Gene editing holds the promise to revolutionize healthcare. But there are only a handful of stocks available for investing in the technology. One of the leaders is Intellia Therapeutics, Inc. (NASDAQ:NTLA).
|Company Name||Intellia Therapeutics, Inc.|
|Market Cap*||$1.3 billion|
|Current Share Price*||$30.79|
How did Intellia Therapeutics rise to become one of the most successful gene-editing pioneers? Here's the story behind the biotech and its stock.
What does Intellia Therapeutics do?
Intellia Therapeutics is a biotech that focuses on developing therapies using CRISPR-Cas9 gene editing. The company's lead drug candidates target cures for genetic diseases like transthyretin amyloidosis (ATTR) and sickle cell disease. Intellia also has several other programs in preclinical development.
What is CRISPR-Cas9?
CRISPR-Cas9 is considered by many people to be the best approach for gene editing developed to date. CRISPR stands for Clustered Regularly Interspaced Short Palindromic Repeats. This refers to sections of DNA that can be read the same way both forward and backward that are separated by stretches of "spacer DNA" that doesn't contain instructions for building proteins. Cas9 is short for CRISPR-associated protein 9.
Scientists discovered several years ago that certain types of bacteria used CRISPR-Cas9 to slice the DNA of attacking viruses. Over time, researchers found out more about how CRISPR-Cas9 works, and they learned how to guide CRISPR-Cas9 to a targeted DNA sequence to edit genes.
Other methods of gene editing already existed, including zinc-finger nuclease (ZFN) technology and transcription activator-like effector nuclease (TALEN). However, CRISPR-Cas9 was significantly less expensive and much easier to use than these earlier approaches.
Intellia Therapeutics' early days
Intellia Therapeutics was founded in May 2014. The company's name is based on the Greek word entelia, which the company says means "a situation of excellence, without fault, and having all the required elements, qualities, or characteristics."
The biotech was formed by venture capital firm Atlas Venture and Caribou Biosciences. Atlas Venture has enjoyed a long history of investing in early-stage life sciences companies, including some that went on to be huge winners such as Alnylam Pharmaceuticals and Exelixis. Atlas Venture partner Nessan Bermingham became Intellia Therapeutics' first CEO.
Caribou Biosciences is a privately held biotech focused on the use of CRISPR-Cas9. The company was co-founded by Jennifer Doudna, one of the pioneering researchers of CRISPR-Cas9. One of Intellia's first actions was to license gene-editing technology from Caribou and contract with the company for research and development services.
In November 2014, Intellia conducted a Series A investment round that raised $15 million in cash. Atlas Venture and Novartis contributed the largest amounts in this financing. Both companies each still own at least 8% of Intellia, with Caribou Biosciences owning nearly 13% of the biotech.
Novartis didn't just buy a stake in Intellia. In January 2015, the big drugmaker and the small biotech announced a five-year research and development collaboration focusing on the use of CRISPR-Cas9 in developing chimeric antigen receptor T cell (CAR-T) and hematopoetic stem cell (HSC) therapies.
Intellia's expertise in gene editing caught the attention of another major company the next year. In April 2016, Regeneron Pharmaceuticals signed a six-year deal with Intellia to develop CRISPR-Cas9 therapies. Intellia received $75 million upfront as part of the agreement. In exchange, Regeneron gained the exclusive rights for products targeting up to 10 indications based on Intellia's CRISPR-Cas9 research.
Intellia's initial public offering
In February 2016, Editas Medicine became the first CRISPR-focused biotech to conduct an initial public offering (IPO). Intellia Therapeutics didn't wait too long to join the fray.
The biotech announced the pricing of its IPO on May 5, 2016. Intellia planned to sell 6 million shares at a price of $18 per share. The underwriters of the stock offering also were granted an option to purchase another 900,000 shares at the IPO price.
Intellia reported on May 11, 2016 that the IPO had successfully closed with the full 6.9 million shares sold. The biotech's net proceeds after all commissions, underwriting discounts, and expenses totaled roughly $112.9 million.
Intellia Therapeutics stock history
With great potential for CRISPR-Cas9 gene editing, you might have expected Intellia Therapeutics stock to be an immediate winner. It was -- but only briefly.
Intellia's share price did soar in the days following its IPO. However, the stock soon fell well below its IPO price. There were at least two reasons behind Intellia's decline.
One was simple: Intellia skyrocketed to a market cap of close to $1 billion with no revenue and the prospects for having any approved product years away at best. To use the words of former Federal Reserve chairman Alan Greenspan, there was probably some "irrational exuberance" among investors over Intellia Therapeutics stock.
Another major factor was considerable uncertainty over Intellia's intellectual property rights. As mentioned earlier, Intellia licensed its CRISPR-Cas9 technology from Caribou Biosciences. The patents involved belong to a group of patents originally filed by the University of California Berkley (UCB), the University of Vienna, and Dr. Emmanuelle Charpentier, who was one of several early researchers of CRISPR-Cas9 and a co-founder of another gene-editing biotech, CRISPR Therapeutics.
However, other parties were also sub-licensing the intellectual property of UCB, the University of Viena, and Charpentier. These parties included CRISPR Therapeutics and ERS Genomics, which was formed to provide access to Charpentier's intellectual property.
To muddy the waters even more, the Broad Institute, Harvard University, and the Massachusetts Institute of Technology (MIT) were granted patents for use of CRISPR-Cas9 in eukaryotic cells -- cells with a nuclease, including all human and animal cells. The UCB side and the parties aligned with the Broad Institute were tangled in patent litigation that worried investors who either owned or were considering buying any of the CRISPR-focused biotech stocks, including Intellia.
