This past week, the FDA gave approval for the first gene editing treatment for sickle cell disease. After the announcement, both EDIT and CRSP declined. What’s going on? Is the market anticipating more patent battles before royalty agreements or are there other factors that are preventing a recognition of value? — Tony A.
Good evening, Jeff and team. Thanks again for coming back on the map and getting back to business. I know we all appreciate what you’ve done and what you’re doing. I have a question about Editas. Every time I read your reports on Editas, the company shines, has exclusive CRSPR licenses, and succeeds in its trials. It appears to have a good cash flow, and it is in a spot for more licensing deals. However, its stock chart is garbage. Even with good news constantly, its value continues to take huge hits. Do you know why this is? I don’t understand why a company with such good potential and so many outcomes is consistently getting crushed. Is there any insight on that? Sorry to be so negative. Just wondering what’s going on there. — Jeremy
Hello Tony and Jeremy, you’re both absolutely right. It doesn’t make any sense at all.
To be fair, Editas (EDIT) is up almost 100% from its lows this year. And CRISPR Therapeutics (CRSP) more than doubled from its lows (but has pulled back a bit since then).
As I outlined in my previous commentary, CRSP had gotten a bit ahead of itself, so I wasn’t surprised by the pullback at all. But Editas is still grossly undervalued.
Tony, as for your question, we often see stocks with exciting news rise on anticipation of the news, and then fall when the news is actually out. We definitely saw some of that this time around.
After all, there was an expectation that we’d see at least one approval for a CRISPR-based therapy by the end of this year, and CRSP was the obvious candidate.
And after the U.K. approved the therapy, the FDA wasn’t far behind.
But that doesn’t explain the broader apathy in the biotech market in general. I actually explored this in my December 5, 2023 AMA — you can find it here just in case you missed it.
Institutional capital has still failed to return the biotech market in this current environment. It has been comfortable with the Magnificent Seven, but outside of that, we haven’t seen any large scale return into growth stocks and biotech in particular.
That’s why — despite incredible news coming out — a stock like Editas isn’t doubling or tripling (as it should be). There just isn’t enough institutional capital buying right now. That’s the crux of the problem.
The good news is that this is temporary, and the bull market in biotech will return with a vengeance.
I plan on making sure we’re all ready when it comes.
