On November 9, 2016 Keryx Biopharmaceuticals, Inc. (Nasdaq:KERX), a biopharmaceutical company focused on bringing innovative medicines to people with renal disease, reported its financial results for the third quarter ended September 30, 2016 and provided a corporate update (Press release, Keryx Biopharmaceuticals, NOV 9, 2016, View Source;p=RssLanding&cat=news&id=2220890 [SID1234516568]).

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"Our second contract manufacturer is successfully producing Auryxia," said Greg Madison, president and chief executive officer of Keryx Biopharmaceuticals. "We are ready to promptly make Auryxia available to pharmacies, pending approval of this manufacturer, which has a November 13, 2016 PDUFA date. Since August, we have been working closely with the kidney community to support them through the supply interruption. We are committed to maintaining a consistent supply of Auryxia, and we are working to ensure that the renal care teams will confidently prescribe Auryxia again."

BUSINESS UPDATE

The company reported Auryxia net U.S. product sales for the third quarter of 2016 of $5.1 million compared to $3.2 million in the third quarter of 2015. Third quarter 2016 product sales reflect approximately 9,700 reported prescriptions of Auryxia during the period. In addition, Keryx announced it will change its method of revenue recognition from the sell-through (deferred) method to the pull-through (ex-factory) method beginning in the fourth quarter of 2016.
On August 1, 2016, Keryx announced a temporary interruption in the supply of Auryxia was imminent due to a production-related issue at its existing manufacturer in converting active pharmaceutical ingredient (API) to finished drug product. Keryx is working with its existing manufacturer to resolve the issue and resume production. Keryx filed a post-approval supplement application with the U.S. FDA for approval of a second contract manufacturer to supply finished drug product. The application has a Prescription Drug User Fee Act, or PDUFA, action date of November 13, 2016. The company is prepared to promptly supply Auryxia to pharmacies, pending FDA approval of its second contract manufacturer. In October 2016, Keryx entered into a long-term agreement with its second contract manufacturer for the manufacture of commercial supply of finished drug product.
Keryx announced that it has completed the sNDA seeking an additional indication for the treatment of iron deficiency anemia in adults with stage 3-5 non-dialysis dependent chronic kidney disease (CKD), and is ready to submit the application to the FDA, pending final agreement on its pediatric plan.
Five abstracts related to ferric citrate have been accepted for poster presentation at the upcoming American Society of Nephrology’s (ASN) 2016 Kidney Week taking place November 15 – 20, 2016. Four of the five abstracts describe data from the pivotal Phase 3 trial evaluating ferric citrate for the treatment of iron deficiency anemia in adults with stage 3-5 non-dialysis dependent CKD. The accepted abstracts are available online on the ASN conference website. In addition, the company plans to submit Phase 3 results for publication in a peer reviewed medical journal.
FINANCIAL SECTION

Third Quarter Ended September 30, 2016 Financial Results
"In the third quarter, we focused on rebuilding supply of Auryxia while at the same time continuing to invest appropriately in future growth areas, including pre-launch activities for the potential label expansion of ferric citrate for the treatment of adults with IDA and stage 3-5 NDD-CKD," said Scott Holmes, chief financial officer of Keryx. "As we look ahead, we will be focused on how quickly we can return Auryxia to patients who had previously been prescribed our medicine, and on bringing Auryxia to new patients who could potentially benefit from treatment."

At September 30, 2016, the company had cash and cash equivalents of $132.2 million.

Total revenues for the quarter ended September 30, 2016 were approximately $6.3 million, compared with $4.2 million during the same period in 2015. Total revenues for the third quarter of 2016 consisted of Auryxia net U.S. product sales of $5.1 million, and license revenue of $1.3 million associated with royalties received on ferric citrate net sales from Keryx’s Japanese partner. Beginning in the fourth quarter of 2016, the company will change its revenue recognition policy from the sell-through method based on patient prescription fulfillments to the pull-through or ex-factory method based on sales of Auryxia to wholesalers and pharmacy customers. This decision was made following the company’s ability to reasonably estimate product returns. Under the ex-factory method, revenue will be recognized when wholesalers and direct customers receive orders of Auryxia.

Cost of goods sold for the quarter ended September 30, 2016 was $18.2 million as compared with $3.1 million during the same period in 2015. Cost of goods sold during the third quarter of 2016 included $13.8 million in write-offs of work-in-process inventory that was determined to no longer be suitable for commercial manufacture. Additionally, cost of goods sold during the quarter also included $2.3 million related to manufacturing charges incurred as a result of not fully utilizing planned production at the company’s existing third-party drug product manufacturer.

Research and development expenses for the quarter ended September 30, 2016 decreased by 22 percent to $8.7 million as compared to $11.2 million during the same period in 2015. The decrease was primarily due to a reduction in clinical expenses associated with the company’s completed Phase 3 clinical trial evaluating ferric citrate for the treatment of IDA in adults with stage 3-5 non-dialysis dependent CKD.

Selling, general and administrative expenses for the quarter ended September 30, 2016 were $20.5 million as compared with $20.2 million during the same period in 2015.

Net loss for the third quarter ended September 30, 2016 was $41.7 million, or $0.39 per share, compared to a net loss of $30.7 million, or $0.29 per share, for the comparable quarter in 2015.

On November 9, 2016 Juno Therapeutics, Inc. (NASDAQ: JUNO), a biopharmaceutical company focused on re-engaging the body’s immune system to revolutionize the treatment of cancer, reported financial results and business highlights for the third quarter 2016 (Press release, Juno, NOV 9, 2016, View Source;p=RssLanding&cat=news&id=2221123 [SID1234516567]).

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"JCAR017, a key product candidate of our CD19 platform, has shown encouraging preliminary efficacy and safety results in NHL and pediatric ALL. At the upcoming American Society of Hematology (ASH) (Free ASH Whitepaper) meeting, additional data from our Phase I trial for JCAR017 in NHL patients will be presented," said Hans Bishop, Juno’s President and Chief Executive Officer. "Progress with CAR T therapy continues as we strive to bring these innovative product candidates to patients battling cancer. We look forward to the upcoming presentations at ASH (Free ASH Whitepaper), including 11 total presentations from a number of ongoing and completed studies."

