Sometimes with biotech stocks, what a company considered to be good news clashes with what the market is expecting. That was true on Oct. 24 when Intellia Therapeutics (NTLA -1.24%) announced some positive new clinical trial data only to see its stock slide by 18% -- and the price hasn't fully recovered as of yet.
What's causing this disconnect, and could Intellia Therapeutics be a buy now? We'll start by answering the first question.
A competitor's candidate is looking more lucrative
One of Intellia's most advanced programs is its candidate called NTLA-2002, which is in phase 3 clinical trials to treat hereditary angioedema (HAE). NTLA-2002 is a one-time gene editing therapy that's intended to fix the genetic basis for HAE permanently, effectively curing it.
While there are therapies approved to treat HAE, as well as other sophisticated treatments in development, the approved medicines are not capable of completely eliminating the attacks of swelling that characterize the illness, and patients need to take them forever.
Intellia figures that the global market for HAE interventions will be worth roughly $6 billion by 2029, so the market is probably large enough to split with a competitor and still see a good return on its research and development (R&D) investments. In the U.S. today, the annual cost of taking preventative treatments is in the ballpark of $500,000, so it's a major financial burden that's ripe for disruption.
Per the data released on Oct. 24, eight of the 11 patients (73%) treated with the highest tested dose of NTLA-2002 were fully attack-free through the study's last long-term follow-up point, eight months after dosing. They didn't need any additional treatment with HAE drugs. For the patients who didn't appear to be functionally cured of the illness, their number of monthly attacks were still dramatically decreased.
It's hard to see these figures as anything other than a major success in which applied science permanently improved the lives of these patients. So why is the market so downbeat on Intellia's stock?
Ionis Pharmaceuticals, another biotech, is also pursuing an HAE program, and it reported results from a phase 3 clinical trial in late May of this year. Patients treated with its therapy once every month for a year saw reductions of their average number of monthly HAE attacks in excess of 87%.
And after just 25 weeks of treatment, 91% of those patients met the clinical criteria for their HAE to be considered well-controlled. That means the market likely believes that its candidate is more consistently effective across different patients than Intellia's candidate.
Ionis could soon get its drug approved, depending on what regulators at the U.S. Food and Drug Administration (FDA) say. Once patients are on such a therapy, they'll need to be on it for life. That'll generate a lot of recurring revenue for Ionis. And it'll disincentivize those patients from getting Intellia's treatment, assuming it's ever approved for sale, which is not guaranteed.
In short, the market seems to have priced in Ionis reaching the HAE market first, and then boxing out Intellia. As Intellia doesn't currently have any revenue from sales, the effect on its stock is particularly acute.
There's upside here for those brave enough
It's true that Intellia's ability to seize market share is now less certain than before Ionis' breakthrough. But that doesn't detract from the validity of its results. Nor do its results compare that unfavorably to Ionis'. A one-time therapy that effectively cures most of the people who take it will probably end up being more comfortable and more affordable for patients over the long run. For those who don't get full relief from a single dose, there's the possibility of using Ionis' candidate to fall back on to control symptoms.
In other words, the market is probably overreacting by dumping Intellia's stock. There's also reason to believe that this biotech is worth buying on the dip. At the close of Q2 2024, it had $940 million in cash, equivalents, and short-term investments. Its trailing 12-month operating expenses are $570 million, so management is anticipating that it should have enough money to continue work through late 2026.
By the end of this year, it'll have two ongoing phase 3 clinical trials testing gene editing interventions for hereditary illnesses, including its HAE program. If those are successful -- and given the earlier-stage data, it is likely that they will be -- it could have its first two products on the market by 2026, assuming that regulators give them the green light.
There is also the risk that things won't go as planned, and the stock will crash further upon the publication of worse-than-anticipated clinical trial data. But with its pair of late-stage programs, the risk of that outcome is now significantly lower than it was when they were in earlier trials.
So, if you're inclined to invest in risky biotech stocks, Intellia is looking like a favorable option right now.
