Intellia Therapeutics, Inc. — 2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017; filed March 14, 2018. Intellia is an early-stage CRISPR/Cas9 genome-editing company. Its programs were in discovery or preclinical development, with no approved products and no product-sales revenue.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Collaboration revenue | $26.1 million | $16.5 million |
| Research and development expense | $67.6 million | $31.8 million |
| General and administrative expense | $28.0 million | $16.8 million |
| Operating loss | $69.6 million | $32.2 million |
| Net loss | $67.5 million | $31.6 million |
| Net loss per share | $1.88 | $1.42 |
| Operating cash flow | $(65.3) million | $36.1 million |
| Capital expenditures | $10.1 million | $6.2 million |
- Revenue was entirely collaboration revenue, principally from Regeneron and Novartis. Revenue increased 58.5%, while operating expenses rose 96.7% as the company expanded staff, research programs, and laboratory capacity. Operating and net losses more than doubled.
- At year-end, cash and cash equivalents were $340.7 million, working capital was $323.5 million, and total assets were $376.2 million. Deferred revenue totaled $65.3 million. The balance sheet reports no borrowings.
- Financing provided $143.0 million of cash in 2017, including $141.0 million net proceeds from a November public offering of 6.25 million shares. The company reported 42.4 million shares outstanding at year-end.
- Management estimated that cash, cash equivalents, and collaboration funding would support operating expenses and capital expenditures through mid-2020. This estimate excluded potential milestone payments and strategic uses of capital and depended on assumptions that may prove incorrect.
- Contractual operating-lease payments totaled $25.4 million, including $5.5 million due within one year. No off-balance-sheet arrangements were reported.
Material changes and quarterly performance
- Compared with 2016, R&D expense increased $35.8 million and G&A expense increased $11.2 million. Management attributed the increases mainly to hiring, advancing early-stage programs, and facility and laboratory costs.
- In fourth-quarter 2017, collaboration revenue was $6.7 million, operating expenses were $31.4 million, and net loss was $24.0 million, versus $5.6 million, $16.4 million, and $10.6 million, respectively, in fourth-quarter 2016.
- The November 2017 share offering strengthened liquidity but increased the share count. The company’s IPO proceeds had been fully used by December 31, 2017, primarily for research and development and general corporate purposes.
Programs, outlook, and principal risks
- Intellia’s in vivo pipeline targeted transthyretin amyloidosis (ATTR), alpha-1 antitrypsin deficiency, primary hyperoxaluria and hepatitis B. Its ex vivo work included proprietary cell-therapy research and partnered CAR-T and hematopoietic stem-cell programs with Novartis.
- ATTR animal results were preclinical: a single dose reduced mouse serum TTR by approximately 97% through 12 months, with approximately 70% sustained liver editing. Interim non-human-primate (NHP) editing results ranged from 0.10% to 32.0% after one dose; some redosed animals exceeded 20% total editing. The company said it was optimizing delivery and selecting human guides, and expected to begin IND-enabling work as soon as mid-2018.
- Management reported 80–95% target-site modification in edited human stem/progenitor cells in collaboration research, with engraftment observed in mice. These results were not clinical evidence of safety or efficacy in patients.
- Key risks include unproven human therapeutic use of CRISPR/Cas9, off-target or other safety effects, delivery and manufacturing challenges, uncertain regulatory requirements and timelines, dependence on collaborators, and the need for future capital. Management stated that additional financing might be required and that financing may not be available on acceptable terms.
- Intellectual-property ownership and freedom to operate are material uncertainties. The PTAB dismissed a CRISPR patent interference without deciding which party invented the disputed subject matter; an appeal was pending. The filing also describes other patent challenges and potential infringement claims.
- Auditors issued an unqualified opinion on the financial statements. Management reported effective disclosure controls and internal control over financial reporting as of year-end; the auditor did not provide an opinion on internal-control effectiveness.
Important facts for investors to verify
- Whether ATTR IND-enabling work and human-guide selection progressed as expected, and how subsequent NHP data compare with the disclosed preliminary range.
- Actual cash burn, collaboration receipts, financing needs, and whether the mid-2020 runway estimate remains supportable.
- Clinical, regulatory, and safety developments for genome editing, including off-target effects and the implications of any adverse events in the field.
- Developments in the UC/Vienna/Charpentier appeal and other CRISPR patent proceedings, and their effect on Intellia’s rights and potential royalty or litigation exposure.
- Partner target selections, program progress, and any changes to the Novartis or Regeneron collaborations, including potential milestones and royalties.
- The effect of the November share issuance and future equity compensation or financing on dilution and per-share value.