Even after rising 30% so far this year, shares of Intellia Therapeutics (NTLA 3.70%) could easily experience another leg up if there's a bull market in the latter half of 2023. With positive readouts from its clinical trials, two powerful collaborators in its corner, and a strong balance sheet, Intellia has a lot of elements traditionally associated with biotechs having a high chance of success.
And that means it could be smart to buy a few shares, especially if you're willing to hold for a few years until it has a chance to get one of its medicines out the door. So here's what you need to know about how and why it's well- positioned to grow.
Great results are starting to look like a trend
On June 11, Intellia reported interim data from its phase 1/2 gene-editing therapy trial investigating its therapy for hereditary angioedema (HAE), and the results appear to be stellar so far.
The 10 patients in the study experienced a startling 95% decrease in the number of monthly angioedemic attacks after the biotech's candidate was used to edit their copies of disease-relevant genes. Even patients with a severe burden from the disease experienced a dramatic improvement after being treated. And some of the patients were still attack-free as long as a year after dosing.
In short, there is a strong possibility that Intellia has developed a functional cure for a hereditary condition using its gene-editing therapy which, if confirmed in later clinical trials, would constitute a tremendous (though not unprecedented) scientific and medical achievement. The main reason the latest accomplishment has a precedent is that the biotech's other phase 1 program, a gene therapy for hereditary transthyretin (ATTR) amyloidosis, appears to be able to also correct patient's genes in a functionally curative fashion.
So Intellia is very much one of the leaders in the gene-editing therapy space, given that gene-editing competitors like CRISPR Therapeutics haven't yet made it to the clinic at all.
Alas, the market's response to the latest development was a yawn. Over the last month, its shares are up by less than 5%. The biggest reason for this underwhelming reaction is that favorable early-stage interim clinical trial results are necessary but far from sufficient to commercialize a new medicine. Future data readouts could show problems with the therapy's safety or efficacy characteristics, or regulators could take issue with something and reject the approval application.
In other words, the information is still quite preliminary, and things could change a lot over the coming years as the program moves through the clinical trials process.
Market factors could carry the day
Still, there's another reason for the lukewarm reception, which might suggest that a bull market could value the new data differently than the market of the past year or so.
During bear markets like the one we've been in, investors are loath to bid up shares of pre-revenue biotech businesses like Intellia. It's easy to see why. Such biotech stocks are extremely risky, and they can't offer much in the way of guaranteed future cash flows to shareholders, nor can they offer much confidence in the prospect of retaining any of their value over the long term whatsoever. Flashy, early-stage results are too soon to matter much as the probability of those results eventually yielding a salable medicine is low at best.
But in a bull market, like the one that may be on the way sometime soon, the equation could be a bit different. Broad confidence in rising price levels leads to more willingness to buy shares of companies that might become big down the line but are small right now, like Intellia. And as there's a lower risk of investors dumping shares of unprofitable businesses to retreat to safe, predictable, and profitable ones.
This is still a pre-revenue biotech stock
While it doesn't currently have any source of recurring sales, Intellia is likely to survive long enough to get to its next set of milestones in the clinic, where it'll need to rigorously prove that its gene therapies are not just safe but that they are effective. It has more than $1.1 billion in cash, equivalents, and short-term liquid investments. And in 2022, it only burned $391.6 million in cash. That means its cash runway should be sufficient to last it through the next two years.
Furthermore, its collaboration partners Regeneron and Novartis are quite powerful, and they have committed to paying hundreds of millions in milestone payments, as well as sharing some of the costs (and profits) of development in Regeneron's case. That should help Intellia to stretch its research and development dollars further and give it access to all sorts of resources when it comes time to commercialize its programs, assuming it ever does.
Therefore, the market is likely to recognize the above when a new bull market comes -- especially if the company reports more interim updates that are positive. While this is still a very risky bet at the moment, the balance of risk and reward makes this stock a decent investment if you're able to wait for a few years before seeing a huge return. Just don't bet the farm; a blowup of a clinical trial is always a possibility, and it'll be harmful to share prices regardless of the type of market it happens in.
