Introduction: What is Intellia Therapeutics?
Intellia Therapeutics, Inc. (NASDAQ: NTLA) is a preclinical-stage genome editing company focusing on developing novel therapeutics using the genome-editing process known as CRISPR/Cas9, or Clustered, Regularly Interspaced Short Palindromic Repeats. Currently, Intellia is broadly focused on in-vivo, delivering directly to target cells in the body, and ex-vivo, developing a therapy from engineered human cells, with a global clinical focus (three countries in progress).
Founded in 2014, NTLA has since grown to revenues of $43 million (2019) with over 270 employees based in Cambridge, Mass. Although CRISPR/Cas9 genome editing technology is not yet clinically validated for human therapeutic use, the company is making strides in strategic markets to achieve the required approvals and is currently transitioning from pre-clinical to clinical in 2020-2021.
Products: Intellia has a pipeline of four therapies in the post-research phase with three realistically expected to show clinical aspirations before year-end 2021.
1. NTLA-2001 for transthyretin amyloidosis "ATTR": Submitted first CTA to initiate a Phase 1 study; Intend to dose first patient by YE 2020
2. NTLA-5001 for acute myeloid leukemia "AML": Expected to submit IND in 1H 2021 for WT1-directed TCR T-cell therapy
3. NTLA-2002 for hereditary angioedema "HAE": Expected to submit IND in 2H 2021
Customers/market: Currently, Intellia is pre-clinical, but the potential market for patients of each of the above products is as follows. For ATTR alone, the expected patient population is hard to estimate, but rival Akcea has found there to be an estimated 50,000 patients with hereditary ATTR amyloidosis worldwide and 200,000 patients with wild-type ATTR amyloidosis worldwide. Intellia additionally estimates there to be over 120 unique mutations from the traditional ATTR adding a layer of complexity to current therapies, but expanding the patient pool to 250,000-500,000. For AML globally, the expected afflicted population is very roughly estimated to be 450,000 with 20,000 new cases in the USA alone estimated for 2020. For HAE, there are roughly 150,000-250,000 people globally afflicted with this rare deficiency.
Management: As with most managerial teams in biotechnology, a key factor for differentiation is management's ability to not only master the science behind the development and testing of therapies but the ability to garner the right resources, partnerships, regulatory-approvals and broader connections for bringing therapies to market.
Chairman of the Board: Frank Verwiel, M.D. & MBA, brings 25 years of strategic, operational, and international experience in the pharma and biotech sector. He has served on the board of directors for AveXis Inc. (AVXS) until the Novartis acquisition in 2018 and on the board of Achillion Pharmaceuticals (ACHN) until the Alexion acquisition in 2020. He also led Aptalis Pharma Inc. as CEO until its 2014 acquisition by Forest Laboratories.
CEO: John Leonard, M.D., brings 30+ years of experience to Intellia, particularly from pharmaceutical R&D. His most recent position in 2013 was Chief Scientific Officer -CSO- and senior VP of R&D at AbbVie (ABBV) where he left to pursue his passion for turning the newly understood CRISPR/Cas9 technology into a therapeutic reality. He also serves on the Board of Directors for IQVIA (IQV), a health IT and clinical research firm, and IFM Therapeutics, a pharmaceutical company specializing in autoimmune diseases.
CSO: Laura Sepp-Lorenzino, Ph.D., brings 30 years of post Ph.D. experience having served for 14 years at Merck & Co (MRK) most recently as executive director and department head of RNA Therapeutics - Discovery Biology. She has also served as a VP at Alnylam Pharmaceuticals (ALNY) and Vertex (VRTX) and currently serves as a member of the Scientific Advisory Board at Thermo Fisher Scientific (TMO).
Financial position: Intellia in 2019 brought in $43.1 million (42% y/y) in collaboration revenue which includes upfront technology access payments for licenses, technology access fees, research funding, and milestone payments earned under the collaboration and license agreements with Novartis and Regeneron (partner since IPO). Intellia has not achieved profitability, of course, acting still in the pre-clinical phase with a promising pipeline. Gross profit loss in 2019 amounted to -$65 million with a total net loss of -$99 million (+16% y/y) after an R&D expense of -$108 million (+22% y/y). Although loss-making, the CEO did state in September at Baird’s 2020 Virtual Global Healthcare Conference that their 2Q 2020 cash position of $362 million is enough for 2+ years of operations.
