Editas Medicine’s share price went on a tear following its IPO in February. In the last two days, however, it’s dropped 36 percent. Here’s why.
After its initial public offering (IPO) in early February, Editas Medicine (NASDAQ:EDIT) went on a tear. Listing at $16, the company’s stock saw a 220-percent increase, jumping to $43 over the course of a month.
However, over the last couple of days, the company’s share price has dropped more than 35 percent, with the bulk of that coming on March 9, when its share price tanked 26 percent during intraday trading.
As a newly listed company, investors may not be entirely familiar with the genome-editing company. Editas Medicine is focused on treating patients with genetically defined diseases by fixing the root of the problem: their disease-causing genes. The company is working on translating CRISPR/Cas9 and TALENs technologies into a novel class of human therapeutics that can enable precise and corrective molecular modifications in order to treat diseases at the genetic level.
Looking at the reason behind the company’s steep drop this week, Fortune points to two theories, the first being a simple and natural correction in the company’s share price given its exponential growth since listing. The company, which is not yet close to human trials, saw its market cap spike up into the realm of $1.3 billion before slipping back down to the area of $700 million.
The other reason the publication cites for the company’s decline is “interference proceedings” by the US Patent and Trademark Office (USPTO) to determine whether UC Berkeley or the Broad Institute and Massachusetts Institute of Technology (MIT) will receive the patent that will cover the CRISPR/Cas9 gene-editing technology that Editas is working with.
As part of the proceedings, a panel of three USPTO judges will hear the challenge to the office’s 2014 decision to award a key CRISPR patent to Feng Zhang of the Broad Institute and MIT rather than Jennifer Doudna of UC Berkeley.
In its prospectus, as part of the section on risks associated with its business, the company notes that “in-licensed patents and patent applications are subject to priority disputes with the University of California, acting on behalf of itself and the University of Vienna, and Emmanuelle Charpentier, and ToolGen, Inc.”
Doudna, while still a founder of Editas, is no longer part of the company, and is now the founder of Caribou Biosciences as well as an advisor to Intellia Therapeutics. Both companies are competitors of Editas. Caribou has an exclusive license to patent rights from the University of California and University of Vienna.
CRISPR Therapeutics has also reported an exclusive license to patent rights from Emmanuelle Charpentier.
Gene editing technology tagged as weapon of mass destruction
In its associated risks, Editas also notes that adverse public perception of genomic medicines and genome editing in particular could negatively impact regulatory approval or demand for products.
It seems that that “adverse public perception” is not a misguided warning. Investors should also note that in a recent US Intelligence Community worldwide thread assessment report, James Clapper, US director of national intelligence, has added gene editing to a list of threats posed by weapons of mass destruction and proliferation.
Prompting the designation is gene editing’s relative ease of use, The MIT Technology Review states.
“Given the broad distribution, low cost, and accelerated pace of development of this dual-use technology, its deliberate or unintentional misuse might lead to far-reaching economic and national security implications,” the report notes.
The report, which was published on February 9, assumes that “[r]esearch in genome editing conducted by countries with different regulatory or ethical standards than those of Western countries probably increases the risk of the creation of potentially harmful biological agents or products.”
Still up 70 percent since listing on the NASDAQ, Editas is bolstered by its heavy hitting investors. Only time will tell whether the legal issues surrounding the CRISPR/Cas9 technology is a bump in the road, or a sign of more struggles to come. Whatever the case, the company’s gene-editing technology is revolutionary, and has contributed to radically advancing the biotech industry.
Securities Disclosure: I, Vivien Diniz, hold no direct investment interest in any company mentioned in this article.