Germantown, Maryland, USA
November 9, 2017

• Quarterly GAAP revenues of $46.0 million and net loss attributable to Intrexon of $39.7 million including non-cash charges of $24.0 million
• Adjusted EBITDA of $(16.4) 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 2017. 

Business Highlights and Recent Developments:

• Xogenex, a majority-owned subsidiary of Intrexon, filed an Investigational New Drug application with the U.S. Food and Drug Administration for a Phase 1 trial of the gene therapy INXN-4001, the world's first multigene therapeutic candidate expressing proteins from three cardiac effector genes for the treatment of heart disease;
• Intrexon's proprietary methanotroph bioconversion platform continued to increase yield across multiple products including 2,3 butanediol, which increased approximately 15% during the quarter, and isobutanol, which increased 78%;
• Okanagan Specialty Fruits, a wholly-owned subsidiary of Intrexon, recently initiated the first commercial launch of its non-browning Arctic® Golden fresh sliced apples in stores across the mid-West and other regions;
• Collaborator ZIOPHARM Oncology, Inc. (Nasdaq: ZIOP) announced that the first patient has been dosed in a new Phase 1 study of its gene therapy Ad-RTS-hIL-12 + veledimex for the treatment of pediatric brain tumors;
• Collaborator Oragenics, Inc. (NYSE MKT: OGEN) dosed the first patient in its Phase 2 clinical trial of AG013, an ActoBiotics® therapeutic candidate, for the treatment of oral mucositis;
• Collaborator Fibrocell Science, Inc. (NASDAQ: FCSC) reported interim results in its Phase 1/2 clinical trial of its gene therapy FCX-007 for the treatment of recessive dystrophic epidermolysis bullosa with encouraging safety and positive early trends noted in wound healing and pharmacology signals;
• Intrexon Crop Protection announced the achievement of a key milestone in its collaboration with a leading agricultural company on the development of an eco-friendly fall armyworm solution utilizing Oxitec's self-limiting technology, the receipt of a milestone payment, and the continued advancement of the program. Native to the Americas, fall armyworm invaded Africa in 2016 and has rapidly spread to at least 28 countries causing an estimated $13.8 billion in losses of maize, sorghum, rice and sugarcane;
• Oxitec's innovative solution to suppress the diamondback moth (DBM), a major pest of brassica crops that costs farmers over $4 billion yearly in crop losses and control management, began field trials in the U.S. following the Finding of No Significant Impact issued by the U.S. Department of Agriculture. DBM is considered one of the most difficult pests to control because it has become resistant to dozens of chemical insecticides and has also evolved resistance in the field to Bacillus thuringiensis (Bt) proteins;
• Intrexon announced a collaboration with Arch Pharmalabs, Ltd. to develop microbial strains for fermentation-based production of an active pharmaceutical ingredient currently sourced from animals; and
• Intrexon entered into a Preferred Stock Equity Facility with an affiliate of Third Security, LLC, a venture capital firm founded by Randal J. Kirk, Intrexon's Chairman and Chief Executive Officer, under which Intrexon may, from time to time at its discretion, sell to the investor up to $100 million of newly issued Series A Redeemable Preferred Stock.

Third Quarter 2017 Financial Highlights:

• Total revenues of $46.0 million, a decrease of 6% from the third quarter of 2016;
• Net loss of $39.7 million attributable to Intrexon, or $(0.33) per basic share, including non-cash charges of $24.0 million;
• Adjusted EBITDA of $(16.4) million, or $(0.14) per basic share;
• The net change in deferred revenue related to upfront and milestone payments, which represents the cash and stock received from collaborators less the amount of revenue recognized during the period, was a decrease of $8.6 million compared to a decrease of $1.8 million in the third quarter of 2016; and
• Cash, cash equivalents, and short-term investments totaled $108.7 million, the value of preferred shares totaled $148.5 million, and the value of common equity securities totaled $26.6 million at September 30, 2017.

