Intellia Therapeutics, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. Intellia is a preclinical genome-editing company developing CRISPR/Cas9-based therapeutics. Its lead programs remained in discovery; it had no product candidates approved for sale and no product-sales revenue. All reported revenue was from collaborations.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| Collaboration revenue | $6.2 million | $1.8 million; up $4.4 million, primarily reflecting Regeneron revenue |
| Research and development | $13.4 million | $5.2 million; up $8.2 million |
| General and administrative | $5.7 million | $3.2 million; up $2.5 million |
| Total operating expenses | $19.2 million | $8.5 million |
| Operating loss | $12.9 million | $6.7 million |
| Net loss | $12.6 million | $6.7 million |
| Net loss per share, basic and diluted | $0.36 | $9.89; per-share comparison is distorted by the 2016 IPO and related share issuances |
| Net cash used in operating activities | $11.4 million | $9.4 million |
| Net cash used in investing activities | $4.2 million | $1.0 million |
Operating loss was approximately 208% of revenue, versus approximately 377% in Q1 2016; these are calculated ratios, not company-reported margins. The wider dollar loss reflected spending growth that exceeded the increase in collaboration revenue. Management attributed expense growth principally to increased headcount and advancing research programs.
At March 31, 2017, cash and cash equivalents were $257.6 million, including $255.7 million of cash equivalents. Current assets were $261.1 million and current liabilities $24.9 million. Total liabilities included $74.0 million of deferred revenue; the filing does not report borrowings or debt as a balance-sheet line item. Accumulated deficit was $66.2 million. Cash declined $15.5 million during the quarter.
Management estimated cash and cash equivalents, together with expected Novartis technology-access fees and research funding, would fund operating expenses and capital expenditures through mid-2019. This estimate excludes potential collaboration milestones and extension fees, depends on assumptions that may prove incorrect, and is not a guarantee. The company said its collaboration agreements were its only committed external funding source.
Material changes and collaboration position
- Revenue rose to $6.2 million from $1.8 million, including $4.1 million recognized from Regeneron in Q1 2017. Intellia had recognized $12.8 million cumulatively under Regeneron through March 31, 2017, with $63.6 million of related deferred revenue remaining.
- Under Novartis, Q1 2017 collaboration revenue was $2.2 million, compared with $1.8 million a year earlier. Cumulative recognized revenue was $16.0 million; related deferred revenue was $10.4 million at quarter-end.
- R&D expense increased 157% to $13.4 million. R&D headcount grew to 88 from 44 a year earlier. G&A expense increased 77% to $5.7 million, with G&A headcount rising to 31 from 17.
- Property and equipment purchases were $4.2 million, versus $1.0 million in Q1 2016, as the company expanded operations and laboratory facilities.
Outlook, risks and unusual items
- Management expected R&D expense to increase through 2017 as programs and the research team expanded. The filing provided no revenue or earnings guidance.
- Key business risks include the unproven nature of CRISPR/Cas9 therapeutics, delivery and safety challenges, lengthy and uncertain preclinical and clinical development, regulatory uncertainty, manufacturing dependence, competition, and the possibility of needing additional capital.
- Collaboration milestones and royalties are contingent on development, regulatory and commercial outcomes. Intellia warned that partners could change priorities, underperform or terminate collaborations, reducing expected funding or delaying programs.
- The Patent Trial and Appeal Board dismissed the CRISPR patent interference in February 2017 without deciding priority of invention. UC/Vienna/Charpentier appealed that decision in April 2017. The resulting intellectual-property position and potential effect on Intellia remained uncertain.
- The company expected adoption of the new lease standard to result in a significant lease obligation on its balance sheet. It reported no material change in contractual obligations and no off-balance-sheet arrangements for the periods presented.
- Management concluded disclosure controls were effective at the reasonable-assurance level as of March 31, 2017; no material change in internal control over financial reporting was reported during the quarter.
Important facts for investors to verify
- Whether actual cash use and collaboration receipts remain consistent with the mid-2019 funding estimate, and the assumptions underlying that estimate.
- Progress, timing and cash requirements of the preclinical programs, particularly the Regeneron co-development program and Novartis-partnered programs.
- Changes in deferred collaboration revenue, research funding, and the timing and probability of any milestone payments.
- Developments in the CRISPR patent appeal and related patent rights, licensing obligations or disputes.
- Whether rising personnel, research, facility and lease costs materially change the expected cash runway or increase the need for external financing.