Intellia Therapeutics, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Unaudited consolidated results; dollar figures below are in millions unless stated otherwise. Intellia is an early-stage gene-editing company developing potential therapeutics using CRISPR/Cas9. Its programs were in discovery and preclinical development, and it had no product sales.
Key financial metrics
| Metric | Q1 2016 | Q1 2015 / comparison |
|---|---|---|
| Collaboration revenue | $1.777 | $1.286; up $0.491, or about 38% |
| Research and development expense | $5.225 | $1.371 |
| General and administrative expense | $3.246 | $1.110 |
| Total operating expenses | $8.471 | $2.481 |
| Operating loss | $(6.694) | $(1.195) |
| Net loss | $(6.689) | $(1.093) |
| Operating cash flow | $(9.421) | $4.822 provided |
| Investing cash flow | $(1.008) | $(0.516) |
| Financing cash flow | $(1.195) | $4.328 provided |
| Cash and cash equivalents at period end | $64.192 | $75.816 at Dec. 31, 2015 |
Margins and profitability: The company reported an operating loss and net loss; collaboration revenue did not cover operating expenses. No product revenue was reported. No debt is shown on the balance sheet. At March 31, current assets were $65.937 and current liabilities were $10.960; total assets were $75.540. Stockholders’ deficit was $27.142, and convertible preferred stock was reported separately with an aggregate liquidation preference of $95.946.
Changes versus the prior comparable period
- Revenue rose mainly because Q1 2016 included recognition of Novartis research funding; all revenue to date was collaboration revenue.
- R&D expense increased by $3.854 million, reflecting a larger research team, third-party research services, and laboratory supplies. R&D headcount rose from 7 to 44 year over year.
- G&A expense increased by $2.136 million, primarily from higher legal, salary, and equity-compensation costs; G&A headcount rose from 7 to 17.
- Operating cash use increased substantially. Management attributed Q1 2016 cash use partly to operating spending and a $2.2 million security deposit for new office and laboratory space. Q1 2015 operating cash flow benefited from Novartis upfront cash receipts.
- Q1 2016 basic and diluted loss per share was $9.89, based on 676,000 weighted-average shares; Q1 2015 loss per common unit was $0.85, based on 1.284 million units. The filing cautions that the periods are not directly comparable following the company’s reorganization and share adjustments.
Liquidity, outlook, and notable developments
- After quarter-end, Intellia received a $75 million nonrefundable upfront payment under its April 2016 Regeneron collaboration. In May, it completed an IPO of 6.9 million shares at $18 per share and concurrent private placements for $55 million. Management reported estimated combined net proceeds of $167.9 million from the IPO and private placements.
- Management estimated that March 31 cash, the Regeneron upfront payment, May financing proceeds, and expected Novartis technology-access and research funding would fund operating expenses and capital expenditures until at least mid-2019, excluding potential collaboration milestones and extension fees. Management noted that this estimate depends on assumptions and cash could be used sooner.
- Management expected R&D costs to increase as programs advance and the organization grows. It also expected higher G&A costs, including costs of being a public company. The company had no committed external funding source beyond collaboration rights and expected payments; milestones and royalties were contingent on uncertain development outcomes.
- The new Cambridge office and laboratory operating lease has a ten-year term, subject to an option to terminate after year six and an option to extend. Future minimum lease payments totaled $28.832 million; the company had provided a $2.2 million security deposit.
- Novartis collaboration revenue recognized through March 31, 2016 totaled $7.9 million; $9.5 million remained deferred. The April 2016 Regeneron agreement covers CRISPR/Cas programs, primarily liver-focused, and provides for potential development, regulatory, and sales milestones and royalties, all subject to contractual terms and future achievements.
- A notable tax item affected Q1 2015: the company recorded a $0.102 million income-tax benefit in continuing operations related to intraperiod tax allocation associated with Novartis preferred-unit consideration. No income-tax benefit was recorded in Q1 2016.
Risks and contingencies
- CRISPR/Cas9 therapeutics were novel and clinically unvalidated; the company disclosed that neither it nor another company had received approval to begin human clinical trials or market CRISPR/Cas9 therapeutics. Safety, delivery, efficacy, regulatory pathway, manufacturing, and commercialization remained uncertain.
- The company highlighted significant intellectual-property uncertainty, including a USPTO interference proceeding involving the Broad Institute patent family and UC/Vienna/Charpentier intellectual property sublicensed through Caribou. The outcome could affect rights to technology used in its programs.
- Collaboration funding and future milestone or royalty receipts depend on partner performance and development progress. Partners may change priorities or terminate agreements, which could reduce funding or delay programs.
- Other disclosed risks included ongoing losses, possible need for additional capital, competition, clinical and regulatory delays, reimbursement uncertainty, and the challenge of hiring and managing a rapidly growing organization.
Important facts for investors to verify
- Whether the stated mid-2019 cash runway remains supported by actual spending, collaboration funding, and financing proceeds; the estimate excludes contingent milestones.
- The exact net proceeds and share-count effects of the IPO and private placements, and the conversion of preferred stock into common stock after quarter-end. The filing reports 35,996,265 common shares outstanding as of June 2, 2016.
- Progress and outcomes of the CRISPR/Cas9 patent interference and related licensing rights, particularly the company’s access to and ability to protect key intellectual property.
- Whether research and development spending, headcount growth, and the $28.832 million lease commitment remain consistent with the company’s operating plans.
- Whether Novartis and Regeneron programs advance and generate eligible payments; potential milestones and royalties are not assured.