Gene-editing specialist Intellia Therapeutics (NTLA 3.70%) has caught the attention of Cathie Wood. The founder and CEO of Ark Invest, an investment management firm focused on investing in innovative companies, includes Intellia as a top 10 holding in one of her firm's actively managed ETFs.
Other actors on Wall Street seem to agree with the pick. The biotech's current price target of $84.22 (according to Yahoo! Finance) represents an upside of about 190% over its current share price of just under $29. Can Intellia Therapeutics live up to this optimism? Let's find out.
What's going on with Intellia Therapeutics?
Intellia's market capitalization is $2.56 billion. That's despite the fact that the company has no product on the market. And even worse, none of its programs are yet in late-stage clinical trials. It's always hard to value clinical-stage biotech stocks, but at first glance, this market cap seems too high. The market must be valuing the company's candidates highly.
So let's go over some of them. One of the most advanced is NTLA-2001, a potential treatment for transthyretin amyloidosis (ATTR). This rare genetic disease is caused by a harmful buildup of a protein in the liver, making it difficult for patients' hearts to pump blood; it can lead to serious health complications, including heart failure. In a phase 1 clinical trial, NTLA-2001 was shown to reduce the disease-causing protein in patients.
Intellia is touting its leading candidate as potentially the first one-time cure for transthyretin amyloidosis. There are about 50,000 patients worldwide with the hereditary form of ATTR, and between 200,000 and 500,000 with the wild-type version (those without the genetic mutation who go on to develop the disease).
NTLA-2001 could be highly lucrative if it can help cure even a portion of those cases. Intellia estimates that the market for transthyretin amyloidosis therapies could be worth more than $11 billion by 2026. It plans to start a phase 3 study for NTLA-2001 by the end of the year. The company is also partnering with Regeneron Pharmaceuticals, a much larger biotech with deeper pockets and more experience in navigating treacherous regulatory waters, to develop NTLA-2001.
Intellia has another candidate that could start a late-stage study by late 2024, called NTLA-2002. It's a potential functional cure for hereditary angioedema (HAE), a rare disease characterized by swelling of the limbs. There are as yet no cures for HAE, although treatments exist that help manage the illness.
NTLA-2002 has also delivered encouraging results in early-stage studies. The disease affects some 6,000 people in the U.S. and roughly one person in 50,000 worldwide, so Intellia thinks the market for therapies for HAE could be worth more than $4 billion by 2026.
In short, Intellia's two leading candidates are both potential cures for rare diseases and have delivered encouraging results in studies so far. Furthermore, for one of those programs, the company has the backing of a more established biotech. That explains much of the market's faith in Intellia Therapeutics.
Plenty of upside -- and downside -- potential
There's no doubt that Intellia looks like a promising company on the verge of making breakthroughs. But what if things go wrong for the biotech?
Funding likely won't be an issue anytime soon, partly thanks to its collaboration with Regeneron. As of the second quarter, Intellia had about $1.1 billion in cash, equivalents, and marketable securities, compared to $1.3 billion as of the end of 2022.
That's very good for a biotech of this size, but the real danger is running into clinical or regulatory roadblocks. It's not rare for clinical-stage biotechs to see their candidates flunking clinical trials or failing to earn approval because of some unforeseen problem, among other potential risks Intellia faces. The biotech's shares could easily drop off a cliff.
Will Intellia match Wall Street's optimistic predictions in the next year? My view is that it won't. It should start at least one late-stage study within this period, but there likely won't be enough clinical progress to make the company's stock rise that much in the next 12 months.
More importantly, should investors who are focused on the long game consider buying Intellia shares? Probably not, unless they're willing to handle heightened risk and volatility. And even then, it's best to start by initiating a small position and add more shares as Intellia Therapeutics demonstrates solid progress. However, this is definitely a stock to keep on a watch list.
