Gene Editing Company Editas Files for IPO
2016 hasn’t started out too well for equity investors, with the S&P 500 dropping -6% in the first week of 2016 trading alone. This doesn’t bode well for IPOs, especially for biotech IPOs, which were hot in 2015 but have been punished as of late. One of our most popular articles in the past few months has been about 7 Gene Editing Companies Investors Should Watch. In that article, we postulated that Editas Medicine is the leader in the gene editing space, primarily because the Company was founded by the world’s leading experts in gene editing. Just last week, Editas Medicine filed for an IPO. Let’s take a closer look at this exciting IPO offering.
Our previous article on Editas talks about their past background, funding, and competitive position. What we’re interested in now is the additional information provided in the S-1 IPO filing. The first thing we’d like to know based on concerns we raised in our previous article is just how well Editas has wrapped up their intellectual property portfolio? In 2014, Editas issued shares to license certain patent rights owned or co-owned by Massachusetts General Hospital, The Broad Institute, Harvard College, MIT, and Duke University. The total consideration for licensing all this IP was just under 5% of Editas’ outstanding shares and future milestone payments amounting to less than $100 million. Aside from their licensed patents, Editas has an IP portfolio which includes 20 issued U.S. and European patents and over 200 pending patent applications.
While that’s all fine and dandy, what about some of the other key players in this field we talked about before who broke off to start their own companies with their intellectual property stakes of pending and issued patents? Co-inventor of the CRISPR/Cas9 technology, Emmanuelle Charpentier, has started her own company called CRISPR Therapeutics. One of the cofounders of Editas, Jennifer Doudna, founded Caribou Biosciences with her own pending patent for CRISPR. Editas specifically calls out these patents in their S-1 filing by stating:
If these third-party patent applications are issued as patents and we are not able to obtain or maintain a license on commercially reasonable terms, such third parties could potentially assert infringement claims against us, which could have a material adverse effect on the conduct of our business.
All eyes will be on the outcome of the pending patents in this space. In the meantime, Editas moved forward in May 2015 with their first commercial collaboration with Juno Therapeutics, a leader in the emerging field of immuno-oncology, to develop novel engineered T cell therapies for cancer. Editas received a $25.0 million up-front, non-refundable, non-creditable cash payment. In addition, Juno Therapeutics will pay to the Company an aggregate of up to $22.0 million in research and development funding over the initial five year term of the research program.
So in in addition to this collaboration, where else will Editas focus their efforts? The below statement taken from their S-1 provides some color on where they see their opportunity:
While genetic defects are now recognized as the causes of many diseases, the vast majority of these diseases lack effective treatments. Of the estimated 6,000 diseases that are known to be caused by genetic mutations, we believe fewer than 5% are served by approved therapies. In some cases, these existing therapies only treat the symptoms of the disease.
They then go on to talk more about the areas they plan to target specifically:
We are advancing over a dozen discovery research programs, including programs to address genetic, infectious, and oncologic diseases of the liver, lung, blood, eye, and muscle. Our most advanced research program is designed to address LCA10, a specific genetic form of progressive blindness with no available therapies or potential treatments in clinical trials in either the United States or European Union. We aim to initiate a clinical trial in this program in 2017.
The incidence of LCA10 is quite low at 2-3 per 100,000 births worldwide. This would then mean that in the U.S. there are only 6 to 9 thousand people affected by this affliction in total. While this is a very low number of potential patients, Editas seems to be using this condition as an ideal proof of concept for their gene editing technology. Given there is no approved therapy or treatment, they could get fast track designation for FDA approval. They also believe they can build an effective small, targeted commercial infrastructure without the need for a commercial partner. In the meantime, they continue addressing other areas of research as seen in the actual Editas pipeline below:
Editas believes its cash and cash equivalents of $155.3 million (as of September 30, 2015) will be sufficient to fund the Company’s current operating plan for at least the next 24 months. They hope to raise an additional $100 million through their IPO. Editas plans to trade under the stock symbol “EDIT”.