Editas Medicine (NASDAQ:EDIT) has been on a roller coaster ride this year. EDIT stock peaked early in the year at $90.58 on Jan. 8, but then tumbled to $31.29 on May 10. Since then, the gene-editing company stock rose to $72.94 on Sept. 2 only to immediately tumble again to $35.61 on Oct. 8. As of Oct. 18, it was up slightly from its trough at $38.38.
Part of the reason for this could be that its market capitalization is so high. As of Oct. 18, it was at $2.61 billion.
This is for a company that has yet to produce any kind of revenue. In fact, its research on a rare retinal degenerative disorder is still in Phase 1. That means it has a long way to go before any real bottom line can be available for shareholders.
In fact, for all intents and purposes, Editas is basically just a research and development (R&D) company on the cutting edge of gene therapy. In fact, after the recent results of its gene therapy candidate were deemed “inconclusive” by Morgan Stanley, the stock fell again.
Where Things Stand With Editas
Another issue overhanging the stock is that its management team is fairly new. In February, James Mullen, who had been Chairman since 2018, became the new CEO. This was after Cynthia Collins, the prior CEO, left the company. She had been brought in to replace the original CEO, Katrine Bosley, in 2019.
Moreover, the company has a new Chief Medical Officer as of November 2020 and a new Chief Scientific Officer as of June 2021. It’s almost as if the company is starting from scratch.
Additionally, the efficacy of the company’s leading gene-editing therapy for a rare eye disease is based on recent results with only five participants. Only two of these showed efficacy signals after a follow-up period of six months.
That is almost nothing to hang a $2.6 billion market value hat on. In fact, a Bloomberg opinion piece refers to this as a “stumble,” since it was the first human trial using CRISPR technology to directly edit DNA in a human patient.
In this case, the tech was used to research a rare eye disease called Leber congenital amaurosis 10 (LCA10). Here is what the Bloomberg piece said:
“A low dose given to two patients didn’t appear to be effective. And among four who got a larger dose, only one saw a substantial improvement in vision across multiple measurements.“
Why EDIT Stock Is So Expensive
As the article explains, Editas is one of five CRISPR-related stocks with huge valuations. The hope is that CRISPR-related therapy “makes DNA editing cheaper, simpler and more flexible.”
Essentially, using CRISPR gene-editing therapy will be a one-time treatment to cure a disease. In this case, the Editas treatment was meant to “snip out a mutation that prevents a gene from correctly making an essential protein in light-detecting eye cells.”
Outside of Editas, Intellia Therapeutics (NASDAQ:NTLA) posted Phase one results in June showing that patients with transthyretin (ATTR) amyloidosis — a liver disease caused by misfolding proteins — had efficacious results with CRISPR gene editing in humans. The technique used a different CRISPR application to deactivate a faulty gene in patients with a deadly inherited disease. The technique significantly reduced the presence of a harmful liver protein.
So when the Editas results appeared to be less efficacious — granted only in one patient out of five — the market tore down EDIT stock. Nevertheless, the article indicated there are positive signs from the Editas results:
“The treatment at least reached eye cells and had an effect on them, which is no easy feat. What’s more, the data come from an early point in the trial, so there’s still time for improvement.“
What to Do With EDIT Stock
At this point, there is virtually no way that someone can estimate what the value of EDIT stock could be in the long run. It’s almost as if this is a binary situation, where the stock will either crater or skyrocket based on future results of the CRISPR gene editing trial.
Therefore, for most investors, the best course of action is to wait until the stock appears to be an absolute bargain. It is still way too early to tell if the current price really reflects that situation.
However, those that enjoy a speculative bet might see EDIT stock is near a trough price. They may want to start to accumulate shares now before it moves up the roller coaster again.
On the date of publication, Mark R. Hake did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.