This piece originally appeared as part of the Friday File for the Irregulars on July 28, but has now been unlocked for everyone. The company reported quarterly results about two weeks ago that were generally well received, and has otherwise gotten more positive press and analyst upgrades over the past month, and the shares are up about 15% since this teaser campaign ran in late July (both the broader market and the healthcare sector are roughly flat during those past four weeks).
The article below has not been updated or revised since it was first published on July 28, 2017. The original comments added in the discussion segment following initial publication are still appended for your information and edification.
Today your Friday File is a two-parter — I’ve got some updates on several companies I follow (and own), and I’ve shared that in a separate piece, but I’ve also been bombarded over the past 24 hours with requests to solve a new teaser pitch from the Money Map folks, so I thought I should whip out at least a brief solution to that one for you. After all, you’re an Irregular — what would I do without you?
The pitch I’m being asked about is an ad for Radical Technology Profits, the higher-end newsletter ($1,950/year) from Michael Robinson over at Money Map Press, and he’s talking up a huge sales surge for a tiny company that he thinks will make you rich… this is the promise on the order form:
“Ride This Tiny Company’s 28,700% Sales Surge All the Way to the Bank
“Secure an early stake now and you could be $2.8 million richer within 18 months.”
The promise is that this “device” will be powerful enough to destroy pretty much any disease — so that hits lots of investors right where they want it, massive wealth and a promise you won’t get sick. Who doesn’t get all tingly about both turning your $10,000 into $2.8 million and making sure Uncle Bob doesn’t die of lung cancer?
More from the ad:
“This tiny device is the brainchild of a Harvard molecular engineer who is now being hailed as the most transformative scientist of his generation.
“He has already been honored with a long list of prestigious awards.
“Experts believe a Nobel Prize is a foregone conclusion.
“And his financial reward could put him in the same league with Microsoft founder Bill Gates and Facebook founder Mark Zuckerberg.
“In fact, this scientific genius has launched a new company to bring his invention to market, just like Gates and Zuckerberg did before him.
“Right now, the company is tiny, with a mere $6 million in revenues.”
Ah, $6 million in revenues. That’s a lot different from the popular assessment of the size of a company by the value of its outstanding shares (that would be market capitalization, or market cap). But yes, you can imply, if you wish, that a company is tiny because it has “only” $6 million in revenues… just keep in mind that lots and lots of biotech and R&D companies have essentially no revenue, companies in this space are typically valued on the future prospects for their technology or their product, not on the actual revenue they’re currently bringing in.
More from the ad:
“But mark my words: They won’t stay small for long.
“You see, on February 15, 2017, a federal court handed down a stunning decision that forever alters the healthcare hierarchy…
“This was one of the fiercest patent cases in history, with the winner seizing patent rights likely to be worth billions and billions of dollars.
“One of the nation’s foremost patent experts called the case a…
“Monumental event for the world.”
So what was this actual patent decision? More clues:
“And now the ground-shaking verdict is in…
“The inventor and his research organization triumphed and have assigned the primary patent license to the inventor’s company.
“Please understand: This tiny $6 million company controls over 40 registered patents – and has another 500 patents pending.”
Right, so what we’ve obviously dealing with here is CRISPR technology — the gene editing breakthrough of a few years ago that has been fought over in the courts, as several different leading research scientists have claimed ownership of the first wave of critical patents for CRISRP-Cas9.
There is a very good chronological description of the patent disputes from The Broad Institute here, though keep in mind that The Broad Institute is a party to many of the lawsuits and partnered with Dr. Feng Zhang and his lab — Dr. Zhang was the one to file the first patent for the use of CRISPR-Cas9 to edit cells of complex organisms, and it was his patents that were upheld in that February hearing (it was an interference case, so essentially the patent examiners ruled that Zhang’s patent did not interfere with the work or patent applications of other researchers, including Dr. Emmanuelle Charpentier, Jennifer Doudna and their teams at UC Berkeley and the University of Vienna).
So yes, this is Editas Medicine (EDIT), a $700 million R&D company that is advancing the patented CRISPR technologies of Feng Zhang and the Broad Institute at Harvard & MIT (though Jennifer Doudna was also a cofounder of Editas, which she left last year). The Broad Institute, and therefore Editas, which is their primary licensee (with exclusive rights to use the technology for genomic medicines, and right of first refusal for any gene targets it is not pursuing), did win an important patent fight in February.
And yes, they do have revenue of about $6 million for the past year… a largely meaningless number, mostly from R&D milestone payments, for a firm that has operating expenses of $115 million over the past year (including $67 million and climbing for R&D spending). They do also have some meaningful alliances, with Allergan in opthalmology, including $90 million in R&D support, and with Juno in cancer (which is where most of that milestone payment income came from).
It’s worth noting that the share prices of the three widely-followed CRISPR-related stocks did not react to that February decision as if it were a “winner takes all” announcement — EDIT did pop up on the news, and Intellia (NTLA — founded by and licensing the patents of Jennifer Doudna) and CRISPR Therapeutics (CRSP — founded by and with patents from Dr. Emmanuelle Charpentier) did drop in price, but none of the three has been particularly impressive since and all are of roughly comparable size (the other key company often mentioned, Caribou Biosciences, also founded by Doudna, is not public) . Which seems to me like shorthand for “the market isn’t sure which of these three, if any, will win in the end.”
The article that the ad cites when using this “Winner takes all” language is here, from the MIT Technology Review, and it’s an article from 2015 about the beginning of the dispute over “who was first to invent” CRISP-Cas9 that was decided back in February. Indeed, the headline of that article is “CRISPR Patent Fight Now a Winner-Take-All Match” … but it’s also worth noting this conclusion:
“…given the pace of innovation in gene editing, today’s legal fights could end up serving little purpose. Improved versions of CRISPR-Cas9 have already been invented, and entirely new methods are likely.”
