Intellia Therapeutics (NTLA 3.70%) and Rocket Pharmaceuticals (RCKT -0.54%) are gene-editing biotechs that want to offer what few others can: cures for hereditary afflictions that have so far proved beyond the reach of medical science. But for the moment, that potential is far off, as both companies are working through clinical trials while subsisting solely on whatever revenue they can earn from their collaborations with other biopharmaceutical businesses.
With that in mind, is one of the pair more likely to succeed than the other? Let's evaluate which is the better gene-editing stock by examining each player's pipeline maturity, cash holdings, and target market size to find out.
Rocket's blasting off toward small markets
The case for Rocket Pharmaceuticals is that it could be commercializing its first medicines in rare disease markets where there aren't any other options.
It'll soon enter phase 2 clinical trials with its candidate to cure or treat Danon disease, a lethal hereditary heart condition that affects up to 30,000 people in the U.S. and E.U. Its program for Fanconi anemia is on track for submission to regulators and commercialization in the coming quarters, potentially treating up to 275 people per year.
Plus, it already submitted its application to the Food and Drug Administration (FDA) to commercialize its candidate to treat severe leukocyte adhesion deficiency-I (LAD-I), an overwhelmingly fatal hereditary disorder of the immune system that afflicts between 50 and 75 people per year in the U.S. and Europe. Its treatment may be curative, and management thinks that it could secure an expanded indication for the moderate and mild forms of the disease relatively soon.
Given that it just issued new stock and pre-funded warrants worth $175 million in addition to its cash and equivalents worth $307 million as of the second quarter, it has under two years of operating expenses on hand. If it can commercialize at least one of its two programs on deck, it could become profitable before the end of 2024.
But, there is a risk that the markets Rocket is targeting are simply too small to sustain the business in the long term. And that's not an insignificant concern as its gene editing therapies are intended to provide long-lasting or even permanently curative benefits with only one dose.
Intellia's path is longer, but could be more profitable
Intellia Therapeutics is a bit earlier-stage than Rocket Pharmaceuticals, boasting just two clinical programs that are nowhere close to commercialization. One program is for transthyretin amyloidosis (ATTR), a fatal genetic illness that affects up to 500,000 people worldwide, and the other is for hereditary angioedema (HAE), another hereditary disease, which affects one out of every 50,000 people, or around 162,000 globally.
Management estimates that the market for ATTR treatments could be as large as nearly $12 billion by 2026, and that the market for HAE drugs could reach a value of $4 billion by the same time, so the company could easily grow by a large amount by capturing only a small fraction of each.
Immediately, investors should recognize that the markets Intellia is looking to enter are vastly larger than the ones that Rocket is targeting despite still focusing on rare illnesses. And while its therapies are also intended to be one-dose cures or near-cures, there is a much lower chance of Intellia curing the entire market and crashing its revenue, assuming its therapies get approved.
Therefore, while it faces the same set of risks in terms of its clinical programs failing to have the desired effect or failing to get regulatory approval, its risk of financial problems post-commercialization are far smaller.
Intellia has trailing-12-month operating costs of $513 million, and cash, equivalents, and short-term investments worth $908 million. So, it's essentially as well-funded as Rocket Pharmaceuticals, having a similar cash runway despite a much larger budget.
In the short term, it is probable that Rocket Pharmaceuticals' stock will rise faster, as its potential pair of upcoming approvals and the resulting revenue from selling its medicine should be well-received by the market. In the longer term, however, it'll likely hit a ceiling with its growth, and it might even cure itself out of a market. Thus, while Rocket isn't a bad option by any means, Intellia is the better gene-editing biotech stock.