Third Quarter 2016 and Recent Corporate Highlights
Clinical Update:

CD19 Portfolio:
Announced seven oral and four poster presentations at the 58th American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting, detailing updated clinical and preclinical results generated in partnership with its collaborators. New data with JCAR017 in adult patients with relapsed/refractory (r/r) diffuse large B-cell lymphoma (DLBCL), which is a subtype of non-Hodgkin lymphoma (NHL), data from the PLAT-02 trial for pediatric patients with r/r acute lymphoblastic leukemia (ALL), and data from a Phase I trial with JCAR014 in high-risk, ibrutinib-refractory patients with chronic lymphocytic leukemia (CLL) will be presented.

JCAR015
Announced the removal on July 12, 2016 by the U.S. FDA of a clinical hold that the agency had placed on the Phase II ROCKET trial on July 6, 2016. The ROCKET trial has reopened for enrollment using JCAR015 with cyclophosphamide (cy) preconditioning alone, and all sites are currently treating patients. Juno’s trials and plans for its other CD19-directed CAR T cell product candidates, including JCAR017, were not affected.

JCAR017
Announced Phase I NHL preliminary efficacy and safety data for the ongoing trial. Juno will update results with more patients and durability data at the ASH (Free ASH Whitepaper) Annual Meeting.

JCAR014
Researchers at the Fred Hutchinson Cancer Research Center (FHCRC) published clinical data in Science Translational Medicine demonstrating that patients who received a dose of CD19-targeted defined composition engineered T cells after chemotherapy went into complete remission. By controlling the mixture of T cells that patients receive, the researchers can see relationships between cell doses and patient outcomes that were previously elusive. The data also suggest that with a defined one-to-one composition of cells, efficacy of treatment is increased, while toxic side effects are decreased. Like JCAR014, JCAR017 uses a one-to-one ratio of helper and killer CAR T cells, and Juno believes it has the potential to be a "best-in-class" treatment for r/r NHL, r/r CLL, and adult and pediatric r/r ALL.

Corporate Development News:
Juno entered into an exclusive license agreement with Memorial Sloan Kettering Cancer Center (MSK) and Eureka Therapeutics, Inc. for a novel, fully-human binding domain targeting B-cell maturation antigen (BCMA), along with antibodies against two additional undisclosed multiple myeloma targets to be used for the potential development and commercialization of CAR cell therapies for patients with multiple myeloma. MSK and Eureka Therapeutics received an undisclosed upfront payment and are eligible to receive additional payments upon the achievement of undisclosed clinical, regulatory, and commercial milestones, and royalties on net sales. The parties expect the BCMA CAR to enter human testing as early as the first half of 2017.

Juno acquired RedoxTherapies, a privately-held company. The acquisition provides Juno with an exclusive license to vipadenant, a small molecule adenosine A2a receptor antagonist that has the potential to disrupt important immunosuppressive pathways in the tumor microenvironment in certain cancers. Juno intends to explore this molecule in combination with its engineered T cell platform and may over time explore it in other areas as well. The upfront consideration for the RedoxTherapies acquisition was $10.0 million in cash. The seller is also eligible to receive payments upon the achievement of clinical, regulatory, and commercial milestones.

Third Quarter 2016 Financial Results
Cash Position: Cash, cash equivalents, and marketable securities as of September 30, 2016 were $1.04 billion compared to $1.11 billion as of June 30, 2016 and $1.22 billion as of December 31, 2015.

Cash Burn: Excluding cash inflows and outflows from upfront payments related to business development, cash burn in the third quarter of 2016 was $59.5 million including $6.4 million for the purchase of property and equipment, compared to $45.7 million in the third quarter of 2015 including $14.2 million for the purchase of property and equipment. The cash burn increase of $13.8 million was primarily driven by cash outflows in connection with the overall growth of the business, offset by $9.2 million received from Celgene in the third quarter of 2016 for reimbursement of costs incurred by Juno in connection with the CD19 program and by lower spend for property and equipment.

Revenue: Revenue for the three and nine months ended September 30, 2016 was $20.8 million and $58.2 million, respectively, compared to $1.6 million and $14.1 million for the three and nine months ended September 30, 2015, respectively. The increase of $19.2 million and $44.1 million in the three and nine months ended September 30, 2016, respectively, was due primarily to revenue recognized in connection with the Celgene collaboration and CD19 opt-in. Included in revenue for the nine months ended September 30, 2016 and 2015 was $14.3 million and $12.3 million received in connection with the Novartis sublicense agreement, respectively.

R&D Expenses: Research and development expenses for the three and nine months ended September 30, 2016, inclusive of non-cash expenses and computed in accordance with GAAP, were $60.9 million and $206.9 million, respectively, compared to $11.5 million and $129.5 million for the same periods in 2015. The increases in 2016 were primarily due to increased costs incurred to execute Juno’s clinical development strategy, manufacture its product candidates, and expand its overall research and development capabilities, milestones achieved in 2016, an increase in stock-based compensation expense, and the difference between the three months ended September 30, 2016 and 2015 in the gain related to Juno’s estimated success payment liability. These increases were offset by lower upfront payments for technology acquisition in 2016 compared with 2015, a gain recognized during the nine months ended September 30, 2016 related to the change in the estimated value of Juno’s contingent consideration liabilities, and the difference between the nine months ended September 30, 2016 and 2015 in the gain or expense related to Juno’s estimated success payment liability. For the three months ended September 30, 2016 and 2015, Juno recorded a gain of $17.7 million and $25.6 million, respectively, related to Juno’s success payment liability, resulting in an increase in research and development expense of $7.9 million. For the nine months ended September 30, 2016, Juno recorded a gain of $20.8 million related to Juno’s success payment liability, compared to an expense of $17.3 million for the same period in 2015, resulting in a decrease of $38.1 million in research and development expense.

