Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Shares of Editas Medicine and Beam Therapeutics Are Soaring Today

By Maxx Chatsko – Aug 6, 2020 at 1:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A rumored merger has investors excited, although details are scarce.

What happened

Shares of Editas Medicine (EDIT 0.66%) and Beam Therapeutics (BEAM 0.29%) rose as much as 23% and 29%, respectively, today after the pair were rumored to be considering a merger. Although investors shouldn't invest based on speculation, a merger would make sense on multiple fronts.

The duo already have an agreement in place to collaborate on genetic medicines, but the struggling pipeline of Editas Medicine could receive a significant boost from Beam Therapeutics. It would also allow Editas shareholders to avoid many of the technical pitfalls of first-generation CRISPR gene-editing tools, which have yet to be adequately reflected in stock prices. Of course, the flip side is that the merger doesn't make as much sense for Beam Therapeutics.

As of 12:50 p.m. EDT, both small-cap stocks had settled to gains of about 14%.

An arrow bouncing up shelves on a wall.

Image source: Getty Images.

So what

There are multiple reasons a merger makes sense. Consider that:

  • Both Editas Medicine and Beam Therapeutics can trace their roots to the Broad Institute. A combination would reduce the legal red tape for sharing and licensing intellectual property and could reduce financial burdens for internal and external licensing and royalty agreements.
  • As is often the case in genetic medicines, there's considerable overlap in the pipelines of Editas Medicine and Beam Therapeutics. Consolidating those efforts would allow for the best product candidates to move forward, rather than create unnecessary competition in a crowded field.
  • Although both companies loosely fall under the CRISPR umbrella, Editas Medicine is developing drug candidates based on CRISPR gene editing, whereas Beam Therapeutics is running with CRISPR base editing. The latter faces significantly reduced technical obstacles and is closer to an ideal genetic medicine platform. First-generation CRISPR gene-editing tools -- such as those wielded by Editas Medicine -- are almost certainly not the future of the field. A merger would avoid that risk for shareholders.

Now what

There's not much to the report that Editas Medicine and Beam Therapeutics are considering a merger. Only one digital publication mentions "chatter" without providing any follow-up details. The rumors are at least plausible given the ties to the Broad Institute and overlap of the scientific founders, but investors simply don't have much to go on. That said, a merger would make more sense for Editas Medicine than Beam Therapeutics, as the latter has a much stronger technical foundation to lean on for the long haul.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Editas Medicine. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Editas Medicine, Inc. Stock Quote
Editas Medicine, Inc.
EDIT
$12.24 (0.66%) $0.08
Beam Therapeutics Inc. Stock Quote
Beam Therapeutics Inc.
BEAM
$47.64 (0.29%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
326%
 
S&P 500 Returns
102%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.