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Here's Why Editas Medicine Collapsed at Market Open Today

What happened

Shares of CRISPR gene-editing pioneer Editas Medicine (NASDAQ: EDIT) fell 12.1% shortly after the market opened Wednesday morning. Why? Although the company reported third-quarter 2017 earnings Tuesday afternoon, there weren't any surprises that should have spooked investors. Indeed, as of 11:47 a.m. EST, the stock had clawed its way back to a far narrower 1.8% loss. 

Wednesday's stumble out of the gate can likely be chalked up to the stock's volatility. The early-stage biopharma has impressive partnerships with Juno Therapeutics and Allergan, is well funded, and has an impressive portfolio of intellectual property. However, Editas Medicine won't begin its first clinical trial until mid-2018 at the earliest. That gives traders and Wall Street a lot of time to overreact to non-events.

Image source: Getty Images.

So what

Despite the volatility, the company reported another quarter of steady progress. It's on track to file its first Investigational New Drug (IND) application with the Food and Drug Administration in mid-2018. The lead drug candidate, EDIT 101, will be tested as a treatment for Leber Congenital Amaurosis type 10 (LCA10), which is the most common cause of childhood blindness worldwide. It's a monogenic disease -- caused by a mutation on a single gene -- making it a perfect candidate for CRISPR-based therapeutics.

Editas Medicine recently reported dose-dependent results for EDIT 101 in a mouse model for LCA10. Although only a quiet first step, the data was an important milestone showing that CRISPR-based treatments could provide therapeutic benefit and could be efficiently delivered into cells -- points that were (and might still be) in question.

The company also reported key updates to pre-clinical oncology programs with Juno Therapeutics, a hiring spree in key areas for the organization, and a healthy cash balance of $296 million at the end of September.

Now what

Given the biopharma's pre-clinical status, and the truly game-changing potential of its technology, investors should continue to expect volatility. As Editas Medicine marches closer to the clinic and begins developing its first therapeutic candidates, investors will gain firmer evidence to support or adjust their investing thesis. That evidence is still a few quarters away, however, so more patience will be required.

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Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool recommends Editas Medicine and Juno Therapeutics. The Motley Fool has a disclosure policy.