Non-GAAP R&D Expenses: Non-GAAP research and development expenses for the three and nine months ended September 30, 2016 were $62.2 million and $214.5 million, respectively, compared to $34.5 million and $75.4 million for the same periods in 2015. Non-GAAP research and development expenses for the three and nine months ended September 30, 2016 include $7.9 million and $25.8 million of stock-based compensation expense, respectively, compared to $3.1 million and $7.3 million for the same periods in 2015. Non-GAAP research and development expenses in 2016 exclude the following:

A gain of $17.7 million and $20.8 million for the three and nine months ended September 30, 2016, respectively, associated with the change in the estimated fair value and elapsed service period for Juno’s potential success payment liabilities to FHCRC and MSK.
Non-cash stock-based compensation expense of $0.9 million and $3.3 million for the three and nine months ended September 30, 2016, respectively, related to a 2013 restricted stock award to a co-founding director that became a consultant upon his departure from Juno’s board of directors in 2014.

An expense of $0.3 million for the three months ended September 30, 2016 and a gain of $5.2 million for the nine months ended September 30, 2016 associated with the change in the estimated fair value of the contingent consideration liabilities recorded in connection with the Stage and X-Body acquisitions.

Upfront payments related to technology licensing and the RedoxTherapies acquisition of $15.0 million for the three and nine months ended September 30, 2016.

Non-GAAP research and development expenses in 2015 exclude the following:
A gain of $25.6 million for the three months ended September 30, 2015 and expense of $17.3 million for the nine months ended September 30, 2015 associated with the change in estimated fair value and elapsed accrual period for Juno’s potential success payment liabilities to FHCRC and MSK.

Non-cash stock-based compensation expense of $1.3 million and $4.8 million for the three and nine months ended September 30, 2015, respectively, related to a 2013 restricted stock award to a co-founding director that became a consultant upon his departure from Juno’s board of directors in 2014.

An expense of $1.3 million and $1.2 million for the three and nine months ended September 30, 2015, respectively, associated with the change in the estimated fair value of the contingent consideration liabilities recorded in connection with the Stage and X-Body acquisitions.

Upfront payments related to license agreements of $30.8 million for the nine months ended September 30, 2015 associated with the Editas and Fate Therapeutics collaborations.

G&A Expenses: General and administrative expenses on a GAAP basis for the three and nine months ended September 30, 2016 were $18.4 million and $51.2 million, respectively, compared to $13.6 million and $41.2 million for the same periods in 2015. The increase in the third quarter of 2016 compared to the same period in 2015 was primarily due to an increase in litigation and patent legal costs, consulting costs related to commercial readiness, and personnel costs, including non-cash stock-based compensation expense. These were offset by a decrease in costs supporting business development activities. The increase in the nine months ended September 30, 2016 compared to the same period in 2015 was primarily due to increased personnel costs, including non-cash stock-based compensation expense and consulting costs related to commercial readiness, offset by lower costs supporting business development activities and lower litigation costs. General and administrative expenses include $5.4 million and $15.9 million of non-cash stock-based compensation expense for the three and nine months ended September 30, 2016, respectively, compared to $4.7 million and $9.4 million for the same periods in 2015.

GAAP Net Loss: Net loss for the three and nine months ended September 30, 2016 was $56.9 million, or $0.56 per share, and $192.8 million, or $1.91 per share, respectively, compared to $23.2 million, or $0.26 per share and $154.2 million, or $1.80 per share for the same periods in 2015.

Non-GAAP Net Loss: Non-GAAP net loss, which incorporates the non-GAAP R&D expense, for the three and nine months ended September 30, 2016 was $58.3 million, or $0.57 per share, and $200.4 million, or $1.99 per share, respectively, compared to $46.3 million, or $0.52 per share, and $100.0 million, or $1.17 per share, respectively, for the same periods in 2015.
A reconciliation of GAAP net loss to non-GAAP net loss is presented below under "Non-GAAP Financial Measures."

2016 Financial Guidance Reaffirmed
Juno reaffirms 2016 cash burn guidance, excluding cash inflows or outflows from upfront payments related to business development activities, of between $220 million and $250 million.

Operating burn estimated to be between $170 million and $195 million.
Capital expenditures estimated to be between $40 million and $55 million, the vast majority of which are related to one-time infrastructure build-outs.

On November 9, 2016 Ionis Pharmaceuticals, Inc. (Nasdaq: IONS) reported income from operations of $16.1 million and a loss from operations of $87.5 million for the three and nine months ended September 30, 2016, respectively (Press release, Ionis Pharmaceuticals, NOV 9, 2016, View Source;p=RssLanding&cat=news&id=2220881 [SID1234516565]). The Company also reported pro forma operating income of $33.7 million and a pro forma net operating loss (NOL) of $30.5 million, both excluding non-cash stock compensation, for the same periods. Ionis ended the third quarter with cash, cash equivalents and short term investments of $687.8 million. The Company is on track to meet its pro forma NOL and cash guidance for the year.

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"This week, we and Biogen announced positive data from an interim analysis of CHERISH, our Phase 3 study in children with later-onset (consistent with Type 2) spinal muscular atrophy (SMA). We are very encouraged with the positive SPINRAZATM data from both of our controlled Phase 3 clinical trials supporting potential benefit not only in infants, but also in children with SMA. We are pleased that our partners at Biogen are already making SPINRAZA available to patients with SMA who have no therapeutic alternatives through a broad Expanded Access Program. In about four weeks after Biogen filed for marketing approval for SPINRAZA, the FDA and the EMA each have accepted their respective application. Importantly, the FDA has granted Priority Review and the EMA has granted Accelerated Assessment, both of which can reduce the standard review time. We look forward to seeing SPINRAZA quickly and successfully advance through the regulatory review process so that it will be even more broadly available to SMA patients through commercial channels. On the basis of these positive data, we will stop the CHERISH study and afford all patients in the study the opportunity to receive SPINRAZA in the ongoing open-label study, SHINE. These data follow the positive results from ENDEAR, our Phase 3 study in infants with the most severe form of the disease, infantile-onset (consistent with Type 1) SMA, which formed the basis for the regulatory filings in the U.S. and E.U., and the filings in progress for other jurisdictions. This was followed by encouraging data from the Phase 2 NURTURE study in pre-symptomatic infants with SMA, which supports the potential beneficial effect of earlier treatment with SPINRAZA in infants with SMA. These data serve to confirm the positive data we have observed in our Phase 2 open-label studies in infants with Type 1 SMA and children with Type 2 or Type 3 SMA, in which we have patients continuing to benefit from SPINRAZA for nearly five years. We believe the totality of these results provide compelling evidence of the broad transformational potential of SPINRAZA for patients with SMA. These results further illustrate the potential of our antisense technology to target severe diseases that other therapeutic modalities are unable to adequately address," said B. Lynne Parshall, chief operating officer of Ionis Pharmaceuticals.

