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Intra-Cellular Therapies, Inc. 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Intra-Cellular Therapies Inc.

Filing date:

02/21/2025

TLDR:

Intra-Cellular Therapies, Inc. shows significant revenue growth driven by CAPLYTA sales but is not yet profitable. A pending acquisition by Johnson & Johnson introduces both opportunities and risks.

ELI5:

This company sells medicine for mental health issues and is growing quickly, but still losing money. Another big company, Johnson & Johnson, is planning to buy them.

Accession #:

0001628280-25-006993

Published on

Analyst Summary

  • Significant revenue growth driven by CAPLYTA sales (47% increase).
  • Operating expenses increased by 28% due to sales force expansion, marketing, and R&D.
  • Net loss decreased from $139.67 million to $74.68 million.
  • Strong liquidity with $1.0 billion in cash, cash equivalents, and investment securities.
  • Pending acquisition by Johnson & Johnson.

Opportunities and Risks

  • CAPLYTA Expansion: Potential approval and commercialization of lumateperone for MDD and other indications.
  • Pipeline Development: Advancement of ITI-1284, ITI-1500, and lenrispodun programs.
  • Strategic Alliances: Potential for future collaborations and licensing agreements.
  • Market Growth: Addressing underserved medical needs in large potential commercial markets.
  • Acquisition Risks: Failure to complete the pending acquisition by Johnson & Johnson, potential disruptions to the business during the pendency of the merger, and potential litigation related to the merger.
  • Commercialization Risks: Inability to effectively commercialize CAPLYTA, failure to obtain regulatory approval for additional indications, and competition from other products.
  • Clinical Trial Risks: Failure of planned clinical trials for lumateperone or other product candidates.
  • Financial Risks: Continued net losses, need for additional funding, and ineffective use of cash resources.
  • Regulatory Risks: Ongoing regulatory obligations, restrictions on labeling or product withdrawal, and potential safety issues.
  • Manufacturing Risks: Reliance on third-party manufacturers and potential supply chain disruptions.
  • Competition: Intense competition from companies with greater resources.
  • Intellectual Property Risks: Inadequate protection of proprietary rights and potential patent litigation.
  • Cybersecurity Risks: Cybersecurity incidents and data breaches.

Potential Implications

Company Performance

  • Success hinges on the successful completion of the acquisition.
  • Continued commercialization of CAPLYTA is crucial.
  • Positive outcomes from clinical development programs are necessary.

Intra-Cellular Therapies, Inc. (ITCI) 10-K Report Analysis – FY 2024

Executive Summary

This report analyzes Intra-Cellular Therapies, Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include significant revenue growth driven by CAPLYTA sales, ongoing clinical trials for additional indications, and a pending acquisition by Johnson & Johnson. While the company is not yet profitable, revenue growth is promising. The pending acquisition introduces both opportunities and risks. The analysis highlights key risks related to the acquisition, clinical trial success, regulatory approvals, and competition.

Overall Assessment: Hold. Given the pending acquisition, the recommendation is to hold existing positions. New positions should be evaluated carefully considering the acquisition terms and potential for deal completion.

Company Overview

Intra-Cellular Therapies, Inc. is a biopharmaceutical company focused on developing and commercializing innovative small molecule drugs for psychiatric and neurological disorders. Their primary commercial product is CAPLYTA, approved for the treatment of schizophrenia and bipolar depression in adults. A key recent development is the announced acquisition by Johnson & Johnson.

Detailed Analysis

Financial Performance

Revenue Analysis

The company reported a substantial increase in net product sales:

  • 2024 Net Product Sales: $680.5 million
  • 2023 Net Product Sales: $462.2 million
  • Increase: 47%

This growth is attributed to increased sales volume of CAPLYTA for its approved indications.

Expense Analysis

Operating expenses also increased:

  • 2024 Total Operating Expenses: $797.57 million
  • 2023 Total Operating Expenses: $623.75 million
  • Increase: 28%

Key drivers of increased expenses include:

  • Cost of Product Sales: Increased due to higher sales volume and royalty payments.
  • Selling, General, and Administrative (SG&A) Expenses: Increased due to sales force expansion, marketing activities, and infrastructure costs.
  • Research and Development (R&D) Expenses: Increased due to ongoing clinical trials for lumateperone and other product candidates.

