Intrexon Announces Fourth Quarter And Full Year 2016 Financial Results
Published: Mar 02, 2017
GERMANTOWN, Md., March 1, 2017 /PRNewswire/ -- 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 fourth quarter and full year financial results for 2016.
Business Highlights and Recent Developments:
- Oxitec, a wholly-owned subsidiary of Intrexon, opened its large scale mosquito production facility in Brazil with the capacity to produce 60 million Friendly Aedes per week. Given ongoing discussions in Brazil management expects the factory's egg capacity will be committed within 2017;
- Oxitec expanded its Friendly Aedes project in Piracicaba, Brazil with the initiation of releases of self-limiting Aedes aegypti mosquitoes in ten additional neighborhoods in the city's center covering an additional 60,000 people;
- The Cayman Islands Mosquito Research and Control Unit commenced operational roll-out of Oxitec's Friendly technology in West Bay, Grand Cayman, in July 2016 as the first phase of an anticipated island-wide deployment, and recent results indicate the program is on track;
- Okanagan Specialty Fruits (OSF) achieved the first commercial harvest of its non-browning Arctic® Golden apple variety and plans commercial launch of fresh sliced apples in select markets across North America in the fall of 2017;
- Together with collaborator ZIOPHARM Oncology, Inc. (NASDAQ: ZIOP) announced signing of a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI) for the development of adoptive cell transfer-based immunotherapies using autologous peripheral blood lymphocytes genetically modified using the Sleeping Beauty system to express T-cell receptors for the treatment of solid tumors in patients with advanced cancers;
- Collaborator ZIOPHARM announced end-of-phase 2 meeting with the FDA for Ad-RTS-hIL-12 + veledimex in recurrent glioblastoma and expects to announce the outcome of this meeting in the first quarter with the goal of initiating a pivotal clinical trial in 2017;
- Collaborator ZIOPHARM announced improved production times in its ongoing Phase I trial of 2nd generation Sleeping Beauty CD19+ CAR-T cells and progress toward its "Point-of-Care" approach. One patient with multiple-relapsed acute lymphoblastic leukemia achieved a complete response and a patient with triple-hit non-Hodgkin lymphoma was treated with T cells manufactured in 2 weeks;
- Collaborator ZIOPHARM presented promising pre-clinical data at the 58th American Society of Hematology Annual Meeting that a single, low-dose of 3rd gen Sleeping Beauty CAR+ T cells co-expressing a CD19-specific CAR and membrane-bound IL15 produced in <2 days resulted in sustained in vivo persistence, potent anti-tumor effects and superior leukemia-free survival;
- Collaborator Fibrocell Science, Inc. (NASDAQ: FCSC) announced dosing of first patient in Phase I portion of Phase I/II clinical trial of FCX-007 gene therapy for treatment of recessive dystrophic epidermolysis bullosa (RDEB);
- Established joint ventures in the Health and Food sectors: Intrexon T1D Partners, LLC to develop ActoBiotics® based antigen-specific immunotherapy to treat type 1 diabetes in humans, and EnviroFlight, a joint venture with Darling Ingredients, Inc. (NYSE: DAR), to employ black soldier fly in the development of sustainable high quality nutrients for the aquaculture and livestock industries;
- Entered into Exclusive Channel Collaborations with Genten Therapeutics, Inc., CRS Bio, Inc., Relieve Genetics, Inc., Exotech Bio, Inc., and AD Skincare, Inc., startups backed by the Harvest Intrexon Enterprise Fund. The collaborations are focused on biologically based delivery of therapeutic molecules to target human health conditions including celiac disease, chronic rhinosinusitis, neuropathic pain, cancer, and aging facial skin, respectively;
- Intrexon's collaboration with a leading global agricultural company utilizing ActoBiotics technology advanced to its next phase of development for biological crop protection solutions following initial studies validating the efficacy of dsRNA for insect control applications;
