Editas Medicine (NASDAQ:EDIT) stock represents investment in pioneering CRISPR gene editing medicine.
It is best to approach a potential investment in Editas Medicine by first understanding the fundamental technology. Biotech is an emerging field, and it’s important to not go into an investment of this sort blindly.
Once we understand the underlying way in which the company operates, we can understand whether it is deserving of investment dollars or not.
Fundamentals of CRISPR Gene Editing
CRISPR stands for clustered regularly interspaced short palindromic repeats. It’s a recently developed technology that allows repeating patterns in the DNA to be directly edited, revised and removed.
CRISPR gene editing has both the scientific and investment communities interested in its application. The benefit to humanity in potentially reversing and eliminating genetic disease can hardly be overstated. There is a clear moral argument to be discussed, but the financial benefits are clear.
Grand View Research valued the market at $1.5 billion in 2020. That same report anticipates compound annual growth rates of 21.7% in the period from 2021 to 2028. If that does occur, market revenues will reach $7.4 billion in 2028.
CRISPR technology allows highly targeted gene editing, and Editas Medicine is one of the leading firms in the space. The question, then, is how the company will capitalize on the opportunity and if it indeed has a chance to do so.
Editas Medicine Pipeline
Editas Medicine’s website notes that the company is developing two types of gene edited medicine: ex vivo and in vivo. Ex vivo gene editing is done outside of the body while in vivo editing is done inside the body.
Editas Medicine currently has eight projects, which includes those two categories of gene editing medicine and cellular therapy machines. The company is attempting to commercialize therapies against ocular diseases, blood disorders including sickle cell disease, and cancer.
Of the eight projects Editas Medicine is currently developing, the two furthest along are only in early clinical stages.
We can only guess at the timeline that will be required for any commercialization to occur, if at all. That the lengthy drug development process is fraught with failure is no secret. It will be several years in the best case scenario. It could take even longer, and there’s the ever present risk that any of these therapies don’t pass FDA muster.
The risk is evident. An investment in EDIT stock is speculative by nature. With that out of the way the next question becomes its fundamental soundness.
Sound at Least Into 2023
The company’s latest corporate presentation is quick to point out that it has sufficient capital to sustain operations into 2023.
On the one hand, investors may take comfort in the fact that the company won’t represent a going concern for at least a few years. But on the other hand, it points to what Editas Medicine represents, which is a biotech relying on hope.
According to its most recent earnings release, Editas Medicine’s cash and equivalents were $723 million, compared to $512 million from the previous sequential quarter.
The company relies on developmental partnerships for the majority of the relatively low revenues that it does generate. It recorded $6.5 million in revenues for the first quarter of this year.
Meanwhile it incurred $63.4 million in R&D and administrative expenses. For all intents and purposes, EDIT stock is a normal biotech stock. It incurs significant expenses, barely records any revenue, but represents a great deal of potential.
I’m not entirely sure what made share prices rise in December and early July. But I can say that there is no fundamental reason that investors should be excited about Editas Medicine currently as an investment. Hopefully it is successful in bringing revolutionary medicine for diseases that were previously intractable. That would be amazing. For now, though, we know very little about how to judge the odds of its ability to do so.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
