The Intellia Therapeutics IPO – Editas vs. Intellia
In a recent article, we talked about whether to invest in gene editing or synthetic biology. The answer is, you can easily invest in both of these disruptive technologies by simply buying shares in just two companies; Intrexon (NYSE:XON) and Editas Medicine (NASDAQ:EDIT). Just last week however, things heated up a bit with Intellia Therapeutics filing for an IPO, hot on the tail of the recent IPO from Editas Medicine (NASDAQ:EDIT). Let’s take a closer look.
Founded in 2014, Intellia Therapeutics has taken in $89 million in funding compared to the $210 million in funding Editas Medicine (NASDAQ:EDIT) took in prior to their IPO. Intellia filed for an IPO last week to raise $50 million compared to the $94.4 million Editas Medicine raised in their recent IPO. Here’s what the Intellia Therapeutics pipeline looks like in that filing:
The woman behind Intellia’s accomplishments and its founder, Jennifer Doudna , is actually listed as a co-founder of Editas Medicine on their website right now. However, she split from Editas Medicine (NASDAQ:EDIT) to found Intellia in an intellectual property dispute that is being touted as one of the greatest of all time. So where does this lawsuit stand? We could not find any concrete timelines nor status updates, but articles like this one from Jacob S. Sherkow provide a good overview of how we got where we are today.
Trying to predict the outcome of this IPO battle, is next to impossible. Legal experts and subject matter experts in gene editing can only speculate about who comes ahead by publishing speculative and technical articles which only result in more confusion for layman readers like us. To complicate matters even more, there are at least 7 gene editing startups we know of trying to play in this space.
Provided there is a successful IPO from Intellia, you could then just buy both Editas Medicine (NASDAQ:EDIT) and Intellia and you’ve got the main players covered. There is a very high level of uncertainty, so both stocks should be priced less than their actual value due to the litigation risk. If you have equally weighted positions, you should fare well and here’s why.
If one of these 2 Companies “wins” the dispute, we’d expect to see the winner have higher absolute returns than the loser. For example, the winner might gain +75% and the loser might lose just -55%. Why? Because the loser can always license what they need from the “winning” company in order to keep their business alive. A company called IPStudies has put together an incredibly detailed analysis of the CRIPSR patent space and claims that these two companies have “complimentary” patent holdings so we can’t just assume that there is one winner and one loser. Here’s a comment we found from IPStudies founder Corinne Le Buhan:
Our genomics expert just completed the January 2016 CRISPR patent landscape analysis (489 published patent families worldwide) and yes, we can confirm it’s incredibly interesting! Beyond the initial interference, the research directions and IP developed by Zhang (36 families) and Doudna (10 families) seem more complementary than conflicting. And there are an increasing number of players securing their positions, either individually or through strategic collaborations. Would a patent pool make sense to gather essential IP on the “standard/core tech” part of CRISPR operation?
You can purchase the entire patent landscape analysis from IPStudies for $3,380 USD if you really want to dig in. It seems like the real battle here is less about establishing a winner and a loser but more about establishing who controls the technology and therefore who stands to be in the dominant position for negotiations regarding licensing. The other thing to consider is that CRISPR is not the only way forward for gene editing. There are at least 2 other ways as seen below:
So the takeaway here for retail investors who want exposure to gene editing is, if the Intellia Therapeutics IPO begins trading, let the dust settle a bit and then begin accumulating a position. You should also have built or have begun building an equally weighted position in Editas Medicine (NASDAQ:EDIT). Hold both positions until we have an outcome. You could equally weight your positions by market cap as well to take into account who the market is voting for at the moment.
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