- Exemplar Genetics, a wholly-owned subsidiary of Intrexon, was awarded a subcontract with Leidos Biomedical Research, Inc., prime contractor for the Frederick National Laboratory for Cancer Research, sponsored by the National Cancer Institute, to support the NIH's National Center for Advancing Translational Sciences in creating genetically engineered miniswine models of sickle cell disease that could potentially lead to new treatments for the disorder;
- Two of Intrexon's subsidiaries achieved additional regulatory approvals: OSF's non-browning Arctic® Fuji apple was granted deregulated status by the U.S. Department of Agriculture's Animal and Plant Health Inspection Service and Health Canada approved AquaBounty Technologies, Inc. (NASDAQ: AQB, AIM: ABTU) AquAdvantage® Salmon for commercial sale in Canada;
- Oxitec announced that the Board of the Florida Keys Mosquito Control District voted to approve the investigational agreement for use of self-limiting Friendly mosquitoes in an effectiveness trial following an approval vote by residents in Monroe County;
- Oxitec announced plans to move forward with open field trials of its self-limiting Mediterranean fruit fly (medfly) in Australia after a series of successful studies across multiple countries demonstrated the self-limiting medfly's ability to mate with wild medfly and subsequently suppress the pest population;
- Oxitec and Gangabishan Bhikulal Investment and Trading Limited announced initiation of outdoor caged trials in India to demonstrate the efficacy of Oxitec's Friendly mosquitoes in suppressing the local population of Aedes aegypti, the primary vector for many dangerous viruses including dengue, Zika, and chikungunya. Recently published work estimates dengue alone infects almost 5.8 million people in India annually and the total financial cost of dengue exceeds $1 billion per year;
- Four of Intrexon collaborators' gene therapy programs attained development achievements with the U.S. Food and Drug Administration: Fast Track designation to Fibrocell for FCX-007 for the treatment of RDEB, Fast Track designation to Oragenics, Inc. (NYSE MKT: OGEN) for ActoBiotics® AG013 for the treatment of oral mucositis, Orphan Drug designation to Agilis Biotherapeutics' AGIL-FA for the treatment of Friedreich's ataxia, and Orphan Drug designation to Fibrocell for FCX-013 for the treatment of linear scleroderma;
- AquaBounty completed the listing of its common shares on the NASDAQ Stock Market and completed an equity subscription from Intrexon. In conjunction with the listing on NASDAQ, Intrexon distributed a special stock dividend of shares of AquaBounty common stock it owned to its shareholders while maintaining majority ownership of AquaBounty's outstanding common stock; and
- Entered into a definitive agreement to acquire GenVec, Inc. (NASDAQ: GNVC), a clinical-stage company and pioneer in the development of AdenoVerse gene delivery technology, with the goal of integrating and expanding upon GenVec's expertise in adenoviral (AdV) vectors and cGMP drug product manufacturing to enhance Intrexon's broad gene transfer capabilities that encompass multiple viral and non-viral platforms and develop a next generation AdV platform with significantly higher payload capacity compared to current systems.
Fourth Quarter Financial Highlights:
- Total revenues of $46.0 million, an increase of 11% over the fourth quarter of 2015;
- Net loss of $44.1 million attributable to Intrexon, or $(0.37) per basic share, including non-cash charges of $38.9 million;
- Adjusted EBITDA of $(5.8) million, or $(0.05) 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 $11.3 million compared to a net increase of $22.3 million in the fourth quarter of 2015;
- Cash consideration received for reimbursement of research and development services covered 54% 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 61% of consolidated cash operating expenses; and
- Cash, cash equivalents, and short-term and long-term investments totaled $243.2 million, the value of investment in preferred stock totaled $129.5 million, and the value of equity securities totaled $23.5 million at December 31, 2016.
