Germantown, Maryland, USA
August 9, 2016

• Quarterly revenues of $52.5 million and GAAP net loss of $49.1 million including non-cash charges of $44.0 million -
• Adjusted EBITDA of $110.7 million 

Intrexon Corporation (NYSE: XON), a leader in the engineering and industrialization of biology to improve the quality of life and health of the planet, today announced its second quarter and first half financial results for 2016.  

Business Highlights and Recent Developments:

• The U.S. Food and Drug Administration (FDA) published final finding of no significant impact and final environmental assessment on Oxitec's OX513A self-limiting mosquito concluding that a field trial of the Friendly™ Aedes in Key Haven, Florida, will not result in a significant impact on the environment;
• Expanded Oxitec's 'Friendly™ Aedes aegypti Project' in Piracicaba, Brazil to an area in the city's center covering 60,000 residents. Releases of Friendly™ Aedes, the mosquito that fights the primary vector of dengue, Zika and chikungunya, began in July;
• Oxitec reported results from Piracicaba's Epidemiologic Surveillance service which showed a 91% reduction of dengue fever cases registered in the 2015/2016 dengue-year as compared to the 2014/2015 period in the CECAP/Eldorado district, an area of 5,000 residents and the initial site of the 'Friendly™ Aedes aegypti Project';
• Announced Grand Cayman will use Oxitec's Friendly™ Aedes to suppress wild Aedes aegypti in an effort to help eliminate diseases transmitted by this mosquito. Releases of Friendly™ Aedes began in July;
• Announced the formation of Intrexon Crop Protection (ICP), a wholly-owned subsidiary dedicated to bio-based control of agricultural pests and diseases through the utilization of Oxitec's diverse self-limiting gene platform for species-specific insect control, as well as the ActoBiotics® system for the expression of targeted biologicals for pest and disease management programs;
• Introduced Florian™ technology, an "on-off" regulation switch system which exhibits the capability to regulate the timing of flowering, as well as selectively activate specific plant genes, through topical application of an activator. This technology demonstrates potential for enabling a variety of commercial applications in agriculture, and the Company will focus its initial efforts on near-to-market opportunities in turf, floral, and forage industries;
• Announced amendments to Exclusive Channel Collaborations (ECCs) with ZIOPHARM Oncology, Inc. (Nasdaq: ZIOP) in the fields of oncology and graft-versus-host-disease to improve alignment. Operating profit rates payable to Intrexon from ZIOPHARM on products developed under these ECCs decrease from 50% to 20%, excluding the companies' existing collaboration with Merck Serono, the biopharmaceutical division of Merck KGaA. Economics from any future sublicensing arrangements with third party collaborators will be split evenly. Intrexon received $120 million in ZIOPHARM preferred stock along with a monthly dividend of 1% payable in additional preferred shares;
• Collaborator ZIOPHARM announced plans for a Phase I clinical trial utilizing autologous T cells transduced with lentivirus to express a CD33-specific chimeric antigen receptor (CAR) in patients with relapsed or refractory acute myeloid leukemia. This will be second trial initiated at The University of Texas MD Anderson Cancer Center under the research and development agreement among ZIOPHARM, Intrexon, and MD Anderson to expeditiously move promising treatments from bench to clinic;
• Entered into an ECC with AD Skincare, Inc., backed by the Harvest Intrexon Enterprise Fund, sponsored by Harvest Capital Strategies, LLC, which will focus on developing an advanced delivery system for anti-aging active ingredients to be used in cosmetic formulations that are designed to reduce the appearance of certain signs of aging on human facial skin;
• Collaborator Fibrocell Science, Inc. (NASDAQ: FCSC) initiated adult patient recruitment in its Phase I/II clinical trial of FCX-007 in June and during July reported the first two adult subjects had been enrolled. Fibrocell expects to commence dosing this year;
• Two Intrexon collaborators' gene therapy programs received Orphan Drug designation from the FDA: Fibrocell's FCX-013 for the treatment of linear scleroderma and Agilis Biotherapeutics' AGIL-FA for the treatment of Friedreich's ataxia;
• Exemplar Genetics announced the FDA exercised enforcement discretion in regard to its ExeGen® low-density lipoprotein receptor miniswine, clearing this animal that enables superior translational research and better predictive efficacy for commercial use as a research model;
• Intrexon's subsidiary AquaBounty Technologies, Inc. (AIM: ABTU; OTC: AQBT) received approval from Health Canada for commercial sale of AquAdvantage® Salmon (AAS) in Canada;
• Appointed Geno Germano, a pharmaceutical executive with over 30 years of experience, to the new role of President, helping lead Intrexon's management team and commercialization efforts;
• Appointed Andrew J. Last, Ph.D., a seasoned executive with 30 years of experience spanning life sciences, including biotechnology, genomics, clinical diagnostics, pharmaceuticals and agrochemicals, as Chief Operating Officer, to oversee Intrexon's multiple technology divisions and operating subsidiaries; and
• Appointed distinguished life sciences executive Fred Hassan to Intrexon's Board of Directors.

First Half Financial Highlights:

• Total revenues of $95.9 million, an increase of 22% over the first half of 2015;
• Net loss of $113.5 million attributable to Intrexon, or $(0.97) per basic share, including non-cash charges of $94.6 million;
• Adjusted EBITDA of $112.5 million, or $0.96 per basic share;
• Cash consideration received for reimbursement of research and development services covered 57% 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 184% of consolidated cash operating expenses.

