Just when it seemed like the market was on its way to new heights, 2023 showed us it wasn't done flinging uncertainty at our expectations. This summer, the benchmark S&P 500 index climbed to within a few percentage points of its all-time high, only to tank again. The fresh outbreak of war in the Middle East isn't helping either.
It might seem like there's no end to market pressure on growth stocks, but rest assured, a long bull run that carries us to new heights is coming. When it does, Caribou Biosciences(NASDAQ: CRBU) could be one that you'll wish you had bought on the dip. The average investment bank price target on the stock suggests it can shoot up more than 400% from recent prices.
While there is a heap of potential upside for Caribou Biosciences, this stock isn't appropriate for everyone. Here are a few important things to know before risking any of your own hard-earned money.
Why Caribou Biosciences stock could skyrocket
Shares of Caribou spiked this summer after the company reported positive clinical trial results for an off-the-shelf cellular cancer therapy it's developing called CB-010. A single dose of the treatment shrank tumors for an astounding 15 out of 16 advanced-stage lymphoma patients.
The results are especially impressive for a couple of reasons. While there are several approved treatments that target the CD19 protein, they're manufactured in single batches from each patient's own stem cells. Caribou's CB-010 is the first off-the-shelf cellular therapy directed against CD19 that doesn't include a gene for programmed cell death protein 1 (PD-1).
In years past, allogenic cellular cancer therapies have fizzled out because they generally haven't been as effective as their single-batch predecessors. It looks like Caribou's new twist on an old theme is working. The lymphoma patients treated so far have aggressive lymphomas that relapsed after, or failed to respond to, at least two previous lines of treatment. At the six-month mark, 44% of this difficult-to-treat group of patients was in complete remission.
The stock has tumbled 44% since its post-data drop spike in July. At recent prices, it sports a tiny little $401 million market cap. Commercial-stage biotech stocks generally trade at mid-single-digit multiples of sales. It's still early, but CB-010 could generate more than $1 billion in annual revenue if it continues producing impressive clinical trial results.
Know the risks
While shares of Caribou Biosciences could soon rocket higher on more positive data for CB-010, further success is a long way from guaranteed. Caribou isn't the only company developing allogenic cell-based cancer therapies. The stock is down about 46% from its peak this summer because investors aren't sure the positive data it's reported is truly competitive.
In June, we learned that five out of 12 lymphoma patients treated with ALLO-501 from Allogene(NASDAQ: ALLO) were still in complete remission six months after treatment. Caribou's data looks slightly better, but it's important to remember we're comparing different patient populations that were quite small to begin with. Any conclusions drawn from such comparisons should be taken with a big grain of salt.
Caribou's therapy candidates are intended to be once-and-done therapies. Without repeat business, the company will have to set a seven-figure list price that insurers might not accept. Earlier this year, Gilead Sciences(NASDAQ: GILD) published five-year follow-up results from the Zuma-1 trial with Yescarta, an autologous cellular cancer therapy.
An astounding 30% of Zuma-1 participants were still in complete remission more than five years after receiving a single round of treatment with Yescarta. Caribou's allogenic approach has advantages, but they'll all be irrelevant if long-term outcomes can't compete with autologous treatments that the medical community is already familiar with.
Caribou Biosciences finished June with $292.5 million in cash after operations lost about $64 million in the first six months of 2023. With a second candidate in clinical trials, CB-011, and a third on the way, CB-012, operating losses will most likely accelerate. There's no telling when the company might have an approved treatment capable of generating recurring revenue, but it will be a few years at best. This is a great stock to buy, but only if your tolerance for risk is sky-high.
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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Caribou Biosciences and Gilead Sciences. The Motley Fool has a disclosure policy.
