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Intrexon Corporation Announces Second Quarter And First Half 2014 Financial Results


8/15/2014 8:52:54 AM

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GERMANTOWN, Md., Aug. 14, 2014 /PRNewswire/ -- Intrexon Corporation (NYSE: XON), a leader in synthetic biology, today announced its second quarter and first half results for 2014. 

Business Highlights and Recent Developments:

  • Acquired Trans Ova Genetics, L.C. ("Trans Ova"), an industry-leading provider of bovine reproductive technologies and the largest producer and supplier of bovine embryos in the United States. The combined technologies of Intrexon and Trans Ova should enable a leadership position in bovine genetics to accelerate efficiency in related food and protein production.
  • Achieved, through Intrexon's Methane Bioconversion platform, the production of farnesene, a key building block chemical for diesel fuel, lubricants and specialty products. Farnesene is the second product, following isobutanol, which Intrexon has upgraded from natural gas by employing its unique cellular engineering capabilities.
  • Enhanced the collaboration with a global animal health company to enable remote access to Intrexon's suite of technologies via the groundbreaking BeyondBio platform. The BeyondBio platform combines the principles of precision engineering, statistical modeling, automation, and lean production to power the next generation of optimized biological designs for unique DNA-based solutions across broad markets.
  • Announced an expansion of immuno-oncology programs, in conjunction with ZIOPHARM Oncology, an Exclusive Channel Collaboration (ECC) partner, to include chimeric antigen receptor T-cell (CAR-T) therapy and increased applications of the RheoSwitch® platform and its unique capabilities into targeted cellular oncology products.
  • Fibrocell Science, facilitated by its ECC with Intrexon, received Orphan Drug Designation for genetically-modified autologous human fibroblasts that combine its autologous fibroblast technology with Intrexon's UltraVector® synthetic biology platform to treat Recessive Dystrophic Epidermolysis (RDEB), a devastatingly debilitating, genetic disease that causes severe blistering and areas of missing skin.

Second Quarter Financial Highlights:

  • Total revenues of $11.8 million, an increase of 76% over the second quarter of 2013;
  • Net loss of $52.0 million, including noncash charges of $43.0 million, attributable to Intrexon, or ($0.53) per share;
  • Adjusted EBITDA of $(10.4) million, or $(0.11) per share; and
  • Cash consideration received for research and development services covered 49% of cash operating expenses (exclusive of operating expenses of majority-owned consolidated subsidiaries).

First Half Financial Highlights:

  • Total revenues of $19.6 million, an increase of 86% over the first half of 2013;
  • Net loss of $47.9 million, including noncash charges of $27.1 million, attributable to Intrexon, or ($0.49) per share;
  • Adjusted EBITDA of $7.2 million, or $0.07 per share; and
  • Total consideration received for technology access fees and reimbursement of research and development expenses covered 130% of cash operating expenses (exclusive of operating expenses of majority-owned consolidated subsidiaries).

"Year to date, cash consideration from our channel collaborators has been more than sufficient to pay our cash operating expenses, while we have continued to build value in our portfolio of royalties and profits participation across multiple product candidates in development across various industries," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon.  "The primary benefit of the attainment of this goal, one we have been working toward for several years, is that shareholder capital is preserved while our portfolio of backend economics in what we expect to be ultimately commercialized products continues to advance.  Considering our present deal queue, including advanced-stage negotiations with new partners, we anticipate building on this trend throughout the balance of 2014."

Second Quarter 2014 Financial Results Compared to Prior Year Period

Total revenues were $11.8 million for the quarter ended June 30, 2014 compared to $6.7 million for the quarter ended June 30, 2013, an increase of $5.1 million, or 76 percent.  The $5.1 million increase in collaboration revenue resulted primarily from the following: (i) recognition of deferred revenue for upfront payments received from 11 collaborations or expansions thereof signed by Intrexon between July 1, 2013 and June 30, 2014; (ii) recognition of research and development services performed by the Company pursuant to these new collaborations; and (iii) increased research and development services performed by Intrexon for collaborations in effect prior to June 30, 2013 as a result of the progression of current programs and the initiation of new programs with these collaborators. 

