It's been a few years since the average investor behaved as if no challenge was too tough for America's biopharmaceutical industry. In turn, shares of gene-editing startup Editas Medicine (EDIT 1.92%) have collapsed by about 88% over the past three years despite recent positive news regarding its experimental therapies and intellectual property.
Editas is driving its first CRISPR-based therapy toward commercialization. Following approval of a similar treatment from CRISPR Therapeutics and partner Vertex Pharmaceuticals in December, its chances of achieving commercialization appear better than ever.
Is Editas Medicine a good investment following the approval of the first CRISPR-based drug? Let's weigh its strengths against the challenges it faces to find out.
Reasons to buy Editas Medicine right now
Editas doesn't have any approved products to sell, but that could change in a couple of years. The company is still enrolling sickle cell disease (SCD) patients into studies with its lead candidate, reni-cel, a CRISPR-based gene therapy made from each patient's own stem cells.
A single infusion of reni-cel should lead to steady production of fetal hemoglobin for SCD patients, which keeps their red blood cells from becoming misshapen. Sickled blood cells can be a source of debilitating pain, but not following treatment with reni-cel. So far, all 10 patients treated with reni-cel in the Ruby trial are free from vaso-occlusive events, including the first two who were treated over a year ago.
Editas Medicine stock could get a big bump if patients remain event-free when the company presents further results from the Ruby study. Management expects to present those results around the middle of 2024 and again near the end of the year.
Treatment with reni-cel involves the removal of each patient's stem cells before they're genetically altered using CRISPR-based techniques. Later this year, Editas intends to show investors it can develop candidates that edit the genomes of stem cells while they're still in the body.
In December, the FDA approved Casgevy, an SCD treatment from CRISPR Therapeutics and Vertex Pharmaceuticals. There are a lot of ins and outs to CRISPR and intellectual property rights. In a nutshell, Editas is the only company with a license that allows it to market a product that edits human genes with CRISPR techniques.
Shortly after earning approval for Casgevy, Vertex Pharmaceuticals paid Editas Medicine $50 million up front for a nonexclusive license to use the gene-editing process the treatment relies on. There could be another $50 million up front on the way, plus up to $40 million annually through 2034, depending on the success of Casgevy's launch.
Without any products to sell, Editas is burning through cash. With payments from Vertex, though, the company doesn't expect to run out of cash until 2026.
Image source: Getty Images.
Reasons to remain cautious
Casgevy from CRISPR Therapeutics and Vertex Pharmaceuticals also helps SCD patients avoid vaso-occlusive events with remarkable results. That means sales expectations for reni-cel could come crashing down, along with Editas Medicine's stock price, if just one patient among 40 to be enrolled in the Ruby trial reports a vaso-occlusive event.
New candidates that edit genes in the body can't come fast enough for Editas Medicine. Now that there are already two gene therapies approved to treat a limited number of SCD patients, investors need to temper their expectations for future reni-cel sales.
Time to buy?
At recent prices, Editas Medicine has a $741 million market cap. That's lower than usual but probably still too rich for a company with just one clinical-stage program that won't send the FDA an application for at least a year.
It's probably best to steer clear of this stock until reni-cel is much closer to achieving commercialization.
