on February 28, 2019 Intrexon Corporation (NASDAQ: XON), a leader in the engineering and industrialization of biology to improve the quality of life and health of the planet, reported its fourth quarter and full year financial results for 2018 (Press release, Intrexon, FEB 28, 2019, View Source [SID1234533838]).
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Recent Business Highlights:
Precigen, Inc., a wholly owned subsidiary of Intrexon, announced the US Food and Drug Administration (FDA) cleared the Investigational New Drug (IND) application for PRGN-3006, an investigational drug for patients with relapsed or refractory acute myeloid leukemia (AML) and higher risk myelodysplastic syndrome (MDS). PRGN-3006 is an autologous chimeric antigen receptor T-cell (CAR-T) therapeutic candidate utilizing Precigen’s transformative UltraCAR-T platform, which reduces manufacturing time to within two days following non-viral gene transfer;
Precigen announced the FDA cleared the IND application for PRGN-3005 UltraCAR-T, an investigational drug using CAR-T cells to treat advanced-stage platinum-resistant ovarian cancer patients and the first UltraCAR-T candidate targeting solid tumors to enter the clinic;
Following the previously reported reacquisition of oncology rights from Ziopharm in October 2018, Precigen and Intrexon entered into an agreement with Merck KGaA, Darmstadt, Germany, a leading science and technology company, and its wholly owned subsidiary Ares Trading, pursuant to which Intrexon assumed rights from Ares Trading under the existing agreement among Precigen, Ares Trading and Ziopharm relating to the development of CAR-T therapies. In addition to receiving 20,640,119 shares of Intrexon common stock, the agreement also included a further $25 million investment in the Company. In return, Merck KGaA, Darmstadt, Germany, received a $25 million convertible note, providing the option to receive either Precigen or Intrexon common stock;
Xogenex, a majority owned subsidiary of Intrexon, has completed an evaluation of three advanced heart failure patients who were administered INXN-4001, an investigational, non-viral, plasmid-based gene drug candidate designed to drive expression of three cardiac effector genes involved in heart failure, in a Phase 1 clinical trial. The data reflected the patients’ status six-months after being given the INXN-4001 and appears to indicate that the drug material and the delivery process were both well tolerated by the patients. Preliminary review of the data suggests improvements in several cardiac performance parameters;
Intrexon’s methane bioconversion platform is being employed to produce 2,3 BDO from natural gas and has achieved 80% of the goal for the first small-scale plant operations;
Detailed engineering design for Intrexon’s first-of-a-kind small-scale methane bioconversion facility to 2,3 BDO is currently being bid out, discussions with partners for sites are ongoing. The overall schedule is still consistent as the sites under consideration are brownfield which require less engineering time than the original greenfield concept;
Exemplar Genetics, a wholly owned subsidiary of Intrexon, announced the launch of a joint venture with the Mayo Clinic, which is focused on the development of a high-quality source of human liver cells or hepatocytes (HHCs);
Trans Ova Genetics, a wholly owned subsidiary of Intrexon, continues to expand and improve its herd genetics with two Jersey heifers ranking 2nd and 9th in the world and 15 bulls that rank at the top of the global Holstein bull population;
EnviroFlight, Intrexon’s joint venture with Darling Ingredients Inc., opened the very first commercial Black Soldier Fly (BSFL) facility, in Maysville, Kentucky in November 2018. The production plant has the ability to produce 900 tonnes/year of dried BSFL, and orders for product from the new facility account for one-third of the anticipated annual output;
Okanagan Specialty Fruits, a wholly owned subsidiary of Intrexon, harvested more than 2,100 bins of Arctic apples in their 2018 harvest, which are available at select retailers as fresh sliced apples and ApBitz dehydrated apple snacks, and is planning to plant up to 1,000,000 trees in the spring of 2019;
Intrexon entered into a strategic licensing agreement with Next Green Wave Holdings Inc. to utilize Intrexon’s Botticelli next generation plant propagation platform to enable rapid production of Next Green Wave’s proprietary cannabis cultivars for the California market;
Oxitec, Ltd., a wholly owned subsidiary of Intrexon, announced that it will be transitioning from its 1st generation self-limiting Friendly Aedes aegypti mosquito (OX513A) to a new Friendly Aedes mosquito (OX5034) that uses Oxitec’s 2nd generation technology, allowing the company to focus on advancing its entire mosquito and crop pest portfolios using this next-generation platform; and
Oxitec has secured two multi-year development agreements with a partner to develop solutions for pest problems beyond the mosquito, which have the potential for application in key markets globally.
Fourth Quarter 2018 Financial Highlights:
Total revenues of $43.2 million, a decrease of 44% from the fourth quarter of 2017;
Net loss of $340.5 million attributable to Intrexon, or $(2.59) per basic share, including non-cash charges of $311.0 million;
Adjusted EBITDA of $(27.2) million, or $(0.21) per basic share; and
Cash, cash equivalents, and short-term investments totaled $222.5 million and the value of common equity securities totaled $2.2 million at December 31, 2018.
Full Year 2018 Financial Highlights:
Total revenues of $160.6 million, a decrease of 31% from the full year ended December 31, 2017;
Net loss of $509.3 million attributable to Intrexon, or $(3.93) per basic share, including non-cash charges of $420.0 million; and
Adjusted EBITDA of $(102.5) million, or $(0.79) per basic share.
