Homology Medicines Stock Forecast: When Jurassic Park was released in 1993, millions went to see it in theaters. They were mesmerized by the magnificent animals that had been brought back to life on the big screen.
With a simple film within a film, the movie gave a brief but effective lesson on the possibilities available through gene editing. Remember how the Jurassic Park scientists replaced missing sections of dinosaur genes with frog DNA?
Some considered the movie a glimpse into the future of science, and it seems they were absolutely right. Fast forward 25 years, and that future has arrived.
Researchers like those at Homology Medicines are on the cusp of successfully preventing and treating debilitating genetic conditions through gene editing and gene therapy.
An Overview of Gene Editing and Gene Therapy
Gene editing is a method of changing the genetic structure of cells by adding, removing, or altering genes at a specific location in the genome.
The most exciting development in this area has come from the testing of CRISPR-Cas9, a system that is faster, less expensive, and more accurate than previous techniques. However, Homology Medicines says it has something even better.
There have been breakthroughs in the use of gene editing to address diseases caused by a single gene, such as hemophilia, cystic fibrosis, and sickle cell disease. Scientists are also exploring the power of gene editing to address more complex conditions like heart disease and cancer.
Gene therapy is a bit trickier to manage, and the science hasn’t moved quite as quickly. Experiments are underway to determine how to effectively replace mutated genes with healthy copies, deactivate mutated genes that are malfunctioning, and integrate new genes into the body for the purpose of treating disease.
For the moment, because these types of therapy are so risky, they are only being explored in relation to serious diseases that have no cure.
Homology Medicines is focused on this area of research, and it has developed an enhanced gene editing and gene therapy platform. Some members of the scientific community are expecting Homology Medicines [NASDAQ: FIXX] methods to become the preferred treatments for certain rare diseases.
Investors know that any medical breakthrough is sure to bring profit, and Homology Medicines appears to be an attractive opportunity. Is Homology Medicines stock, in fact, a buy?
What Does Homology Medicines Do?
Homology Medicines [NASDAQ: FIXX] was founded in 2015 to explore the potential of a new gene editing method – specifically, a set of adeno-associated virus vectors that are derived from human hematopoietic stem cells (AAVHSCs).
This method has the potential to deliver genetic treatments through gene therapy. It may also successfully cure disease through nuclease-free gene editing by working with the body’s natural DNA repair process of homologous recombination.
The first disease in Homology’s line of fire is PKU, or Phenylketonuria. It’s a rare genetic condition that causes a build up of the amino acid phenylalanine. In the United States, infants are screened for PKU right away, and treatment begins almost immediately.
If left untreated or if the treatment is ineffective, children develop irreversible brain damage within their first few months of life.
Homology has the exclusive global license for its technology, and many members of the scientific community have shown interest in the system’s potential.
The company’s leadership team is comprised of experts in a variety of related fields of study, including President and CEO Arthur Tzianabos, Ph.D., who brings 25 years of biotech experience, and Chief Scientific Officer Albert Seymour, Ph.D., whose career includes 20 years of integrating human genetics with pharmaceutical research and development.
All of that looks good on paper, but how does it relate to generating value for shareholders? In other words, what is Homology Medicines stock forecast?
Is Homology Medicines Stock a Buy?
Biotechs often operate at a loss for years before suddenly generating massive profits. That’s the nature of the industry.
It takes a lot of resources to work through the type of research and development that leads to breakthrough therapies. Investors buy shares with the understanding that they won’t see profits right away. Instead, they are betting on the strength of the science to eventually lead to new treatments for disease.
Homology Medicines announced its third quarter results in November 2019. The per share loss was slightly more than predicted, coming in at ($0.67) per share versus the expected ($0.58) per share.
Year-over-year, the per-share loss has gone up, as compared to third quarter 2018’s ($0.40) per share.
The good news is that the company’s revenues were a bit higher than expected, totaling $0.44 million. This surpassed predictions by 17.60 percent, though it was substantially lower than third quarter 2018’s $0.85 million.
Overall, share prices dropped nearly 50 percent of their value from the beginning of 2019 until the end of the year.
When compared with the market gains, that seems like a significant issue. However, comparing biotech stocks to companies in other industries simply doesn’t work.
Instead, it’s smart to look at how the biotech industry as a whole is expected to perform. In the near-term, companies in the same category as Homology Medicines fall in the top 36 percent of growth industries. If Homology is successful in bringing a viable product to market, it will be a part of that growth story.
Investors have shown interest in the promise of Homology Medicines, but biotech is a complex industry. Any stock purchase comes with substantial risk, and Homology is no exception.
What are the Risks of Buying Homology Medicines?
The biggest concern with any biotech company is the high rate of failure once therapies begin human trials.
There have been many, many cases in which seemingly miracle treatments are unsuccessful in treating real-world patients.
Sometimes, the treatments simply don’t work as expected. Other times, the side effects or patient risks outweigh the benefits. Either way, bad news from a clinical trial can have a substantial negative impact on stock values.
Some investors choose to mitigate this risk by investing in larger biotech partners, rather than buying smaller biotech shares directly.
The larger companies have more diverse pipelines, so a single failure doesn’t result in a complete loss. Those interested in being a part of Homology Medicines’ potential success but prefer not to go all-in can buy shares in partner Novartis instead.
Homology Medicines Stock Forecast Summary
The bottom line is that investing in Homology Medicines – or really any biotech firm – is not for the faint of heart. True breakthrough therapies are rare. However, when they do happen, those who got on board early can see triple-digit gains in their investment.
If you can tolerate a roller coaster of stock gains and losses, and you are convinced that Homology’s science has promise, this stock is a buy.
If you need something a bit more stable, you may prefer a company that doesn’t have all its hopes pinned on a single scientific theory.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.