Cathie Wood's Ark Investment Management has deemed CRISPR/Cas 9 genome editing as "biotech's breakthrough of the century." Back in 2018, Ark identified this gene-editing tool as a potential $2 trillion-a-year opportunity, thanks to its potential to disrupt the treatment of 10,000 monogenic human diseases, aquaculture, and medical diagnostics.
After a dramatic sell-off in CRISPR/Cas 9 gene-editing stocks during the 2022 bear market, Wood's flagship fund has been steadily buying shares of Intellia Therapeutics (NTLA 3.70%) in 2023. Intellia is the second most advanced CRISPR/Cas9 player among the space's small contingent of publicly traded companies.
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Here's why investors may want to take a cue on Intellia from this all-star stock picker.
Intellia: A deeply undervalued biotech
Intellia's most advanced therapeutic candidates are NTLA-2001 for transthyretin (ATTR) amyloidosis, which it's developing in partnership with Regeneron Pharmaceuticals, and the wholly owned NTLA-2002 for hereditary angioedema (HAE). Wall Street analysts think these two clinical assets justify a risk-adjusted market cap of approximately $7.5 billion. Even so, Intellia's market cap currently stands at approximately $3.56 billion. The stock's bulls, in turn, seem to think its shares could more than double in value from current levels.
And the bulls may be onto something. The commercial potential of Intellia's gene-edited therapies is enormous, as they could offer a lasting solution for patients with ATTR amyloidosis and HAE. These are two serious diseases that are expected to generate combined sales of $15 billion by 2030, according to Coherent Market Insights. Unlike other treatments that only manage the symptoms, Intellia's therapies could correct the underlying genetic defects, giving it a competitive edge in both of these massive markets.
Behind these lead assets, Intellia is also doing the necessary pre-clinical work to bring several other candidates into human trials soon. On this front, the biotech has designs on developing next-generation gene-edited products for high-value indications such as CD30 positive lymphomas, rare bleeding disorders, and alpha-1 antitrypsin deficiency associated lung and liver disease (a relatively common genetic disease). Intellia's long-term vision is to leverage its gene-editing technology to address scores of rare genetic disorders and various liquid and solid tumors.
What's more, Intellia is extremely well capitalized at the moment. Speaking to this point, the biotech exited the first quarter of 2023 with approximately $1.2 billion in cash and cash equivalents. That amount should cover the company's operating expenses until 2026. By then, Intellia ought to either be a late-stage company, or perhaps, an early commercial-stage company.
What's behind Intellia's depressed valuation?
The market's pessimism about Intellia stems from several factors. The most important one is that Intellia's gene-editing platform has not been proven in the market yet, which makes its commercial prospects uncertain. Gene-edited products have the potential to transform patient outcomes, but they also face logistical challenges that could limit their sales. Another factor is that Intellia is unlikely to launch a product before late 2026, assuming everything goes well. Investors have shown little interest in long-term value in the current market.
Lastly, there's the risk that Intellia's innovative platform may never produce a commercial-stage product or one that is widely adopted by prescribers. On this last point, the biotech's lead product candidates face entrenched competition from drugs already on the market for these rare disorders. Prescribers may hesitate to switch patients to an alternative treatment and/or third-party payers may be slow to offer favorable reimbursement terms as a result.
Time to buy?
Intellia is a biotech company with a unique and innovative platform that could enable it to develop breakthrough therapies for various diseases. However, this mid-cap biotech stock is not for the faint of heart due to the various risks associated with its unique platform. But it also offers a chance to reap huge rewards if the company succeeds in its ambitious goals.
Therefore, risk-tolerant investors might want to follow Wood's example and invest in this leading gene-editing company. This biotech stock stands out as a bargain considering its potential for explosive growth in the coming years, along with the fact that it provides exposure to one of the most innovative breakthroughs in human medicine in the modern era.