Year-to-Date 2017 Financial Highlights:

• Total revenues of $154.0 million, an increase of 6% over the nine months ended September 30, 2016;
• Net loss of $89.8 million attributable to Intrexon, or $(0.75) per basic share, including non-cash charges of $66.0 million;
• Adjusted EBITDA of $(25.5) million, or $(0.21) per basic share; and
• The net change in deferred revenue related to upfront and milestone payments, which represents the cash and stock received from collaborators less the amount of revenue recognized during the period, was a decrease of $28.2 million compared to a net increase of $127.8 million in the nine months ended September 30, 2016.

"I am proud of our team for its astonishing number of significant accomplishments.  We continue our transition from a company with substantial potential to one that is realizing that promise scientifically and commercially," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon. "Four years ago, we were focused almost exclusively on early stage programs but now are engaged in partnering efforts to capitalize on certain of our mature programs, including Methane Bioconversion Platform and Intrexon Crop Protection.  We believe that these efforts will allow us to increase our investments in ground-breaking new programs while realizing, sometimes with partners, the available potential of our earlier work.

"Today, for example, with earlier-developed therapeutic candidates moving into Phase 3 and Phase 2 clinical trials, we mark a historic technical achievement in the fight against heart failure with the filing of an IND for the world's first multigenic gene therapy targeting the leading cause of human death.  This candidate generated promising safety and efficacy data in large animal models, and we are hopeful that it will greatly improve the prospects for the many patients -- 5.7M adults in the U.S. alone -- with this grim diagnosis.  We shall be introducing additional complex, multigenic therapies into the clinic, both through our partners and on behalf of Precigen, in the near future.

"We see a similar pattern in our Energy and Food portfolios and look forward to developing this in Environment and Consumer as well and so believe that the balance of this year and 2018 will be validating for our strategy and ambition," concluded Mr. Kirk.

Third Quarter 2017 Financial Results Compared to Prior Year Period

Total revenues decreased $3.0 million, or 6%, from the quarter ended September 30, 2016. Collaboration and licensing revenues decreased $2.4 million from the quarter ended September 30, 2016 due to a decrease in research and development services for certain of the Company's collaborations as the Company temporarily redeployed certain resources towards supporting prospective new platforms and partnering opportunities. Product revenues decreased $1.6 million, or 17%, primarily due to lower customer demand for cows and live calves. Gross margin on products also decreased in the current period primarily due to customer demand. Service revenues increased $1.3 million, or 15%, due to an increase in the number of bovine in vitro fertilization cycles performed due to higher customer demand. Gross margin on these services was consistent period over period.

Research and development expenses increased $7.4 million, or 26%, due primarily to increases in (i) salaries, benefits and other personnel costs for research and development employees, (ii) depreciation and amortization, (iii) rent and utilities expenses, and (iv) lab supplies and consulting expenses. Salaries, benefits and other personnel costs increased $2.6 million due to an increase in research and development headcount necessary to invest in current or expanding platforms and to develop new prospective collaborations and other partnering opportunities. Depreciation and amortization increased $2.0 million primarily as a result of (i) the amortization of developed technology acquired from Oxitec, which began in November 2016 upon the completion of certain operational and regulatory events, and (ii) the amortization of developed technology acquired from GenVec in June 2017. Rent and utilities expenses increased $1.4 million primarily due to the expansion of certain facilities to support the Company's increased headcount. Lab supplies and consulting expenses increased $1.1 million as a result of (i) the progression of certain programs into the preclinical and clinical phases with certain of Intrexon's collaborators and (ii) the expansion or improvement of certain of the Company's platform technologies. Selling, general and administrative (SG&A) expenses increased $5.5 million, or 16%. Salaries, benefits and other personnel costs increased $2.7 million primarily due to (i) increased headcount to support the Company's expanding operations and (ii) increased stock-based compensation expense resulting from grants to certain of the Company's officers in February 2017. Legal and professional fees increased $0.9 million primarily due to (i) increased legal fees to defend ongoing litigation and (ii) increased fees incurred for business development and prospective partnering efforts.

