Intellia Therapeutics, Inc. — Q1 2018 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2018. Intellia is a preclinical genome-editing company developing CRISPR/Cas9-based therapeutics. It had no approved products or product-sales revenue; all reported revenue came from collaborations with Novartis and Regeneron.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 | Change |
|---|---|---|---|
| Collaboration revenue | $7.5 million | $6.2 million | Up $1.3 million |
| Research and development expense | $22.5 million | $13.4 million | Up $9.1 million |
| General and administrative expense | $7.4 million | $5.7 million | Up $1.7 million |
| Operating loss | $22.4 million | $12.9 million | Loss increased $9.5 million |
| Interest income | $1.1 million | $0.3 million | Up $0.8 million |
| Net loss | $21.4 million | $12.6 million | Loss increased $8.7 million |
| Basic and diluted loss per share | $0.51 | $0.36 | Loss per share increased |
Operating expenses were $29.9 million, versus $19.2 million a year earlier. The filing does not report a meaningful product gross margin; the business remains collaboration-funded and loss-making.
At March 31, 2018, cash and cash equivalents were $327.8 million, down from $340.7 million at year-end 2017. Current assets were $337.7 million and current liabilities were $25.6 million. Total liabilities were $64.0 million, principally deferred collaboration revenue; the filing reports no borrowings. Deferred revenue totaled $55.4 million. Accumulated deficit was $137.0 million.
Q1 operating cash use was $17.8 million, compared with $11.4 million in Q1 2017. Investing cash use was $1.9 million, versus $4.2 million; financing provided $6.7 million, primarily from stock-option exercises, compared with $0.05 million in the prior-year quarter. Net cash declined $12.9 million. Management estimated that available cash and expected collaboration funding would support operating expenses and capital expenditures through mid-2020, excluding potential milestones, extension fees, or strategic uses of capital; this estimate depends on assumptions that may prove incorrect.
Material changes and accounting
- Revenue increased mainly because of higher Regeneron-related activity, including $2.0 million of TTR research and development services recognized in the quarter, compared with $0.9 million in Q1 2017.
- R&D expense rose primarily from $5.3 million more in laboratory supplies, research materials and services, and $3.7 million more in personnel-related costs. R&D headcount increased to 151 from 88 year over year. G&A growth primarily reflected personnel costs; headcount rose to 46 from 31.
- Intellia adopted ASC 606 on January 1, 2018 using the modified retrospective method. The company reported Q1 collaboration revenue $0.2 million lower and net loss $0.2 million higher than under the previous accounting basis. The 2017 comparison uses legacy revenue accounting and may not be directly comparable. Adoption also reduced deferred revenue and resulted in a $5.4 million favorable opening adjustment to accumulated deficit.
Outlook, developments and risks
- Management expected R&D and G&A expenses to increase during 2018 as the company expanded its teams and advanced research and preclinical work. No product-revenue or profitability guidance was provided.
- Management reported preclinical TTR results, including sustained protein reduction in mice, and preliminary non-human-primate editing results ranging from 0.10% to 32% after one dose; repeat dosing produced more than 20% editing in multiple animals. These findings are preliminary and do not establish human safety or efficacy.
- The company planned to initiate TTR IND-enabling studies in mid-2018 and anticipated submitting an IND by the end of 2019. These are forward-looking plans, not guaranteed milestones.
- Key risks include the unproven nature of CRISPR/Cas9 therapeutics, delivery, safety and off-target effects, uncertain regulatory pathways, manufacturing and clinical-development challenges, reliance on collaborators and future financing, and extensive competition. Intellectual-property rights are also uncertain: an appeal concerning the UC/Vienna/Charpentier patent family and a Broad Institute proceeding was heard on April 30, 2018, with a decision expected after the hearing.
- Novartis and Regeneron collaboration milestones and royalties are contingent on future development, regulatory and commercial outcomes and are not assured funding. Regeneron may terminate its agreement without cause on notice. Management stated that collaboration payments were Intellia’s only committed external funding source.
- The company reported no material changes to previously disclosed contractual obligations or legal proceedings. It expected adoption of the new lease standard in 2019 to result in a significant lease liability.
Important facts for investors to verify
- Cash runway assumptions, quarterly cash burn and the timing and amount of future collaboration receipts.
- Progress against the planned TTR IND-enabling work and end-2019 IND target, including whether further NHP results support the preliminary findings.
- R&D spending growth, staffing costs and the company’s ability to manage increasing operating expenses.
- Updates to the UC/Vienna/Charpentier and Broad Institute intellectual-property proceedings and their potential effect on freedom to operate.
- Collaboration target selections, partner development activity, termination rights and any milestone or royalty payments actually earned.
- Effects of ASC 606 on reported collaboration revenue and deferred revenue when comparing periods.