On November 8, 2018 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 third quarter financial results for 2018.
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Recent Commercial Achievements:
Intrexon continues discussions with several major energy companies concerning partnering of its Methane Bioconversion Platform;
Site selection on Intrexon’s first 2,3 BDO plant is on track for year end;
Okanagan Specialty Fruits, a wholly owned subsidiary of Intrexon, completed the 2018 Arctic Apple harvest, yielding ten times last year’s production, and expects to make pre-sliced Arctic apples available through over 500 retail outlets this month;
EnviroFlight, Intrexon’s joint venture with Darling Ingredients Inc., is scheduled to open phase one of the largest black soldier fly larvae (BSFL) facility in the U.S. this month; and
Intrexon commenced deployment of its Botticelli platform, beginning with a collaboration in tomato with a large international producer.
Recent Technical/Business Achievements:
Precigen, Inc., a wholly owned subsidiary of Intrexon, recently reported data on a multigenic therapeutic candidate that in appropriate pre-clinical models suggests potential superiority to approved anti-PD-1 checkpoint inhibitors;
From Intrexon’s methane bioconversion platform, the Company now is producing 2,3, BDO from natural gas at roughly 50% of the theoretical target yield, has demonstrated performance at 500X scale-up and has conducted sustained production runs exceeding 1,000 hours;
Oxitec, Ltd., a wholly owned subsidiary of Intrexon, entered into a second cooperative agreement with the Bill & Melinda Gates Foundation to develop a new strain of Oxitec’s Friendly biological engineering platform to develop a self-limiting Anopheles stephensi mosquito to help combat this mosquito that spreads malaria in India, Middle East and the Horn of Africa;
ActoBio Therapeutics, Inc., a wholly owned subsidiary of Intrexon, and T1D Partners, LLC, announced that the first patient has been dosed in the Company’s Phase Ib/IIa clinical trial for AG019 for the treatment of early onset type 1 diabetes (T1D);
Continuing its expansion into regenerative medicine, Exemplar Genetics, a wholly owned subsidiary of Intrexon, reported the first pig has been born with the potential to produce organs for human transplant;
Trans Ova Genetics, a wholly owned subsidiary of Intrexon, created six bull calves that rank at the top of the global Holstein bull population;
Intrexon announced advances in the development of its engineered yeast platform to produce cannabinoids for medical use via fermentation. This microbe-based process has potential to provide greater supply-chain security and avoids the resource-intensive isolation that often leads to quality and quantity variability in end products;
The U.S. Food and Drug Administration (FDA) recommended amendment of the Association of American Feed Control Officials (AAFCO) ingredient definition of dried BSFL to include feeding to poultry. The approval of BSFL for use in poultry feed expands the potential for this ingredient as a more sustainable source of protein and enables EnviroFlight to support this new market opportunity with its new facility;
Collaborator Fibrocell Science, Inc. (NASDAQ: FCSC) reported the FDA granted Fast Track Designation to FCX-013, the company’s clinical stage candidate for the treatment of moderate to severe localized scleroderma, and the FDA’s Office of Orphan Products Development awarded Fibrocell a $1.4 million clinical trial research grant for continued clinical development of FCX-007, the company’s gene therapy candidate for the treatment of recessive dystrophic epidermolysis bullosa (RDEB); and
Collaborator Oragenics, Inc. (NYSE: OGEN) announced the resumption of its Phase 2 clinical trial for AG013 for the potential treatment of oral mucositis (OM).
Recent Corporate Highlights:
Intrexon completed its registered underwritten public offering of $200 million aggregate principal amount of 3.50% convertible senior notes due in 2023 (Convertible Notes);
Precigen Inc., a wholly owned subsidiary of Intrexon, and Ziopharm Oncology, Inc. (NASDAQ: ZIOP) announced a new definitive license agreement to replace all existing agreements between the companies that will provide Ziopharm exclusive and non-exclusive rights to technology controlled by Precigen, Inc., as well as securing for Precigen developmental control over the majority of its portfolio.
The Company, through its subsidiary ActoBio Therapeutics, acquired the remaining interests in certain entities previously owned by a related party. As a result, ActoBio owns the exclusive rights to use its technologies to develop therapeutics in the fields of chronic rhinosinusitis and celiac disease;
Intrexon transferred its stock exchange listing from the New York Stock Exchange (NYSE) to the Nasdaq Global Select Market (Nasdaq) and began trading under "XON" ticker on the Nasdaq exchange on September 25, 2018; and
Intrexon announced the formation of a Bioinformatics Hub in Munich, establishing Intrexon Bioinformatics Germany GmbH (IBG).
Third Quarter 2018 Financial Highlights:
Total revenues of $32.4 million, a decrease of 30% from the third quarter of 2017;
Net loss of $57.3 million attributable to Intrexon, or $(0.44) per basic share, including non-cash charges of $38.7 million;
Adjusted EBITDA of $(28.9) million, or $(0.22) per basic share;
The net change in deferred revenue related to upfront and milestone payments, which represents the cash and stock received from collaborators less the amount of revenue recognized during the period, was a decrease of $17.3 million compared to a decrease of $8.6 million in the third quarter of 2017; and
Cash, cash equivalents, and short-term investments totaled $246.6 million, the value of preferred shares totaled $158.4 million, and the value of common equity securities totaled $4.7 million at September 30, 2018.
