Gene editing is one of the most revolutionary trends in modern medicine. The potential to swap out a person's genes to eliminate and prevent diseases is here, and investors are keenly looking at gene-editing stocks.
Data by ReportLinker shows that the gene-editing market is expected to grow from $5.3 billion this year to $10.6 billion by 2028, showing a compound annual growth rate of 15%.
Several gene-editing companies' shares are doing well. CRISPR Therapeutics is up nearly 5% this year, while Vertex Therapeutics is up more than 19%. Rocket Pharmaceuticals, while down more than 3% so far this year, is up more than 19% over the past month.
Editas Medicine (EDIT 1.92%), on the other hand, is down nearly 17% this year. Here are three reasons why Editas is a good buy now and one reason why it isn't.
Getting in early on a promising company
Editas' lead therapy to treat sickle cell disease (SCD) and transfusion-dependent beta thalassemia (TBT), EDIT-301 is behind exa-cel, the SCD and TBT therapy that Vertex and CRISPR have developed. EDIT-301 is still in phase 1 trials, while exa-cel is in phase 3 trials and is awaiting word whether it will be approved by the Food and Drug Administration (FDA).
That means there's more risk for Editas investors because there's less of a guarantee that EDIT-301 will be approved, and even if it is, the payoff for that approval is further away. There's also the concern that exa-cel's potential early-mover status will slow sales for EDIT-301 if that therapy is approved.
However, those concerns also mean that the stock is still trading at a much lower valuation than its potential, compared to CRISPR or Vertex. That's because the some of the possibilities of exa-cel have already been priced into the latter companies' stocks. In other words, Editas is a prime example of a high-risk, high-reward biotech stock at its current valuation.
Editas already has eight programs in its pipeline, though EDIT-301 is the company's only therapy in clinical trials at this point.
With Editas shares trading at only slightly above their 52-week low, the chance for a big payday is greater than would be expected for more established gene-editing companies because there's more potential upside.
Better science may win in the end
Editas uses AsCas12a gene editing, while many of its competitors in the gene-editing space are using Cas9 gene editing. The advantage to AsCas12a is that it can more specifically target genetic mutations that cause diseases without creating as many off-target effects. A second advantage is that AsCas12a editing doesn't require a patient's donor cells for therapies, but rather can create its own allogenic cells.
While Cas9-based editing has shown itself to be very efficient in single-gene knockout screens, it isn't as effective in multigene editing. AsCas12a editing allows easier processing to allow multigene editing from a single RNA endonuclease. This means that the method Editas uses for gene editing could be more useful for maladies that require multigene editing, such as certain types of cancer.
With Editas having no approved gene-editing therapies yet, no one knows how the regulatory process will pan out. Certainly, it is expected that any gene-editing therapy will face a higher degree of scrutiny from the FDA. The more specific nature of the AsCas12a gene editing should help Editas in that regard.
Analysts are high on the stock
Editas got a bump on Sept. 29 when Stifel analyst Dae Gon Ha increased his 12-month price target for Editas from $9 to $17 and upgraded his position on the biotech stock from hold to buy, saying investors haven't taken into account the progress and potential of EDIT-301. In general, analysts give Editas a 12-month price target that is nearly double the $7.33 it was trading at on Oct. 3, with the high price target being $30 and the average price target being $13.63.
Not enough cash to get to the finish line
As of the second quarter, Editas said it had $480 million in cash, enough to fund operations into the third quarter of 2025. However, neither EDIT-301 nor any of its other pipeline candidates are even in phase 2 trials, so it may take a lot longer than two years to get the company's first therapy approval from the FDA. In the meantime, the company lost $29.8 million in the quarter and had only $2.9 million in collaboration and research revenues in that period.
Of course, if Editas can show progress in its trials, it won't be difficult to find a pharmaceutical company that will be willing to partner with it, helping fund its efforts in return for future profits. The company already has collaboration agreements with Bristol Myers Squibb and Immatics for two early-stage oncology programs.
