Intellia Therapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. Intellia is a preclinical-stage CRISPR/Cas9 genome-editing company. It had no approved products, and all revenue to date came from collaborations.
Financial performance and position
Amounts are in U.S. dollars; financial statement figures are unaudited. Income statement and cash flow comparisons are against Q1 2018; balance sheet comparisons are against December 31, 2018.
| Metric | Q1 2019 / March 31, 2019 | Comparable period / prior year-end |
|---|---|---|
| Collaboration revenue | $10.4 million | $7.5 million, Q1 2018; up $3.0 million (about 40%) |
| Research and development expense | $23.7 million | $22.5 million, Q1 2018 |
| General and administrative expense | $10.5 million | $7.4 million, Q1 2018 |
| Total operating expenses | $34.2 million | $29.9 million, Q1 2018 |
| Operating loss | $23.8 million | $22.4 million, Q1 2018 |
| Interest income | $1.9 million | $1.1 million, Q1 2018 |
| Net loss / loss per share | $21.9 million / $0.49 | $21.4 million / $0.51, Q1 2018 |
| Cash used in operations | $21.5 million | $17.8 million, Q1 2018 |
| Cash, cash equivalents and marketable securities | $296.6 million | Cash and cash equivalents alone were $327.8 million at March 31, 2018; a comparable combined balance is not provided in the filing text |
| Accounts receivable | $3.6 million | $7.5 million at December 31, 2018 |
| Deferred revenue | $49.1 million | $55.9 million at December 31, 2018 |
| Accumulated deficit | $223.3 million | $201.0 million at December 31, 2018 |
Operating expenses exceeded revenue by $23.8 million, an operating loss margin of about 228% of revenue. Net loss increased slightly year over year, while loss per share improved as weighted-average shares rose to 45.2 million from 42.0 million. The filing does not present a conventional gross margin. No borrowings are listed; lease liabilities were $19.5 million, including $4.4 million current and $15.1 million long-term.
At quarter-end, current assets were $303.7 million and current liabilities were $39.2 million. The company reported $47.1 million of cash and cash equivalents and $249.5 million of marketable securities. These securities were primarily short-term U.S. Treasury, financial institution debt, and corporate debt securities.
Material changes and operating developments
- Revenue rose mainly because the December 2018 Novartis agreement amendment added revenue recognition, and because Regeneron ATTR cost-sharing and research activity increased.
- R&D expense increased $1.2 million, primarily from personnel, research-related IT/software, and lab-equipment depreciation. G&A increased $3.1 million, including higher personnel and equity compensation and $1.3 million of additional legal fees, principally for intellectual property matters.
- Interest income increased $0.8 million, reflecting investment in marketable securities under a revised investment policy and higher interest rates.
- Operating cash use increased $3.7 million year over year. Investing activities provided $5.7 million, mainly reflecting net maturities of marketable securities; financing activities provided $4.0 million, including $3.6 million from at-the-market stock sales.
- Intellia adopted the new lease accounting standard on January 1, 2019, recognizing lease liabilities and right-of-use assets. Adoption resulted in a $0.3 million reduction to opening accumulated deficit and had no material effect on the income statement or cash flows.
- In April 2019, the company extended its 130 Brookline Street lease through January 2025. Initial base rent is approximately $0.1 million per month, with annual increases of 3%; the landlord also provided a $0.2 million tenant-improvement allowance.
Outlook, risks, and contingencies
- Management expected R&D and G&A expenses to increase during 2019 as the company expanded research and advanced its ATTR program. Management estimated existing cash, cash equivalents, marketable securities, and expected collaboration funding would support operations into the first half of 2021. This estimate excludes potential milestones, extension fees, and strategic uses of capital and depends on assumptions that may prove incorrect.
- NTLA-2001, the lead in vivo ATTR candidate co-developed with Regeneron, was in IND-enabling preparation. Intellia reported plans to begin IND-enabling toxicology studies in mid-2019 and remained on track, as of the filing, to submit an IND in 2020. These were forward-looking expectations, not completed milestones.
- Other disclosed research included preclinical AATD and primary hyperoxaluria programs and engineered cell therapy research. The company described favorable preclinical findings, including animal-model results; these do not establish human safety or efficacy.
- Intellia warned that its CRISPR/Cas9 therapies were unvalidated in humans, development and regulatory outcomes were uncertain, and it expected continued losses. Additional financing could be needed; equity issuance could dilute shareholders, while collaboration funding may require granting rights on unfavorable terms.
- A material intellectual-property dispute with Caribou Biosciences was in arbitration. Intellia sought a ruling that disputed guide-RNA patent families were covered by its license; Caribou disputed that interpretation. A decision was expected in Q3 2019, but the outcome was uncertain.
- CRISPR patent ownership and freedom-to-operate disputes, including challenges involving the UC/Vienna/Charpentier and Broad Institute patent portfolios, could affect Intellia’s licensed rights and ability to develop or commercialize products. The filing noted that the USPTO issued a relevant UC/Vienna/Charpentier patent on April 23, 2019.
- The company relied on Novartis and Regeneron for collaboration funding, research, and development capabilities. Milestone and royalty receipts were contingent and uncertain. The Novartis research term was scheduled to end in December 2019; Novartis had an option to pay $50 million to internalize the platform under specified terms.
- Management stated disclosure controls and procedures were effective at the reasonable-assurance level as of March 31, 2019, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the expected 2020 NTLA-2001 IND filing and the planned mid-2019 toxicology work proceeded as anticipated; review subsequent clinical and regulatory disclosures.
- Actual cash burn and collaboration receipts versus management’s runway estimate into the first half of 2021, including any financing or use of the remaining at-the-market authorization.
- The outcome and implications of the Caribou arbitration and subsequent developments in CRISPR patent ownership, licensing, and freedom to operate.
- Progress, funding, and rights under the Novartis and Regeneron collaborations, including the Novartis term ending in December 2019 and its platform-internalization option.
- Whether preclinical animal results translate into human safety and efficacy, and how development, manufacturing, regulatory, and IP risks affect program timelines and costs.