Why Verve Therapeutics Stock Crushed It This Week

What happened

Therapeutic Verve (VERV -5.06%), a clinical-stage gene-editing company focused on cardiovascular disease, saw its shares soar this week by 17.1%, according to data from S&P Global Intelligence. Biotech stock surged this week for three main reasons:

  1. Verve shares have soared since Vertex Pharmaceuticals (VRTX -3.28%) entered into a strategic collaboration and licensing agreement with the biotech for an undisclosed liver disease on July 18, 2022. Vertex reportedly made an upfront cash payment of $25 million and agreed to purchase 1,519,756 common shares of Verve priced at $23.03 per share in this liver disease collaboration.
  2. On July 12, Verve announced that the first patient had been dosed in a Phase 1 trial for its lead gene-editing candidate, VERVE-101, in patients with heterozygous familial hypercholesterolemia, an inherited disease that causes dangerously high levels of “bad” cholesterol.
  3. On Thursday, investment banking firm Stifel Nicolaus upgraded Verve shares to buy pending.

So what

Verve shares are up 150% since July 1, 2022. As a result, the clinical-stage biotech now sports an eye-catching market cap of $2.35 billion.

This is an exceptionally strong sign that Wall Street is a true supporter of Verve’s new gene-editing platform. Most clinical-stage biotechs, after all, have lost a staggering amount of value this year, with dozens of former mid-cap companies transforming into small-cap entities in 2022.

Now what

Can Verve’s shares still rise in the short term? Wall Street thinks so. Biotechnology’s 12-month average forward price target implies an additional upside potential of 37% from current levels. That being said, growth-oriented investors should not overlook the downside risk associated with this stock.

The bottom line is that Verve’s gene-editing platform has yet to be clinically validated. Early shareholders, in turn, may want to hold onto their original stance on the small side until the first batch of initial safety and efficacy data becomes available next year.

George Budwell has no position in the stocks mentioned. The Motley Fool fills positions and recommends Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.

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