Here's Why Editas Medicine Inc. Bounced Up 20% in June

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What happened

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Shares of Editas Medicine Inc. (NASDAQ: EDIT), a biotech start-up employing CRISPR gene editing technology, rose 20.3% in June according to data from S&P Global Market Intelligence. A longer than hoped for timeline and a negative report from a prominent scientific journal sent the stock reeling in May, but investors found reasons to remain optimistic last month.

So what

Editas Medicine stock fell 32.6% during May for a couple reasons. The company told investors the initial new drug application (IND) for LCA10 wouldn't be ready until the middle of 2018 due to manufacturing delays. The FDA won't allow clinical trials to begin without an approved IND, which means we'll have at least another year to wait before we have any evidence the technology Editas is built upon actually works in humans.

The market clobbered Editas near the end of May after Nature Methods published a scathing article that suggests CRISPR-Cas9 gene-editing leads to a disturbing number of unintended mutations in mice. If the scientists from Stanford and the University of Iowa are correct, Editas and its peers have a serious problem. This is why the company and Intellia Therapeutics have since asked the journal to retract the study. Nature Methods soothed investor concerns last month by adding an editorial note that alerts readers to the criticisms and promises to issue a full response in the future.

Now what

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In their retraction requests, Intellia and Editas note the academic researchers noticed the higher than expected rate of mutations outside of the intended targets in a very small sample size of just two treated mice compared to only one that went untreated. Also, the control specimen wasn't even from the same litter.

This wasn't necessarily a case of shoddy experiment design, the investigators stated they were merely surprised by their observations, and wanted to share what they found in hopes that others would investigate further. In other words, they were acting like scientists.

When Editas finally prepares its IND application, you can bet the FDA will want to see reams of evidence that show mice, and most likely several other types of animals treated with LCA10 don't exhibit an unacceptable rate of unintended mutations. I wouldn't let the academic researchers' findings heavily influence an investment decision, but investors would do well to avoid this highly speculative stock until the company produces some clinical trial data to chew on.

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Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.