When looking only at the past 12 months, Editas Medicine (EDIT +3.62%), a small-cap biotech company, seems to be doing well. The drugmaker's shares have soared by 80% over this period. However, zooming out gives a different picture: Editas Medicine has lost more than 90% of its market value in the past five years. Is the company's recent run sustainable, or will the stock -- whose price is just under $3 -- continue to fall until investors are left with worthless shares?
Image source: Getty Images.
A terrible track record
Editas Medicine is a clinical-stage biotech. Pre-commercial drugmakers carry higher-than-average risk, as they routinely encounter significant clinical or regulatory roadblocks that sink their stock prices. Further, Editas Medicine specializes in gene editing. Although this technology is showing incredible promise in helping researchers find cures for previously untreatable conditions, it still has a long way to go before widespread adoption by the healthcare community, including health insurance companies that have to foot the bill.
That's because gene editing therapies tend to be complex to administer and very expensive (often costing more than $1 million per treatment course), making them a commercial nightmare, even when they earn approval. Could Editas Medicine overcome these challenges? Unlikely. Over the past five years, the biotech has faced several setbacks, forcing it to undergo pipeline resets and abandon the development of some of its leading candidates. Let's consider three examples.
NASDAQ: EDIT
Key Data Points
First, there was an otherwise promising medicine called EDIT-101, with which Editas Medicine was targeting a rare eye disease called Leber Congenital Amaurosis 10. Editas Medicine decided to put the development of EDIT-101 on hold until it could find a partner with deep pockets to help foot the R&D bill. That was in 2023. It has yet to find that partner. The same thing happened with EDIT-103, another potential therapy for another rare eye disease called rhodopsin-associated autosomal dominant retinitis pigmentosa.
Then, in 2024, Editas Medicine announced it was abandoning the development of reni-cel, an investigational gene-editing therapy for transfusion-dependent beta-thalassemia, also because it could not find a commercial partner. Now, of course, these past failures don't mean that Editas Medicine is doomed, but they aren't irrelevant to our analysis either. Given this track record and the fact that most new drug candidates in the biotech industry fail, why think that Editas Medicine's future clinical progress will be any different?
Perhaps if the company had produced strong phase 3 study results in the meantime, but Editas Medicine's remaining programs are all in the early stages of their development. It currently has no programs in late-stage clinical trials. Again, any biotech that fits that description is risky, let alone one with a recent track record of failures in a challenging-to-navigate gene editing market. In my view, Editas Medicine's shares are likely to continue moving in the wrong direction -- that is, toward $0 -- over the next five years. Investors should stay far away from this company.
