Key Points
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Intellia Therapeutics is getting around a recent major regulatory setback.
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However, the stock still faces several potential issues.
Cathie Wood, the CEO of the investment management firm Ark Invest, is known for focusing on companies with significant innovative potential. One of her firm’s picks, Intellia Therapeutics (NASDAQ: NTLA), fits the bill.
Intellia is a mid-cap biotech company specializing in gene editing and developing medicines for diseases for which few exist. The drugmaker has already performed exceptionally well this year, with shares up 47%. Should investors consider purchasing shares of Intellia Therapeutics after this run?
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Scientist altering DNA.
Image source: Getty Images.
Why Intellia’s shares are soaring
Intellia Therapeutics’ two leading pipeline candidates are lonvo-z and nex-z. The former is an investigational treatment for hereditary angioedema, a rare condition that causes painful episodes of swelling across the body, including on the limbs and face. Nex-z targets transthyretin amyloidosis, a genetic disease that results in the malfunctioning of the transthyretin protein and can cause a range of life-threatening cardiovascular issues.
Last year, the U.S. Food and Drug Administration (FDA) put two phase 3 studies for nex-z on clinical hold after a patient died in one of them due to liver failure. Here’s the good news: The FDA has now lifted these clinical holds and allowed Intellia Therapeutics to move forward with its clinical studies. Since the stock fell following these negative developments last year, it’s not surprising to see it bounce back while the biotech takes a giant step toward putting these issues in the rearview mirror.
Reasons to be cautious about Intellia Therapeutics
Despite the good news, there are good reasons to remain skeptical of Intellia Therapeutics’ prospects. First, neither the company nor regulators have revealed whether or not nex-z caused the liver issues that led to the patient’s death. Without that bit of information, Intellia Therapeutics could, for all we know, run into similar issues in the near future. True, the company is taking a more careful approach in its late-stage studies for nex-z moving forward.
It will exclude patients with certain liver issues (and several other health problems), for instance, while carefully monitoring signs of liver inflammation. However, the fact that nex-z could still be responsible for the patient’s death is a bit worrying. Gene editing medicines already have a hard time ramping up commercial efforts because they are usually costly and complex to administer, making it challenging for third-party payers to adopt them. A lingering safety issue won’t make anything easier for the company.
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That’s before we throw in the usual potential clinical and regulatory roadblocks Intellia Therapeutics could run into that would sink its stock price. True, the company does have things going its way, such as its partnership with biotech giant Regeneron to develop nex-z. Also, there are hundreds of thousands of patients worldwide with transthyretin amyloidosis, and unlike current medicines, nex-z would be a one-and-done treatment for the disease.
These are some reasons Intellia Therapeutics could be a promising biotech. However, given the significant risks, only investors comfortable with heightened volatility should consider the stock.
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intellia Therapeutics and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.