"In addition, last week we announced positive results from our Phase 2 study with IONIS-FXIRx in patients with end-stage renal disease on dialysis. Results from the study demonstrated robust, statistically significant reductions in Factor XI activity in treated patients. IONIS-FXIRx also displayed a good safety and tolerability profile. In patients treated with 200 mg or 300 mg of IONIS-FXIRx there were no clinically meaningful platelet declines and no increase in major or clinically relevant non-major bleeding. These results provide further support for the potential benefit IONIS-FXIRx could have for patients who need to prevent clotting but who have increased risk of bleeding," continued Ms. Parshall.

Financial Results

"We ended the third quarter of this year with net income primarily because of the $85 million in license fees we earned, including $75 million from Biogen for licensing SPINRAZA. Through the first nine months of 2016, we have earned more than $186 million in revenue from license fees and milestone and other payments from our partnered programs. We have the opportunity to add to our strong base of revenue from partnerships with commercial revenue from SPINRAZA," said Elizabeth L. Hougen, chief financial officer of Ionis Pharmaceuticals.

"Through the first nine months of 2016, we have continued to advance our Phase 3 programs and Akcea is preparing to commercialize volanesorsen while we have prudently managed our expenses. As a result, we finished the first nine months of 2016 with a GAAP loss from operations of $87.5 million, which included nearly $57 million in non-cash compensation expense related to equity awards, that when excluded, resulted in a pro forma net operating loss of $30.5 million. We also ended the first nine months of this year with more than $685 million in cash. We are on track to meet our guidance of a pro forma NOL in the low $60 million range and a year-end cash balance in excess of $600 million," concluded Ms. Hougen.

All pro forma amounts referred to in this press release exclude non-cash compensation expense related to equity awards. Please refer to the reconciliation of GAAP to pro forma measures, which is provided later in this release.

Revenue

Ionis’ revenue for the three and nine months ended September 30, 2016 was $110.9 million and $186.3 million, compared to $49.1 million and $232.1 million for the same periods in 2015. Ionis’ revenue in the first nine months of 2016 consisted of the following:

$96.9 million from Biogen for licensing and advancing the Phase 3 program for SPINRAZA and advancing IONIS-BIIB4Rx;
$15 million from Kastle Therapeutics for acquiring Kynamro;
$10 million from Janssen for licensing IONIS-JBI1-2.5Rx;
$1.5 million from GSK for advancing IONIS-HBV-LRx; and
$62.9 million primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.
Ionis’ revenue in the first nine months of 2015 included $91.2 million in connection with the exclusive license agreement with Bayer, $89.8 million in milestone payments from partnered programs and $51.1 million, primarily from the amortization of upfront fees and manufacturing services Ionis performed for its partners.

Ionis’ revenue fluctuates based on the nature and timing of payments under agreements with its partners and consists primarily of revenue from the amortization of upfront fees, milestone payments and license fees.

Operating Expenses
Ionis’ operating expenses included costs to support the Company’s five ongoing Phase 3 studies and three open-label extension studies related to its Phase 3 programs for SPINRAZA, IONIS-TTRRx and volanesorsen. In addition, Akcea continued to build a global organization and prepare for the commercial launch of volanesorsen. As such, Ionis’ operating expenses on a GAAP basis for the three and nine months ended September 30, 2016 were $94.8 million and $273.7 million, respectively, and on a pro forma basis, were $77.2 million and $216.8 million, respectively. This is compared to GAAP operating expenses of $97.3 million and $245.0 million and pro forma operating expenses of $82.3 million and $203.0 million for the same periods in 2015. In addition, Ionis’ operating expenses for the first nine months of 2016 on a GAAP basis increased due to an increase in non-cash compensation expense that resulted from an increase in the exercise price of the stock options the Company has granted over the past several years.

Net Income (Loss)
Ionis reported net income of $7.4 million and a net loss of $112.4 million for the three and nine months ended September 30, 2016, respectively, compared to a net loss of $35.8 million and $16.8 million for the same periods in 2015. Basic and diluted net income per share for the three months ended September 30, 2016 was $0.06. Basic and diluted net loss per share for the nine months ended September 30, 2016 was $0.93. This is compared to a basic and diluted net loss of $0.30 and $0.14 for the three and nine months ended September 30, 2015, respectively.

Balance Sheet
As of September 30, 2016, Ionis had cash, cash equivalents and short-term investments of $687.8 million compared to $779.2 million at December 31, 2015. Ionis’ cash balance decreased in the first nine months of 2016 primarily due to spending to support the Company’s ongoing Phase 3 programs for SPINRAZA, IONIS-TTRRx and volanesorsen. Ionis’ working capital was $623.4 million at September 30, 2016 compared to $688.1 million at December 31, 2015. The decline in Ionis’ working capital was a result of the cash used in operations and a decline in the Company’s investment in Regulus Therapeutics resulting from a decline in Regulus’ share price.

On November 9, 2016 Intrexon Corporation (NYSE: 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 2016 (Press release, Intrexon, NOV 9, 2016, View Source [SID1234516564]).

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Intrexon Corporation logo
Changes to non-GAAP financial measures:

Beginning this quarter, the Company has redefined its Adjusted EBITDA and Adjusted EBITDA per share measures, which will no longer include an adjustment for the impact of the change in deferred revenue related to upfront and milestone payments, to comply with new interpretations on non-GAAP financial measures recently issued by the SEC staff. The prior period non-GAAP financial measures have been revised to conform to the current presentation. Refer to the Appendix to this earnings release for a reconciliation of the revised and previously defined Adjusted EBITDA measures in the current and prior periods. Going forward, the Company will no longer present Adjusted EBITDA based on the previous definition. However, supplemental information about the impact of the change in deferred revenue related to upfront and milestone payments will continue to be provided in future periods. Adjusted EBITDA as previously defined can be calculated by adding the redefined Adjusted EBITDA measure and the impact of the change in deferred revenue related to upfront and milestone payments.

