Editas Medicine (EDIT -1.07%) released third-quarter 2019 results on Tuesday morning. At first glance, its revenue and earnings numbers appeared to detail a terrible quarter, notably with a steep decline in revenue and widening generally accepted accounting principles (GAAP) losses. As evidenced by the stock's 9.5% pop yesterday, however, there's more to the genome-editing specialist's latest quarterly update in these early stages of its long-term story than its top and bottom lines seem to imply.
Before we get there, let's have a look at how those headline numbers fared relative to the same year-ago period:
| Metric |
Q3 2019 |
Q3 2018 |
Growth |
|---|---|---|---|
|
Collaboration and other R&D revenue |
$3.85 million |
$14.52 million |
(73.5%) |
|
GAAP net income (loss) |
($32.94 million) |
($15.24 million) |
N/A |
|
GAAP net income (loss) per share |
($0.66) |
($0.32) |
N/A |
Data source: Editas Medicine. R&D = research and development. GAAP = generally accepted accounting principles.
On core medicine portfolio advancements
First, investors should note that Editas' revenue decline was almost entirely driven by $15 million in revenue recognized in last year's third quarter from an option-exercise payment under a strategic alliance with Allergan. That alliance is centered around its EDIT-101 treatment for Leber congenital amaurosis type 10 (LCA10), the leading cause of childhood blindness.
Editas' R&D expenses grew 30.5% year over year, to $22.7 million, largely due to process and platform development costs incurred as part of a profit-sharing agreement with Allergan for EDIT-101.
IMAGE SOURCE: GETTY IMAGES.
To that end, the first potential patient for EDIT-101 has been successfully screened, and confirmation is currently pending for the first surgery to administer the treatment in early 2020. As I noted earlier this year, this milestone will mark the first-ever trial of an in-vivo (or editing inside the body) CRISPR medicine.
Meanwhile, Editas continues to expect to be ready by the end of this year for investigational new drug (or IND) designation, enabling studies for its experimental medicines to treat Usher Syndrome 2A. The company also continues to develop its EDIT-301 medicine as a best-in-class treatment for sickle cell disease and beta thallasemia.
On the expanded Celgene partnership
In a separate press release yesterday Editas also announced an amendment to its collaboration agreement with Celgene's (CELG) Juno Therapeutics -- which began in 2015 and was set to expire next year -- through which the companies can research, develop, and commercialize new alpha-beta T cell medicines to treat cancer and autoimmune diseases. Per the terms of the new agreement, Editas will receive a payment of $70 million and is eligible to receive potential future milestone and royalty payments.
"The Celgene team continues to be impressed by the progress the Editas team has made in developing the leading technology for making CRISPR-based medicines in our initial collaboration," elaborated Celgene's President of Research and Early Development, Rupert Vessey. "We look forward to this next phase of our collaboration as we drive programs from research into clinical development."
The road ahead
Editas ended the quarter with cash, cash equivalents and marketable securities of $332.6 million. Though that excludes the impending $70 million payment from Celgene, the company reminded investors that it's still enough to fully fund operating expenses and capital expenditures for at least two years.
Editas CEO Cynthia Collins summed it up:
Our momentum in 2019 remains strong in advancing our pipeline of in vivo CRISPR and engineered cell medicines. We announced this morning an amended agreement with Celgene to further expand and accelerate our oncology pipeline. In hemoglobinopathies, we look forward to presenting in vivo pre-clinical data for EDIT-301 at ASH that supports its potential as a best-in-class medicine. Finally, we eagerly anticipate first patient dosing with EDIT-101 for LCA10 in the coming months.
At this point, investors can only wait for the momentous developments the next few quarters will bring for Editas Medicine. But given its lucrative new deal with Celgene and the continued progress of its core experimental medicine portfolio, it was no surprise to see shares rallying in response.
