Intellia Therapeutics (NTLA 0.34%) has been on fire this year. Shares of the clinical-stage biotech have climbed an impressive 83% to date. However, Wall Street remains bullish on the company. Intellia Therapeutics' average price target (according to Yahoo! Finance) is $26.63, implying the stock could jump another 57% from its current levels over the next year. Should investors rush to purchase Intellia Therapeutics' shares based on The Street's bullish sentiments?
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Why there could be more upside ahead
Intellia Therapeutics has performed well largely thanks to strong clinical progress with its leading candidate, lonvo-z, an investigational gene editing medicine for hereditary angioedema (HAE), a rare condition that causes painful and dangerous swelling attacks across the body. Though there are standards of care for this disease that help manage swelling attacks, there is no cure. Intellia Therapeutics hopes it has developed the closest thing to a cure with lonvo-z. In a phase 3 clinical trial, patients treated with a single infusion of lonvo-z experienced an 87% reduction in attacks after a six-month evaluation period compared with those who received a placebo. Further, 62% of patients were completely attack-free, compared with just 11% in the placebo group.
Lonvo-z now looks destined for approval, and Intellia Therapeutics has already begun submitting an application package to the U.S. Food and Drug Administration (FDA). What's more, Intellia Therapeutics could have another important catalyst over the next 12 to 18 months. The company is developing another gene-editing treatment, nex-z, in collaboration with Regeneron (REGN +0.66%). Nex-z is undergoing a pair of phase 3 studies in patients with a rare, progressive genetic disease called transthyretin (ATTR) amyloidosis, which can cause severe cardiovascular problems. The company may release data from these clinical trials sometime next year. Provided the results are positive, Intellia's shares may soar.
NASDAQ: NTLA
Key Data Points
Significant risks involved
The commercial opportunity across lonvo-z and nex-z looks attractive, largely because of the latter. Only one person in 50,000 is affected by HAE, so there could be around 7,000 patients with the disease in the U.S., and about 162,000 worldwide. Of course, lonvo-z won't capture this entire opportunity, even under an optimistic scenario. It may not earn approval outside the U.S., for instance. So, lifetime sales for lonvo-z may not be that impressive. And annual revenue from the therapy will be even lower.
But once we turn to nex-z, the landscape looks different. The hereditary version of ATTR amyloidosis affects 50,000 people worldwide, while the wild type (that comes with age) affects between 200,000 and 500,000 patients. Diagnosis rates are also increasing, particularly for wild-type ATTR amyloidosis, driven by the world's aging population. And thanks to its partnership with the larger, more experienced Regeneron, Intellia Therapeutics could launch this medicine in many markets worldwide.
So, nex-z is central to Intellia Therapeutics' prospects. However, investors should keep in mind that the stock is very risky. Any clinical-stage biotech company tends to be so. True, Intellia's phase 3 success with lonvo-z makes its outlook less uncertain, but a lot could still happen, including unforeseen regulatory setbacks that aren't that uncommon with smaller drugmakers. Further, it's also worth noting that the company has had some issues with nex-z. Last year, the FDA placed clinical trials for the medicine on hold after a patient who received it died due to liver damage.
While the FDA eventually lifted the clinical hold, more safety concerns may eventually arise and, perhaps, disrupt nex-z's progress. Then there is the fact that Intellia Therapeutics develops gene-editing treatments that tend to be very expensive, making it hard to get health insurance companies on board, even when they are effective. This could eventually pose a problem once (if) Intellia Therapeutics launches its medicines.
Is Intellia stock a buy?
Intellia Therapeutics' recent phase 3 clinical trial success, its other late-stage candidate, and its strong cash balance all make a good case for the stock. The biotech ended the first quarter with $517.2 million in cash and equivalents, but it also conducted a secondary common stock offering after the period ended, raising about $207 million in gross proceeds. Management thinks the company has enough cash to last until 2028, even without factoring in the money it will receive from lonvo-z, once it hits the market.
However, some of Intellia Therapeutics' success with lonvo-z may already be baked into the stock price, and its shares won't move much once it's approved -- they could even decline if long-term shareholders decide to take that opportunity to pocket some profits. Further, the stock will fall off a cliff if it encounters any issue with nex-z. These factors make Intellia a risky bet. My view is that the stock is unlikely to match Wall Street's price target over the next 12 months.
And although it may have even more upside than that over the next five years if nex-z aces its phase 3 studies, the risks related to a potential failure on that front make the stock suitable only for those comfortable with significant volatility.