Business Highlights and Recent Developments:

Oxitec opened its new 5,000 m² large scale Friendly Aedes mosquito production facility in Piracicaba, Brazil. It has the capacity to produce 60 million Friendly Aedes per week which can help protect up to 3 million people by reducing local populations of the dangerous Aedes aegypti mosquito, the primary vector of Zika, chikungunya, dengue and other damaging viruses;
Oxitec and Piracicaba City Hall announced deployment of Friendly Aedes in ten additional downtown neighborhoods in September which along with São Judas comprise the entire area of the Friendly Aedes project expansion in Piracicaba to help protect an additional 60,000 residents;
The Cayman Islands Mosquito Research and Control Unit commenced the "FriendlyAedes aegypti Project", an operational roll-out of Oxitec’s Friendly technology in an hotspot area of West Bay;
A bipartisan coalition of 61 Florida House members issued a letter urging the U.S. Federal Government to take proactive steps including Emergency Use Authorization to allow Florida’s state and local governments to use Oxitec’s genetically engineered Friendly Aedes;
Okanagan Specialty Fruits (OSF) achieved the first commercial harvest of its non-browning Arctic Golden apple variety which will be sold as fresh sliced apples in test markets across North America in early 2017;
OSF’s non-browning Arctic Fuji apple variety was granted deregulated status by the U.S. Department of Agriculture’s Animal and Plant Health Inspection Service and found to be as safe and nutritious as conventional apples, joining OSF’s Arctic Golden and Arctic Granny varieties;
AquaBounty Technologies, Inc., Intrexon’s majority-owned subsidiary, reported Canada’s Federal Court of Appeal upheld the AquAdvantage Salmon approval, and the company is advancing its business plan to prepare for expanded production and commercial launch, which includes identification of additional aquaculture facilities in the U.S.;
AquaBounty filed a Form 10 registration statement for listing its Common Shares on the NASDAQ exchange. Intrexon has agreed to an equity subscription and will convert all of the outstanding convertible debt it holds to help satisfy the initial listing requirements. Intrexon also plans to distribute a portion of its holding of AquaBounty common shares via a stock dividend to its shareholders while retaining a majority ownership stake;
Collaborator ZIOPHARM Oncology, Inc. (Nasdaq:ZIOP) announced the publication of data in the Journal of Clinical Investigation (JCI) from first-in-human trials highlighting benefits of using the non-viral Sleeping Beauty system to genetically modify T-cells to express chimeric antigen receptors (CAR) for use against leukemia and lymphomas;
ZIOPHARM presented data at the European Society for Medical Oncology 2016 Congress in Copenhagen, Denmark, demonstrating activation of anti-tumor immune response using Ad-RTS-hIL-12 in patients with advanced breast cancer;
Collaborator Fibrocell Science, Inc. (NASDAQ:FCSC) completed enrollment in the NC1+ cohort and enrolled first subject for the NC1- cohort in the Phase I/II clinical trial of FCX-007, Fibrocell’s orphan gene-therapy product candidate, for the treatment of Recessive Dystrophic Epidermolysis Bullosa;
Collaborator Oragenics, Inc. (NYSE MKT: OGEN) received supportive feedback from the U.S. Food and Drug Administration in response to request for a Type C meeting concerning Phase 2 study protocols for its oral mucositis therapeutic candidate, AG013;
Oragenics announced selection of a second generation lantibiotic, OG716, an orally-active homolog that has exhibited positive results in an animal model for treatment of Clostridium difficile, and plans to begin IND enabling studies;
New animal model data advancing the understanding of hypertrophic cardiomyopathy (HCM) utilizing Exemplar Genetics’ custom miniswine research model of HCM created for Myokardia, Inc. will be highlighted at the American Heart Association Scientific Sessions 2016 in New Orleans on November 15th;
Two publications in the JCI demonstrated the potential of Exemplar Genetics ExeGen CFTR miniswine research models to help define and develop effective gene therapies for cystic fibrosis;
Entered into Exclusive Channel Collaborations with Genten Therapeutics, Inc. and CRB Bio, Inc., two startups backed by the Harvest Intrexon Enterprise Fund. Genten Therapeutics will center efforts on ActoBiotics expression of gluten peptides to reestablish immune tolerance for patients with celiac disease. CRS Bio will focus on targeted delivery of antibodies for treatment of chronic rhinosinusitis leading to improved breathing and patients’ quality of life; and
Appointed Lieutenant General (Ret.) Thomas P. Bostick, Ph.D., P.E., who most recently served as the 53rd U.S. Army Chief of Engineers and the Commanding General of the U.S. Army Corps of Engineers, as Senior Vice President and Head of the Environment Sector. He will oversee the Company’s strategies and programs to deploy biologically based solutions for the protection and remediation of the environment.
Third Quarter Financial Highlights:

Total revenues of $49.0 million, a decrease of 8% from the third quarter of 2015;
Net loss of $29.0 million attributable to Intrexon, or $(0.24) per basic share, including non-cash charges of $25.5 million;
Adjusted EBITDA (as redefined) of $(3.7) million, or $(0.03) per basic share;
Adjusted EBITDA (as previously defined) of $(5.6) million, or $(0.05) per basic share;
The net decrease 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 $1.8 million compared to $4.0 million in the third quarter of 2015;
Cash consideration received for reimbursement of research and development services covered 60% of cash operating expenses (exclusive of operating expenses of consolidated subsidiaries);
Total consideration received for technology access fees, reimbursement of research and development services and products and services revenues covered 80% of consolidated cash operating expenses; and
Cash, cash equivalents, and short-term and long-term investments totaled $280.7 million, the value of investment in preferred stock totaled $123.7 million, and the value of equity securities totaled $39.4 million at September 30, 2016.
Year-to-Date Financial Highlights:

