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Why is Editas Medicine Trading 110% HIgher in the Past Month?

Editas Medicine (EDIT) is up 110% in the past month on the company's blockbuster results for its sickle-cell anemia treatments. It's a big breakthrough and also validates the company's approach to developing treatments. Read more to find out why EDIT could keep moving higher in 2021.

Editas Medicine (EDIT) has more than doubled over the past month. The catalyst for the stock’s gains is positive data for its gene-editing therapy for sickle-cell disease. 

Also, biotech stocks have been quite strong over the past few months and are amid a breakout from a multi-year, trading range. Within the biotech sector, the genomics industry has the most upside due to the myriad, potential applications of “editing” DNA to achieve better outcomes.

Genomics’ Long-Term Upside

Genomics is the study of genes. The field opened up following the Human Genome Project which sequenced DNA for the first time. This breakthrough has multiple applications that are in their early stages. In the near-term, it’s helping scientists detect vulnerability to diseases even before symptoms are present. 

It’s also helping diagnose diseases more accurately by studying bacteria, viruses, or cells at the genetic level. Eventually, it’s believed that we will have “personalized medicine” in which treatments are optimized according to a patient’s genes. Another future application will be actual “gene editing” to turn off malignant cells or turn on dormant cells.

Insights into the human genome contributed to the successful development of coronavirus vaccines from Pfizer (PFE) and Moderna (MRNA). The vaccines both utilize messenger RNA (mRNA) which gives instructions to cells to produce proteins that launch an immune response against the virus.

Editas Medicine Profile

Editas Medicine was founded in 2013 by Dr. Cynthia Collins and James Mullen. It has several high-profile early investors including Google Ventures, Bill Gates, Khosla Investors, and Viking Global Management. 

EDIT is looking to develop treatments that fix faulty or mutated DNA that lead to diseases like sickle-cell anemia, blindness, or Alzheimer’s. Currently, it has three promising treatments in its pipeline to address sickle-cell anemia, Leber congenital amaurosis (an illness affecting vision in newborns), and a treatment to dissolve solid tumors.

After the recent gains, EDIT has a market cap of $4 billion. Over the last 12 months, it lost $95 million and generated $92 million in revenue. It’s difficult to value early-stage, biotech companies based on their financials. One breakthrough drug can result in the stock price climbing by many multiples, while others can continually bleed lower if they are not successful. With EDIT, there is the reason for additional confidence given these promising results and the pedigree of its early backers.

The POWR Ratings are bullish on EDIT as it has a Buy rating. It has an “A” for Trade Grade and Peer Grade and a “B” for Buy & Hold Grade and Industry Rank. Among Biotech stocks, it’s ranked #61 out of 389.

Catalyst

Since its IPO in February 2016, EDIT’s stock price had been range-bound between $12 and $40. Even this year, it remained within that range despite the market’s volatility. However, in recent weeks, EDIT has broken higher from this range and continually melted up. Since Thanksgiving, the stock is up 110%. 

The major catalyst is the positive data for its gene-editing therapeutic EDIT-301 which is presented at the American Society of Hematology (ASH). At the conference, EDIT showed the efficacy of its treatments and that it could be successfully manufactured on a large-scale. The company is expected to begin FDA trials soon. 

Many genomics companies are working on a treatment for sickle-cell, however, the consensus was that EDIT was behind CRISPR Therapeutics (CRSP) and Vertex Pharmaceuticals’ (VRTX) treatment. Following the results, it seems that EDIT has taken the leading position in the race for a sickle-cell treatment.

What’s Next

Naturally, investors are wondering if the stock is still a buy. Before trying to figure out its next move, it’s necessary to understand what’s been driving the gains in EDIT’s stock price.

Even before this data, EDIT had positive tailwinds in its favor including the strength in biotech stocks, and investors’ appetite for growth opportunities. Genomics is expected to grow from $17.2 billion last year to $52.1 billion in 2027. Additionally, the field is in its early innings, and many potential applications are just beginning to be studied and discovered.

The sickle-cell data is a gamechanger, especially as it’s a treatment for the cellular disease and showing that patients’ cells’ hemoglobin production can be turned on. It’s meaningful, in its own right, since sickle-cell affects about 100 million people in the world. 

However, it’s also a validation of EDIT’s technology and approach to treating these types of diseases. It will increase confidence among investors that EDIT can successfully develop treatments for other genetic diseases as well.

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EDIT shares were trading at $63.42 per share on Monday afternoon, up $1.50 (+2.42%). Year-to-date, EDIT has gained 114.18%, versus a 15.64% rise in the benchmark S&P 500 index during the same period.



About the Author: Jaimini Desai

Jaimini Desai has been a financial writer and reporter for nearly a decade. His goal is to help readers identify risks and opportunities in the markets. As a reporter, he covered the bond market, earnings, and economic data, publishing multiple times a day to readers all over the world. Learn more about Jaimini’s background, along with links to his most recent articles.

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