I don’t know if that’s true or not, but certainly it’s not all about the courtroom or the patent office — gene editing companies are popping up all over, and the value of all the companies that rely on some form of CRISPR-Cas9 (or some other CRISPR
“cutting enzyme,” Cas9 is not the only one being used) did not evaporate to nothing at the moment the patent decision was handed down… so that tells you something.
Is it really going to cure all disease? Or capture half of the $3 trillion (that’s what Michael Robinson says represents the entire spending of the healthcare market) in the next 18 months?
Uh, no. That’s ridiculous. There will almost certainly be no sales of CRISPR-Cas9 treatments in the next several years, these are technologies that scare a lot of people and that are in the very earliest stages of clinical trials, with very limited scope so far as they try to prove some efficacy and safety along the way while they advance to the bigger targets.
Here’s a little more from the ad:
“When this device is through it’s as if the disease never existed in the first place.
“This device is so extraordinary, MIT Technology Review says it could ‘replace antibiotics’ – a $45 billion global industry.
“And that’s just for starters….”
That story is here… and yes, it’s real, but it’s also lab science — this “replace antibiotics” experiment is still in the petri dish and seems, from that article at least, to be a ways away from even being tested in animals, let alone humans. Lots of stuff looks compelling in the lab, or generates headlines, but doesn’t play out as expected (or hoped) once it’s tried in a living animal… and plenty of stuff looks compelling in animal studies but doesn’t work as expected, or safely, when it comes to the human body… and going from the lab to animal testing to human testing and actual clinical trials takes a loooooong time.
Which isn’t to say that edited genes aren’t being used in human trials — they are, and have been for almost a year. The first use of CRISPR Cas9 technology in humans was reportedly last Fall in China, where there are several clinical trials underway now, and there are lots of other early stage clinical trials proposed or soon to be underway in the US as well (there’s a pretty good summary here), and gene editing has been in the clinic for more than a decade using other less-precise or less-lauded technologies.
But when it comes to building profit hopes based on early stage discoveries, or on treatments that are in their very first clinical trials, it’s probably best to add some extra years to your mental calendar and lower your expectations.
Which isn’t to say that these companies, including Editas (EDIT), are necessarily bad investments — I have no idea whether or not they’ll end up being profitable and successful, and success is certainly possible. But it’s very much an exploding field of inquiry — there are even big Defense Department grants still going out, including to the research groups who first identified and used CRISPR gene editing, to see whether it’s possible to do this work more safely… to block unwanted CRISPR editing, or make changes that are reversible. That’s a reminder that we’re still in the very, very early innings of this game.
What about that “any day now” huge announcement that Michael Robinson hints at as driving EDIT shares higher? Is that just a hook to get you to sign up for a pricey newsletter?
Well, probably — copywriters have to insert urgency even where there isn’t any, and they have to invent or exaggerate upcoming catalysts, that’s how they get you to part with your $1,950… they know that if you decide to think about it for a few weeks, or feel the freedom to even sleep on it, that you’re probably lost as a customer. Getting that credit card immediately is crucial for them.
But yes, there are some potential catalysts for Editas — here’s what Robinson says about those upcoming “announcements”:
“Any day now, this tiny $6 million company is expecting to make a major announcement.
“This could immediately send their stock soaring – and as an early investor, you’ll be perfectly positioned to grab the biggest windfalls….
“Already, Bill Gates, as well as the billionaires at Google, have gone all in, and momentum is growing at a dizzying clip.
“In fact, this stock could close out soon, leaving a lot of folks severely disappointed.”
Yes, Editas has backing from a lot of folks — including Google Ventures and Bill Gates and lots of others. I have no idea whether there’s any likelihood of it being taken over (“closed out”), but I suppose it’s possible.
But the only real near-term catalysts that seem to have any chance of being meaningful, beyond the appeal of the patent decision and whatever outcome results, are their next earnings report, probably the week after next, which will likely include updates on all of their work but is not expected to mean anything as far as I can tell; and their efforts to get their first treatment into clinical trials, which according to their latest investor presentation will mean that that right about now they’re initiating their clinical natural history study for LCA10 (Leber Congenital Amaurosis 10, a genetic eye disease), which will lead to them trying to submit the IND (requesting FDA permission to begin clinical trials) for LCA10 in, they hope, the middle of next year — all part of the Allergan partnership. I doubt that natural history study is going to be stock-moving news, and it may already be underway, though an IND filing next year could certainly move the needle (that clinical development has already been pushed back by a bit, so perhaps Robinson was expecting it sooner). If there’s some other big announcement coming, a partnership or something else or a near-term and final rejection of the patent appeals, I have no idea what it is. And I kinda suspect that Robinson is exaggerating that point.
If one thing is clear above all others, though, it’s that I’ve got no personal “edge” to be gained by gaming the decisions of a patent court or judging the relative merits of different highly advanced gene editing technologies… you’ve got to know your limitations. I’m certainly not an expert on any of this stuff, so all I can really tell you is that yes, Michael Robinson is teasing Editas (EDIT)… and no, there’s no way the stock price is going to go from $17 to $5,000 in the next year and a half (that’s what a 28,700% price gain would get you).
Beyond that, well, you’re on your own — what do you think? Expect great things ahead for Editas? Believe that their patents are vastly undervalued? Think other researchers have leapfrogged EDIT with subsequent patents or technologies? Does your brain hurt yet? Let us know with a comment below.