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Here's Why Editas Medicine Dropped Today

What happened

Shares of Editas Medicine (NASDAQ: EDIT) are down 10.7% at 1:50 p.m. EST on no apparent news other than it's a high-flying biotech that's fallen out of favor with biotech investors of late. Shares of the gene-editing company are down about 28% over the last month but up about 64% over the last six months.

So what

Investors are likely still a little spooked about a change in leadership at Editas after James Mullen took over the CEO role from Cynthia Collins earlier this month. Mullen was chairman of Editas' board, so he has experience with the company. And this isn't Mullen's first rodeo; he has experience leading companies as CEO, including contract manufacturer Patheon and Biogen, a relatively large biotech company. Nevertheless, changes at the top might be a sign that the company didn't deserve the run-up in valuation over the previous few months.

Image source: Getty Images.

The downward trend may also be tied to Editas' most recent capital raise last month. The company sold approximately $231 million worth of new stock, causing dilution for current shareholders. Secondary offerings are par for the course for development-stage companies, but the $66-PER-SHARE price for the secondary offering was substantially off the all-time high of close to $100 set just a few weeks prior. The substantial discount suggests that perhaps the run-up in valuation starting in early December was overblown.

Now what

Daily double-digit drops aren't fun to experience, but investors in gene-editing companies like Editas should be focused on multiyear returns. Investors will get to hear Mullen's vision for the future of Editas when the company reports fourth-quarter results on Thursday morning.

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Brian Orelli, PhD has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Editas Medicine. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.


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