Editas Medicine (NASDAQ: EDIT) is a very forward-looking investment in that the company has yet to put a product to market but has a great deal of potential with over 200 current patents and an additional 800 pending review. With a total addressable market (TAM) potentially worth upwards of $80 billion for just one of its products, investors have taken note, and institutions continue to scoop up shares as the company issues more shares to cover research and development (R&D) costs. Is now the time to invest in Editas Medicine?

The bull case for Editas Medicine

Editas Medicine has a few exciting products in its pipeline but the ones furthest ahead in the release process are EDIT-101 and EDIT-301. The first is for Leber congenital amaurosis 10(LCA10), a hereditary condition that causes blindness in infants and the second is for sickle cell disease (SCD) and Beta Thalassemia, both blood conditions. Globally, roughly 3 in 100,000 infants are affected by LCA10, 300,000 people by SCD, and 80 million with b Thalassemia. With these numbers and based on existing, marginally effective therapies and the costs associated, Editas stands to make stratospheric sums (in the hundreds of billions by rough estimates) should its treatments receive FDA approval.

The company is in a stable financial position with roughly $650 million in equity while it puts its treatments through clinical trials, awaiting approval. Additionally, to remain above water, Editas can continue to issue shares like the 3.5 million it did back in January. The company also benefits from collaborative revenues, which are up 14% year over year (YoY) at $6.5 million in Q1 2021. Editas Medicine's impressive intellectual property portfolio makes it one of the leading future contenders in the gene-editing market and is perhaps why nearly 75% of all outstanding shares are held by institutions like hedge and mutual funds.

The bear case for Editas Medicine

As per its Q1 2021 report, Editas Medicine incurred a loss of $0.86 per share, $0.10 higher than estimates and up nearly 25% from a year ago. Additionally, R&D expenses were up 21.1% at $42 million and general and administrative expenses increased 20% to $21.4 million. That's par for the course for a company with no viable marketable product but recent troubling events have contributed to the company's stock price volatility. 

In January, Chief Scientific Officer, Charles Albright, left the company to 'pursue another opportunity', and the following month, CEO Cynthia Collins stepped down for personal reasons. Trials have started on EDIT-101 in the first half of 2019 but preliminary results have not been positive, showing little improvement in patients' vision. All these factors, coupled with its recent share dilution have contributed to a 49% stock price decline year-to-date (YTD) for Editas Medicine. 

So, should I invest in Editas Medicine?

As this is a company working with relatively new technology and not earning any real revenue from its products yet, I would approach this investment very carefully; perhaps a small starting position until further trial results are announced. The early negative results for EDIT-101 are just that -- early -- so I'm not too concerned. Editas Medicine also has cancer treatments in its pipeline which would address a huge market. Its targeted cures for global ailments that have troubled humans for eons are the future of medicine. The company's current stock price makes opening a position all the more enticing. 

Quickfire round:

1. Who is the CEO of Editas Medicine?

Chairman James C. Mullen was appointed President and CEO upon Cynthia Collins' departure in February

2. Are there existing treatments for LCA10? What's the cost?

Spark Therapeutics' Luxturna costs $425,000 per eye

3. When did Editas Medicine go public?

February 2, 2016

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