Intellia Therapeutics, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; filed October 31, 2019. Intellia is a preclinical genome-editing company developing CRISPR/Cas9 therapies for in vivo and ex vivo applications. All revenue reported to date was collaboration revenue; the company had no approved products or product-sale revenue.
Financial performance
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $10.6m | $7.4m | $32.2m | $22.6m |
| Research and development | $27.5m | $23.2m | $76.7m | $69.2m |
| General and administrative | $8.4m | $8.3m | $32.1m | $23.5m |
| Operating loss | $25.3m | $24.1m | $76.6m | $70.1m |
| Net loss | $23.6m | $22.7m | $71.3m | $66.3m |
| Basic and diluted loss per share | $0.49 | $0.53 | $1.53 | $1.55 |
Revenue growth reflected recognition of the December 2018 Novartis amendment payment and increased Regeneron ATTR research and development activity. Higher R&D spending reflected research materials and services, personnel and IP-related costs. Nine-month G&A growth was primarily due to higher IP legal fees and personnel costs. Loss per share improved despite a larger net loss, alongside increased weighted-average shares.
Cash, liquidity and financing
- At September 30, 2019, cash and cash equivalents were $38.4m and marketable securities totaled $257.4m; cash, cash equivalents and marketable securities together were approximately $295.8m. Total assets were $346.6m and stockholders’ equity was $275.7m.
- Nine-month operating cash use was $74.6m, compared with $52.7m in 2018. Investing cash use was $2.7m; financing provided $56.9m, including $54.1m net proceeds from at-the-market (ATM) stock sales.
- The company reported no borrowings. It recognized $19.6m of operating lease liabilities, including $5.5m current and $14.1m long-term; deferred collaboration revenue was $35.1m.
- Management expected available funds and collaboration research and cost-reimbursement funding to support operating expenses and capital needs into the second half of 2021. This estimate excluded potential Regeneron milestone payments or extension fees and other strategic uses of capital, and depended on assumptions that could prove incorrect.
- During the nine months, Intellia issued 3.35m shares under its 2018 ATM for $54.1m net proceeds. Approximately $14.0m remained available under that program at quarter-end; a separate $150m ATM had not been used. Shares outstanding were 48.9m at September 30 and 48.9m as of October 25, 2019.
Material developments, outlook and risks
- Pipeline: NTLA-2001, the lead in vivo ATTR program co-developed with Regeneron, had completed a pre-IND meeting and entered IND-enabling toxicology studies. Intellia expected to submit an IND in mid-2020. In non-human primates, a single dose had produced an average reduction of circulating TTR protein greater than 95%, sustained for ten months. The filing also reported preclinical PH1 mouse findings and progress in engineered T-cell research; these are not clinical efficacy results.
- Collaboration transition: The five-year Novartis research collaboration term was scheduled to end in December 2019. Novartis could pay $50m to internalize the platform and select a limited number of additional targets over five years. Intellia reported about $4.1m of Novartis transaction price remaining for recognition through December 2019. Future collaboration funding, milestones and royalties were not assured.
- Caribou arbitration: An interim award found structural and chemical guide-RNA modification technologies exclusively licensed to Intellia, but contemplated an exclusive, perpetual, worldwide “leaseback” to Caribou for the specific chemical modifications. Payment terms remained to be negotiated or arbitrated; further proceedings could be delayed. The filing said the award did not affect current programs, and Intellia was not using the modified guide RNAs in active programs.
- IP uncertainty: The USPTO declared and later expanded an interference between the UC/Vienna/Charpentier and Broad Institute patent families concerning CRISPR/Cas9 use in eukaryotic cells. Outcomes of this and other patent disputes could affect rights, costs and freedom to operate.
- Other risks: CRISPR/Cas9 therapies were unvalidated clinically, and programs remained preclinical. Key risks include safety, efficacy, delivery, manufacturing, regulatory and clinical-trial uncertainty; reliance on collaborators and third parties; IP disputes; and the possibility of needing additional financing, with potential dilution or program reductions. The company expected R&D spending to increase as it advanced ATTR toward clinical development.
- Other reporting items: Adoption of the new lease standard on January 1, 2019 recognized lease assets and liabilities but had no material effect on reported operations or cash flows. Management concluded disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Progress and timing of NTLA-2001 toxicology, manufacturing and the planned mid-2020 IND submission; distinguish animal data from human clinical evidence.
- Actual cash use relative to the stated runway, the assumptions behind the second-half-2021 estimate, and any subsequent financing or ATM share issuance.
- Novartis collaboration end-of-term decisions, including any platform internalization, target selections or replacement funding.
- Final Caribou award terms and developments in the UC/Vienna/Charpentier–Broad patent interference and other relevant IP proceedings.
- Regeneron’s continued funding and participation in ATTR development, and any milestones or extension fees actually earned.