europe during the second half of the year.
What’s next for Crystal Biotech?
Although data from clinical trials looks promising, VyjuVac may run into unexpected regulatory problems. It is also necessary to consider the ability of the crystal for its operation. Smaller biotechs can often face serious problems as a result of funding issues. Crystal Biotech currently generates no revenue and is not profitable. The gene-editing specialist ended the first quarter with $269.3 million in cash and cash equivalents and an additional $165.3 million in short-term investments.
Given Crystal Biotech’s cash burn of approximately $24 million during the first quarter, its current cash balance seems sufficient to support its operations during the roughly 10 months that typically help the FDA make decisions on new drug applications. looks like. Funding for the biotech shouldn’t be too much of a problem, at least until regulators get an answer on ViewWeek.
However, Crystal Biotech may need to raise additional funds to support Vyjuvac’s commercialization efforts, assuming the therapy earns the green light. The company may resort to various forms of financing, especially since the approval of its lead candidate may result in a sharp increase in the share price; This is something smaller biotech companies often do. Crystal Biotech last issued fresh shares in November 2021.
Crystal Biotech has a lot riding on Viewpoint, whose approval will help validate the company’s platform. The biotech has several other pipeline candidates targeting other dermatological diseases. Revenue from Vyjuvac will help Crystal Biotech pour more money into research and development, and allow it to make even more progress with its other candidates.
What does this mean for investors? On the one hand, Crystal Biotech seems risky; If Vyjuvac fails to win over regulators, the company’s shares will fall off a cliff. On the other hand, the company’s prospects look bright. Even if Vyjuwake initially fails to gain approval, it may be due to technical and solvable issues.
Ultimately, bringing gene therapy to market looks reasonably likely – even if there are regulatory delays. This bodes well for the future of Crystal Biotech. While it’s hard to predict how the company will perform until a decision by the FDA, long-term investors may consider initiating a (short) position in this biotech stock.
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Prosper Junior Bakiny does not have a position in any of the stocks mentioned. The Motley Fool does not hold any positions in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed here are the views and opinions of the author and do not necessarily represent those of Nasdaq, Inc.