Here's Why Editas Medicine Inc. Stock Is Slipping Today

What happened

Shares of Editas Medicine Inc. (NASDAQ: EDIT), a biotech that aims to correct disease‑causing genes with CRISPR technology, are in retreat following the pricing of a secondary share offering this morning. The stock has fallen about 9.2% as of 10:38 p.m. EST on Wednesday.

So what 

Editing faulty genes looks like a cost-effective way to treat heaps of diseases, but running clinical trials necessary to bring new treatments to market is terribly expensive. Editas Medicine's plan to raise cash by issuing new shares is bitter, yet necessary, medicine.

The proposed price of $25.38 per share is a bit lower than the stock's recent price, which briefly topped $30 earlier this month. Shares are slipping today because management signaled a slightly troubling lack of confidence by pricing the offering a little lower than some analysts had expected.

Now what

Editas Medicine intends to sell up to 2.23 million shares and raise about $50 million before fees in the process. Selling the full allotment would raise the number of shares outstanding by roughly 5% and looks necessary despite a fairly strong balance sheet. The company finished September with about $209 million in government-backed securities that won't mature for at least a year but just $87 million in cash and cash equivalents.

Without any products to sell, the start-up's operations burned through about $84.1 million in the first nine months of 2017, and the show's just begun. The company's most advanced candidate, for the treatment of a rare cause of sight loss, could be ready to enter clinical trials in the second half of 2018.

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