Gene-editing specialist Editas Medicine (EDIT -2.43%) has had a challenging 2022, even compared to the struggling stock market. The company's shares are down 35% this year and nearly 60% over the past 12 months. If the company can turn things around, its recent struggles merely represent an opportunity to get in on a discount.
Before pressing the buy button, however, let's consider whether Editas Medicine has what it takes to rebound from its woes.
Why is Editas Medicine struggling?
Difficult market and economic conditions marked by high inflation, supply chain issues, and geopolitical tensions unquestionably contributed to Editas Medicine's recent decline. But in fairness, the company has problems of its own. Even without going too deeply into the workings of Editas Medicine, it is a clinical-stage company, meaning it currently has no products on the market. It also does not generate much revenue and is consistently unprofitable.
In our current environment, it is not surprising that speculative companies of this sort are getting hammered. Other clinical-stage, gene-editing companies -- such as CRISPR Therapeutics, bluebird bio, and Intellia Therapeutics -- have suffered more or less the same fate. To make matters worse for Editas, none of its candidates have yet made it to a late-stage clinical trial. Furthermore, the company's progress in one of its most advanced programs, EDIT-101, hit a bit of a snag last year.
EDIT-101 is a potential therapy for a rare eye disorder called Leber congenital amaurosis (LCA) 10. It is part of the family of LCA illnesses that typically affect the retina and cause various visual impairments. Although EDIT-101 seemed safe when Editas Medicine reported interim results from a phase 1/2 clinical trial in September, efficacy results were less impressive. LCA10 adult patients in the low-dose cohort of the study did not seem to make any meaningful improvements, although those in the mid-dose cohort did.
The good news is that it is far too early to give up on EDIT-101. Editas will run more clinical trials, particularly in the mid- and high-dose cohorts. In April, it announced that it had started treating pediatric patients in the mid-dose cohort.
Still, Editas Medicine doesn't seem to be performing as well as some of its gene-editing peers in the market. CRISPR Therapeutics and its partner Vertex Pharmaceuticals plan to submit regulatory applications by year end for their joint programs, CTX001, as a potential treatment for sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT).
Bluebird looks on the verge of earning regulatory approval in the U.S. for two of its key gene-editing therapies. Meanwhile, Editas Medicine is unlikely to launch any product on the market anytime soon. Assuming it starts a phase 3 clinical trial for EDIT-101 in early 2023, it would likely take at least two years for EDIT-101 to make it to the market -- as long as it doesn't run into safety or efficacy issues.
In the meantime, Editas Medicine will likley have to resort to issuing new shares to raise funds, thereby diluting existing shareholders. It ended the first quarter with $566.4 million in cash and cash equivalents, which management said would be enough for the company to fund its operating expenses and capital expenditures until 2024. By comparison, Editas had $619.9 million in cash and cash equivalents as of the end of 2021.
The company may need more money if EDIT-101 goes far enough, perhaps to help fund late-stage clinical trials or for potential commercialization efforts. All of these uncertainties are hard to swallow.
Risk-averse investors should look elsewhere
Editas has other promising programs in the works, one of which is EDIT-301, a potential therapy for SCD and TDT. EDIT-301 received the Orphan Drug Designation from the U.S. Food and Drug Administration (FDA) in May as a potential TDT treatment. The agency reserves this honor for medicines that target rare diseases, and it comes with various financial benefits.
Editas Medicine is also developing a new, gene-editing technology called SLEEK. According to the company, this technology could unlock innovative therapies for various illnesses, including some forms of cancer. With that said, EDIT-301 is still early in its development process, as is Editas' SLEEK technology. As things stand, the company's shares look risky, although it also boasts massive upside potential if everything goes according to plan.
Considering that rarely happens, only patient investors comfortable with heightened risk and volatility should consider investing in Editas Medicine right now. For others, there are plenty of safer biotech stocks to consider.
