Could This Cathie Wood Stock Soar in 2027?

Ark Invest, an investment management firm led by Cathie Wood, has invested in several gene-editing-focused biotechs. That makes sense. The firm focuses on disruptive innovation, and gene editing has the potential to revolutionize treatments for many conditions. One company in this field that seems close to a major milestone is Intellia Therapeutics (NASDAQ:NTLA). The company's shares have outperformed the broader market this year, and it has an important catalyst coming in 2027. Could Intellia Therapeutics maintain its momentum?

Image source: Getty Images.

Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

Intellia Therapeutics' breakthrough

Intellia Therapeutics develops gene-editing therapies for rare diseases with high unmet medical needs. Earlier this year, it reported positive Phase 3 results for one of its leading candidates, lonvo-z, in patients with hereditary angioedema (HAE). This condition leads to painful -- and sometimes life-threatening -- episodes of swelling across patients' bodies. There are treatments for this disease, but lonvo-z could attract significant demand from patients, since it is a one-time therapy for the condition.

In the Phase 3 study, 80 patients were enrolled, with 52 receiving lonvo-z and the remaining getting a placebo. The one-time CRISPR-based infusion of the therapy led to an 87% reduction in the mean monthly number of HAE attacks compared with placebo between weeks 5 and 28 of the study. Further, 62% of patients on lonvo-z were completely attack-free and therapy-free, compared with 11% of patients on placebo. Intellia Therapeutics has submitted an application for regulatory approval for lonvo-z in the U.S., and the medicine could get the nod from regulators by March 2027. Will the stock jump if it does? On the one hand, that would be an important milestone for Intellia Therapeutics.

The company currently has no approved products, generates little revenue, and remains consistently unprofitable. However, the eventual approval is likely already priced into the share price and may not move it much once it happens. After all, even the reaction to Intellia Therapeutics' Phase 3 results for lonvo-z was mixed -- shares initially fell slightly but later rose once the company released more data.

The market may also think lonvo-z's opportunity is fairly small. Intellia Therapeutics estimates a population of about 7,000 HAE patients currently receiving treatment in the U.S. That's already not that many people, and we also have to account for the fact that lonvo-z is a one-time therapy. Even assuming full penetration of this existing treated population (a generous assumption) and a $1 million price tag per treatment course, lonvo-z could generate $7 billion in total cumulative revenue in the U.S. for this indication.

And even under this optimistic scenario, it will take years for the medicine to get to every patient. More patients could be diagnosed over time, expanding the company's addressable market. Still, the point is that lonvo-z's potential in the U.S. for this indication isn't massive.

What does the future hold?

Intellia Therapeutics is also developing nex-z, a potential gene-editing medicine for transthyretin (ATTR) amyloidosis. It is undergoing two Phase 3 studies. However, nex-z has faced significant challenges, including liver-related safety concerns that led to clinical holds on its Phase 3 programs.

The clinical holds have been lifted, but these safety issues have continued to hang over the company. Nex-z looks like an otherwise promising medicine that could target a larger population than lonvo-z, and Intellia Therapeutics is developing it with Regeneron (NASDAQ:REGN), a biotech giant with significant funds.

But given nex-z's issues, this therapy may encounter significant commercialization problems even if it passes Phase 3 studies and earns regulatory approval. And of course, it may still fail in late-stage clinical trials. What does all this tell us about Intellia's prospects?

Despite being an innovative biotech company, the company's future looks uncertain. Lonvo-z has a small addressable market, and nex-z faces safety issues. Perhaps the company's other candidates that are undergoing early-stage studies will make significant clinical progress.

But my view is that Intellia Therapeutics is unlikely to see a significant jump next year. Even more importantly, it is a risky stock and could destroy shareholders' wealth over the next five years. Investors uncomfortable with significant volatility should definitely look elsewhere.

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.