Intellia Therapeutics, Inc. — FY 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. The filing also reports fourth-quarter results; this is an annual filing, not a standalone quarterly report.
Business context
Intellia is an early-stage genome-editing biotechnology company developing potential CRISPR/Cas9 therapeutics. Its programs were in discovery or preclinical development at year-end; it had no approved products, product sales, or clinical-stage programs described in the filing. Its pipeline includes in vivo liver programs—ATTR, hepatitis B, alpha-1 antitrypsin deficiency, and inborn errors of metabolism—and partnered ex vivo CAR-T and hematopoietic stem-cell programs.
Financial performance and liquidity
| Metric | FY 2016 | FY 2015 |
|---|---|---|
| Collaboration revenue | $16.5 million | $6.0 million |
| Research and development expense | $31.8 million | $11.2 million |
| General and administrative expense | $16.8 million | $8.3 million |
| Total operating expenses | $48.6 million | $19.5 million |
| Operating loss | $32.2 million | $13.4 million |
| Net loss | $31.6 million | $12.4 million |
| Net loss per share | $1.42 | $51.02 |
| Operating cash flow | $36.1 million provided | $1.8 million used |
Fourth-quarter 2016 collaboration revenue was $5.6 million and net loss was $10.6 million. Gross margins are not meaningful to the company’s reported operations because revenue was entirely from collaborations, not product sales.
At December 31, 2016, cash and cash equivalents were $273.1 million, working capital was $250.6 million, total assets were $299.0 million, and stockholders’ equity was $209.8 million. Deferred revenue totaled $78.3 million, including $20.2 million current. The balance sheet reports no borrowings; property lease commitments totaled $30.9 million. Management estimated that year-end cash plus expected Novartis technology-access fees and research funding would fund operating expenses and capital expenditures through mid-2019, excluding potential collaboration milestones or extension fees.
Operating cash flow was boosted by collaboration receipts, especially Regeneron’s $75.0 million upfront payment; it should not be read as evidence of positive operating profitability. The company raised $170.5 million in net financing cash flow in 2016, including IPO and concurrent private-placement proceeds. It reported no dividends and no off-balance-sheet arrangements.
Material changes versus the prior year
- Revenue increased to $16.5 million from $6.0 million, mainly reflecting the Regeneron collaboration signed in April 2016; the company recognized $8.7 million from Regeneron and $7.8 million from Novartis in 2016.
- Net loss widened to $31.6 million from $12.4 million as operating expenses rose with research-program advancement, headcount growth, and public-company costs. R&D headcount increased from 38 to 77; total employees were 104 at year-end.
- Cash and cash equivalents rose to $273.1 million from $75.8 million, following the IPO, private placements, and collaboration funding. The IPO sold 6.9 million shares at $18 per share.
- Preferred stock converted to common stock in connection with the IPO. The company had 36.0 million common shares outstanding at December 31, 2016; the filing cautions that the substantial share-count increase affects year-over-year per-share comparisons.
Outlook, risks, and unusual items
- Management expected 2017 R&D spending to increase as the team expanded and programs advanced. No clinical or product-revenue guidance was provided.
- All lead programs remained early-stage, and CRISPR/Cas9 therapeutics had not been clinically validated. The company warned that delivery, editing accuracy, off-target effects, safety, efficacy, manufacturing, regulatory pathways, and patient acceptance remain uncertain.
- Intellia depends on collaboration and license partners. Regeneron may select targets and has co-development and co-commercialization rights for the first selected target, ATTR; Novartis has rights in partnered CAR-T and HSC programs. Future milestones and royalties are contingent and uncertain.
- Intellectual-property rights are a material risk. In February 2017, the PTAB dismissed the interference proceeding involving the UC/Vienna/Charpentier and Broad Institute patent claims without deciding which party had priority; the decision could be appealed, and the company warned of possible further prosecution or infringement disputes.
- The company’s revenue depends on collaboration accounting and recognition over performance periods. At year-end, $78.3 million of deferred revenue remained and revenue timing could change with revised research plans or estimates.
- Lease commitments were $30.9 million. Management also expected lease-accounting changes to result in recognition of a significant lease obligation upon adoption of the new standard.
- Management reported effective disclosure controls as of year-end. The filing did not include management’s internal-control-over-financial-reporting assessment or an auditor attestation because of the transition period for newly public companies.
Most important facts for investors to verify
- Whether the mid-2019 cash runway estimate remains achievable, given increasing R&D costs and reliance on collaboration funding.
- Progress, timing, and safety evidence for preclinical programs, particularly delivery and off-target editing results; no clinical efficacy evidence was reported.
- Collaboration terms, partner target selections, termination rights, and the likelihood and timing of contingent milestones or royalties.
- Developments in CRISPR/Cas9 patent prosecution, appeals, licensing rights, and potential infringement litigation.
- Cash deployment, equity dilution, deferred-revenue recognition assumptions, and the company’s lease and other contractual commitments.