"With several of the most ambitious stated objectives at the time of our IPO now achieved, most notably with our work in UltraCAR-T and in natural gas upgrading, our team is more energized than ever to establish its tangible value in the world," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon. "We expect to achieve this initially through independent equitization and/or monetization events at Precigen and from our Methane Bioconversion Platform, while other business units of our company may also find higher values independently of our company."
Mr. Kirk concluded, "It has always been our purpose to be an enabler of enterprise that is built on engineered biology and not to create an industrial conglomerate. In this we have succeeded greatly so we look forward to seeing some of our bold enterprises making their marks in the world. We are confident in our prospects to achieve this and that we have adequate cash resources to fuel us to these realizations."
Fourth Quarter 2018 Financial Results Compared to Prior Year Period
Total revenues decreased $33.8 million, or 44%, from the quarter ended December 31, 2017. Collaboration and licensing revenues decreased $30.9 million from the quarter ended December 31, 2017 due to (i) the mutual termination in 2017 of the Company’s second exclusive channel collaboration (ECC) with Ziopharm for the treatment of graft-versus-host disease, (ii) a decrease in research and development services for certain of the Company’s ECCs as the Company redeployed certain resources towards supporting prospective new platforms and partnering opportunities and began to focus more on the further development of relationships and structures that will provide the Company with more control and ownership over the development process and commercialization path, including programs where the Company reacquired the previously licensed technology rights in 2018, and (iii) a decrease in research and development services performed by the Company for collaborators upon the transition of program execution to its collaborators. Product revenues decreased $2.8 million or 36% primarily due to lower milk prices which resulted in lower customer demand for cows and cloned products. Gross margin on products declined in the current period as a result of decreased sales. Gross margin on services improved in the current period as a result of pricing changes and an increase in the number of embryos produced per bovine in vitro fertilization cycle due to improved production results.
Research and development expenses increased $242.0 million, or 628%, and include $228.0 million of expenses related to in-process research and development reacquired from former collaborators. Selling, general and administrative (SG&A) expenses decreased $7.9 million, or 24%. This decrease was primarily due to lower compensation expenses due to adjustments to previously accrued compensation expenses for performance and retention incentives for SG&A employees in 2018. The Company recorded an impairment charge of $60.5 million in the fourth quarter of 2018 due to a change in the Company’s business strategy for commercializing the Oxitec technology targeting the Aedes aegypti mosquito.
Full Year 2018 Financial Results Compared to Prior Year Period
Total revenues decreased $70.4 million, or 31%, from the year ended December 31, 2017. Collaboration and licensing revenues decreased $68.7 million from the year ended December 31, 2017 primarily due to (i) the mutual termination in 2017 of the Company’s second ECC with Ziopharm for the treatment of graft-versus-host disease, (ii) a decrease in research and development services for certain of the Company’s ECCs as the Company redeployed certain resources towards supporting prospective new platforms and partnering opportunities and began to focus more on the further development of relationships and structures that provide the Company with more control and ownership over the development process and commercialization path, including programs where the Company reacquired the previously licensed technology rights in 2018, and (iii) a decrease in research and development services performed by the Company for collaborators upon the transition of program execution to its collaborators. Product revenues decreased $5.1 million or 15% primarily due to lower milk prices which in turn resulted in lower customer demand for live calves, cows previously used in production, and cloned products. Gross margin on products declined in the current period as a result of lower product sales and increased operating costs associated with new product offerings and cloned products. The increase in service revenues of $1.8 million, or 4%, as well as the gross margin thereon relates to pricing changes and an increase in the number of embryos produced per bovine in vitro fertilization cycle due to improved production results.
Research and development expenses increased $261.4 million, or 183%, and include $236.7 million of expenses related to in-process research and development reacquired from former collaborators. SG&A expenses decreased $8.3 million, or 6%, from the prior period. Legal and professional fees decreased $7.5 million primarily due to (i) decreased legal fees associated with ongoing litigation and (ii) decreased fees incurred for regulatory and other consultants. The Company recorded an impairment charge of $60.5 million in the fourth quarter of 2018 due to a change in the Company’s business strategy for commercializing the Oxitec technology targeting the Aedes aegypti mosquito.
Total other income (expense), net, decreased $41.5 million, or 185%. This decrease was primarily attributable to losses on the Company’s investment in Ziopharm preferred stock prior to returning this investment to Ziopharm in the fourth quarter of 2018, as well as an increase in interest expense related to the 3.5% convertible notes issued by the Company in the third quarter of 2018.
Based on Intrexon’s financial position, including its cash, cash equivalents and short-term investments of $224 million at December 31, 2018, in connection with issuing its financial statements Intrexon expects to include a conclusion in its Form 10-K that there is substantial doubt about its ability to continue as a going concern.
Conference Call and Webcast
The Company will host a conference call today Thursday, February 28th, at 5:30 PM ET to discuss the fourth quarter and full year 2018 financial results and provide a general business update. The conference call may be accessed by dialing 1-888-317-6003 (Domestic US), 1-866-284-3684 (Canada), and 1-412-317-6061 (International) and providing the number 4443860 to join the Intrexon Corporation Call. Participants may also access the live webcast through Intrexon’s website in the Investors section at View Source