Risky biotechnology start-ups that soared in recent years can't catch a break in 2022. Beam Therapeutics (NASDAQ:BEAM) recently signed a major research deal with Pfizer (NYSE:PFE) that could be worth up to $1.35 billion, and hardly anyone seemed to notice.

This was clearly great news for Beam Therapeutics, but a stock market scorned for clinical-stage biotech stocks didn't respond the way anyone familiar with the company would have expected. Instead of surging higher in response to the Pfizer deal, Beam Therapeutics stock actually fell nearly 2% on the day of the announcement.

Nearly all biotech stocks are in the doghouse lately and it looks like the market may have missed something here. Let's look closer to see if Beam Therapeutics is a smart buy at the moment.

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Over the past few years, Pfizer has watched its peers experiment with CRISPR-based gene editing techniques without making any significant investments. Beam Therapeutics' base-editing technology, though, really got the big pharma company's attention.

Instead of removing and replacing entire sections of genetic material like Intellia, andCRISPR Therapeutics (NASDAQ:CRSP), Beam Therapeutics is pioneering a more precise method called base editing. This involves altering just one letter of genetic material at a time, which is a lot more useful than it might seem. Around half of all known genetic variations associated with diseases are caused by single-point mutations.

Pfizer will give Beam Therapeutics a $300 million payment up front to discover new drug candidates aimed at three undisclosed targets that won't compete with Beam's existing programs. Beam's eligible for up to $1.05 billion in milestone payments if all three go on to become a commercial success.

Beam Therapeutics is eligible to receive royalties at an undisclosed percentage of global sales for each future program. Beam Therapeutics even has an option to co-develop and co-commercialize one of the future candidates for a larger cut of sales.

Beam Therapeutics finished September with $934 million in cash after operations burned through $329 million during the first nine months of the year. Pfizer's cash injection should raise the company's cash balance high enough to get through 2023 before it needs to tap investors for more.

There's no telling whether Pfizer will decide to license a candidate from Beam Therapeutics. If Pfizer drags its feet, the gene-editing start-up has some preclinical-stage programs of its own that might have a chance to impress investors before it's time to raise capital again.

The most advanced candidate in Beam's pipeline at the moment, BEAM-101 is an experimental gene therapy for the treatment of sickle cell disease. The company doesn't expect to begin enrolling patients into the first clinical trial with BEAM-101 until the second half of 2022.

With a recent market cap of $4.5 billion, there's already a lot of success for Beam's pipeline priced into the stock. Unfortunately, the road ahead could be a lot more challenging than investors are anticipating. Last year, Vertex Pharmaceuticals (NASDAQ:VRTX) and collaboration partner CRISPR Therapeutics reported highly encouraging results from a clinical trial with CTX001 that started way back in 2018.

CTX001 is an experimental gene therapy for sickle cell disease that's similar to BEAM-101 in that it encourages the production of fetal hemoglobin. If early interim data that Beam Therapeutics posts a couple of years from now doesn't appear competitive with CTX001, the stock could take a tumble. While this is a top gene-editing stock to watch, it's still a little too risky to buy right now.

This article represents the opinion of the writer, who may disagree with the official recommendation position of a Motley Fool premium advisory service. Were motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Is Beam Therapeutics a Good Stock to Buy Now? - The Motley Fool

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