Germantown, Pennsylvania, USA
November 9, 2016

• Quarterly GAAP revenues of $49.0 million and net loss of $29.0 million including non-cash charges of $25.5 million -
• Adjusted EBITDA (as redefined) of $(3.7) million -
• Adjusted EBITDA (as previously defined) of $(5.6) 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 third quarter financial results for 2016. 

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.

Website: http://www.dna.com

Published: November 10, 2016