Total revenues of $144.9 million, an increase of 10% over the nine months ended September 30, 2015;
Net loss of $142.5 million attributable to Intrexon, or $(1.21) per basic share, including non-cash charges of $120.1 million;
Adjusted EBITDA (as redefined) of $(20.8) million, or $(0.18) per basic share;
Adjusted EBITDA (as previously defined) of $107.0 million, or $0.91 per basic share;
The net increase in deferred revenue related to upfront and milestone payments was $127.8 million compared to $51.8 million in the nine months ended September 30, 2015;
Cash consideration received for reimbursement of research and development services covered 58% of cash operating expenses (exclusive of operating expenses of consolidated subsidiaries); and
Total consideration received for technology access fees, reimbursement of research and development services and products and services revenues covered 150% of consolidated cash operating expenses.
"While maintaining our capital efficiency, our team has made good progress across multiple dimensions," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon. "We have devoted considerable resources toward bringing to market the more mature portion of our portfolio, while advancing a large number of developmental projects, both partnered and internal, and growing our capabilities – through the addition of personnel, now numbering approximately 900, improving our leadership team and expanding our technologic capabilities."

Mr. Kirk concluded, "We anticipate a very strong finish for this excellent year of accomplishment. Our strategy, resources, team, plans, ongoing projects and the engagement we currently enjoy give us great confidence that we truly can and should lead the bioindustrial revolution, a development that is becoming more obvious and more needed by the day."

Third Quarter 2016 Financial Results Compared to Prior Year Period

Total revenues were $49.0 million for the quarter ended September 30, 2016 compared to $53.4 million for the quarter ended September 30, 2015, a decrease of $4.4 million, or 8%. Collaboration and licensing revenues decreased $4.1 million from the quarter ended September 30, 2015 due to the recognition in 2015 of previously deferred revenue related to collaboration agreements for which the Company satisfied all of its obligations or which were terminated during the quarter ended September 30, 2015. This decrease was offset by (i) the recognition of deferred revenue for upfront payments received from collaborations signed by the Company between October 1, 2015 and September 30, 2016 and the recognition of the payment received in June 2016 from ZIOPHARM to amend their collaborations; and (ii) increased research and development services for these collaborations and for the progression or the addition of new programs with previously existing collaborators. Product revenues were $9.3 million for the quarter ended September 30, 2016 compared to $9.4 million for the quarter ended September 30, 2015, a decrease of $0.1 million, or 2%. Gross margin on products improved in the current period primarily due to a decline in the average cost of cows. Service revenues were $8.7 million for the quarter ended September 30, 2016 compared to $8.9 million for the quarter ended September 30, 2015, a decrease of $0.2 million, or 3%. Gross margin on services decreased in the current period primarily due to an increase in service related costs in the current period driven by increased headcount to support future revenue growth.

Total operating expenses were $77.8 million for the quarter ended September 30, 2016 compared to $61.3 million for the quarter ended September 30, 2015, an increase of $16.5 million, or 27%. Research and development expenses increased $7.4 million, or 34%, due primarily to increases in (i) salaries, benefits and other personnel costs for research and development employees, (ii) lab supplies and consulting expenses, and (iii) depreciation and amortization. Salaries, benefits and other personnel costs increased $2.1 million due to (i) an increase in research and development headcount to support new and expanded collaborations and (ii) a full period of costs for research and development employees assumed in the Company’s acquisition of Oxitec in September 2015. Lab supplies and consulting expenses increased $3.9 million as a result of (i) the progression into the preclinical phase with certain of Intrexon’s collaborators; (ii) the increased level of research and development services provided to the Company’s collaborators; and (iii) a full period of costs incurred as a result of the Company’s September 2015 acquisition of Oxitec. Depreciation and amortization increased $0.9 million primarily as a result of (i) the inclusion of a full period of depreciation and amortization on property, equipment and intangible assets acquired in the Company’s 2015 acquisitions, (ii) amortization of developed technology acquired from EnviroFlight in February 2016, and (iii) amortization related to AquaBounty’s intangible assets upon regulatory approval in November 2015. Selling, general and administrative (SG&A) expenses increased $10.8 million, or 47%, over the third quarter of 2015. Legal and professional expenses increased $4.5 million due to (i) consulting expenses payable in shares of Intrexon’s common stock pursuant to the Company’s services agreement with Third Security, LLC, or Third Security, which the Company entered into in November 2015; (ii) expenses incurred to support domestic and international government affairs for regulatory and other approvals necessary to commercialize the Company’s products and services; (iii) increased legal fees to defend ongoing litigation; and (iv) incremental costs incurred to support the ongoing operations of the Company’s 2015 acquisitions. Salaries, benefits and other personnel costs for SG&A employees increased $5.3 million due to increased headcount, including the hiring of two new executive officers and additional business development professionals, to support the Company’s expanding operations, as well as its acquisition of Oxitec in September 2015.

Year-to-Date 2016 Financial Results Compared to Prior Year Period

Total revenues were $144.9 million for the nine months ended September 30, 2016 compared to $132.1 million for the nine months ended September 30, 2015, an increase of $12.8 million, or 10%. Collaboration and licensing revenues increased $15.5 million over the nine months ended September 30, 2015 primarily due to (i) the recognition of deferred revenue for upfront payments received from collaborations signed by the Company between October 1, 2015 and September 30, 2016, including the payment received in June 2016 from ZIOPHARM to amend their collaborations; and (ii) increased research and development services for these collaborations and for the progression of programs or the addition of new programs with previously existing collaborators. This increase is partially offset by the recognition in 2015 of previously deferred revenue related to collaboration agreements for which the Company satisfied all of its obligations of which were terminated during 2015. Product revenues were $28.7 million for the nine months ended September 30, 2016 compared to $32.6 million for the nine months ended September 30, 2015, a decrease of $3.9 million, or 12%. The decrease in product revenues primarily relates to a decrease in quantities sold of livestock previously used in production and live calves sold due to lower customer demand. These decreases were partially offset by an increase in the quantity of weaned calves sold due to higher customer demand. Gross margin on products decreased due to a decline in the average sales prices of livestock previously used in production and also of live calves, and is partially offset by an increase in gross margin on sales of pregnant cows due to a decline in the average cost of cows. Service revenues were $33.3 million for the nine months ended September 30, 2016 compared to $32.2 million for the nine months ended September 30, 2015, an increase of $1.1 million, or 4%. The increase relates to an increase in the number of in vitro fertilization cycles performed due to higher customer demand. Gross margin on services was consistent period over period.

