Intellia Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 6, 2020. Unaudited results. Intellia is a pre-revenue genome-editing company developing CRISPR/Cas9-based in vivo and engineered-cell therapies.
Financial highlights
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $16.3m | $11.1m | $29.2m | $21.6m |
| Research and development | $37.8m | $25.5m | $72.4m | $49.2m |
| General and administrative | $11.5m | $13.1m | $22.8m | $23.7m |
| Operating loss | $(33.0)m | $(27.5)m | $(66.1)m | $(51.3)m |
| Net loss | $(32.4)m | $(25.7)m | $(64.2)m | $(47.6)m |
| Basic and diluted loss per share | $(0.61) | $(0.56) | $(1.24) | $(1.05) |
Revenue was entirely collaboration revenue; the company reported no product sales. Q2 revenue included an $8.4m one-time cumulative catch-up adjustment related to the Regeneron agreement modification. R&D growth primarily reflected increased pipeline and platform spending, manufacturing preparation and a larger workforce. G&A declined mainly because of lower intellectual-property legal expenses. Lower investment income also contributed to the wider net loss.
At June 30, 2020, cash and cash equivalents were $361.7m and marketable securities were $75.1m, for $436.8m combined; restricted cash of $1.9m was additional. Total assets were $490.8m, current liabilities $59.1m, deferred revenue $100.7m, and stockholders’ equity $351.6m. No financial debt was reported. Six-month operating cash flow was positive $18.9m, versus negative $49.1m in 2019, principally reflecting Regeneron upfront and other collaboration receipts, including a $70.0m upfront payment and the rise in deferred revenue. Investing activities provided $150.4m, mainly from securities maturities; financing activities provided $137.1m, including $107.7m net follow-on offering proceeds. Accumulated deficit was $365.1m.
Material changes and business developments
- Compared with the first half of 2019, revenue increased $7.6m, but R&D expense rose $23.3m and net loss widened $16.6m.
- In May, Intellia amended its Regeneron collaboration: the technology collaboration term was extended to April 2024, five liver targets were added, and hemophilia A and B co-development agreements were established. Regeneron paid a $70m upfront amount, including a $25m extension fee. The companies share future hemophilia development costs and profits 35%/65%, respectively, with Regeneron leading those programs.
- Regeneron also purchased 925,218 shares for $30m, or $32.42 per share, at a stated 100% premium to the prior 30-day volume-weighted average price. The filing records $12.6m as the fair value in equity accounting; the balance is reflected in the collaboration transaction-price accounting.
- Intellia’s June follow-on offering issued 6.3m shares and raised $107.7m net. Shares outstanding rose from 50.2m at year-end 2019 to 58.7m at June 30; the company also had $130m of capacity remaining under its at-the-market program.
- Novartis’ research term had ended in December 2019, but the agreement remains in effect. FDA acceptance of Novartis’ sickle-cell IND triggered a $5m milestone recognized in Q1 2020.
Outlook, risks and contingencies
- Management expected R&D expense to increase through 2020 as it advanced ATTR, AML and HAE programs. It expected cash, cash equivalents, marketable securities and Regeneron research/cost reimbursements to fund operations and capital needs for at least 24 months, excluding potential milestones, extension fees and strategic uses of capital. The financial-statement liquidity note gives a shorter estimate of at least 12 months; see verification items below.
- NTLA-2001: Intellia had submitted a UK clinical trial application and planned first-patient dosing by year-end 2020, subject to regulatory approval and COVID-19 impacts. NTLA-2002 IND or equivalent filing was expected in the second half of 2021; NTLA-5001 filing was expected in the first half of 2021. These were plans, not assured milestones; programs remained preclinical at the reporting date.
- COVID-19’s effects on employees, collaborators, vendors, research, manufacturing and clinical timelines were uncertain. The company said it could not reasonably estimate the pandemic’s potential financial impact.
- Key risks include the unproven safety and efficacy of CRISPR-based therapies, clinical and regulatory delays, manufacturing and delivery challenges, dependence on collaborators and external financing, and substantial competition. Patent and licensing rights are material uncertainties, including the ongoing Broad Institute/UC-Vienna patent interference and the Caribou arbitration. The Caribou interim award concerns specified guide-RNA modifications and a CD19 CAR-T program; terms remained subject to negotiation or further proceedings.
- License agreements include contingent development, regulatory and commercial milestone payments whose timing and amounts were not reasonably estimable. The company reported no material change in litigation since year-end 2019. It also entered into long-term Cambridge leases, including a new 39,000-square-foot facility lease.
Most important facts for investors to verify
- Resolve the filing’s liquidity-horizon difference: the notes state funding for at least 12 months, while MD&A states at least 24 months.
- Track actual cash burn excluding large collaboration receipts, deferred-revenue changes and securities maturities; assess the pace of R&D spending and any further financing or dilution.
- Check regulatory and clinical progress against the stated NTLA-2001, NTLA-2002 and NTLA-5001 timelines, including any COVID-19-related delays.
- Monitor Regeneron collaboration execution, cost-sharing and target arrangements, and the consequences of its ATTR cost/profit share falling from 50% to 25% effective mid-June 2020.
- Follow developments in the CRISPR patent interference, Caribou arbitration and other license obligations that could affect freedom to operate, costs or program rights.