Business context and reporting period
Intellia Therapeutics, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2017. The company is developing CRISPR/Cas9 genome-editing therapeutics; its programs remained in discovery or preclinical development, and it had no product sales. All reported revenue came from collaborations with Novartis and Regeneron.
Key financial metrics
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Collaboration revenue | $7.3 | $4.9 | $19.4 | $10.9 |
| Research and development expense | $17.5 | $7.9 | $46.5 | $20.5 |
| General and administrative expense | $5.7 | $4.7 | $17.8 | $11.7 |
| Operating loss | $(15.9) | $(7.7) | $(44.8) | $(21.3) |
| Net loss | $(15.4) | $(7.5) | $(43.6) | $(21.1) |
| Net loss per share, basic and diluted | $(0.44) | $(0.22) | $(1.25) | $(1.16) |
- At September 30, 2017, cash and cash equivalents were $222.3 million, down $50.8 million from December 31, 2016. This included $206.7 million of cash equivalents.
- Nine-month operating cash use was $44.0 million; capital expenditures were $7.7 million. Financing provided $0.9 million, mainly from employee stock purchases and option exercises. The prior-year period included $75.0 million from Regeneron and IPO-related proceeds.
- Reported liabilities included $65.0 million in deferred revenue, current and long-term, rather than reported borrowings. The filing does not show material debt. Deferred revenue is not debt.
- Stockholders’ equity was $175.8 million; accumulated deficit was $97.2 million. No profit margin was reported; operating expenses substantially exceeded collaboration revenue.
- Outstanding common shares were 36.1 million at September 30, 2017. Nine-month weighted-average shares rose substantially versus 2016, in part because of the 2016 IPO and related share issuances.
Material changes versus prior comparable periods
Revenue increased $2.4 million in Q3 and $8.5 million in the first nine months of 2017. Management attributed the increase to collaboration timing and recognition of deferred revenue, including Regeneron research services. R&D expense rose $9.6 million in Q3 and $26.0 million year to date, primarily as research headcount grew from 66 to 135 and programs advanced. G&A rose $1.0 million in Q3 and $6.1 million year to date, reflecting higher staffing and related compensation. The resulting net loss more than doubled year to date. Operating cash flow also shifted from $50.5 million provided in the prior-year period to $44.0 million used, chiefly because 2016 included Regeneron’s upfront payment.
Outlook, management commentary, risks and unusual items
- Management estimated that September 30 cash and expected Novartis technology-access and research funding would fund operating expenses and capital expenditures through mid-2019. This estimate excludes potential collaboration milestones and is subject to assumptions that could prove incorrect.
- Management expected R&D spending to increase through 2017 as the company expanded its team and advanced research and preclinical work. Profitability and the timing or amount of future product revenue could not be estimated.
- In a 52-week mouse study, a single dose reportedly reduced serum TTR protein by approximately 97% through 12 months, with approximately 70% editing at the target liver DNA site. These are preclinical results, not evidence of human safety or efficacy.
- Interim non-human-primate studies showed liver editing rates ranging from 0.10% to 32% across exploratory guides, formulations and dosing regimens; some redosed animals exceeded 20% total editing. The company cautioned that these top-line findings were preliminary and subject to further review. It was optimizing delivery and expected to designate a human therapeutic development candidate as soon as Q1 2018.
- Key risks include the unvalidated nature of CRISPR/Cas9 therapeutics, delivery and off-target safety, uncertain regulatory pathways, preclinical-to-human translation, manufacturing, intellectual-property disputes and dependence on collaborators. A UC/Vienna/Charpentier appeal concerning the dismissal of a U.S. patent interference proceeding was pending.
- The company reported no material change in contractual obligations and no off-balance-sheet arrangements. It expected adoption of the new lease standard to result in a material lease obligation; it did not expect the new revenue standard to have a material financial-statement impact.
- Management concluded disclosure controls were effective at the reasonable-assurance level as of September 30, 2017; no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- Whether the projected mid-2019 funding runway remains achievable given cash burn, hiring, capital spending and collaboration receipts.
- How subsequent full analyses affect the preliminary NHP findings, and whether delivery optimization produces reproducible editing and safety results.
- Whether the anticipated Q1 2018 development-candidate timing was met and how programs progress toward clinical testing.
- The pace and accounting of collaboration revenue, deferred revenue recognition, and any milestone or research payments from Novartis and Regeneron.
- Developments in CRISPR/Cas9 patent proceedings, licensing rights and any resulting effects on freedom to operate.