Intellia Therapeutics is a Cathie Wood portfolio and has a high Wall Street valuation.
The company’s top contenders look promising, but one of them just failed miserably.
Intellia Therapeutics’ outlook looks very risky right now.
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Intellia Therapeutics(NASDAQ:NTLA)a small-cap biotech company, has some notable bulls. One of them is Cathie Wood, CEO of Ark Invest. The innovation-focused investment firm has long owned shares of Intellia, likely because of its work on potentially harmful gene-editing technologies.
Intelli Therapeutics also has fans on Wall Street. The company’s current average target price of $32.3 (according to Yahoo! Finance) represents a significant upside of 131% from current levels. And that’s despite a recent setback that sent shares of Intellia Therapeutics plummeting.
Should investors buy the stock at current levels? Let’s find out.
Intellia Therapeutics is focused on developing treatments for rare diseases. The company has two products in clinical trials, both of which are CRISPR-based drugs. One is Lonvo-z, which is designed to treat hereditary angioedema (HAE), a genetic disease that causes unpredictable episodes of swelling.
Lonvo-z may be a one-time cure for this condition. And as an in vivo gene-editing therapy, it avoids the complicated process of cell harvesting and editing that often makes ex vivo therapy so difficult.
Lonvo-z performed well in early-stage studies and is now in a Phase 3 clinical trial, with data from that trial and a potential regulatory submission expected next year.
Image source: Getty Images.
Then there’s nex-z, a drug that Intellia Therapeutics is co-developing Regeneron Pharmaceuticals. The partners hope that nex-z can treat transthyretin (ATTR) amyloidosis, a disease caused by a dangerous build-up of the transthyretin protein in the body (in the heart or around certain organs). This can lead to a variety of health problems, such as cardiomyopathy, or when the heart cannot pump blood properly, polyneuropathy, or peripheral nerve damage.
Nex-z is undergoing two Phase 3 trials: one in patients with ATTR amyloidosis and cardiomyopathy, and one in patients with polyneuropathy. However, the company recently announced that it had to pause these clinical trials because one patient suffered severe liver damage. The patient has not died and is being treated, but this raises serious questions about whether nex-z is safe and will ever receive regulatory approval.
That’s why Intellia Therapeutics shares are down more than 45%. Can stocks recover?
First, let’s look at the potential commercial opportunity for two of Intellia Therapeutics’ first-line candidates, the company’s recent clinical failure aside.
The biotech company estimates that about 150,000 patients have HAE. Given the number of treatment options available for this drug, Lonvo-z may be successful. In fact, Intellia Therapeutics believes that Lonvo-z will be available by 2028. could sell 5 billion USD. However, this capability pales in comparison to the impressive heights of the nex-z.
Intellia estimates that there are between 250,000 and 500,000 people worldwide with ATTR amyloidosis, and the drugmaker believes that nex-z could reach 500,000 by 2028. can raise a whopping 12 billion
If these therapeutics come close to these predictions, buying shares of Intellia Therapeutics today will be a monster over the next three years. But let’s pull on the brakes for a moment.
First, Intellia Therapeutics’ projected sales of these drugs are almost certainly overly optimistic, even if they are approved. One reason is that gene-editing drugs aren’t cheap, and it hasn’t always been easy to get third-party payers to cover them for patients. And given their high prices, they are out of reach for the vast majority of patients without insurance.
Second, we have to wonder if these therapies will ever see the light of day outside the clinic, especially given their recent failure. It’s a reminder of the risks associated with investing in clinical-stage biotech companies.
With that in mind, should investors still consider buying shares of Intellia Therapeutics?
On the one hand, the stock will rise from current levels if the biotech can resolve its safety issues with nex-z, still get approval for Lonvo-z as well, and generate even decent sales for those products. On the other hand, the recent drop may be the beginning. If the nex-z’s safety issues persist, the stock could drop further even if it moves forward with the Lonvo-z.
In other words, these are stocks only risk-tolerant investors should even consider initiating a position, and even then it’s best to start (very) small.
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Prosper Junior Bakiny has no positions in any of the mentioned shares. The Motley Fool has positions on and recommends Intellia Therapeutics and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.
Meet Beaten Biotech Stocks Cathie Wood Loves and Wall Street Says Could Rise More Than 130% Originally Posted by The Motley Fool