In December 2016, Intellia Therapeutics, Caribou Biosciences, CRISPR Therapeutics, and ERS Genomics announced "a global cross-consent and invention management agreement" that allowed all of the organizations to share the intellectual property owned by UCB, the University of Vienna, and Charpentier. This agreement simplified some aspects of the patent uncertainty.
But the situation worsened for Intellia and its allies in February 2017. The U.S. Patent and Trademark Office (USPTO) ruled that the Broad Institute's patents for the use of CRISPR-Cas9 in eukaryotic cells didn't interfere with the UCB side's patents. Although the UCB team appealed the decision to a federal court, the ruling definitely hurt the stocks of Intellia and the other biotechs aligned with UCB.
Eventually, though, investors' focus returned to the potential for CRISPR-Cas9. All of the CRISPR-focused biotech stocks enjoyed a nice run in the second half of 2017. Intellia's momentum, however, ground to a halt when the company announced another stock offering on Nov. 1, 2017, diluting investors.
So far in 2018, Intellia stock has performed well. The company reported progress on several fronts, including successful editing in mice of the gene mutation that contributes to liver problems associated with some alpha-1 antitrypsin deficiency patients and the initiation of final testing in non-human primates of its lead candidate targeting ATTR.
Issues have also been raised along the way about the safety and efficacy of CRISPR-Cas9. For example, in May 2017, Nature Methods published a study that found that CRISPR-Cas9 could result in many unintended genetic mutations. This was quite concerning since one of the touted benefits of CRISPR-Cas9 gene editing is its accuracy.
Eventually, this particular issue was laid to rest. In March 2018, the authors of the study issued a retraction and an error correction. Their initial findings were wrong: CRISPR-Cas9 didn't cause hundreds of off-target mutations.
In the meantime, though, another potential problem with CRISPR-Cas9 surfaced. In January 2018, researchers posted a paper on a website geared toward pre-print scientific research that hasn't been reviewed by peers. This paper suggested that human immune responses could interfere with CRISPR-Cas9.
The scientists discovered that many humans have immune responses to the types of bacteria in which CRISPR-Cas9 self-defense mechanisms have been found. While they didn't demonstrate that immune responses would definitely cause problems with how CRISPR-Cas9 works in humans, their research raised concerns about the possibility.
This news caused the stocks of Intellia, CRISPR Therapeutics, and Editas Medicine to drop. The decline was short-lived, though. Each stock quickly rebounded as investors learned that there could be workarounds to the immune response problem -- if it indeed was proven to be a problem.
That wasn't the end of scares for CRISPR-Cas9. In June 2018, two separate articles published in Nature Medicine pointed to the possibility that the use of CRISPR-Cas9 could cause cancer. The gene-editing method works more effectively in cells with mutations in the p53 gene. However, p53 mutations are linked to increased risk of several types of cancer.
It wasn't all bad news. At this point, the higher cancer risk appears to only be an issue when CRISPR-Cas9 is used to "knock out" or delete a DNA sequence and replace it with a corrected sequence. Intellia's lead candidate targeting ATTR only uses the knockout type of gene editing. However, some of the biotech's preclinical programs do knockout and replace DNA sequences. There could be challenges for Intellia down the road related to increased cancer risk.
Most recently, another scientific paper published in Nature Biotechnology on July 16, 2018, again raised concerns about the potential for CRISPR-Cas9 to cause unexpected genetic mutations. The initial findings suggested that the unintended changes to DNA sequences could occur far away from the target site.
What's next for Intellia Therapeutics
Intellia Therapeutics and Regeneron hope to submit a filing to the U.S. Food and Drug Administration (FDA) by the end of 2019 to begin phase 1 clinical testing of the CRISPR-Cas9 gene-editing therapy targeting AATR. Progressing to clinical testing in humans is an enormously important next step for Intellia.
The company does have other pipeline programs that it hopes to advance, however. Following is a summary of Intellia's pipeline candidates:
Transthyretin amyloidosis (ATTR)
|Late-stage preclinical development||Regeneron|
|Alpha-1 antitrypsin deficiency (AATD)||Preclinical development||None|
Primary hyperoxaluria type 1
Acute myeoloid leukemia (AML)
Sickle cell disease
|Late-stage preclinical development||Novartis|
Autoimmune disease (specific disease undisclosed)
The primary thing that investors should take away from Intellia's pipeline is that the biotech is still in very early stages. Preclinical discovery is the first step in the drug development process. Preclinical development, which can include testing in test tubes or in animals, comes next. Intellia's references to "late-stage preclinical development" simply mean that the preclinical testing is far enough along that the company hopes to advance to clinical testing in humans in the not-too-distant future.
Is Intellia Therapeutics a stock to buy?
The promise for CRISPR-Cas9 is certainly exciting. Intellia's lead program targets a disease, ATTR, that impacts 50,000 patients around the world. Currently, there are limited treatment options, and the disease is usually fatal within 15 years of the onset of symptoms. The potential to cure ATTR is very appealing -- and would without question make Intellia billions of dollars if it's successful.
But whether or not Intellia will be successful is unknown. Some of the risks of CRISPR-Cas9 have been discussed. Other issues could still arise. And on top of these potential problems, the questions over intellectual property rights for CRISPR-Cas9 remain unsettled.
To further add to the arguments against Intellia, the biotech is well behind CRISPR Therapeutics and Editas Medicine in development. Both of these competing CRISPR-focused biotechs hope to begin phase 1 clinical studies for their lead candidates later this year.
Biotechs with clinical-stage drugs are only suitable for aggressive investors. But stocks of biotechs like Intellia Therapeutics, which doesn't even have a candidate in clinical testing yet, should only be considered by the most aggressive of the aggressive investors. Although I'm cautiously optimistic about the prospects for CRISPR-Cas9, and by extension, Intellia Therapeutics, I don't think the stock is one to buy right now.