Total operating expenses were $237.5 million for the nine months ended September 30, 2016 compared to $244.6 million for the nine months ended September 30, 2015, a decrease of $7.1 million, or 3%. Research and development expenses declined $38.0 million, or 31%, due primarily to the inclusion in 2015 of a $59.6 million payment in common stock for an exclusive license to certain technologies owned by the University of Texas MD Anderson Cancer Center. This decrease was partially offset by increases in (i) salaries, benefits and other personnel costs for research and development employees, (ii) lab supplies and consulting expenses, and (iii) depreciation and amortization. Salaries, benefits and other personnel costs increased $6.7 million due to (i) an increase in research and development headcount to support new and expanded collaborations and (ii) costs for research and development employees assumed in the Company’s acquisition of Oxitec in September 2015. Lab supplies and consulting expenses increased $10.1 million as a result of (i) the progression into the preclinical phase with certain of Intrexon’s collaborators; (ii) the increased level of research and development services provided to the Company’s collaborators; and (iii) costs incurred as a result of the Company’s September 2015 acquisition of Oxitec. Depreciation and amortization increased $4.7 million primarily as a result of (i) the inclusion of a full period of depreciation and amortization on property, equipment and intangible assets acquired in the Company’s 2015 acquisitions and (ii) amortization related to AquaBounty’s intangible assets upon regulatory approval in November 2015. SG&A expenses increased $32.6 million, or 44%, over the nine months ended September 30, 2015. Salaries, benefits and other personnel costs for SG&A employees increased $9.2 million due to (i) increased headcount, including the hiring of two new executive officers and additional business development professionals, to support the Company’s expanding operations; (ii) noncash compensation paid to the Company’s CEO pursuant to the compensation agreement entered into in November 2015; (iii) a full period of stock compensation expense for officers hired in 2015; and (iv) salaries, benefits and other personnel costs for employees assumed in the Company’s acquisition of Oxitec in September 2015. These increases were partially offset by a decrease in stock compensation and other compensation expenses resulting primarily from the departure of certain officers of the Company in 2016. Legal and professional expenses increased $13.9 million primarily due to (i) consulting expenses payable in shares of Intrexon’s common stock pursuant to the Company’s services agreement with Third Security which the Company entered into in November 2015; (ii) expenses incurred to support domestic and international government affairs for regulatory and other approvals necessary to commercialize the Company’s products and services; (iii) increased legal fees for trial and post-trial activities in Trans Ova Genetics, L.C.’s, or Trans Ova, litigation with XY, LLC, and to defend ongoing litigation; and (iv) incremental costs incurred to support the ongoing operations of the Company’s 2015 acquisitions and other business development activities. In 2016, the Company also recorded $4.2 million in litigation expenses arising from the entrance of a court order in Trans Ova’s trial with XY, LLC.

Total other income (expense), net, was $(39.1) million for the nine months ended September 30, 2016 compared to $65.1 million for the nine months ended September 30, 2015, a decrease of $104.2 million, or 160%. This decrease was attributable to the $81.4 million realized gain recognized upon the special stock dividend of all of Intrexon’s shares of ZIOPHARM to the Company’s shareholders in June 2015 and the decrease in fair value of the Company’s equity securities portfolio.

On November 9, 2016 Infinity Pharmaceuticals, Inc. (NASDAQ: INFI) reported its third quarter 2016 financial results and its transition of the company to focus on IPI-549, a potentially first-in-class immuno-oncology product candidate that selectively inhibits PI3K-gamma. IPI-549 is the first and only PI3K-gamma inhibitor in clinical development (Press release, Infinity Pharmaceuticals, NOV 9, 2016, View Source;p=RssLanding&cat=news&id=2221099 [SID1234516562]). In October, Infinity licensed duvelisib, an investigational, oral, dual inhibitor of phosphoinositide-3-kinase (PI3K)-delta and PI3K-gamma, to Verastem, Inc.

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"During the third quarter, we undertook a number of important initiatives to focus Infinity on the advancement of IPI-549, a promising novel approach to targeting the immune-suppressive tumor microenvironment," stated Adelene Perkins, president and chief executive officer. "Refocusing Infinity required a significant organizational restructuring, an amendment to our license agreement from Takeda for both duvelisib and IPI-549, and the license of duvelisib to Verastem. We are pleased that Verastem will now be advancing duvelisib for patients and our corporate imperative going forward is to maximize the value of IPI-549."

"We are encouraged by the initial IPI-549 clinical monotherapy data recently presented, and we expect to begin evaluating IPI-549 in combination with Opdivo, a PD-1 immune checkpoint inhibitor, this fall. We anticipate reporting updated Phase 1 data from the Phase 1 study in the first half of 2017. Data in two recent Nature publications provide a strong rationale for advancing IPI-549 and show that IPI-549 in combination with immune checkpoint inhibitors may overcome resistance to checkpoint blockade," Ms. Perkins continued.

Recent developments include the following:

IPI-549

Entered clinical collaboration with BMS to evaluate IPI-549 in combination with Opdivo: Earlier today, Infinity and Bristol-Myers Squibb announced a clinical trial collaboration to evaluate IPI-549 in combination with Bristol-Myers Squibb’s Opdivo (nivolumab) in patients with advanced solid tumors. The dose-escalation portion exploring IPI-549 as a monotherapy in Infinity’s Phase 1 study is continuing, and the first dose-escalation cohort studying IPI-549 in combination with Opdivo is expected to begin this fall.
The ongoing Phase 1 clinical study of IPI-549 is designed to explore the activity, safety, tolerability, pharmacokinetics and pharmacodynamics of IPI-549 as a monotherapy and in combination with Opdivo in approximately 175 patients with advanced solid tumors. Once the dose-escalation phase evaluating IPI-549 plus Opdivo is completed, an expansion phase is planned to evaluate the combination in patients with selected solid tumors, including non-small cell lung cancer (NSCLC), melanoma and squamous cell carcinoma of the head and neck (SCCHN).

