We recently published a list of 10 Most Promising Gene Editing Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Pacific Biosciences of California (NASDAQ:PACB) stands against other most promising gene editing stocks to buy according to hedge funds.
The pharmaceutical industry remains a hub of patent innovation, driven by evolving treatment paradigms, unmet medical needs, and the rising influence of technologies like pharmacogenomics, digital therapeutics, and artificial intelligence. At the forefront of modern biotechnology are gene therapy and gene editing. Gene therapies correct genetic defects by introducing new genetic material at the cellular level, often by adding a functioning copy of a gene.
Genome editing began making its way into clinical trials in the mid-2000s. In 2014, CRISPR and CRISPR-associated (Cas) proteins were still primarily research tools generating excitement in academic circles. Their medical potential was evident, though the path to real-world treatments seemed distant. Six years later, after a Nobel Prize, CRISPR technology is now being tested in over 20 clinical trials.
See also: 10 Most Promising Biotech Stocks According to Hedge Funds.
The cell and gene therapy sector has faced significant investment challenges since the boom years of 2020 and 2021. However, signs of recovery are emerging, according to data shared by the Alliance for Regenerative Medicine at the 2024 Cell & Gene Meeting on the Mesa. Investment in the first half of 2024 reached $10.9 billion, surpassing 2019’s total of $9.8 billion. Nevertheless, these figures are still far below the $19.9 billion and $22.7 billion invested in 2020 and 2021, respectively, with funding levels dropping to $12.6 billion in 2022 and $11.7 billion in 2023. ARM CEO Tim Hunt acknowledged that the industry has been “very challenging” for the past few years. Hunt highlighted that most of the nearly $11 billion raised in early 2024 went to “later-stage companies” with advanced clinical trials and human data. Morgan Stanley also noted that the Federal Reserve’s September interest rate cut could have positive implications for riskier assets, like cell and gene therapy, aligning with broader trends in biotech.
However, Mizuho Securities analyst Jared Holz cautioned that those expecting a rapid surge in fundraising and IPOs due to the rate cut might be disappointed, suggesting that a gold rush is unlikely:
“I don’t see the floodgates opening necessarily, because the last time that we were kicking out 50 or more IPOs a year, the broader sector was negatively impacted by that.”
“Be careful what you wish for. Too many IPOs in this space I think is actually a very, very meaningful negative for publicly traded equities.”
That said, the industry is still poised for significant growth. According to a report by Precedence Research, the global genome editing market, valued at $7.98 billion in 2023, is expected to grow to $9.33 billion in 2024 and reach around $38.19 billion by 2033. This represents a robust CAGR of 16.95% over the forecast period from 2024 to 2033. The market’s expansion is fueled by the increasing prevalence of conditions such as Down syndrome and cystic fibrosis globally. Moreover, the ex-vivo segment led the market in 2023, driven by the rising trend of gene harvesting for treating blood disorders and advancements in CAR-T cell therapies. Adding on to this, ongoing research into ex-vivo gene therapies for conditions like fatty liver disease and obesity is further accelerating market growth.
Our Methodology
For our list of the 10 most promising gene editing stocks, we began by examining companies in the sector through ETF holdings and media reports. We then filtered out notable stocks that had an average analyst upside of at least 10% and positive analyst ratings. From this pool, we selected the top companies with the highest number of hedge fund investors, based on Insider Monkey’s database of 912 hedge funds as of the end of Q2 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A molecular biologist, carefully studying the reagents under a microscope.
Pacific Biosciences of California, Inc. (NASDAQ:PACB)
Number of Hedge Fund Holders: 18
Average Upside: 54.55%
Pacific Biosciences of California (NASDAQ:PACB) is a biotech company that specializes in advanced technologies crucial for various genomic applications, including RNA sequencing, epigenetics, target sequencing, and whole genome sequencing, among others. The company has also developed an innovative enrichment method for targeted SMRT Sequencing on the PacBio Sequel System, making use of the CRISPR-Cas9 system. This technique eliminates the need for PCR amplification, enabling more efficient sequencing. Combined with SMRT Sequencing’s long reads, high consensus accuracy, and even coverage, this method offers the sequencing of specific genomic regions with precision.
The company faced a tough first half of 2024, reporting second-quarter revenue of $36 million, which fell short of expectations. That said, its consumable revenue grew 24% year-over-year. As part of a strategic restructuring plan, Pacific Biosciences of California (NASDAQ:PACB) aims to cut non-GAAP operating expenses by over $75 million annually, steering the company toward the lower end of its full-year revenue target of $170 million to $200 million.
Earlier in late August, Scotiabank revised its outlook on PACB, lowering the price target from $8 to $7 while maintaining a Sector Outperform rating. The adjustment reflects more conservative revenue projections for 2024 and 2025, as the company faces slower recovery from market constraints on capital spending. Despite these short-term challenges, the bank remains optimistic about Pacific Biosciences’ future, driven by the potential of its HiFi sequencing technology and the growing adoption of its Revio system.
In the second quarter of 2024, 18 out of 912 hedge funds tracked by Insider Monkey held shares of Pacific Biosciences, with ARK Investment Management, led by Catherine D. Wood, being the largest shareholder with a $45.5 million stake.
Overall, PACB ranks 10th on our list of most promising gene editing stocks to buy according to hedge funds. While we acknowledge the potential of PACB, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PACB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
