Intellia Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Intellia is a preclinical genome-editing company developing CRISPR/Cas9-based therapies. All revenue to date was collaboration revenue; the company had no product sales.
Financial performance
Amounts below are in millions of dollars, except per-share data. Cash flows are for the six-month periods.
| Metric | Q2 2018 | Q2 2017 | H1 2018 | H1 2017 |
|---|---|---|---|---|
| Collaboration revenue | $7.7 | $5.9 | $15.1 | $12.1 |
| Research and development expense | $23.5 | $15.6 | $46.0 | $29.0 |
| General and administrative expense | $7.8 | $6.4 | $15.2 | $12.1 |
| Operating loss | $(23.6) | $(16.0) | $(46.0) | $(29.0) |
| Interest income | $1.4 | $0.4 | $2.5 | $0.7 |
| Net loss | $(22.2) | $(15.6) | $(43.6) | $(28.2) |
| Net loss per share | $(0.52) | $(0.45) | $(1.03) | $(0.81) |
| Operating cash used | — | — | $(40.3) | $(27.1) |
At June 30, cash and cash equivalents were $305.5 million, including $300.3 million of cash equivalents, versus $340.7 million at December 31, 2017. Current assets were $317.6 million and current liabilities $25.2 million, for working capital of approximately $292.5 million. Total liabilities were $60.4 million, primarily deferred revenue; the balance sheet reports no debt. Stockholders’ equity was $279.3 million, and accumulated deficit was $159.3 million.
H1 investing cash outflow was $2.8 million, mainly property and equipment purchases; financing provided $7.9 million, primarily from option exercises. Cash declined $35.1 million during H1. No product gross margin was reported because there were no product sales.
Changes and accounting comparability
- H1 collaboration revenue increased $3.0 million year over year, principally from greater Regeneron-related research and development services for the TTR program. H1 operating expenses rose $20.1 million, driven by higher research spending and headcount; R&D employees increased to 160 from 110 year over year.
- H1 net loss widened by $15.4 million. The filing attributes expense growth to advancing early-stage research, including laboratory supplies, research materials, services, and personnel.
- Intellia adopted ASC 606 on January 1, 2018 using the modified retrospective method. Reported 2018 collaboration revenue was lower than it would have been under the previous accounting standard by $1.0 million for Q2 and $1.2 million for H1; H1 net loss was higher by $1.2 million. Therefore, reported 2018 and 2017 revenue are not fully comparable.
Outlook, programs, and risks
- Management estimated that June 30 cash and cash equivalents, together with anticipated collaboration technology-access and research funding, would fund operating expenses and capital expenditures through mid-2020. This estimate excludes potential milestone payments and certain strategic uses of capital, and depends on assumptions that may prove incorrect.
- Management expected R&D and G&A expenses to increase through 2018. The company expects to rely on equity financings and collaborations if additional funds are needed; it said collaboration payments were its only committed external funding source.
- Intellia reported ongoing IND-enabling work for its lead TTR amyloidosis program and anticipated an IND submission by the end of 2019, subject to ongoing work and study results. The reported animal and non-human-primate findings are preclinical and do not establish human safety or efficacy.
- Key risks include the unproven clinical and regulatory path for CRISPR/Cas9 therapies, delivery, safety and manufacturing challenges, dependence on collaborators, competition, and intellectual-property disputes. The filing describes ongoing CRISPR/Cas9 patent proceedings, including an appeal following the PTAB’s dismissal of an interference proceeding; the Federal Circuit hearing had taken place, with a decision expected after the filing date.
- After quarter-end, Intellia disclosed that it had entered a Regeneron co-development and co-promotion agreement for ATTR, with Intellia as clinical and commercial lead. The filing also reports that CFO Graeme Bell planned to resign effective August 3, 2018; the CEO was to serve as principal financial officer and the finance controller as principal accounting officer until successors were appointed.
- The company reported effective disclosure controls as of June 30, 2018, no material change in internal control over financial reporting during the quarter, no material change in contractual obligations, and no material change to previously disclosed legal proceedings.
Important facts for investors to verify
- Whether R&D spending and cash burn remain consistent with management’s mid-2020 funding estimate, and what assumptions underpin that estimate.
- Progress and results of TTR IND-enabling studies and the timing and requirements for any IND submission.
- How ASC 606 affects future collaboration revenue and deferred-revenue balances, and the remaining recognition schedules under the Novartis and Regeneron agreements.
- Developments in CRISPR/Cas9 patent proceedings and the scope, durability, and enforceability of Intellia’s licensed intellectual-property rights.
- Execution of the ATTR agreement and leadership transition, including appointment of a permanent CFO.
- Potential dilution or collaboration dependence if additional capital is required; milestone and royalty payments are contingent and their timing and achievement are uncertain.