Given a 33% decline over a month, is it advisable to seize the discount with Intellia Therapeutics' shares?
Intellia Therapeutics' shares (NTLA -3.74%) have dropped by approximately 33% over the past month, following the release of data from an early-stage clinical trial on November 16 and the company's third-quarter earnings on November 7. Generally, such updates would serve as positive catalysts for a stock, especially if there were positive results to share.
However, in this case, the stock appears to be still recovering from losses sustained in October. Clinical results from Intellia's gene editing program for hereditary angioedema (HAE) didn't compare favorably with a competitor's candidate.
Is this stock still a good investment, or are there potential problems emerging?
Let's delve deeper into the latest developments
Let's analyze the recent data produced by Intellia to see if there are any significant concerns.
Intellia's experimental gene-editing therapy, nex-z (formerly NTLA-2001), aims to treat or cure a severe, progressive, and ultimately fatal hereditary illness called transthyretin amyloidosis, or ATTR amyloidosis. Nex-z is designed as a one-time intervention with long-lasting results, as it permanently edits the patient's genes to rectify the issues causing the disease. It's also one of Intellia's flagship programs, and it's currently enrolling patients for a phase 3 clinical trial, with another phase 3 trial set to commence before the end of the year.
However, due to the therapy's direct gene editing, Intellia is required to follow an extended safety testing schedule. Therefore, they are required to monitor patients in their earlier phase 1 trials for a considerable period. This allows for periodic checks on efficacy data in the small cohort of patients in those trials.
According to Intellia's update on the phase 1 trial on November 16, nex-z demonstrated remarkable effectiveness in lowering the circulating protein responsible for causing ATTR symptoms in 11 of the 36 trial participants by an average of 89% for a minimum of 24 months without any further dosing. The remaining participants have not yet reached the 24-month follow-up appointment, but there's no indication yet of ATTR's reemergence in their follow-ups. Given the trends observed so far, it's likely that their 24-month efficacy data will be equally promising.
Intellia emphasizes that these results suggest that nex-z could potentially alter the disease's course to the benefit of patients, slowing or halting its progression. However, its safety data are somewhat less encouraging, which may be contributing to investor unease.
Although these issues were not definitively linked to the treatment itself, a few patients experienced cardiovascular problems such as cardiac failure after treatment. One possible explanation is that ATTR amyloidosis becomes progressively more harmful to the body over time, and while nex-z may prevent further damage, it's not designed to reverse harm that has already accumulated.
In other words, the market's expectations for nex-z's performance may be unrealistically high, despite it being a potential cure for the condition it addresses.
What challenges could be lurking ahead?
If commercialized, Intellia believes the market for nex-z could reach 550,000 people with ATTR and its various subtypes worldwide, and that the market for interventions for the condition could exceed $11 billion annually by 2029. Capturing even 5% of the market and retaining that share for a few years would quickly make nex-z a blockbuster drug, significantly boosting Intellia's sales revenue, which is currently $0. The fact that its early-stage data remain promising should instill confidence that its later-stage trials have a good chance of success.
Intellia had $944.7 million in cash, equivalents, and marketable securities as of the third quarter. Management projects it will have sufficient funds to maintain its current pace of operations through late 2026, given expected revenues from partnerships. Given its total operating expenses for the first three quarters of 2024 were $442.8 million, this projection seems reasonable. Should it need additional financing to bring nex-z to market, its positive clinical results should make it relatively easy to secure funding.
Of course, there's no guarantee that nex-z will have an easy time reaching the market. Regulators at the U.S. Food and Drug Administration (FDA) will scrutinize its safety data closely, given the gravity of making permanent changes to patients' genomes. It's more likely that regulators will request more comprehensive safety data than with most other biotech candidates.
However, the recent decline in Intellia's stock price appears to be an overreaction. The company hasn't encountered any serious issues since the past 30 days that it hadn't faced before. If you're willing to take on a certain level of risk in biotech stocks, buying the dip and holding on for several years could be a wise investment strategy, especially if Intellia is able to bring one of its programs to market.
Despite the promising efficacy data for Intellia's gene-editing therapy, nex-z, some investor unease may be due to its somewhat less encouraging safety data. In light of this, investors might consider performing a thorough risk-benefit analysis before investing in Intellia Therapeutics, taking into account the potential for regulatory scrutiny and the company's need for additional financing to bring nex-z to market.
Considering Intellia's current financial position and projected cash flow, as well as the significant market potential and promising early-stage data for nex-z, some investors might view the recent drop in the stock price as an opportunity for potential future gains, especially if the company successfully addresses any regulatory concerns and brings nex-z to market.
