Why Is Editas (EDIT) Down 4.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Editas Medicine (EDIT). Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Editas due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Editas Q2 Earnings Beat, Sales Miss, Pipeline in Focus
Editas Medicine, Inc. incurred a loss of 56 cents per share in the second quarter of 2023, narrower than the Zacks Consensus Estimate of a loss of 76 cents. The company had reported a loss of 78 cents per share in the year-ago quarter.
Collaboration and other research and development revenues, which comprise the company’s top line, were $2.9 million in the reported quarter, down 54.7% from $6.4 million reported in the year-ago quarter. The reported figure missed the Zacks Consensus Estimate of $6 million. Per management, the decrease in collaboration revenues was on account of Bristol Myers’ program opt-in in the second quarter of 2022, which did not occur in the same period of 2023.
Editas is advancing alpha-beta T-cell experimental medicines for the treatment of solid and liquid tumors in collaboration with Bristol Myers through its wholly-owned subsidiary, Juno Therapeutics, Inc. The company also has an existing collaboration agreement with Shoreline Biosciences for its SLEEK gene editing knock-in technology along with iNK cell programs.
Quarter in Detail
In the second quarter of 2023, research and development expenses (R&D) decreased to $29.8 million compared with $43.7 million in the year-ago period. The 31.8% decline in R&D expenses was due to Editas’ strategic reprioritization, including a targeted clinical and manufacturing focus on EDIT-301 and reduced employee-related costs.
Under the strategic reprioritization effort announced in January 2023, Editas redirected all its resources to the development of EDIT-301 as its lead candidate. The company also discontinued internal investments in inherited retinal disease programs and its wholly-owned multiplexed edited iPSC-derived iNK cell programs, only to be developed in collaboration. The workforce of the company has also been reduced by approximately 20% to extend the cash runway into 2025.
General and administrative expenses were $17.2 million in the reported quarter, which remained flat year over year. The slight improvement was on the grounds of increased professional services expenses to support business development activities, partially offset by a decrease in stock compensation expense.
Editas had cash, cash equivalents and investments worth $480 million as of Jun 30, 2023 compared with $401.8 million as of Mar 31, 2023. The company expects its existing cash, cash equivalents and marketable securities to fund operating expenses and capital expenditure into the third quarter of 2025.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
The consensus estimate has shifted 15.06% due to these changes.
VGM Scores
At this time, Editas has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Editas has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Editas belongs to the Zacks Medical - Biomedical and Genetics industry. Another stock from the same industry, Apellis Pharmaceuticals, Inc. (APLS), has gained 76.9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2023.
Apellis Pharmaceuticals, Inc. reported revenues of $94.97 million in the last reported quarter, representing a year-over-year change of +481.9%. EPS of -$1.02 for the same period compares with -$1.46 a year ago.
Apellis Pharmaceuticals, Inc. is expected to post a loss of $1.22 per share for the current quarter, representing a year-over-year change of +30.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.3%.
Apellis Pharmaceuticals, Inc. has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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