The group of technologies that enable gene editing help scientists modify an organism's DNA. This field is very promising since it could help unlock successful and innovative therapies for various illnesses, including those with few (if any) current treatment options. That's why biotech investors would do well to pay attention to companies that focus on gene editing.

Investing in the right one could turn out to bring rich returns down the road. Let's look at one of the more prominent pure-play gene-editing stocks on the market: Editas Medicine (NASDAQ:EDIT). This company recently took a nosedive following a disappointing clinical update. Is now a good time to purchase its shares?

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Mixed results from a clinical trial

One of Editas Medicine's most advanced pipeline candidates is EDIT-101. It is an investigational gene-editing treatment for an eye disorder called Leber congenital amaurosis 10 (LCA10). This rare illness causes visual impairment (and sometimes blindness) in patients from early childhood. Editas Medicine released some data from an ongoing phase 1/2 clinical trial for EDIT-101 in LCA10 patients in late September. And while there were some encouraging signs, the results were mixed. Fortunately, EDIT-101 seems safe, as it has thus far been well tolerated by patients, with mostly mild adverse events.

The results pertaining to efficacy were less impressive. Editas Medicine released efficacy data for five subjects in two cohorts: a low-dose cohort (two patients) and a mid-dose cohort (three patients); all patients had at least three months of follow-up. Editas Medicine reported that only the participants in the mid-dose cohort -- two out of the three, to be exact -- showed some improvement as measured by various tests of vision. While it is far too early to give up on EDIT-101, investors clearly would have liked better results -- that's why Editas Medicine's shares dropped after it released this data.

Still, outcomes in the mid-dose cohort could get better as the follow-up period lengthens, and participants in the high-dose group could also demonstrate real improvement. 

Person sitting at a desk looking at downward-bound graph on a computer.

Image source: Getty Images.

Why Editas Medicine can bounce back

Editas Medicine is a clinical-stage biotech, so it comes with a fair share of risks. Since it does not currently generate any product sales, its performance on the stock market will depend on clinical and regulatory developments. Investors should expect a wild ride, as Editas Medicine's shares are likely to be highly volatile. But for those willing to stomach the volatility, this biotech could be an excellent option.

For one, the company does have a couple of other pipeline candidates, including EDIT-301 -- a potential treatment for sickle cell disease and beta-thalassemia, both of which are rare blood-related disorders. Editas Medicine expects to dose its first patient in a clinical trial of EDIT-301 as a treatment for sickle cell disease by the end of the year. There's also EDIT-102, a potential therapy for Usher syndrome 2a (a rare condition that affects vision and hearing).

EDIT-102 has yet to enter human clinical trials. In the meantime, Editas Medicine is continuing to innovate. In August, the company presented data on a new gene-editing technology dubbed SLEEK, which stands for Selection by Essential-Gene Exon Knock-In. The company believes this breakthrough could "enable the development of next generation cell therapeutics for cancer and other serious diseases."

It is also important to note that funding isn't a big issue for Editas Medicine, at least for now. As of June 30, the company has $698.1 million in cash and cash equivalents. For a clinical-stage biotech of this size, that will last for some time. Management thinks its current pile of money will enable the company to fund its operations well into 2023. With a market cap of just $2.58 billion, Editas Medicine boasts significant upside potential.

The company's average price target of $52.21 is a lot higher than its current share price of $37.17. I believe it is worth it for patient investors to consider adding shares of this biotech stock. However, it would be best to initiate a small position first and progressively add more as Editas Medicine earns more clinical wins. 

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.