Meet the beaten-down biotech stock Cathie Wood loves that could rise more than 65% according to Wall Street

Cathie Wood, head of Ark Invest, is known for buying shares in innovators at the start of their growth story and holding them for the long term. The idea is to get in with these players at a bargain price and then benefit as they launch products and their sales gain momentum. It takes time, but patient investors could make a big profit if they follow Wood’s strategy – and buy a few of their favorite stocks.

In recent weeks, Wood has added to one of her key holdings, a stock that has lost about 20% this year. This particular player is the second largest holding in Wood’s healthcare fund and is among the top 10 holdings in her flagship fund Ark Innovation Fund. The company received its first product approval late last year, proving the effectiveness of its potentially groundbreaking technology.

Meet the beaten-down biotech stock that Wood loves and that Wall Street says could rise more than 65% in the next 12 months.

Cathie Wood’s strategy

But first, let’s delve a little deeper into Cathie Wood’s strategy. As mentioned, this top investor looks for companies that are developing technologies today that could be transformative in the future.

For example, Ark Innovation’s largest positions are in the electric vehicle giant Tesla and cryptocurrency exchanges Coinbase Global. These companies already generate large revenues, but still have a lot of room to run given the potential growth of their industries.

And when it comes to healthcare stocks, Wood picks stocks from her peak that could revolutionize patients’ lives Twist Bioscience – a manufacturer of DNA products – too Recursive pharmaceuticals – a company that aims to “industrialize” drug discovery through the use of hardware, software and data. These and other healthcare companies, if they achieve their goals, could provide growth over time – and investors who got in early could stand to benefit the most.

Now let’s get to know the biotech stock that both Wood and Wall Street believe can rise: a gene editing company CRISPR therapeutics (CRSP 0.65%). This company demonstrated the strength of its technology last year when it received approval for its drug to treat blood disorders, Casgevy. This was the world’s first regulatory approval for a therapy based on CRISPR gene editing. This technique involves cutting the DNA at a specific location to allow for a natural repair process.

The Casgevy launch

CRISPR Therapeutics has partnered with a major biotech company Vertex Pharmaceuticals on Casgevy, and the companies began rolling out the therapy this year. So far, 45 treatment centers have been activated and 40 patients have started treatment. The rollout of this therapy to treat beta-thalassemia and sickle cell anemia is slower than, say, a pill because the treatment involves multiple steps – from collecting stem cells to taking Casgevy – and the process takes months.

All of this means that revenue growth will also take time. And in the partnership with CRISPR Therapeutics, Vertex receives 60% of the profits. Still, this is an excellent deal for the smaller biotech company as it allows the company to leverage Vertex’s commercial infrastructure and experience – a big plus, especially given the complexity of a gene editing product compared to a simple pill. And Vertex is also responsible for 60% of the program costs.

But that time spent generating revenue, along with CRISPR Therapeutics’ 54% gain over the last year, may be two factors that have investors thinking twice before investing in the stock this year. Wood saw this as an opportunity to strengthen her position. And as mentioned, Wall Street predicts the stock will rise sharply from today’s levels in the coming months.

Upcoming Catalysts for CRISPR Therapeutics

Catalysts could include progress in the launch of Casgevy and updates to the company’s exciting pipeline – based on its now proven gene editing therapy. The company is currently conducting clinical trials for its CAR-T candidates – which involve transforming T cells – in oncology and systemic lupus erythematosus (SLE), and is also studying a gene editing candidate for the treatment of type 1 -Diabetes.

CRISPR Therapeutics’ later products could be groundbreaking as gene editing leads to functional cures for certain diseases. This is the case with Casgevy, which is a one-time treatment for patients.

All of this means that Casgevy could be just the beginning of CRISPR Therapeutics’ growth story, making now a good time to follow Cathie Wood into this exciting biotech stock.

Adria Cimino holds positions at Tesla and Vertex Pharmaceuticals. The Motley Fool has positions in and recommends CRISPR Therapeutics, Coinbase Global, Tesla, Twist Bioscience, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.