Research and development expenses were $14.5 million for the quarter ended June 30, 2014 compared to $13.5 million for the quarter ended June 30, 2013.  The $1.0 million increase in research and development expenses is primarily the result of a $1.5 million increase in compensation costs due to stock options grants Intrexon made to research and development employees in the first quarter of 2014.  Lab supplies expense increased $0.6 million due to the increased level of research and development services provided to the Company's collaborators.  These increases were offset by a $1.0 million decrease in third party technology license fees due to the termination of a licensing agreement.

General and administrative expenses were $15.4 million for the quarter ended June 30, 2014 compared to $7.4 million for the quarter ended June 30, 2013.  The $8.0 million increase in general and administrative expenses is primarily the result of $6.0 million of additional compensation costs resulting from Intrexon's hiring of additional employees in order to effectively operate as a public company and also from stock option grants Intrexon made to general and administrative employees in the first quarter of 2014.  The Company's legal and professional fees increased $1.3 million due to increased costs to operate as a public company and also various merger and acquisition and other business development activities.

Total other income (expense) includes the unrealized changes in the fair value of equity securities Intrexon holds in its collaborators which depreciated $(33.8) million for the quarter ended June 30, 2014 compared to appreciation of $7.7 million for the quarter ended June 30, 2013.

First Half 2014 Financial Results Compared to Prior Year Period

Total revenues were $19.6 million for the six months ended June 30, 2014 compared to $10.6 million for the six months ended June 30, 2013, an increase of $9.0 million, or 86 percent.  The $9.0 million increase in collaboration revenue resulted primarily from the following:  (i) recognition of deferred revenue for upfront payments received from 11 collaborations or expansions thereof signed by Intrexon between July 1, 2013 and June 30, 2014; (ii) recognition of research and development services performed by the Company pursuant to these new collaborations; and (iii) increased research and development services performed by Intrexon for collaborations in effect prior to June 30, 2013 as a result of the progression of current programs and the initiation of new programs with these collaborators. 

Research and development expenses were $26.6 million for the six months ended June 30, 2014 compared to $24.9 million for the six months ended June 30, 2013.  The $1.7 million increase in research and development expenses is primarily the result of a $1.3 million increase in compensation costs due to stock options grants Intrexon made to research and development employees in the first quarter of 2014 and the inclusion of six months of salaries, benefits and other personnel costs for AquaBounty Technologies, Inc. ("AquaBounty") in Intrexon's consolidated results for 2014 compared to approximately three and a half months in 2013.  Other AquaBounty research and development expenses increased $0.5 million for this same reason.  These increases were offset by a $1.0 million decrease in third party technology license fees due to the termination of a licensing agreement.

General and administrative expenses were $29.0 million for the six months ended June 30, 2014 compared to $13.9 million for the six months ended June 30, 2013.  The $15.1 million increase in general and administrative expenses is primarily the result of $8.9 million of additional compensation costs resulting from Intrexon's hiring of additional employees in order to effectively operate as a public company, stock option grants the Company made to general and administrative employees in the first quarter of 2014, and inclusion of six months of costs for AquaBounty employees in 2014 compared to approximately three and a half months in 2013.  The Company also incurred stock-based compensation expense for options granted to its non-employee directors, which increased $1.8 million due to changes in its director compensation plan, which Intrexon adopted in conjunction with its becoming a public company.  Intrexon's legal and professional fees increased $2.9 million due to increased costs to operate as a public company, the formation of its joint venture with Intrexon Energy Partners and various merger and acquisition and other business development activities.

Total other income (expense) includes the unrealized changes in the fair value of equity securities Intrexon holds in its collaborators which depreciated $(11.9) million for the six months ended June 30, 2014 compared to $(21.6) million for the six months ended June 30, 2013. Total other income (expense), net for the six months ended June 30, 2013 includes a $7.4 million gain on the Company's previously held equity interest in AquaBounty as a result of its consolidating AquaBounty as of March 15, 2013.

