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Crispr’s IPO doesn’t hit its target

by Robert WeismanThe Boston Globe
October 19th, 2016

Four pale hands suggestively wearing suits as their sleeves, hold small amounts of US dollar bills.





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Crispr Therapeutics Inc. stumbled in its initial public offering, more evidence that investors are cooling on the promising gene-editing technology known as CRISPR-Cas9.


One of three biotech companies using the technology locally to develop cures for genetic diseases, Crispr raised $56 million Tuesday in an IPO after the cutting the price and the number of shares offered. The stock closed essentially flat Wednesday on the first day of trading.


A pair of Cambridge-based rivals raised more capital in IPOs earlier this year. Editas Medicine, the first of the three to tap the public markets, raised $94 million in its IPO in February. Intellia Therapeutics Inc. raised $104 million in a May offering. But the shares of both companies have lost more than half their value from their opening-day prices.


“Timing is everything,” said Jim Weiss, senior portfolio manager at Chicago investment firm Segall Bryant & Hamill. “When you see a third IPO in the same space, there could be a perception by investors that this one is less attractive. At first people are gushing over the concept because it’s so revolutionary. Then they realize its going to take a long time and a lot of money to get products to market.”


Crispr Therapeutics said it sold 4 million common shares at $14 each Tuesday. In a securities filing earlier this month, it said it planned to offer 4.7 million shares at a range of $15 to $17 a share. But the company also raised an additional $35 million by selling 2.5 million shares at $14 apiece in a private placement to Bayer Global Investments, an existing shareholder.


Bayer AG, the parent company of Bayer Global Investments, struck a joint venture with Crispr Therapeutics in August to develop cures for blood disorders, blindness, and congenital heart disease based on the gene-editing technology. Crispr Therapeutics also has a partnership with Boston’s Vertex Pharmaceuticals Inc. to use the technology for cystic fibrosis treatments.


Shares of Crispr Therapeutics, which is based in Basel, Switzerland, but has its main research lab in Cambridge, edged up 9 cents to $14.09 in their market debut.


Stock watchers said the broader IPO market has slowed during the past month, partly due to uncertainties surrounding the upcoming US presidential election. Both major candidates have criticized drug makers and promised to rein in high prices for medicines.


“Investors fear that health care could be regulated more stringently than it has been, especially if [Democrat] Hillary Clinton wins,” said John Dorfman, founder and chairman of Dorfman Value Investments in Boston. “Investors don’t know what prices these companies will be able to charge for their products three, five, or seven years from now.”


Crispr Therapeutics representatives didn’t respond to a request for comment Wednesday.


Gene-editing had been seen as a hot niche market because it holds the potential to repair the genetic defects that cause thousands of diseases. Crispr-Cas9, a technology that has emerged only in the past five years, is considered the cheapest and most accurate tool to use in that editing.


Jonathan Gertler, chief executive and managing partner at Back Bay Life Science Advisors, said the pullback in gene-editing stocks is part of a broader market correction in the biotech sector. Sixty-five percent of the biotechs that went public from 2011 to 2015 are now trading below their opening-day prices while 20 percent are trading below the value of their cash balances, he said.


“The markets have pulled back,” Gertler said. “There’s just more scrutiny of all biotechs after the bull market of recent years. Gene editing is exceedingly promising and very exciting, but it’s hard to generate enthusiasm in the current market.”


Another factor he cited is patent litigation hanging over CRISPR-Cas9, the scientific tool at the heart of drug development efforts by Crispr Therapeutics, Editas, and Intellia.


The intellectual property behind the tool was developed in molecular biology labs at the Broad Institute of MIT and Harvard, the University of California Berkeley, and the University of Vienna. Editas has licensed its technology from the Broad, while Intellia and Crispr Therapeutics have licensed theirs from UC Berkeley and the University of Vienna. The outcome of a high-stakes case now before the US Patent and Trademark Office could influence the race to market.


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