In the exciting and volatile biotech industry, stocks can rise quickly due to clinical or regulatory advances. It’s impossible to reliably predict in advance which companies will do that, but we can get some clues from Wall Street analysts.
According to the consensus estimate of analysts is Intellia Therapeutica(NASDAQ: NTLA)a biotechnology in the clinical phase, has a significant advantage. The shares could rise 354% if we hit their average price target of $65. Should you put your money into Intellia Therapeutics now, expecting huge profits?
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Let’s find out.
Intellia Therapeutics fits the profile of stocks that investors have been moving away from in recent years: somewhat speculative and unprofitable companies. That describes most clinical-stage biotech companies. To impress investors, the gene editing specialist will have to show serious progress.
The good news is that Intellia has two ongoing Phase 3 trials. The first is for NTLA-2001 in the treatment of transthyretin amyloidosis with cardiomyopathy. This rare disease, caused by an abnormal buildup of proteins in body organs, occurs in two forms: wild-type (usually in older people) and hereditary. It causes several symptoms, including cardiomyopathy, a condition in which patients’ hearts have difficulty pumping blood.
There is no cure for transthyretin amyloidosis; that’s what biotech is trying to develop. Intellia could provide updates on this ongoing investigation over the next twelve months. It also plans to initiate another Phase 3 trial for NTLA-2001 by the end of the year for the treatment of hereditary transthyretin amyloidosis with polyneuropathy (a nerve disease).
Intellia is conducting another late-stage study for NTLA-2002 for the treatment of hereditary angioedema, a rare condition characterized by swelling of the extremities. It is also working on several early phase trials.
How will pipeline progress impact Intellia’s performance over the next twelve months? Positive Phase 3 results would likely increase the stck price, but by how much? That depends on several factors, including the peak sales potential for the relevant candidates, how effective the treatments have proven in clinical trials, potential competition, and more.
According to Intellia, NTLA-2001 and NTLA-2002 will have commercial opportunities worth over $11 billion and over $6 billion, respectively, by 2029. If this is correct, that’s a huge addressable market for a company with a market cap of $1.5 billion.
That said, even if approved, NTLA-2001 and NTLA-2002 will not capture this entire space on their own. That never happens; their sales potential is probably much lower than their commercial opportunities. According to one forecast, NTLA-2001 will generate annual sales of $938 million in the US by 2038.
Furthermore, it is impossible to predict how well these therapies will perform in their ongoing late-stage trials. Even with promising data from Phase 2 clinical trials, it is not uncommon for therapies to fail in pivotal trials. If that happens to one of Intellia’s flagship programs, Intellia’s stock could take a deep dive.
Based on these factors, Intellia Therapeutics’ stock price over the next twelve months won’t get anywhere near what Wall Street predicts. However, that alone doesn’t mean the stock isn’t a buy. But could that be so?
One argument in favor of Intellia is that it has found a deep-pocketed partner to help develop some of its drugs, including NTLA-2001. That partner is a biotech giant Regeneron Pharmaceuticals. Collaborations like these help smaller drugmakers get more funding and make it less likely that they will face unforeseen regulatory setbacks. On that note, Intellia had $940 million in cash and equivalents as of June 30, a solid amount considering its size. Financing may not be a problem
However, Intellia Therapeutics still looks like a high-risk, high-reward play. It could go either way, depending on how well the candidates perform in phase 3 trials. This is probably not the best option for risk-averse biotech investors. But if you have a higher risk tolerance, you may consider initiating a small position in the stock.
Consider the following before purchasing shares in Intellia Therapeutics:
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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Intellia Therapeutics. The Motley Fool has a disclosure policy.
This beaten stock could rise 354%, according to Wall Street, originally published by The Motley Fool