Profitability

The company is not yet profitable, but the net loss decreased:

  • 2024 Net Loss: $74.68 million
  • 2023 Net Loss: $139.67 million

This improvement is primarily due to increased revenue offsetting higher operating expenses.

Liquidity and Capital Resources

The company’s financial position is strong:

  • Cash, Cash Equivalents, and Investment Securities (December 31, 2024): $1.0 billion

This provides sufficient capital to fund operations and development programs.

Management’s Discussion and Analysis (MD&A) Insights

Management highlights the following key strategic elements:

  • Continuing commercialization of CAPLYTA.
  • Seeking FDA approval for lumateperone for MDD.
  • Advancing lumateperone for additional psychiatric indications.
  • Expanding the commercial potential of lumateperone into neurological areas.
  • Advancing other product candidates in clinical development.

Management’s tone is optimistic, emphasizing growth opportunities and pipeline development. However, the MD&A also acknowledges risks related to clinical trial success, regulatory approvals, and competition.

Risk Assessment

Key Risks Identified:

  • Acquisition Risks: Failure to complete the pending acquisition by Johnson & Johnson, potential disruptions to the business during the pendency of the merger, and potential litigation related to the merger.
  • Commercialization Risks: Inability to effectively commercialize CAPLYTA, failure to obtain regulatory approval for additional indications, and competition from other products.
  • Clinical Trial Risks: Failure of planned clinical trials for lumateperone or other product candidates.
  • Financial Risks: Continued net losses, need for additional funding, and ineffective use of cash resources.
  • Regulatory Risks: Ongoing regulatory obligations, restrictions on labeling or product withdrawal, and potential safety issues.
  • Manufacturing Risks: Reliance on third-party manufacturers and potential supply chain disruptions.
  • Competition: Intense competition from companies with greater resources.
  • Intellectual Property Risks: Inadequate protection of proprietary rights and potential patent litigation.
  • Cybersecurity Risks: Cybersecurity incidents and data breaches.

Opportunity Assessment

Key Opportunities Identified:

  • CAPLYTA Expansion: Potential approval and commercialization of lumateperone for MDD and other indications.
  • Pipeline Development: Advancement of ITI-1284, ITI-1500, and lenrispodun programs.
  • Strategic Alliances: Potential for future collaborations and licensing agreements.
  • Market Growth: Addressing underserved medical needs in large potential commercial markets.

Uncommon Metrics

The filing does not explicitly highlight uncommon metrics. However, the following are implicitly important:

  • CAPLYTA Prescription Growth: A key indicator of commercial success.
  • Clinical Trial Enrollment Rates: Critical for timely development of product candidates.
  • Payer Mix and Reimbursement Rates: Significant for revenue generation.

Conclusion and Actionable Insights

Intra-Cellular Therapies has demonstrated strong revenue growth with CAPLYTA, but faces challenges in achieving profitability and navigating the complexities of the pharmaceutical industry. The pending acquisition by Johnson & Johnson is a significant event that introduces both opportunities and risks. The company’s success hinges on the successful completion of the acquisition, continued commercialization of CAPLYTA, and positive outcomes from its clinical development programs.

Recommendation: Hold. Given the pending acquisition, the recommendation is to hold existing positions. New positions should be evaluated carefully considering the acquisition terms and potential for deal completion.

Caution: Investors should carefully consider the risks associated with the pending acquisition and the inherent uncertainties in pharmaceutical development and commercialization.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: (Total Revenues – Cost of Product Sales) / Total Revenues = ($680,852 – $56,963) / $680,852 = 91.64%
    • Trend: Previous year Gross Profit Margin = ($464,370 – $33,745) / $464,370 = 92.74%. Percentage Change: (91.64% – 92.74%) / 92.74% = -1.19%
    • Industry: The pharmaceutical industry generally has high gross profit margins, often exceeding 70%. A 91.64% gross profit margin is very strong, indicating efficient cost management in relation to revenue.
  • Operating Profit Margin:

    • Calculation: Loss from Operations / Total Revenues = (-$116,721) / $680,852 = -17.14%
    • Trend: Previous year Operating Profit Margin = (-$159,381) / $464,370 = -34.32%. Percentage Change: (-17.14% – (-34.32%)) / -34.32% = -50.06%
    • Industry: A negative operating profit margin is not ideal, but the improvement from -34.32% to -17.14% suggests progress in controlling operating expenses relative to revenue. Many biotech companies in the development stage have negative operating margins.
  • Net Profit Margin:

