What happened

Shares of Editas Medicine (NASDAQ:EDIT) were skyrocketing 41.5% higher as of 11:57 a.m. EST on Monday. The company didn't announce any big news over the weekend or today, so why is the stock taking off? 

For one thing, it isn't just Editas that's performing well today. All of the biotech stocks with a focus on CRISPR gene editing have delivered solid gains. I suspect this surge stems at least in part from comments made late last week by Ark Investment Management CEO Cathie Wood. She stated in an interview with Bloomberg: "I would have to say the biggest upside surprises are going to come from the genomic space. That's because the convergence of DNA editing, artificial intelligence, and gene therapies, importantly CRISPR gene editing, is going to cure disease."

Editas is generating much higher gains today than the other leading CRISPR-focused biotech, CRISPR Therapeutics (NASDAQ:CRSP), though. That's probably due to a couple of factors. First, Editas has reported some great news in recent weeks, including filing a request with the U.S. Food and Drug Administration (FDA) to begin a phase 1/2 study of EDIT-301 in treating sickle cell disease. Second, Editas' short interest is a lot higher than its rival's short interest. We could be seeing a short squeeze in motion as short-sellers scramble to close their positions, driving Editas' shares higher in the process.

DNA with a light shining in the background

Image source: Getty Images.

So what

Huge jumps like Editas is delivering today are exciting. However, investors probably shouldn't become overly exuberant. Sometimes stocks can go down even more quickly than they go up.

But the prospects for Editas do appear to be brighter than they have been in a while. The company could have a winner with EDIT-301 if its clinical results ultimately look as good as its preclinical data. Editas' lead pipeline candidate, EDIT-101, also could prove to be a game-changer in treating Leber congenital amaurosis type 10 (LCA10), the leading cause of childhood blindness.

Now what

The important things to watch with Editas going forward are the results from its clinical studies. Editas has encountered some enrollment challenges with its phase 1/2 study of EDIT-101 due to the COVID-19 pandemic. The rollouts of new coronavirus vaccines could help alleviate those issues in the first half of 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re 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.