1 Gene Editing Stock to Buy Now, and 1 to Sell

In our modern age, the power of gene editing is undeniable. After years of foundational scientific research, it's now becoming possible to treat illnesses that were until very recently intractable. And (as is usually the case during periods of great innovation), there's plenty of money to be made from winners of the future if an investor chooses carefully.

On that note, let's look at one gene-editing stock that could be going places, and one that's likely to languish.

Buy: Caribou Biosciences

One stock with an encouraging outlook is gene-editing biotech Caribou Biosciences (CRBU -1.33%). The Berkeley, California-based company has two cancer programs in phase 1 trials: one for relapsed or refractory B-cell non-Hodgkin lymphoma, and another to treat relapsed or refractory multiple myeloma.

Its non-Hodgkin lymphoma candidate, CB-010, is off to a running start. The Food and Drug Administration (FDA) has already granted it an orphan drug designation, as well as the fast track and regenerative medicine advanced therapy (RMAT) designations. Those designations will allow Caribou to move CB-010 through the clinical trial process and potentially bring it to market faster  than it might otherwise, and also reduce how much those studies cost the company.

Critically, CB-010 has some early validation in the clinic. Of the 16 patients in its phase 1 trial, 44% still had a complete response to treatment six months after being treated with one dose. In other words, their cancer was undetectable. That was a significantly better proportion of patients with a complete response than in much larger studies conducted by competitors with similar therapies, which saw at best 36% still responding after six months. 

Further trials could well produce less favorable results, but for now, the data looks great, and Caribou has enough resources to keep advancing CB-010 through its trials. The company raised $134 million in a stock offering in July, and it now has more than $400 million in cash and investments on the books. Per management, that should be enough to last it through the fourth quarter of 2025, at which point it will need to have some decent clinical trial results in hand if it wants to raise more capital at good terms.

So with positive early data and plenty of money to get its candidate to the next phase of development, this stock is more or less as bullish as an early-stage biotech stock ever looks. That's why I bought it recently, and why you might want to consider adding it to your portfolio too. 

Sell: Editas Medicine 

Editas Medicine (EDIT 1.92%) faces considerable obstacles to ever making a dollar of revenue from sales of a drug, and even if it gets that far, there will be even more obstacles between it and success. 

One big issue with Editas is that its lead program, EDIT-301, is years behind the competition. The candidate is intended to treat beta-thalassemia as well as sickle cell disease, and it's currently in phase 1/2 trials. It is likely to be several more years before the company can complete the clinical trial process for EDIT-301 and submit it to regulators for approval.

Meanwhile, rival Bluebird Bio is already penetrating the market with its beta-thalassemia therapy, which could soon be approved for use in sickle cell disease as well. And CRISPR Therapeutics is angling to get its gene therapy for both conditions within about six months. Given that all of these businesses are producing treatments for beta-thalassemia and sickle cell that are functional cures, the number of patients in the market for treatment should decline over time. By the time Editas gets its candidate commercialized, assuming it does, it'll be competing for a share of a notably smaller target market.

Then there is the issue of its finances. Management thinks its cash holdings of $480 million will be sufficient to carry the company through the third quarter of 2025. That makes sense given that as of Q2 2023, its trailing 12-month operating expenses were $235 million. But it will almost certainly take longer than a couple of years for it to bring EDIT-301 (or anything else in its pipeline) to market. Shareholders will probably eventually face dilution from new stock issuance, though it's also possible that management will take out debt instead, as long as lenders think it will have the ability to repay it. 

In short, there's simply not a compelling investing thesis for Editas at the moment as the risks it faces are disproportionately large compared to its potential upside.