Cathie Wood, the CEO of Ark Invest, is known for investing in companies with strong innovative potential. That includes biotechs that specialize in gene editing, a group of techniques that could revolutionize medicine by helping researchers develop therapies for diseases they previously couldn't treat.
Intellia Therapeutics (NTLA 1.54%), a gene-editing company, is currently 25th on Ark Invest's complete list of holdings list. The biotech is off to a strong start, with its shares already up 41%. But could it keep that momentum going? Let's find out whether this Cathie Wood pick is worth investing in.
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Why Intellia Therapeutics' shares are soaring
Intellia Therapeutics' two leading candidates, lonvo-z and nex-z, both target rare diseases. The latter was undergoing a pair of phase 3 studies last year when the U.S. Food and Drug Administration (FDA) placed them under clinical hold following the death of a patient from liver damage. The good news is that the FDA has now lifted the clinical hold on one of those two studies.
After the company's shares dropped due to this regulatory setback late last year, it's not surprising to see the stock recovering these losses as nex-z gets the all-clear from regulators. And even though Intellia Therapeutics' other phase 3 study is still under clinical hold, with the first being lifted, there is a good chance the second will be, too. That's one of the reasons the stock has performed well this year.
The stock is still risky
Intellia Therapeutics' recent struggles highlight the risks of investing in clinical-stage biotechs, especially those specializing in gene editing. Even after approval, because they are complex to administer and very expensive, gene editing medicines have struggled to gain significant traction.
NASDAQ: NTLA
Key Data Points
In fairness to Intellia Therapeutics, it could have a large addressable market. Nex-z is being developed to treat transthyretin amyloidosis, a progressive disease that causes a range of cardiovascular issues. There are 50,000 patients worldwide with the hereditary version of transthyretin amyloidosis, and between 200,000 and 500,000 with the wild type (that typically occurs in older adults).
There is no cure for the disease, and Intellia Therapeutics is developing nex-z as a potential one-time curative treatment. The biotech's lonvo-z could also address a relatively large market. It could target a rare disease called hereditary angioedema (HAE), which causes episodes of swelling in the limbs. There are 150,000 patients in the world with this disease.
Intellia Therapeutics estimates that the HAE market will be worth $6.3 billion by 2030, while the transthyretin amyloidosis market will be valued at $16.8 billion by then. However, Intellia Therapeutics could still face significant clinical and regulatory issues that could sink its share price. And even if nex-z and lonvo-z hit the market, their peak sales potential will be severely limited, given the challenging nature of gene editing medicines.
Intellia Therapeutics' stock remains very risky for these reasons. Investors, perhaps except those comfortable with heightened risk and volatility, should stay away.
