Can This Experimental Gene Therapy Be Enough to Lift Editas Medicine in the Future?

Editas Medicine (EDIT 1.72%) sits at the bleeding edge of biotech's hottest field, gene editing to treat inherited diseases. The company has shifted its focus to a product it is testing for severe sickle cell disease, an affliction that disproportionately affects African Americans, and another blood disease, beta thalassemia.

The company achieves this through a technology known as CRISPR: Clustered, Regularly Interspaced, Short Palindromic Repeats. Using it, scientists can alter a person's defective genes that are responsible for terrible disorders like sickle cell. The field has attracted a lot of attention and money over the past quarter century but has seen several high-profile failures as well.

Future of promise, present of losses and layoffs

Investors won't be interested in Editas for the sake of current profits when it continually shows net losses, nor of dividends that it doesn't even offer, but rather for the promise of future discoveries. In 2022, the company's net loss attributable to common stockholders was $220.4 million, or $3.21 per share, compared to $192.5 million, or $2.85 per share, in 2021.

Analysts expect similar losses this year, averaging $3.02 in earnings per share (EPS). In 2024, the analysts foresee losses averaging $2.90 in EPS. In January, the company said it was laying off 20% of its workforce to save money. The employees who lost their jobs were presumably working on programs the company said it is discontinuing to develop genetic therapies for inherited retinal disease and solid tumors, although it is looking for partners for further research in these fields.  

For future development, beyond EDIT-301, Editas is focusing on in vivo gene therapy products. The National Institutes of Health notes that this "is a strategy in which genetic material usually in the form of DNA, is applied to modify the genetic repertoire of target cells for therapeutic goals." The company is especially focused on altering hematopoietic stem cells in this way to treat genetic blood cell diseases. All of these products are in the pre-clinical (animal) testing phases.

Genetic therapy for sickle-cell anemia

Much will depend on the outcome of ongoing clinical trials of Editas's EDIT-301 compound for severe sickle cell disease.

Early-stage clinical trials on human volunteers are always small, but even more so when it comes to gene therapy. Last year, the company finished dosing the first two patients with EDIT-301, releasing "positive safety and efficacy data" from them, "suggesting clinical proof-of-concept" in December. Editas is now beginning to administer EDIT-301 to more patients in its Phase 1/2 RUBY trial, aiming to reach 20 patients by the end of 2023. In the middle of the year, the company plans to present a clinical update on the study.

If successful, the product could then undergo a Phase 3 clinical trial, and the company could then seek approval from the U.S. Food and Drug Administration, perhaps two or more years down the road, although clinical timelines are notoriously difficult to predict and the agency could end up sending the company a "complete response letter" instead of approving the therapy, necessitating more clinical trials. One recently approved genetic therapy, CSL's Hemgenix for hemophilia B, got the green light from the FDA in November, based on data from a Phase 3 clinical trial that had been going on since at least 2018.

The worldwide market for sickle-cell disease treatment is large. According to Fortune Business Insights, it totaled $1.7 billion in 2021, $2.2 billion last year, and will reach $8.7 billion in 2029. If Editas's treatment is approved, it could potentially take up a significant share of that even if the indication is limited to the severe form of the disease, since the gene therapy addresses the root cause of the disorder by correcting the natural genetic error that causes it.

In the best-known form of sickle cell disease, sickle cell anemia, some of a person's red blood cells have the form of sickles or crescent moons instead of being round, which can slow or block the person's blood flow. "There's no cure for most people with sickle cell anemia," the Mayo Clinic notes. "Treatments can relieve pain and help prevent complications associated with the disease."

The same compound Editas is testing for sickle cell disease, EDIT-301, is also in early-stage clinical trials for a different blood disorder, transfusion-dependent beta thalassemia; the first patient was scheduled to receive the first dose by the end of March. Patients with a severe form of that disease require blood transfusions every three or four weeks. The worldwide market for this disease is smaller, totaling $411.8 million in 2021, rising to $698.3 million in 2028, according to Coherent Market Insights.

Can Editas survive until its sickle cell disease treatment reaches the market?

In a February conference call to discuss Editas's 2022 results, President and CEO Gilmore O'Neill said in response to a question about the RUBY trial, "That is going to generate a lot of very important clinical data." Whether the trial has enough patients to satisfy regulators depends on discussions with the FDA and other agencies, he said.

Senior Vice President and Chief Medical Officer Baisong Mei said, "We are very confident and pleased with the RUBY trial's progress."

The question is whether Editas can get enough funding to keep going until its sickle cell and beta thalassemia treatment reaches market, which is still years off and a highly uncertain event. The company does still have $297 million in working capital on hand, as of the end of 2022, but that's a sharp drop from $460 million at the end of 2021, which may explain why the company chose to narrow its focus and lay off employees early this year. If the company's shift to manage expenses while making progress proves successful, the gene therapy could be fuel for its future. So investing in Editas appears to be a risky but potentially high-reward proposition.