Initial clinical data presented at AACR (Free AACR Whitepaper) cancer immuno-therapy conference: In September, Infinity announced initial clinical data for IPI-549. Preliminary Phase 1 results from nine patients with advanced solid tumors showed that the safety, pharmacokinetics and pharmacodynamics of IPI-549 monotherapy treatment appeared favorable. These data were presented in a poster session at the Second CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference (CIMT) (Free CIMT Whitepaper): Translating Science into Survival.1
Preclinical data on IPI-549 published in two Nature articles: Earlier today, Infinity announced the publication of new findings by research collaborators, including Drs. Jedd Wolchok and Taha Merghoub at Memorial Sloan Kettering Cancer Center, and Infinity scientists in the November 9 online issue of Nature. The paper, entitled "Overcoming resistance to checkpoint blockade by targeting PI3K-gamma in tumor-infiltrating myeloid cells," 2 describes research showing that the presence of suppressive myeloid cells play a critical role in tumor resistance to checkpoint inhibitors and that IPI-549 is able to help recover sensitivity to checkpoint inhibition in this setting by remodeling the immune-suppressive tumor microenvironment primarily through its effects on myeloid cells.
In September, Infinity announced the first Nature publication on PI3K-gamma by research collaborators, including Dr. Judith Varner, at University of California San Diego School of Medicine and Moores Cancer Center and Infinity scientists in the September 19 online issue of Nature. The paper, entitled "PI3K-gamma is a molecular switch that controls immune suppression," 3 describes preclinical data showing that macrophage PI3K-gamma signaling promotes immune suppression by inhibiting activation of anti-tumor T cells. Additionally, blocking PI3K-gamma activated the immune response and significantly suppressed growth of implanted tumors in animal models. Inhibiting PI3K-gamma also boosted sensitivity of some tumors to existing anti-cancer drugs and showed synergy with existing immuno-therapies.

These two articles will publish back-to-back in the November 17, 2016, print edition of Nature. Taken together, these findings reinforce the therapeutic potential of IPI-549 to alter the immune-suppressive microenvironment, promoting an anti-tumor immune response that may lead to tumor growth inhibition and providing a strong rationale for the ongoing Phase 1 study.

Corporate

Amended license of duvelisib from Takeda: In September, Infinity amended its agreement with Takeda for the license of duvelisib and IPI-549. Under the amended agreement with Takeda, upon entry into the Verastem Agreement, Infinity’s milestone obligations for its first licensed compound (duvelisib) were terminated and deemed satisfied. In exchange, Infinity and Takeda will share equally in potential future royalties on net sales of duvelisib that Infinity is eligible to receive from Verastem. Additionally by satisfying milestone obligations on duvelisib under the Takeda license, IPI-549 now qualifies for the lower milestone obligations of the second licensed compound. As a result, Infinity’s potential regulatory milestone payments to Takeda related to IPI-549 have been reduced by up to $120 million, from up to $170 million to up to $50 million. Development milestones of $5.0 million, as well as potential commercial milestones, remain unchanged by the amendment.
Duvelisib licensed to Verastem: In November, Infinity and Verastem announced that the companies entered into a license agreement for exclusive worldwide rights to develop and commercialize duvelisib. Under the agreement, Infinity is eligible to receive up to a total of $28 million across two milestone payments: $6.0 million upon positive data from the Phase 3 DUO study in patients with relapsed/refractory chronic lymphocytic leukemia, and $22 million upon the first regulatory approval of duvelisib inside or outside of the U.S. Verastem is also obligated to pay Infinity tiered mid-to-high single-digit royalties on net sales of duvelisib and will be responsible for the royalties on net sales of duvelisib owed by Infinity to Mundipharma International Corporation Limited and Purdue Pharmaceutical Products L.P.
Reduced facility lease commitments: In November, Infinity and Alexandria Real Estate Equities (ARE) entered into an agreement to terminate Infinity’s lease for its facilities at 780 Memorial Drive in Cambridge, MA, effective as of October 31, 2016. In connection with the termination, Infinity paid ARE a termination payment of approximately $1.8 million. Infinity elected to terminate its lease to consolidate its facilities as part of its strategic restructuring efforts.
Third Quarter 2016 Financial Results

At September, 2016, Infinity had total cash, cash equivalents and available-for-sale securities of $112.3 million, compared to $146.4 million at June 30, 2016.
Infinity did not record any revenue during the third quarter of 2016. Revenue for the third quarter of 2015 was $90.7 million for research and development (R&D) services associated with the previous collaboration with AbbVie for duvelisib in oncology.
R&D expense for the third quarter of 2016 was $12.8 million compared to $37.7 million for the same period in 2015. The decrease in R&D expense was primarily related to a decrease in activities for duvelisib and a decrease in compensation as a result of the restructuring announced earlier this year.
General and administrative (G&A) expense was $7.1 million for the third quarter of 2016, compared to $9.8 million for the same period in 2015. The decrease in G&A expense was primarily related a decrease in commercial-readiness activities for duvelisib.
Net loss for the third quarter of 2016 was $19.5 million, or a basic and diluted earnings per common share of $0.39, compared to a net income of $42.5 million, or a basic earnings per common share of $0.85 and diluted earnings per common share of $0.84, for the same period in 2015.
Cash and Investments Outlook
Following the license agreement with Verastem and further restructuring activities, Infinity today provided an update on its anticipated year-end 2016 cash and investments balance and expected cash runway.

Infinity expects to end 2016 with a year-end cash and investments balance ranging from $70 million to $80 million, compared to prior expectations of $45 million to $55 million.
Infinity expects that its existing cash, cash equivalents and available-for-sale securities at September 30, 2016, will be adequate to satisfy the company’s capital needs into the first quarter of 2018 based on its current operational plans, compared to previous guidance of cash runway into the third quarter of 2017.
The company’s updated financial guidance is in the absence of additional funding or business development activities and has expenses related to duvelisib beyond November 1, 2016, capped at $4.5 million. Additionally, Infinity’s updated cash runway expectation excludes any potential milestone payments from Verastem related to duvelisib.