Tuesday, February 12, 2019

A Current AIM Small Cap Equity Holding: Editas Medicine (EDIT, $21.10): “Waiting on a Management EDIT” By: Erik Olson, AIM Student at Marquette University

Editas Medicine (EDIT, $21.10): “Waiting on a Management EDIT”
By: Erik Olson, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


Editas Medicine. (NASDAQ:EDIT) is a discovery-phase pharmaceutical company that engages in the development of genome editing technology.

• Editas’ CEO and CFO are both leaving on March 1st.

• The LCA10 program is seeing progress and dosing is expected to occur in the second half of 2019.

• Management continues to set optimistic long-term goals in hopes of maintaining and growing market share.

• The EDIT-101 study is likely to see progress and will be starting with older patients first.

Key points:

Announced January 18, 2019, CEO and board member Katrine Bosley is leaving the company on March 1. She will remain an advisor for the company until the end of the year. This is very concerning considering the fact that CFO Andrew Hack announced his departure late last year as well. JP Morgan analysts have stated that they believe Katrine was forced out and not leaving to pursue another opportunity. 

Management shined more light on the progress of the LCA10 program. It is expected that initial patient screening will occur in mid-2019 and dosing sometime in the second half of 2019. Management updated on how enrollment for this will occur. Enrollment will be structured in a way that adults that have problems with light perception will be treated first. Followed by adults with broader vision issues and then finally on to pediatric patients.

Editas continues to set optimistic goals. By 2022, management hopes to have more than 3 medicines in early-stage clinical trials. Additionally, they hope to have more than 2 in late-stage clinical trials. In order to continue building on previous progress, the company hopes to have on new product on from their Celgene collaboration and more than one new product for ocular diseases.

Phase 1/2 for EDIT-101 study is coming along well. The plan is to enroll 10-20 patients starting with older individuals. The trial will be a dose escalating trial starting with what is believed to be the lowest dosage. It is widely believed that the benefits from EDIT-101 are predicted to be seen in a matter of weeks or months.

What has the stock done lately?

Since the beginning of December, the stock price has dropped about 38%. This is quite significant as the stock is currently trading around $19.70, down over 40% from a 6-month high of $33.19. In addition to market turmoil, the announcement of two top level executives departure battered the price. The stock started to make gains at the beginning of this year, but was quickly wiped away with the news.

Past Year Performance: 

EDIT has decreased 41.38% over the past 1 year. The stock has been on a steady decline without many sharp falls. In any instance the stock dropped significantly, it recovered slightly afterwards before continuing down.

(1-year vs. Russell 2000)
Source: Bloomberg

My Takeaway:

Editas stock price has been beaten down numerous times over the past year. While the current trading price is still above the initial purchase price for the AIM small cap fund, analysts should have sold this a while ago. The current price it is trading at what seems like a discount from the stock’s true intrinsic value. Once replacements are found for the CEO and CFO are found, the stock price will likely increase. The board has emphasized an interest in finding a CEO with operational experience in order to execute on clinical trials. Additionally, product outlook appears positive as long as management is able to follow through.

(1-month chart)

Source: Bloomberg