Could Editas Medicine Become the Next CRISPR Therapeutics?

Editas Medicine (EDIT 1.92%) and CRISPR Therapeutics (CRSP 0.34%) share more than a few similarities despite being at different stages of the biotech lifecycle. Both companies are betting that their acumen with gene editing will enable them to make therapies that were impossible to conceive of just a few years ago, and they're both aiming for the same disease markets.

But as you may have heard, with the recent launch of its first gene therapy, called Casgevy, CRISPR Therapeutics is now a revenue-stage biotech, whereas Editas is still working on its first medicines in clinical trials. Could the smaller and earlier-stage business wow the market and drive significant returns for its shareholders like CRISPR Therapeutics did, or is it destined for the dustbin of once-promising biotechs?

CRISPR Therapeutics is a hard act to follow

For Editas to become the next CRISPR Therapeutics, it'll need to satisfy three conditions. First, it'll need to succeed in bringing one of its pipeline programs to the market after completing the clinical trials process and reporting data that satisfies regulators at the Food and Drug Administration (FDA) as well as elsewhere.

CRISPR's first success was with its gene therapy called Casgevy, which is currently approved in the U.S. to treat sickle cell disease (SCD) as well as transfusion-dependent beta-thalassemia (TDT). Editas is now in early-stage clinical trials with its candidate to treat those same conditions. At present, there's no telling if it will be able to commercialize that project, but there's nothing inherently preventing it.

Second, the company will need to find the resources or relationships required to advance its pipeline to maturity. For CRISPR Therapeutics, its collaborator Vertex Pharmaceuticals fit the bill, and the larger company chipped in significantly to cover the costs of development. Editas doesn't yet have any such collaborator on its most advanced programs, but it does have a slew of pre-clinical collaborations with Bristol Myers Squibb, so in principle, it could find other benefactors too.

In terms of its other resources, it has $350 million in cash, short-term investments, and equivalents. Management thinks that's sufficient to last for another two years from now into 2026. That's all well and good, but it'll almost certainly need to raise more money to commercialize its therapies. Still, raising money, perhaps by issuing more stock, is par for the course for most biotechs, so Editas' cash reserves are not a problem at the moment.

Finally, assuming the company finds the requisite resources and uses them to produce a new medicine that regulators are on board with approving for sale, Editas will need to compete against the other businesses in its markets. For CRISPR Therapeutics, there's one competitor in the SCD and TDT spaces, and it's Bluebird Bio.

CRISPR hasn't yet proven that its product is capable of outcompeting Bluebird's, and it might not. It's unlikely that it has any durable competitive advantages. But at least on paper, it has a solid chance, as it arrived in the SCD market at the same time as Bluebird, and its therapy, like Bluebird's, is thought to be curative or nearly curative.

Editas' chances will be slimmer even under the best of conditions. It probably won't even be ready to try to get permission to commercialize its TDT and SCD programs for years, if ever. Without data showing that its candidate is significantly cheaper to produce or otherwise superior in some way, it's hard to envision how it would gain market share upon approval. But on the bright side, it has plenty of time to develop such data.

Don't count on Editas experiencing the same trajectory

On the whole, it is technically possible that Editas will become the next CRISPR Therapeutics over the next three or four years. None of the obstacles it faces are impossible to navigate, and it will have the benefit of learning from the clinical and commercial experiences of its competitors as it advances. But the odds look long right now.

Aside from the future difficulties of trying to enter a pair of disease markets several years after its competitors have had time to become entrenched, its lack of a major gene therapy collaborator today makes its success far less likely.

It's practically a law of the biopharma universe that big pharmas gravitate to sign deals with biotechs that seem to have valuable technologies or promising pipeline assets. The earlier they ink those collaboration agreements, the better of a deal they get. Editas' roster of collaborators looks quite thin, which clashes with the company's narrative of it being at the forefront of gene editing tech.

Furthermore, whereas CRISPR Therapeutics had the benefit of hype during its earlier clinical-stage work, Editas doesn't. For whatever reason, sentiment about the stock has been consistently poorer than it was for CRISPR. That undermines the idea that positive clinical catalysts might send its stock upward and make shareholders richer.

Therefore, investors should not bet that Editas will follow the same path. If it succeeds, it'll be due to significantly changing its strategic positioning by way of intentional business development and focused research and development (R&D) activity. And until those changes occur, it's best to avoid buying the stock.