By fits and starts, the market for initial public offerings is getting its footing. Of the four deals on tap this week, all are biotech operators. But among these offerings, there is one that is likely to stand out — Intellia Therapeutics.
Intellia plans to offer 5 million shares at a range of $16 to $18, and the lead underwriters include Credit Suisse Group AG (ADR) (CS), Jefferies and Leerink Partners. The proposed ticker stated in Intellia’s S1 form is NTLA.
The excitement for the IPO centers around Intellia’s Crispr-Cas9 technology, which is a naturally occurring defense mechanism in bacteria that fights against foreign DNA. Dr. Jennifer Doudna, a scientist at Berkeley, sees this as a way to potentially fight cancer and other diseases.
Back in 2012, she co-wrote a paper in the Wall Street Journal that shows how Crispr-Cas9 could be leveraged as a gene-editing tool. Think of it as a pair of scissors that can cut out bad genes, which can then be repaired with new ones.
Dr. Doudna’s pioneering work resulted in over 2,600 published papers. In fact, MIT Technology Review called Crispr-Cas9 “the biggest biotech discovery of the century.”
Something else: Dr. Doudna is also on the founding scientific board of Intellia. Given this, it should be no surprise that the company has attracted top-notch strategic partners, such as Regeneron Pharmaceuticals Inc (REGN) and Novartis AG (ADR) (NVS). Both plan to invest a total of $55 million in the upcoming IPO.
For the most part, the initial focus for Intellia will be on diseases of the liver — which makes a lot of sense as all blood goes to this organ. So it should be easier for delivering a Crispr-Cas9 therapy.
But of course, the long-term potential is enormous. Let’s face it, thousands of diseases have genetic links, including cancer, heart disease and diabetes.
Risks and Rewards for the NTLA IPO
As with any new-fangled medical technology, there has been a fight over the intellectual property rights to the core of Crispr-Cas9. Already, Dr. Doudna has lost an initial patent dispute. But then again, there will likely not be a resolution for some time (yes, as always seems to be the case, the lawyers will make lots of money).
What’s more, there have been no human clinical trials for Crispr-Cas9. In other words, there is a big-time risk that this medical innovation may ultimately not work. Actually, it could prove extremely difficult to have enough precision to make the right cuts to human DNA.
Although, even if Crispr-Cas9 works, there could still be problems. Interestingly enough, there are nightmare scenarios, kind of like from the Brave New World, where genetic experimentation somehow goes haywire. Might Crispr-Cas9 somehow be used for designer babies?
According to the NTLA S-1 filing:
“For example, earlier gene therapy trials led to several well-publicized adverse events, including cases of leukemia and death. Serious adverse events in our clinical trials, or other clinical trials involving gene therapy or gene-editing products or our competitors’ products, even if not ultimately attributable to the relevant product candidates, and the resulting publicity could result in increased government regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our product candidates, stricter labeling requirements for those product candidates that are approved and a decrease in demand for any such product candidate.”
Yes, there are many potential minefields with this, so investors really need to be cautious.
But then again, there are always tremendous risks with any new frontiers of science. Besides, investors have been fairly receptive to Crispr-Cas9, as seen with the recent IPO of Editas Medicine Inc (EDIT).
Since coming public in early February, the shares have racked up gains of about 106%. No doubt, this should bode well for the NTLA offering, which is expected to hit the markets Friday.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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