What happened

Shares of gene-editing company Editas Medicine (EDIT 2.40%) rose by a healthy 11.5% over the course of January, according to data provided by S&P Global Market Intelligence. This big monthly gain stemmed from a definitive agreement between Editas and privately held Shoreline Biosciences that was announced on January 19, 2023.

Per the terms of the agreement, Shoreline will gain access to Editas' proprietary SLEEK (SeLection by Essential-gene Exon Knock-in) and AsCas12a gene-editing technologies via a licensing deal. Furthermore, Shoreline will buy Editas' preclinical gene-edited induced pluripotent stem cell- (iPSC) derived natural killer cell (iNK) programs and related manufacturing technologies. The specific financial terms of the deal weren't disclosed at the time of the announcement, however.

So what

Earlier in January, Editas announced a reorganization plan centering around the prioritization of its lead blood disorder candidate, EDIT-301. As part of the plan, the biotech also announced a 20% workforce reduction and the culling of some of its earlier-stage assets. In light of those moves, this licensing and asset sale transaction with Shoreline wasn't totally unexpected at the time of its announcement.

As things stand now, Editas ought to have a cash runway that extends through 2025. That's key because EDIT-301 is several years away from producing data that might lead to a regulatory filing. In fact, the novel gene-edited therapy is currently slated to yield midstage sickle cell disease data in late 2025, according to clinicaltrials.gov. Editas, as a result, has a long way to go before it can start funding operations through commercial sales.

Now what

Is Editas stock worth buying after this double-digit uptick in January?

Although the competitive landscape for treatments for rare blood disorders like sickle cell disease is widely expected to be unfavorable for newcomers in the second half of the decade, Wall Street analysts still think EDIT-301 might be able to hit blockbuster status in this setting. The key will be how the therapy's safety and efficacy results compare to those of other commercially available products.

So, in a sense, Editas' stock does seem undervalued relative to the company's long-term prospects.

Having said that, however, there are scores of beaten-down biotech stocks right now, and many of them offer a slew of nearer-term catalysts, meaning we might expect them to grow sooner. Editas, therefore, might be best viewed as an intriguing watch-list candidate for the time being.