Trans Ova Acquisition Details

Effective August 8, 2014, Intrexon closed the above-referenced acquisition of Trans Ova.  Total consideration paid at closing consisted of $60.0 million in cash and the issuance of 1,444,388 shares of Intrexon common stock.  Intrexon is obligated to pay an additional $20.0 million in cash in equal installments on the first, second and third anniversaries of closing and may be obligated to make other contingent payments as specified in the purchase agreement.  For the year ended December 31, 2013, net sales of Trans Ova were $63.2 million, which represented an increase of $15.0 million, or 30 percent, over 2012 net sales.  For the year ended December 31, 2013, net income of Trans Ova was $4.4 million

Conference Call and Webcast

The Company will host a conference call today at 5:30pm ET to discuss the second quarter and first half 2014 financial results and provide a general business update.  The conference call may be accessed by dialing 1-877-870-4263 (Domestic US) and 1-412-317-0790 (International) and asking to join the "Intrexon Conference Call."  Participants may also access the live webcast through Intrexon's website in the Investors section under Calendar of Events.

About Intrexon Corporation

Intrexon Corporation (NYSE: XON) is a leader in synthetic biology focused on collaborating with companies in Health, Food, Energy, Environment, and Consumer Sectors to create biologically-based products that improve the quality of life and the health of the planet.  Through the company's proprietary UltraVector® platform, Intrexon provides its partners with industrial-scale design and development of complex biological systems.  The UltraVector® platform delivers unprecedented control over the quality, function, and performance of living cells.  We call our synthetic biology approach and integrated technologies Better DNA®, and we invite you to discover more at www.dna.com.

Non-GAAP Financial Measures

This press release presents Adjusted EBITDA and Pro Forma Adjusted EBITDA earnings per share, which are non-GAAP financial measures within the meaning of applicable rules and regulations of the Securities and Exchange Commission ("SEC"). For a reconciliation of Adjusted EBITDA to net loss attributable to Intrexon in accordance with generally accepted accounting principles and for a discussion of the reasons why the company believes that these non-GAAP financial measures provide information that is useful to investors see the tables below under "Reconciliation of GAAP to Non-GAAP Measures."  Such information is provided as additional information, not as an alternative to Intrexon's consolidated financial statements presented in accordance with GAAP, and is intended to enhance an overall understanding of the Company's current financial performance.

Trademarks

Intrexon, BeyondBio, UltraVector, RheoSwitch Therapeutic System, RheoSwitch, RTS, and Better DNA are trademarks of Intrexon and/or its affiliates.  Other names may be trademarks of their respective owners.

Safe Harbor Statement

Some of the statements made in this press release are forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe harbor Provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are based upon Intrexon's current expectations and projections about future events and generally relate to Intrexon's plans, objectives and expectations for the development of Intrexon's business.  Although management believes that the plans and objectives reflected in or suggested by these forward-looking statements are reasonable, all forward-looking statements involve risks and uncertainties and actual future results may be materially different from the plans, objectives and expectations expressed in this press release. These risks and uncertainties include, but are not limited to, (i) Intrexon's current and future ECCs and joint ventures; (ii) developments concerning Intrexon's collaborators; (iii) Intrexon's ability to successfully enter new markets or develop additional products, whether with its collaborators or independently; (iv) competition from existing technologies and products or new technologies and products that may emerge; (v) actual or anticipated variations in Intrexon's operating results; (vi) actual or anticipated fluctuations in Intrexon's competitors' or its collaborators' operating results or changes in their respective growth rates; (vii) Intrexon's cash position; (viii) market conditions in Intrexon's industry; (ix) Intrexon's ability, and the ability of its collaborators, to protect Intrexon's intellectual property and other proprietary rights and technologies; (x) Intrexon's ability, and the ability of its collaborators, to adapt to changes in laws or regulations and policies; (xi) the ability of Intrexon's collaborators to secure any necessary regulatory approvals to commercialize any products developed under the ECCs; (xii) the rate and degree of market acceptance of any products developed by a collaborator under an ECC; (xiii) Intrexon's ability to retain and recruit key personnel; (xiv) Intrexon's expectations related to the use of proceeds from its initial public offering; (xv) Intrexon's estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and (xvi) Intrexon's expectations relating to Trans Ova, AquaBounty and any other consolidated subsidiaries. For a discussion of other risks and uncertainties, and other important factors, any of which could cause Intrexon's actual results to differ from those contained in the forward-looking statements, see the section entitled "Risk Factors" in Intrexon's Annual Report on Form 10-K, as well as discussions of potential risks, uncertainties, and other important factors in Intrexon's subsequent filings with the Securities and Exchange Commission. All information in this press release is as of the date of the release, and Intrexon undertakes no duty to update this information unless required by law.

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