Intellia Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. The unaudited consolidated financial statements cover a preclinical-stage CRISPR/Cas9 genome-editing company; all revenue to date was from collaborations, with no approved products or product sales. Amounts below are in millions of dollars unless stated otherwise.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Collaboration revenue | $11.1 | $7.7 | $21.6 | $15.1 |
| Research and development expense | $25.5 | $23.5 | $49.2 | $46.0 |
| General and administrative expense | $13.1 | $7.8 | $23.7 | $15.2 |
| Total operating expenses | $38.6 | $31.3 | $72.8 | $61.2 |
| Operating loss | $(27.5) | $(23.6) | $(51.3) | $(46.0) |
| Net loss | $(25.7) | $(22.2) | $(47.6) | $(43.6) |
| Basic and diluted loss per share | $(0.56) | $(0.52) | $(1.05) | $(1.03) |
- Revenue grew 45% in Q2 and 42% for the first half, primarily reflecting recognition of the 2018 Novartis amendment payment and higher Regeneron ATTR research activity. Collaboration revenue is the only revenue source; product revenue and royalties had not been generated.
- Q2 net loss widened by $3.5 million year over year. Higher operating expenses more than offset increased collaboration revenue and interest income. G&A growth was principally driven by IP-related legal fees; R&D growth reflected personnel, facilities, IT/software and lab costs.
- At June 30, cash, cash equivalents and marketable securities totaled $275.8 million; a further $27.1 million of ATM proceeds was due and settled by July 2. Current assets were $307.1 million and current liabilities $38.5 million. The filing reports no debt.
- First-half operating cash outflow was $49.1 million, versus $40.3 million in 2018. Investing activities provided $28.9 million, mainly due to security maturities, while financing provided $10.5 million. Cash and cash equivalents declined $9.7 million to $49.1 million; marketable securities account for most of the company’s liquid resources.
- Deferred revenue was $42.2 million at June 30, down from $55.9 million at year-end, reflecting revenue recognition. The filing does not present gross margin as a meaningful separate measure.
Material changes and business developments
- Compared with the first half of 2018, collaboration revenue rose $6.4 million, operating expenses increased $11.6 million and net loss increased $4.0 million. G&A expense rose $8.4 million, including $6.0 million of additional legal fees, principally related to IP matters.
- The company issued 2.21 million shares through its ATM program during the first half, generating $35.2 million in net proceeds; 2019 share count at June 30 was 47.7 million, up from 45.2 million at December 31. Approximately $33.9 million remained available under the sales agreement at June 30.
- Adoption of the new lease standard in January 2019 brought operating lease assets and liabilities onto the balance sheet. The company also extended its 130 Brookline Street lease through January 2025 and began a sublease for additional space.
- Collaboration exposure is concentrated in Novartis and Regeneron. Novartis’ research collaboration term ends in December 2019, with a possible $50 million platform-internalization option. The Regeneron collaboration runs through April 2022, subject to its terms; the partners share development costs and profits on the ATTR Co/Co program.
Outlook, commentary and risks
- Management estimated that cash, cash equivalents, marketable securities, ATM proceeds due and expected Novartis and Regeneron research or cost-reimbursement funding would support operations into the second half of 2021. This estimate excludes potential collaboration milestones or extension fees and other strategic uses of capital, and depends on assumptions that may prove incorrect.
- Management expected R&D expense to increase during 2019 as the company expands its team and advances ATTR toward clinical development. The company expects to rely on equity financing and collaborations until it can generate substantial product revenue; it had no other committed external funding source.
- On August 1, 2019, after quarter-end, Intellia reported that it had held an FDA pre-IND meeting for NTLA-2001, initiated IND-enabling toxicology studies and expected to submit an IND in mid-2020. It also expected Phase 1 manufacturing to commence by year-end 2019. These are forward-looking plans, not results achieved during the quarter.
- Management reported preclinical results, including durable TTR reduction in non-human primates and mouse-model results for PH1 and engineered T-cell work. These findings are preliminary and do not establish human safety or efficacy. The filing emphasizes that CRISPR/Cas9 therapeutics remain unvalidated clinically and that development, manufacturing, regulatory and commercialization outcomes are uncertain.
- Key legal/IP contingencies include Intellia’s arbitration with Caribou over the scope of licensed guide-RNA IP, with a decision expected in Q3 2019, and a June 2019 USPTO interference proceeding between the UC/Vienna/Charpentier and Broad Institute patent families. Adverse outcomes could affect rights, costs or freedom to operate. The filing does not provide a clear quantified loss estimate for these matters.
- Other stated risks include clinical and regulatory delays, off-target or other safety effects, manufacturing and delivery challenges, dependence on collaborators and third parties, potential future financing and dilution, and changing public acceptance or regulation of genome editing. Management concluded disclosure controls were effective at the reasonable-assurance level as of June 30, 2019.
Important facts for investors to verify
- Whether actual cash burn and collaboration funding remain consistent with management’s runway estimate into the second half of 2021.
- ATM issuance, remaining capacity, subsequent share count and the potential dilution from future equity financing.
- Progress and outcomes of the Caribou arbitration and the CRISPR patent interference, including implications for licensed rights and freedom to operate.
- Whether NTLA-2001 toxicology, manufacturing and IND milestones proceed on the disclosed schedule, and what subsequent data show about safety and efficacy.
- Novartis collaboration developments after its December 2019 research-term end, and Regeneron funding and execution of the ATTR Co/Co program.