Gene editing stocks have been all the rage of late. Various companies utilizing CRISPR technology to edit the genomes of patients have made some intriguing recent breakthroughs.
These breakthroughs, along with the growth potential said technologies could have for the healthcare sector generally, have made gene editing stocks among the top growth plays in the market right now.
Growth investing guru Cathie Wood agrees. Among two of her core holdings in her genomics fund are Intellia Therapeutics (NTLA) and Editas Medicine (EDIT).
Intellia is Wood’s larger holding. It’s also outperformed rival Editas.
However, there’s reason to like Editas right now. On the heels of Intellia’s breakthrough trial data earlier this year, EDIT stock rode the coattails of this sector higher. That said, should this company produce its own similarly effective set of study data, anything’s possible for this gene editing stock.
Let’s dive into why EDIT stock may be a higher-risk, higher-reward option to consider right now. I remain neutral on this stock. (See Editas Medicine stock charts on TipRanks)
Editas’ Robust Pipeline
As per Editas Medicine’s website, the company will be manufacturing two kinds of gene modification medicines: in vivo, and ex vivo.
The Massachusetts-based company already has eight projects up and running right now. Such projects include both those types of cellular therapy medicines, as well as gene editing medicines. Editas is taking measures to commercialize treatments concerning ocular disorders, cancer, and other blood-related diseases.
Out of these projects that are in progress currently, only two of them are in the initial phases of clinical trials. The process of introducing a new drug can be quite long, and with no surety of success. Even if the drug is developed after a few years, there’s no guarantee if the treatments would overcome the hurdles posed by FDA.
Thus, this is an intriguing stock with impressive upside, should the company’s drug portfolio pan out. However, there’s undoubtedly a considerable amount of risk associated with this stock.
Decent Fundamentals, at Least into 2023
In the company’s most recent corporate presentation, Editas Medicine revealed that it has adequate funds to carry on its operations into 2023. As per the latest earnings report published by the company, its cash and cash equivalents stood at $723 million, up by $211 million from the last sequential quarter.
This company is primarily reliant on developmental collaborations for a major portion of the minimal revenue that it generates. In the first quarter of 2021, Editas Medicine generated approximately $6.5 million in revenue.
During the same period, this company had to incur expenses worth $63.4 million for R&D and administrative purposes. This makes Editas Medicine just like any other regular early-stage biotech play. After all, it has substantial expenses, and hardly generates any income. Nevertheless, this stock represents immense potential.
Indeed, it appears the speculative surge in high-risk stocks was entirely responsible for the rapid rise we saw in EDIT stock earlier this year. However, this is a stock to which investors are increasingly giving a lot of credence right now, given the potential gene editing stocks provide for the long-term future of healthcare.
Risks
There is more than one gene editing play in the market right now. In fact, competition is heating up in this space.
In this regard, Editas looks like a high-risk, high-reward pick. The company’s prospective pipeline is enticing. However, only two projects are currently in the early stages of clinical trials.
Gene editing stocks really came onto the scene around five years ago, with trials only recently really getting off the ground. Accordingly, this could still be ground floor territory for investors betting on a brighter future. Then again, perhaps the FDA will put its foot down and restrict gene editing stocks from much of the growth investors anticipate.
That said, at the beginning of the year, Editas received FDA approval to start Phase 1 and 2 clinical trials on nursing patients who have sickle cell disease. At present, a bone marrow transplant is the only remedy for this disease. If these clinical trials prove fruitful, some impressive gains are likely in the near future.
Wall Street’s Take
As per TipRanks’ analyst rating consensus, Editas is a Moderate Buy. Out of eight analyst ratings, there are six Buy recommendations, and two Hold recommendations.
The average Editas price target is $60.71. Analyst price targets range from a low of $40 per share, to a high of $80 per share.
Bottom Line
EDIT stock has fluctuated dramatically over the past three years, and there’s significant risk associated with this stock. Nevertheless, aggressive long-term growth investors may be enticed by the company’s hyper-growth status.
Accordingly, this is an investment that’s dependent on the individual risk profile of a given investor in today’s market.
Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article
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