McCreath: High correlation between Ark Innovation and unprofitable tech stocks
Two Cathie Wood funds are back in the spotlight after adding about US$1 billion in market value on Monday following a promising advance in the field of gene editing.
Wood’s Ark Investment Management LLC is a top holder of companies operating in this area after the active investor made an early bet on Crispr Therapeutics AG, Intellia Therapeutics Inc. and Editas Medicine Inc.-- three companies using a technology for editing the human genome called Crispr. Ark is also the second largest holder in Beam Therapeutics Inc., another company working on fixing genetic mutations.
All four stocks rallied after Intellia and Regeneron Pharmaceuticals Inc. produced the first study of a Crispr treatment to alter genes inside the body, driving up the stocks of gene editing and other biotechs working with therapies around human DNA. The move marks a rebound for Editas and Crispr, as well as a pair of Wood’s actively managed exchange traded funds, which were hammered earlier this year as investors turned away from more speculative growth stocks to value safe havens.
The Ark Genomic Revolution ETF rose 3.3 per cent on Monday while the US$25 billion Ark Innovation ETF rallied 3.8 per cent into the close of trading in New York.
“This may sway the FDA to be more constructive toward running gene editing trials in the U.S.,” said Benjamin Burnett an analyst with Stifel. Intellia’s trial was also a good sign for Precision BioSciences Inc., he told clients in a research note, and the stock climbed 6.6 per cent.
Intellia led the gains, soaring 50 per cent to close at a record on Monday, while Crispr climbed 6.4 per cent. Beam jumped 16 per cent. Editas gained as much as 20 per cent before paring to a 5 per cent gain.
Sentiment driven gains for Editas are “unwarranted” Goldman Sachs analyst Madhu Kumar told clients saying he saw a lack of similarities between sell-rated Editas and buy-rated Intellia’s technologies. The bank raised the 12-month price target on Intellia to US$163 from US$115.
Meanwhile, Alnylam Pharmaceuticals Inc. which works on a medicine to treat transthyretin amyloidosis --the disease Intellia is trying to cure in its study -- dropped 5.2 per cent. Intellia is already hard at work on its next target, hereditary angioedema. BioCryst Pharmaceuticals Inc. and KalVista Pharmaceuticals Inc., companies working on treatments for that disease also tumbled.
“We believe this data will enter the history books, signifying that in vivo gene editing and one-time cures are possible,” Ark analyst Ali Urman wrote after Intellia’s update. “The only question remaining is will it be durable?”