On Wednesday, Wells Fargo made a significant adjustment to the price target of Editas Medicine (NASDAQ:EDIT), reducing it from $27.00 to $9.00. Despite this change, the firm maintained its Overweight rating on the stock.
The adjustment followed Editas Medicine's disclosure of preclinical data for its in vivo hematopoietic stem and progenitor cell (HSPC) editing program. Additionally, the company provided business development and financial updates, which included the commencement of a process to partner or out-license its reni-cel therapy.
Editas Medicine announced its strategic decision to concentrate its efforts and resources on its in vivo pipeline, which is believed to be a more cost-effective development path and presents a larger market opportunity. The company acknowledged that the costs associated with the development and commercialization of reni-cel are too substantial for a firm of its size.
Wells Fargo's analyst cited these updates as the reason for the revised price target. The new target is based on updated assumptions in the discounted cash flow (DCF) model used by the firm. The assumptions now include the potential partnership of the reni-cel program, with a forecasted royalty rate of 15%.
Furthermore, the financial model has been updated to incorporate Editas Medicine's in vivo programs for sickle cell disease (SCD) and thalassemia (TDT). These programs are projected to launch in 2032, with a peak cumulative penetration rate of 12% and a 25% probability of success. These projections are now factored into the valuation model, influencing the new price target.
The news of the reduced price target comes as Editas Medicine continues to refine its strategy and focus on advancing its pipeline in a way that aligns with the company's resources and market potential.
In other recent news, Editas Medicine has seen significant developments in its strategic direction and financial standing. Baird recently reduced the price target for Editas Medicine to $10 from $18, while maintaining an Outperform rating.
The company has also secured an upfront payment of $57 million from a financing agreement with DRI Healthcare Trust. Leerink Partners and Truist Securities maintained their Market Perform and Buy ratings respectively on Editas' stock, despite the latter reducing their target price.
The company is making strides in gene editing treatments for sickle cell disease and beta-thalassemia, reporting high levels of editing in hematopoietic stem and progenitor cells.
Additionally, Editas has shared initial data from its in vivo approach, sparking interest in the potential of this new direction. Despite the initial promise of the in vivo platform, Baird noted some uncertainty regarding the timeline for an Investigational New Drug application.
These are recent developments that investors should consider as they assess the company's prospects.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Editas Medicine's financial situation, providing context to Wells Fargo's price target reduction and the company's strategic shift. The company's market capitalization stands at $270.56 million, reflecting the market's current valuation of the firm.
InvestingPro Tips highlight that Editas Medicine is "quickly burning through cash" and "not profitable over the last twelve months." These observations align with the company's decision to focus on its in vivo pipeline as a more cost-effective development path. The tip noting that "analysts anticipate sales decline in the current year" further underscores the challenges Editas faces, potentially influencing its decision to seek partnerships for certain programs.
Additionally, InvestingPro data shows a significant 3-month price total return of -41.35%, which correlates with the recent strategic updates and Wells Fargo's price target adjustment. This volatility is reflected in the InvestingPro Tip stating that "stock price movements are quite volatile."
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide further insights into Editas Medicine's financial health and market position.
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