    • Calculation: Net Loss / Total Revenues = (-$74,676) / $680,852 = -10.97%
    • Trend: Previous year Net Profit Margin = (-$139,674) / $464,370 = -30.07%. Percentage Change: (-10.97% – (-30.07%)) / -30.07% = -63.52%
    • Industry: Similar to the operating margin, a negative net profit margin is not favorable, but the improvement from -30.07% to -10.97% indicates a move towards profitability.
  • Return on Assets (ROA):

    • Calculation: Net Loss / Total Assets = (-$74,676) / $1,366,912 = -5.46%
    • Trend: Previous year ROA = (-$139,674) / $728,295 = -19.18%. Percentage Change: (-5.46% – (-19.18%)) / -19.18% = -71.53%
    • Industry: A negative ROA indicates the company is not efficiently using its assets to generate profit. However, the increase from -19.18% to -5.46% is a positive sign.
  • Return on Equity (ROE):

    • Calculation: Net Loss / Total Stockholders’ Equity = (-$74,676) / $1,148,460 = -6.50%
    • Trend: Previous year ROE = (-$139,674) / $591,424 = -23.62%. Percentage Change: (-6.50% – (-23.62%)) / -23.62% = -72.48%
    • Industry: A negative ROE suggests the company is not generating profits from shareholder investments. The improvement from -23.62% to -6.50% is a positive trend.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Net Loss / Weighted Average Number of Common Shares = (-$74,676) / 103,131,017 = -$0.72
    • Trend: Previous year EPS = (-$139,674) / 95,881,729 = -$1.46. Percentage Change: (-$0.72 – (-$1.46)) / -$1.46 = -50.68%
    • Industry: Negative EPS is common for biotech companies investing heavily in R&D. The increase from -$1.46 to -$0.72 is a substantial improvement.

Liquidity

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities = $1,307,364 / $205,704 = 6.36
    • Trend: Previous year Current Ratio = $667,799 / $123,545 = 5.41. Percentage Change: (6.36 – 5.41) / 5.41 = 17.56%
    • Industry: A current ratio above 1 indicates the company has more current assets than current liabilities. A ratio of 6.36 is very strong, suggesting excellent liquidity.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventory) / Total Current Liabilities = ($1,307,364 – $26,283) / $205,704 = 6.23
    • Trend: Previous year Quick Ratio = ($667,799 – $11,647) / $123,545 = 5.31. Percentage Change: (6.23 – 5.31) / 5.31 = 17.33%
    • Industry: A quick ratio of 6.23 is very healthy, indicating the company can easily meet its short-term obligations even without relying on inventory sales.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Investment Securities) / Total Current Liabilities = ($306,948 + $694,118) / $205,704 = 4.87
    • Trend: Previous year Cash Ratio = ($147,767 + $350,174) / $123,545 = 4.03. Percentage Change: (4.87 – 4.03) / 4.03 = 20.84%
    • Industry: A cash ratio of 4.87 is exceptionally strong, indicating the company has ample cash and liquid assets to cover its current liabilities.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Stockholders’ Equity = $218,452 / $1,148,460 = 0.19
    • Trend: Previous year Debt-to-Equity Ratio = $136,871 / $591,424 = 0.23. Percentage Change: (0.19 – 0.23) / 0.23 = -17.39%
    • Industry: A debt-to-equity ratio of 0.19 is low, indicating the company relies more on equity than debt financing.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $218,452 / $1,366,912 = 0.16
    • Trend: Previous year Debt-to-Assets Ratio = $136,871 / $728,295 = 0.19. Percentage Change: (0.16 – 0.19) / 0.19 = -15.79%
    • Industry: A debt-to-assets ratio of 0.16 is low, suggesting a conservative capital structure with a small proportion of assets financed by debt.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Loss from Operations + Interest Income / Interest Expense = (-$116,721 + $42,518) / 0 = N/A (Interest expense is not explicitly provided, assuming it is negligible)
    • Trend: Previous year Interest Coverage Ratio = (-$159,381 + $20,343) / 0 = N/A (Interest expense is not explicitly provided, assuming it is negligible)
    • Industry: Since interest expense is not explicitly provided and assumed to be negligible, the interest coverage ratio is not meaningful.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Cost of Product Sales / Average Inventory = $56,963 / (($65,173 + $50,268)/2) = 0.98
    • Trend: Not enough information to calculate previous year’s inventory turnover.
    • Industry: An inventory turnover of 0.98 is low, which may be typical for a pharmaceutical company with specialized inventory.
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Total Revenues) * 365 = ($166,500 / $680,852) * 365 = 89.22 days
    • Trend: Previous year DSO = ($114,018 / $464,370) * 365 = 89.65 days. Percentage Change: (89.22 – 89.65) / 89.65 = -0.48%
    • Industry: A DSO of 89.22 days is relatively high, indicating it takes a longer time to collect revenue from sales.
  • Days Payable Outstanding (DPO):