Investment thesis: Intellia Therapeutics Inc. has been quiet for several years as they advanced the research needed for CRISPR/Cas9 applications and delivery. 2020 marks the first year that they will go clinical with a promising proprietary in vivo development candidate aiming to treat transthyretin amyloidosis (pat. pop. 250,000-500,000). By Dec. 2020, investors will know whether this candidate reaches Phase 1, and by Dec 21' investors will know whether Intellia's two other candidates remain on track for IND applications. Analysts have made their expectations clear for both a multiple expansion from 15.84x (Sep 2020) to 22.6x by Dec. 2020 and a revenue growth target of $61 million (+41% y/y). With the optimism of partner support from Regeneron and Novartis, Intellia is likely to perform well this year with an FYE price target of $30.55 (+30% upside).
Market/pipeline: Phase 1 for ATTR starting YE 2020
Although Intellia has a range of products and research opportunities, three are important for investors to understand in the short-term (pre-2022); however, the full pipeline is shown in the graphic below. Graphic Source: Intellia Therapeutics Inc. (Aug 2020)
NTLA-2001: This is Intellia's first proprietary in vivo development candidate aiming to treat transthyretin amyloidosis -ATTR-, a disease with a target population of both hereditary and wild-type ATTR roughly amounting to 250,000-500,000 globally. Intellia seeks to competitively treat ATTR by reducing the level of transthyretin protein production with a single course of treatment with life-long suppression, a promising first advancement with the use of CRISPR/Cas9 therapy for ATTR. Differentiation to other therapies is based out of significant patient treatment burden reduction over competitors currently only offering chronic treatment options, and potential economic advantages. Intellia is leading the co-development with Regeneron, a long-time Intellia partner.
Intellia announced in Aug 2020 that they submitted a strong first Clinical Trial Application -CTA- in the UK to initiate a small-patient population Phase 1 study with 1st patient dosing expected by Dec. 2020 with other agencies under consideration. Intellia has found good interest in the UK for gene-based medicine and is enthusiastic about clinical efficiency there. Intellia stated at the Baird Conference that they aim to particularly monitor off-target effects with CRISPR and acute toxicities that add a level of risk from the results of mouse/primate tests completed. Data is roughly expected in mid-to-late 2021.
Financially speaking, the global amyloidosis treatment market size (includes types: ATTR, AL, AA, Aβ2M, amongst others) was valued at $4.5 billion (2019) and expected to grow to $5.2 billion (2021) with an expected CAGR of 6.7% until 2025.
NTLA-2002: This is Intellia's development candidate for treating hereditary angioedema -HAE- and second in vivo knockout therapeutic candidate. HAE is a rare genetic disorder affecting roughly 150,000 to 250,000 people globally. Only chronic treatment options are currently available making a knockout edit of the KLKB1 gene particularly effective and competitive over current options. Additionally, NTLA-2002 builds on the ATTR program’s infrastructure, including the modular LNP delivery system.
Intellia stated in Aug. 2020 that they aim to submit an IND in 2H 2021.
Financially speaking, the global HAE market is estimated globally to be roughly $2.6 billion (2021) and is expected to grow with a CAGR of 8.2% until 2025.
NTLA-5001: This is Intellia's first ex vivo development candidate and Intellia seeks to treat acute myeloid leukemia -AML- by engineering autologous T-cell receptors -TCR- focusing on Wilm's Tumor 1 antigen which is often over-expressed in AML and other cancers (potential lateral therapeutic targets such as ovarian cancer, glioblastoma, lung cancer, and mesothelioma). This affects roughly 450,000 people globally with 20,000 new cases estimated for 2020 in the USA alone.
Intellia stated in Aug 2020 that they aim to submit an IND in 1H 2021.
Financially speaking, the global AML market was valued at $702 million (2018) and is expected to grow to $1.04 billion (2021) with a 14% CAGR until 2024.