Total other income, net, increased $1.4 million, or 31%. This increase was primarily attributable to (i) increases in fair market value of the Company's equity securities portfolio and (ii) dividend income from the Company's investments in preferred stock.

Equity in net loss of affiliates, which includes the Company's pro-rata share of the net losses of its investments accounted for using the equity method of accounting, decreased $3.3 million, or 52%. This decrease was primarily due to the temporary redeployment of certain of the Company's resources away from these joint venture programs towards supporting prospective new platforms and additional collaborations.

Year-to-Date 2017 Financial Results Compared to Prior Year Period

Total revenues increased $9.0 million, or 6%, over the nine months ended September 30, 2016. Collaboration and licensing revenues increased $7.2 million, or 9%, over the nine months ended September 30, 2016, primarily due to the recognition of deferred revenue associated with the payment received in June 2016 from ZIOPHARM to amend the collaborations between the parties and increased revenues associated with collaborations entered into with the Harvest start-up entities in 2016. Product revenues decreased $2.9 million, or 10%, primarily due to lower customer demand for cows and live calves. Gross margin on products improved in the current period primarily due to a decline in the average cost of cows. Service revenues increased $4.6 million, or 14%, due to an increase in the number of bovine in vitro fertilization cycles performed due to higher customer demand. Gross margin on services decreased slightly in the current period primarily due to an increase in royalties and commissions due to vendors.

Research and development expenses increased $21.4 million, or 26%, due primarily to increases in (i) salaries, benefits and other personnel costs for research and development employees, (ii) lab supplies and consulting expenses, (iii) depreciation and amortization, and (iv) rent and utilities expenses. Salaries, benefits and other personnel costs increased $7.4 million due to an increase in research and development headcount necessary to invest in current or expanding platforms and to develop new prospective collaborations and other partnering opportunities. Lab supplies and consulting expenses increased $6.3 million as a result of (i) the progression of certain programs into the preclinical and clinical phases with certain of Intrexon's collaborators and (ii) the expansion or improvement of certain of the Company's platform technologies. Depreciation and amortization increased $4.3 million primarily as a result of (i) the amortization of developed technology acquired from Oxitec, which began in November 2016 upon the completion of certain operational and regulatory events, and (ii) the amortization of developed technology acquired from GenVec in June 2017. Rent and utilities expenses increased $2.5 million due to the expansion of certain facilities to support the Company's increased headcount. SG&A expenses increased $6.3 million, or 6%. Salaries, benefits and other personnel costs increased $4.2 million primarily due to (i) increased headcount to support the Company's expanding operations and (ii) increased stock-based compensation expense resulting from grants to certain of the Company's officers in February 2017. Legal and professional fees increased $4.7 million primarily due to (i) increased legal fees to defend ongoing litigation, (ii) increased business development and public relations consulting expenses, and (iii) the Company's acquisition of GenVec that was completed in June 2017. These increases were offset by $4.2 million in litigation expenses recorded in the prior period arising from the entrance of a court order in Trans Ova Genetics, L.C.'s trial with XY, LLC.

Total other income (expense), net, increased $66.8 million, or 171%. This increase was primarily attributable to (i) increases in fair market value of the Company's equity securities portfolio, investments in preferred stock and other convertible instruments and (ii) dividend income from the Company's investments in preferred stock.

Equity in net loss of affiliates, which includes the Company's pro-rata share of the net losses of its investments accounted for using the equity method of accounting, decreased $5.7 million, or 33%. This decrease was primarily due to the temporary redeployment of certain of the Company's resources away from these joint venture programs towards supporting prospective new platforms and additional collaborations.

Website: http://www.dna.com

Published: November 9, 2017