On Wednesday, Evercore ISI raised its rating for Editas Medicine (NASDAQ:EDIT) from In Line to Outperform, significantly increasing the price target to $7.00 from the previous $3.00.
The firm highlighted that Editas Medicine, a gene-editing company, possesses $322 million in cash reserves, which includes proceeds from a recent royalty deal. This financial position is expected to support the company's operations into the second quarter of 2026.
Despite the robust cash position, the market valuation of Editas stands at approximately $260 million, which is $62 million less than its cash on hand. Evercore ISI believes that the current stock price does not reflect the company's true value, suggesting that the stock is worth $7.00 per share at present.
The valuation includes several key components. The cash per share amounts to $3.46. Additionally, Editas Medicine is the exclusive licensor of the Cas 9 and 12a CRISPR technology from Broad Institute, with licensing rights extending through 2033 and 2035.
The potential to sublicense these rights for up to 35 programs that utilize the technology has been conservatively estimated to add $1.3 per share in value, risk-adjusted. This figure could rise as assets progress through development stages.
Furthermore, the company's asset, Reni-cel, has been valued at $2.00 per share. This valuation of Reni-cel is included in the overall assessment of the company's worth. The upgrade to Outperform reflects the firm's positive outlook on the stock's potential, based on the detailed financial analysis and the underlying value of Editas Medicine's technology and assets.
In other recent news, Chardan Capital Markets maintained a positive outlook on Editas Medicine, reiterating a Buy rating and a price target of $12.00. On the other hand, Oppenheimer maintained its Perform rating, whereas RBC (TSX:RY) Capital Markets, Barclays (LON:BARC), and Truist Securities all reduced their stock targets.
These recent developments include the company's strategic shift towards its in vivo platform, the plan to out-license its reni-cel therapy, and the anticipation of presenting new data from the RUBY trial for sickle cell disease at the American Society of Hematology 2024 conference.
Furthermore, Editas Medicine reported third-quarter operating expenses of $65.7 million and showcased early preclinical results of its hemopoietic stem and progenitor cell editing in mice. The company also secured an upfront payment of $57 million from a financing agreement with DRI Healthcare Trust.
The company anticipates that its current cash reserves will fund operations into the second quarter of 2026.
The management team believes that the current cash reserves will sustain operations until the second half of 2026.
InvestingPro Insights
To complement Evercore ISI's bullish outlook on Editas Medicine (NASDAQ:EDIT), recent data from InvestingPro provides additional context to the company's financial situation and market performance.
InvestingPro data shows that Editas Medicine's market capitalization stands at $275.71 million, slightly higher than the $260 million mentioned in the article, but still below its cash reserves. This aligns with an InvestingPro Tip indicating that the company "holds more cash than debt on its balance sheet," supporting Evercore's positive view on the company's financial position.
However, investors should note that Editas is "quickly burning through cash," according to another InvestingPro Tip. This could be a concern despite the current strong cash position highlighted in the article. The company's revenue for the last twelve months was $61.76 million, with a substantial revenue growth of 150.95% over the same period. Yet, Editas is not currently profitable, with a negative gross profit of $158.43 million and an operating income of -$228.52 million.
These figures underscore the challenges faced by gene-editing companies like Editas, which often require significant investment in research and development before achieving profitability. For investors considering Evercore's upgraded outlook, it's worth noting that InvestingPro lists 12 additional tips that could provide further insights into Editas Medicine's financial health and market position.
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