Year-to-Date 2018 Financial Highlights:
Total revenues of $117.4 million, a decrease of 24% from the nine months ended September 30, 2017;
Net loss of $168.9 million attributable to Intrexon, or $(1.31) per basic share, including non-cash charges of $109.0 million;
Adjusted EBITDA of $(75.3) million, or $(0.58) per basic share; and
The net change in deferred revenue related to upfront and milestone payments, which represents the cash and stock received from collaborators less the amount of revenue recognized during the period, was a decrease of $34.5 million compared to a decrease of $28.2 million in the nine months ended September 30, 2017.
"Our company is transitioning from one with great science and technology to one with great products and product candidates that embody our engineered biology," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon. "Recognizing our requirements, we are fully occupied on the development of systems, teams and plans to successfully commercialize products that we believe will be transformative in their fields."
Mr. Kirk concluded, "While we do not underestimate the challenges that face us – or anyone – in making such a transition, we have persevered in the execution of our plans laid long ago and believe that we are seeing the fruits of our prior labors. It long has been our goal to create one of the truly great companies in the world and all of us at intrexon are excited to be where we are today and looking with great anticipation toward our future."
Third Quarter 2018 Financial Results Compared to Prior Year Period
Total revenues decreased $13.6 million, or 30%, from the quarter ended September 30, 2017. Collaboration and licensing revenues decreased $13.8 million from the quarter ended September 30, 2017 due to (i) a decrease in research and development services for certain of the Company’s exclusive channel collaborations, or 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, (ii) a decrease in research and development services for certain of the Company’s ECCs as a result of program progression where the Company’s collaborators have taken responsibility of the execution of the programs, (iii) changes in revenue recognition for upfront and milestone payments under the new Accounting Standards Codification 606, or ASC 606, revenue standard whereby revenues are recognized based on the amount of services the Company performs for its collaborators, and (iv) the mutual termination of the Company’s second ECC with ZIOPHARM for the treatment of graft-versus-host disease in December 2017. Gross margin on products declined in the current period as a result of increased operating costs associated with new product offerings and cloned products. 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 $8.4 million, or 23%, and include $8.7 million expense related to in-process research and development reacquired as part of an asset acquisition in September 2018. Although selling, general and administrative (SG&A) expenses were consistent period over period, legal and professional fees decreased $2.9 million primarily due to a decline in the use of regulatory and other consultants. This decrease was offset primarily by higher compensation expenses related to performance and retention incentives for SG&A employees.
Year-to-Date 2018 Financial Results Compared to Prior Year Period
Total revenues decreased $36.6 million, or 24%, from the nine months ended September 30, 2017. Collaboration and licensing revenues decreased $37.8 million from the nine months ended September 30, 2017 primarily due to (i) 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, (ii) a decrease in research and development services for certain of the Company’s ECCs as a result of program progression where the Company’s collaborators have taken responsibility of the execution of the programs, (iii) changes in revenue recognition for upfront and milestone payments under the new ASC 606 revenue standard whereby revenues are recognized based on the amount of services the Company performs for its collaborators, and (iv) the mutual termination of the Company’s second ECC with ZIOPHARM for the treatment of graft-versus-host disease in December 2017. Product revenues decreased $2.2 million or 9% primarily due to lower customer demand for live calves, cows previously used in production, and cloned products. These decreases were partially offset by increased customer demand for pregnant recipients. 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 $2.5 million, or 7%, 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 $19.4 million, or 19%, and include (i) $8.7 million expense related to in-process research and development reacquired as part of an asset acquisition in September 2018 and (ii) $5.3 million of one-time costs associated with closing one of Oxitec’s Brazilian subsidiary’s leased research and development facilities as the Company decentralized operations previously conducted in this facility. Research and development consultants and lab supplies increased $3.1 million primarily due to increased expenses from contract research organizations and consultants providing services for both programs being developed internally and pursuant to some of the Company’s collaborations. Depreciation and amortization increased $2.1 million primarily as a result of the depreciation expense on research and development assets and amortization of developed technology acquired from GenVec, Inc. in June 2017. Although SG&A expenses were consistent period over period, legal and professional fees decreased $7.5 million primarily due to decreased legal fees associated with ongoing litigation and decreased fees incurred for regulatory and other consultants. This decrease was offset by an increase of $6.9 million in compensation expenses related to performance and retention incentives for SG&A employees.
Conference Call and Webcast
The Company will host a conference call today Thursday, November 8th, at 5:30 PM ET to discuss the third quarter 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 8225818 to join the Intrexon Corporation Call. Participants may also access the live webcast through Intrexon’s website in the Investors section at View Source