Over the past few years, investors have moved away from somewhat speculative and unprofitable companies to put their money into safer, steadier investments. Editas Medicine (EDIT -4.01%), a gene-editing-focused clinical-stage biotech, is firmly in the speculative camp, which is why its shares are down by 97% since early 2021.
The stock is trading for about $1.50 right now. However, its average price target of $3.38 (according to Yahoo! Finance) implies a potential upside of about 125%. Should investors scoop up the company's shares expecting them to soar?
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Editas Medicine's challenges
Developing and marketing gene-editing therapies is challenging, as Editas Medicine knows well. The company's previous leading program was called reni-cel. It was being tested as a potential treatment for two rare blood disorders: sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT).
Here is the problem: Ex vivo gene-editing therapies are complex to administer. The process requires collecting patients' cells, editing them, and reinserting them into the patients. Even going through the clinical trial phase for a treatment of this kind is more expensive than if it were a simple oral pill.
Though reni-cel was making progress and showing strong signs of efficacy with the patients who had received treatment, Editas Medicine decided to discontinue its development because it couldn't find a commercial partner with big pockets.
Even before that, though, Editas Medicine was fighting an uphill battle. Between 2022 and 2023, three gene-editing therapies were approved in the U.S.: Zynteglo, Lyfgenia, and Casgevy. Zynteglo and Lyfgenia treated TDT and SCD, respectively, while Casgevy targeted both. Editas Medicine's relatively slow progress with reni-cel didn't bode well with investors, considering there were already competing therapies on the market.
The company's decision to discontinue this program was the right one -- the move hardly makes the stock particularly attractive, but trying to push reni-cel toward commercialization despite its slow progress and the competitive landscape would have been prohibitively expensive.
Is there any hope for the stock?
Editas Medicine has decided to pivot toward developing in vivo gene-editing therapies. Unlike the ex vivo variety, these kinds are administered via injection into the body of therapeutic genes -- so there is no need to collect the patients' cells. Editas Medicine has partners for some of its in vivo programs. It is working on some medicines with Bristol Myers Squibb, a leading pharmaceutical company.
Further, Editas Medicine has decreased expenses and costs thanks to discontinuing the development of reni-cel and laying off a sizable portion of its workforce. It expects its cash and equivalents balance of $221 million as of the end of the first quarter to keep it afloat until the second quarter of 2027.
With a stock price of $1.50, it wouldn't be too surprising to see this company more than double in value in the next year, perhaps because of progress with an early-stage clinical program, or licensing deals for one of its medicines, or buyout interest from a larger drugmaker.
However, Editas Medicine is far too risky a stock for long-term investors. Its current candidates haven't even started human clinical trials yet. It will be years before any get close to approval. It's also worth pointing out that Editas Medicine gave up the development of EDIT-101 and EDIT-103, two potential gene-editing therapies for various eye diseases, also because it failed to find a commercial partner.
Given the biotech's poor track record and the current state of its operations, investing in the stock right now and expecting it to generate strong returns over the long run wouldn't be that different from gambling.
