Is Editas Medicine a Buy?

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No profits. Years to go before any significant revenue might be made. And plenty of potential obstacles that could cause failure. Those things aren't what you'd prefer in any stock in which you're considering investing your hard-earned money.

All of these statements are applicable to Editas Medicine (NASDAQ: EDIT). So is the biotech stock one to absolutely avoid? Not necessarily. Actually, there are several reasons why Editas could be a stock to buy.

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A little background on Editas Medicine

Editas Medicine is one of a handful of biotechs that focus on developing gene-editing therapies. Gene editing involves modifying DNA by inserting, deleting, or replacing chemical base pairs. The unique sequences of these DNA base pairs provide the blueprint for how living organisms develop and function.

In particular, Editas uses a gene-editing approach called CRISPR, which stands for clustered regularly interspaced short palindromic repeats. (Thank goodness for acronyms, right?) In a nutshell, CRISPR consists of short repetitive sequences of bacterial DNA base pairs that read the same both forward and backward and are separated by stretches of DNA that doesn't provide instructions for building proteins (referred to as "spacer DNA"). But the important thing to know about CRISPR is that it can be used to modify DNA base pairs.

Editas Medicine was founded in 2013 by a team of scientists who were pioneers in discovering CRISPR-based gene editing: Feng Zhang, George Church, and Jennifer Doudna. However, Doudna left Editas the following year to start another CRISPR-focused biotech.

In 2014, the U.S. Patent and Trademark Office awarded Broad Institute the first U.S. patent ever for using CRISPR to edit the DNA of eukaryotic cells (cells that contain a nucleus, including all cells in humans and animals). This patent was based on Zhang's work. Several months later, Editas obtained an exclusive license to Broad Institute's patent.

Over the last few years, Editas has conducted early research and preclinical testing of CRISPR gene editing in the treatment of several diseases. Juno Therapeutics, now owned by Celgene, teamed up with Editas in 2015 to use CRISPR to modify T cells in cancer therapies. And in 2017, Allergan (NYSE: AGN) partnered with Editas to develop gene-editing therapies for eye diseases.

Some good news

Editas has enjoyed some good news in recent weeks. On Nov. 30, 2018, the company announced that the FDA accepted the Investigational New Drug (IND) application for CRISPR gene-editing therapy EDIT-101 in treating Leber congenital amaurosis type 10 (LCA10).

LCA is the leading cause of genetic childhood blindness, with LCA10 the most common form of the disease. There aren't any approved treatments for the rare genetic disease yet. EDIT-101 is injected into a patient's eye, delivering a CRISPR gene-editing mechanism to correct mutations in the CEP290 gene.

The FDA's acceptance of the IND for EDIT-101 sets Editas up to have the first in vivo (in the body) CRISPR therapy to ever be tested in humans. It also earned the biotech a cool $25 million milestone payment from Allergan, which holds the exclusive license for EDIT-101 outside the U.S. and will co-market the therapy inside the U.S. with Editas if it ultimately wins regulatory approval.

Editas' other good news came on Dec. 2, 2018. That's when the biotech presented encouraging preclinical data at the American Society of Hematology (ASH) annual meeting for its CRISPR gene-editing therapies targeting genetic blood disorders beta-thalassemia and sickle cell disease.

Other drugmakers are also developing potential treatments for beta-thalassemia and sickle cell disease, including gene-editing therapies. Editas, though, thinks that its approach could result in safer and more effective medicines for the diseases than other approaches.

Is the stock a buy?

Editas Medicine's market cap stands close to $1.4 billion even though there's a long way to go before it can even hope to have an approved product. There are significant hurdles to jump first. And some potential issues with CRISPR gene editing have already been identified by other researchers.

But if Editas is successful with EDIT-101, the opportunities for the company are enormous. Editas is already hoping to leverage its work on treating LCA10 to target other genetic eye diseases. Its deal with Broad Institute basically gives the company first right of refusal on using the CRISPR technology patented by Broad for any genetic target.

Risk-averse investors would be better off choosing other stocks to invest in. But for aggressive investors with a long-term view, Editas just might be a bet that pays off handsomely.

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Keith Speights owns shares of CELG and Editas Medicine. The Motley Fool owns shares of and recommends CELG. The Motley Fool recommends Editas Medicine. The Motley Fool has a disclosure policy.