    • Calculation: (Accounts Payable / Cost of Product Sales) * 365 = ($26,074 / $56,963) * 365 = 166.74 days
    • Trend: Not enough information to calculate previous year’s days payable outstanding.
    • Industry: A DPO of 166.74 days suggests the company takes a long time to pay its suppliers, which could be a strategy to manage cash flow.
  • Asset Turnover:

    • Calculation: Total Revenues / Total Assets = $680,852 / $1,366,912 = 0.50
    • Trend: Previous year Asset Turnover = $464,370 / $728,295 = 0.64. Percentage Change: (0.50 – 0.64) / 0.64 = -21.88%
    • Industry: An asset turnover of 0.50 indicates the company is not generating a high level of revenue relative to its assets.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $128.60 / (-$0.72) = -178.61
    • Trend: Not enough information to calculate previous year’s P/E ratio.
    • Industry: A negative P/E ratio is not meaningful, as it results from negative earnings.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Total Stockholders’ Equity = (106,240,009 * $128.60) / $1,148,460,000 = 11.89
    • Trend: Not enough information to calculate previous year’s P/B ratio.
    • Industry: A P/B ratio of 11.89 is relatively high, suggesting the market values the company’s assets at a premium.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Total Revenues = (106,240,009 * $128.60) / $680,852,000 = 20.06
    • Trend: Not enough information to calculate previous year’s P/S ratio.
    • Industry: A P/S ratio of 20.06 is high, indicating investors are paying a significant premium for each dollar of the company’s revenue.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash and Cash Equivalents = (106,240,009 * $128.60) + $218,452,000 – $306,948,000 = $13,569,204,154
      EBITDA = Net Loss + Interest Income + Income Tax Expense + Depreciation + Amortization = -$74,676,000 + $42,518,000 + $473,000 + $508,000 + $0 = -$31,177,000
      EV/EBITDA = $13,569,204,154 / (-$31,177,000) = -435.23
    • Trend: Not enough information to calculate previous year’s EV/EBITDA.
    • Industry: A negative EV/EBITDA ratio is not meaningful due to the negative EBITDA.

Growth Rates

  • Revenue Growth:

    • Calculation: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue = ($680,852 – $464,370) / $464,370 = 46.62%
    • Industry: A revenue growth rate of 46.62% is very strong, indicating rapid expansion of sales.
  • Net Income Growth:

    • Calculation: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income = (-$74,676 – (-$139,674)) / (-$139,674) = -46.54%
    • Industry: While still negative, the net income growth rate of -46.54% indicates a significant improvement in net losses compared to the previous year.
  • EPS Growth:

    • Calculation: (Current Year EPS – Previous Year EPS) / Previous Year EPS = (-$0.72 – (-$1.46)) / (-$1.46) = -50.68%
    • Industry: The EPS growth rate of -50.68% reflects the improvement in earnings per share, aligning with the net income growth.

Other Relevant Metrics

  • Clinical Trial Expenses: The company recognizes research and development expenses, including clinical trials, as the services are incurred. This involves significant judgment to estimate expenses based on the progress of clinical trials.
  • Reserves for variable consideration associated with government and payer rebates: Product sales are calculated based on the wholesale acquisition cost less variable consideration for which reserves are established to arrive at net product sales. These estimates involve the use of significant assumptions and judgements.

Commentary

Intra-Cellular Therapies demonstrates a strong revenue growth of 46.62% and improved profitability metrics, including a significant reduction in net losses and EPS. The company maintains excellent liquidity, as indicated by its high current, quick, and cash ratios. While still operating at a loss, the trend suggests a move towards profitability, supported by efficient cost management and increasing revenues. The upcoming merger with Johnson & Johnson, as disclosed in Exhibit 2.3, could provide further financial stability and growth opportunities.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️