On Oct. 19, the early-stage gene-editing biotech Beam Therapeutics (BEAM 1.88%) announced it would be slashing its workforce by 100 employees, or around 20% of its total, while also refocusing its pipeline on the programs it assumes have the best chance of eventually becoming commercialized. Now, its shares are down 20% in the last 30 days as a result.

But that hasn't stopped portfolio managers like Cathie Wood from continuing to buy its shares even in the days following the announcement. So the question is, is this business in retreat permanently, or just regrouping to succeed in the long haul? Let's examine both possibilities to see if it's still worth buying for the right kind of investor. 

Consider the silver linings

There are a few things to understand about Beam's scale-down. First, the company's leaders likely anticipate that raising more funds in the near future will be more difficult than it was in the past. 

As of the second quarter, it had just over $1 billion in cash, short-term investments, and equivalents, and it also had more than $177 million in debt. Without any chances of getting a product onto the market in the next couple of years, and with a somewhat meaty debt load already, taking out more debt will thus probably be more expensive than it was before. It's feeling pressure to economize on research and development (R&D), the lifeblood of the business. Still, it's better to make hard decisions about future expenditures now rather than later when it'll have less room to maneuver financially.

Its trailing-12-month operating expenses are roughly $462 million. Before the cuts, it thus had approximately enough money to last through 2024 and into the start of 2025. So it now has another year of runway. With the lower overhead afforded by layoffs and pipeline cuts, management says that Beam now has the resources to keep the lights on through the start of 2026. That's more time to advance pipeline programs, find collaborators to assist with the costs of drug development, and also potentially to license gene-editing assets that other biopharmas might be interested in using.

The pipeline sacrifices aren't necessarily bad ones either. Its gene-editing program to treat beta thalassemia is now de-prioritized. Reading between the lines, the door is now open for it to eventually be terminated. Given that the gene-therapy market for beta thalassemia is filling up with competitors like Bluebird Bio and CRISPR Therapeutics, dropping out of the race is not a bad decision.

Instead, its candidates for treating sickle cell disease (SCD) and alpha-1 antitrypsin deficiency (AATD) will be Beam's focus. It's also continuing to advance with its program for glycogen storage disease 1a (GSD1a), which it wants to move into early-stage clinical trials, and its early-stage clinical program for T-cell acute lymphoblastic leukemia (T-ALL) will remain ongoing too. Only its SCD and T-ALL programs are in clinical stage for now. 

Tread even more carefully with this stock now

It's favorable for Beam to admit that it probably won't be able to compete in the market for near-curative beta thalassemia gene therapies. Its early-stage program was never going to catch up to the therapies already on the market nor the ones approaching their shot at regulatory approval. The trouble is, the situation is much the same for its sickle cell disease candidate. 

The same cast of competitors is again quite far ahead and likely to commercialize their SCD programs within a year, and Beam's is still in phase 1/2. The risk of the biotech arriving very late to a market where most of the eligible patients are already cured by a competing product is still very high. But now it's visibly worried about its finances in a way that it wasn't before even if it isn't actually low on money yet.

Therefore, in one sense trimming the pipeline somewhat reduced the risks associated with this stock, though plenty of serious risks still remain. In another sense, it now has even fewer clinical-stage programs, all of which are early stage. That means it has fewer shots on the goal in terms of chances to commercialize something down the line. And it might well run out of money before it has programs that are mature enough to even try. Three years simply won't be enough time to get its SCD or T-ALL programs done with their clinical trials, never mind through the likely lengthy regulatory-approval process with the Food and Drug Administration (FDA).

Nonetheless, the show will go on for at least a few more years, and with the right set of development partners or collaborations, Beam still has a fair shot at survival and eventual success. This is still a highly risky biotech investment which could see its shares sink much further. There is, however, a slim chance that it'll eventually be a winner for those who buy it now and hang in there through the tough times to come. Just recognize that there are many other pre-revenue biotechs with largely the same proposition.