Competition: Investors should be aware that several competitors do exist in the space including genome engineering companies focused on CRISPR/Cas9, such as Beam Therapeutics (BEAM), Caribou Biosciences, CRISPR Therapeutics (CRSP), Editas Medicine (EDIT), amongst others, companies focused on genome editing such as Allogene Therapeutics (ALLO), bluebird bio (BLUE), Cellectis S.A. (CLLS), amongst others and companies pursuing gene therapy in vivo and ex vivo including Asklepios Biopharmaceutical and Gilead Sciences(GILD), amongst others.
NTLA's Financial Position: Sufficient Cash & Good Partnership Revenues
Table Source: Self Created | Data Source: Seeking Alpha - NTLA
Revenue/cash flow: As seen above, Intellia's scientific foundation and collaboration revenue have grown significantly since its IPO with $0 revenue in 2014 to $43 million in revenue in 2019. 1H 20'/1H has shown a 36% increase in revenue due to advancements in Intellia's pipeline and expanding partnerships that are building on each therapy's infrastructure, primarily stemming from the foundational CRISPR/delivery work of the ATTR program with LNP delivery, a key advantage that Intellia is developing to maintain momentum. Cash flow from Operations -CFO- for the first time in the company's history has turned positive with 2Q 2020 bringing in $57.4 million in positive cash flow offsetting 1Q 20's -$38.5 million CFO.
Balance sheet composition: As seen below, Intellia has kept a stable balance sheet with a consistent cash buffer (>$270 million) managed mainly from equity offerings, as seen with the most recent June 2020 $115 million public common stock offering. Total debt is primarily (ca 70%) made up of capital leases and shows no serious risks. As stated above, although Intellia is loss-making which continually reduces cash-on-hand, the CEO did state in September that Intellia's 2Q 2020 cash position of $362 million is enough for 2+ years of operations which can relieve investor worries of a cash shortage or further share dilutions in 2020.
Table Source: Self Created | Data Source: Seeking Alpha - NTLA
Valuation: Multiple Expansions & Revenue Growth
Evaluating Intellia must be done on a revenue basis, as all of their internal therapeutics (ex Novartis partnership) are pre-clinical with the outlying progress seen primarily in revenue adjustments from milestones and multiple expansions as progress through the 6-7 year clinical journey begins to take shape starting with Phase 1 dosing of NTLA-2001 beginning in December 2020.
Table Source: Self Created | Data Source: Seeking Alpha - NTLA
Investors should understand that due to a large analyst following (9 in total), Intellia on average should preform relatively to mark with the above base-case assumptions (+30% upside) reflecting the average analyst expectations and current financial position.
Revenue is conservatively forecasted and multiples above 22x reflect slight optimism regarding staying on track for Phase 1 by Dec. 2020 without acute toxicities or large off-target effects from the resulting small population initial trial in the UK potentially published in mid-to-late 2021. The pessimistic case which outlines a no-growth 2020 (from Sep.), is based on a multiple not rewarded for progress towards initial Phase 1 which should encompass any slight delays less than 6-months (approximately), but an on-track basis for 2021 targets with NTLA-2002 and NTLA-5001. The optimistic case (+36% upside) reflects an expansion towards last June's sentiment on multiples primarily rewarded based on a revenue surprise +$6.74 million and an EPS improvement of $0.06 over analyst expectations.
Conclusion: Goldman Agrees, NTLA is a "Buy"
In conclusion, Intellia Therapeutics Inc. (NASDAQ: NTLA) is a pre-clinical biotech company going clinical this year with competitive therapeutics and sufficient support from long-standing partners such as Regeneron and Novartis. The company is sufficiently capitalized after the June 2020 capital raise of $115 million which is projected to enable NTLA-2001 into Phase 1 by Dec 20' and both NTLA-2002 and NTLA-5001 at IND status by Dec. 21'.
For long-term NTLA holders, this may be the time that the market begins to take notice of this relatively quiet biotech and for new investors, it may be time to watch trial results/regulatory progress in 2021. Either way, it seems not only is Goldman marking NTLA a "buy" at a $30 price target, but the broader market as a whole with the author expecting FYE 2020 to reach a price target of $30.55 (+30% upside).
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.