"We began the year with great anticipation that 2016 will be a period in which we should demonstrate significant progress on several dimensions," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon, "and so far are tracking very well against our objectives. While continuing our trajectory of growing financial performance and capital efficiency, we have advanced many of our programs, achieving key scientific, developmental and regulatory milestones. In addition, our production and marketing plans around three mature yet game-changing assets – the Friendly™ Aedes mosquito, the Arctic® apple and the AquAdvantage® salmon – are being managed aggressively, and we look forward to the world enjoying the benefits of each of these unique, sustainable and environmentally responsible solutions to major problems."

Mr. Kirk concluded, "Considering the poignant moment in history that we occupy, one in which there is increasing recognition of the need for the engineering of biology to be responsibly practiced in order to solve an enormous number of world problems in areas such as healthcare, food, energy and the environment, our greatest need in order for Intrexon to play a leading role on this industrial and social vector, is the recruitment and development of great talent at every level of our organization – on our board, within our executive management team and in our labs that today span North America and Europe.  In this regard, I am honored every day to work in partnership with our President, Geno Germano, the rest of our executive team and with so many brilliant and dedicated scientists and professionals throughout our organization.  I believe that the world should expect great things from such a team, and I believe that they will deliver on these expectations. "

Second Quarter 2016 Financial Results Compared to Prior Year Period
Total revenues were $52.5 million for the quarter ended June 30, 2016 compared to $44.9 million for the quarter ended June 30, 2015, an increase of $7.6 million, or 17%. Collaboration and licensing revenues increased $10.3 million over the quarter ended June 30, 2015 due to (i) the recognition of deferred revenue for upfront payments received from the Company's license and collaboration agreement with the biopharmaceutical business of Merck KGaA, which became effective in May 2015, and from other collaborations signed by Intrexon between July 1, 2015 and June 30, 2016; 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. Product revenues were $10.9 million for the quarter ended June 30, 2016 compared to $14.3 million for the quarter ended June 30, 2015, a decrease of $3.4 million, or 24%. The decrease in product revenues and gross margin thereon primarily relates to a decrease in the quantities of pregnant cows, livestock previously used in production and live calves sold due to lower customer demand for these products. The decreases were partially offset by an increase in the quantity of weaned calves sold due to higher customer demand. Service revenues were $13.9 million for the quarter ended June 30, 2016 compared to $13.3 million for the quarter ended June 30, 2015, an increase of $0.6 million, or 5%. The increase relates to an increase in the number of in vitro fertilization cycles performed due to higher customer demand. 

Total operating expenses were $75.7 million for the quarter ended June 30, 2016 compared to $62.3 million for the quarter ended June 30, 2015, an increase of $13.4 million, or 22%. Research and development expenses increased $8.0 million, or 39%, 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 $2.3 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 Limited, or Oxitec, in September 2015. Lab supplies and consulting expenses increased $3.4 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 $1.9 million primarily as a result of (i) the inclusion of a full quarter of depreciation and amortization on property and 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. Selling, general and administrative (SG&A) expenses increased $6.6 million, or 28%, over the second quarter of 2015. Legal and professional expenses increased $5.8 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 incurred 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. These increases were partially offset by a decrease of $2.2 million for salaries, benefits and other personnel costs. Salaries, benefits and other personnel costs for SG&A employees decreased primarily due to a decrease in stock compensation and other compensation expenses resulting primarily from the departure of certain officers of the Company.  These decreases were partially offset by increased headcount, including a new executive officer to support the Company's expanding operations as well as the acquisition of Oxitec in September 2015.

First Half 2016 Financial Results Compared to Prior Year Period
Total revenues were $95.9 million for the six months ended June 30, 2016 compared to $78.7 million for the six months ended June 30, 2015, an increase of $17.2 million, or 22%. Collaboration and licensing revenues increased $19.6 million over the six months ended June 30, 2015 due to (i) the recognition of deferred revenue for upfront payments received from the Company's license and collaboration agreement with the biopharmaceutical business of Merck KGaA, which became effective in May 2015, and from other collaborations signed by Intrexon between July 1, 2015 and June 30, 2016; 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. Product revenues were $19.4 million for the six months ended June 30, 2016 compared to $23.2 million for the six months ended June 30, 2015, a decrease of $3.8 million, or 16%. The decrease in product revenues and gross margin thereon primarily relates to a decrease in the quantities of pregnant cows, livestock previously used in production and live calves sold due to lower customer demand for these products. The decreases were partially offset by an increase in the quantity of weaned calves sold due to higher customer demand. Service revenues were $24.6 million for the six months ended June 30, 2016 compared to $23.2 million for the six months ended June 30, 2015, an increase of $1.4 million, or 6%. The increase relates to an increase in the number of in vitro fertilization cycles performed due to higher customer demand.

Total operating expenses were $159.7 million for the six months ended June 30, 2016 compared to $183.3 million for the six months ended June 30, 2015, a decrease of $23.6 million, or 13%. Research and development expenses declined $45.5 million, or 46%, 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 $4.6 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 $6.2 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 $3.8 million primarily as a result of (i) the inclusion of a full period of depreciation and amortization on property and 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 $21.8 million, or 43%, over the six months of 2015. Salaries, benefits and other personnel costs for SG&A employees increased $3.8 million due to (i) increased headcount, including a new executive officer, to support the Company's expanding operations; (ii) a full period of stock compensation expense for a company-wide option grant to employees in March 2015; and (iii) 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 (i) a decrease in stock compensation and other compensation expenses resulting primarily from the departure of certain officers of the Company. Legal and professional expenses increased $9.5 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 incurred 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 settlement expenses arising from the entrance of a court order in Trans Ova Genetics, L.C.'s trial with XY, LLC.

Total other income (expense), net, was $(43.8 million) for the six months ended June 30, 2016 compared to $94.7 million for the six months ended June 30, 2015, a decrease of $138.5 million, or 146%. 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.

Website: http://www.dna.com

Published: August 9, 2016