Unprofitable clinical-stage biotechs have lost their appeal in the past year, given the challenging economic and market conditions we still haven't entirely left behind. That's why companies such as Editas Medicine (EDIT 1.92%) and Intellia Therapeutics (NTLA 3.70%) are down massively over the trailing 12-month period.
However, Wall Street expects both to bounce back. The average price targets for Editas Medicine and Intellia Therapeutics are $13.18 and $83.75, respectively, according to Yahoo! Finance. That implies an upside of about 54% for the former and 119% for the latter as of this writing.
Can these biotechs meet these expectations, or is Wall Street too optimistic? Let's find out.
1. Editas Medicine
Editas Medicine's poor performance over the past 12 months isn't just due to its status as a clinical-stage biotech. Last year, the company ran into issues with one of its leading pipeline candidates, EDIT-101. Upon realizing that this investigational medicine for Leber congenital amaurosis 10 (an eye disease) would have a tiny addressable market, the biotech decided to pause enrollment into a trial for EDIT-101 until it could find a partner to help it fund its development.
Editas Medicine has yet to find this partner, but it is making headway with another potential therapy, EDIT-301. This gene-editing treatment targets sickle cell disease (SCD) and transfusion-dependent beta-thalassemia (TDT). Editas Medicine announced some early data from four SCD patients and one TDT patient in ongoing studies in June. All four SCD patients are free of painful side effects of SCD called vaso-occlusive crises since infusion.
These are encouraging results, but it is much too early to celebrate, as Editas Medicine still has a long way to go before it can even think about requesting regulatory approval for EDIT-301. Meanwhile, the company generates little revenue and is consistently unprofitable. So, funding will be an issue. In June, the biotech raised $125 million in gross proceeds through a secondary offering.
It ended the second quarter with $480 million in cash, cash equivalents, and marketable securities, an increase from the $401.8 million it had as of the end of the first quarter. Investors should expect several more episodes of dilutive means of financing in the next couple of years, during which Editas Medicine still won't be able to launch any product on the market.
And even once it earns the green light for EDIT-301, if it goes that far, it will have to deal with competition from companies such as Bluebird Bio and the team of Vertex Pharmaceuticals and CRISPR Therapeutics, which have launched (or are close to launching) gene-editing therapies for TDT and SCD. Editas Medicine's shares could soar on good news and meet Wall Street's price target within a year. The biotech industry tends to be volatile like that.
But for investors interested in more than just short-term gains, the stock looks far too risky.
2. Intellia Therapeutics
Intellia Therapeutics has no commercialized products, but it is in a much better position than many clinical-stage biotechs. Intellia Therapeutics has a pretty solid financial situation. As of the end of Q2, the company had $1.1 billion in cash, equivalents, and marketable securities, a slight decrease from the $1.3 billion it had as of the end of 2022.
On the clinical side of things, Intellia Therapeutics' leading candidates are called NTLA-2001 and NTLA-2002. The former targets transthyretin amyloidosis, a rare disease caused by a buildup of the transthyretin protein that can cause various symptoms, including heart problems. Intellia Therapeutics is developing NTLA-2001 in collaboration with Regeneron.They plan to start a pivotal study for this medicine by the end of the year.
NTLA-2002 is a potential treatment for hereditary angioedema (HAE), a rare genetic disease accompanied by painful swelling of various body parts, including the limbs and face. NTLA-2002 is currently in a phase 2 study, and if all goes well, Intellia Therapeutics plans on starting a phase 3 clinical trial by the third quarter of 2024.
So, things look promising for this biotech, and if it can register solid and consistent clinical wins through the next couple of years -- and eventually earn approval for NTLA-2001 and NTLA-2002 -- its shares will soar. That said, Intellia Therapeutics' market cap is currently $3.3 billion, even after the beating it took over the past year. That seems too high for a company that, although promising, currently has no products in phase 3 studies.
Will Intellia Therapeutics more than double in the next 12 years, as Wall Street predicts? With several catalysts on the way, it seems not entirely implausible. Still, only investors with a high risk tolerance should consider initiating a small position in this stock.