Full Year Financial Highlights:
- Total revenues of $190.9 million, an increase of 10% over the full year ended December 31, 2015;
- Net loss of $186.6 million attributable to Intrexon, or $(1.58) per basic share, including non-cash charges of $159.0 million;
- Adjusted EBITDA of $(26.6) million, or $(0.23) per basic share;
- The net increase in deferred revenue related to upfront and milestone payments was $116.5 million compared to $74.1 million in the full year ended December 31, 2015;
- 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 129% of consolidated cash operating expenses.
"Over the course of 2016, while nevertheless achieving its overall financial goals, significantly advancing a great many of its partnered programs, and meaningfully extending its technology platforms, the Company faced political and regulatory headwinds in our marketable products portfolio that we had not fully appreciated at this time last year, causing us to underachieve commercially as compared with our expectations," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon.
"Operationally, however, we executed exceptionally well. We essentially balanced cost recovery, deal money, and products and services revenues to our cash operating expenses, thus maintaining our desired capital efficiency, strengthened our leadership team, moved many of our developmental programs forward in the lab, the field or the clinic, and our more than 600 scientists extended our leadership in the engineering of biology by providing several new technology platforms that should enable many novel, valuable and differentiated products. Several of these already have drawn partnering interest, and others should add significant incremental value to some of the Company's existing partnerships."
"In addition, we are evaluating structural alternatives concerning our business in healthcare as we appreciate that, as compared with the rest of our business, healthcare is unique as an industry, having a discrete shareholder base, methods of measurement and a vastly greater industrial maturity."
Mr. Kirk concluded, "We therefore view our prospects for 2017 with the highest expectations for performance. We more than ever are confident that Intrexon can lead the greatest industrial vector in history."
Fourth Quarter 2016 Financial Results Compared to Prior Year Period
Total revenues increased $4.5 million, or 11%, over the quarter ended December 31, 2015. Collaboration and licensing revenues increased $6.6 million from the quarter ended December 31, 2015 due to (i) the recognition of deferred revenue for upfront payments received from collaborations signed by the Company in 2016, including the consideration received in June 2016 from ZIOPHARM to amend the collaborations between us; and (ii) increased research and development services for these collaborations and for the expansion of programs or the addition of new programs with previously existing collaborators. Product revenues decreased $1.5 million, or 17%, and gross margin decreased from the quarter ended December 31, 2015. The decrease in product revenues and gross margin 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 and also due to a decline in average sales price of livestock previously used in production. Service revenues and gross margins were consistent quarter over quarter.
Research and development expenses increased $2.8 million, or 11%, due primarily to increases in (i) salaries, benefits and other personnel costs for research and development employees hired to support new or expanded collaborations, (ii) lab supplies and consulting expenses incurred as our collaborator programs progress towards the clinical phase, and (iii) amortization of intangible assets which commenced upon regulatory approvals received by our subsidiaries. While selling, general and administrative (SG&A) expenses were generally flat quarter over quarter, legal and professional expenses increased $4.7 million due to (i) expenses incurred to support domestic and international government affairs for regulatory and other approvals necessary to commercialize the Company's products and services; and (ii) increased legal fees to defend ongoing litigation. Salaries, benefits and other personnel costs for SG&A employees decreased $6.0 million primarily due to a decrease in performance-based cash incentives for the Company's executive officers in 2016, partially offset by the costs of increased headcount, including the hiring of two new executive officers and additional business development professionals.
Total other income (expense), net, decreased $12.4 million, or 336%, from the quarter ended December 31, 2015. This decrease was attributable to the $16.0 million unrealized and realized losses recognized on the Company's equity securities portfolio, partially offset by dividend income from the Company's investment in preferred stock.
Full Year 2016 Financial Results Compared to Prior Year Period
Total revenues increased $17.3 million, or 10%, over the year ended December 31, 2015. Collaboration and licensing revenues increased $22.1 million over the year ended December 31, 2015 due to (i) the recognition of deferred revenue for upfront payments received from collaborations signed by the Company in 2016, including the consideration received in June 2016 from ZIOPHARM to amend the collaborations between us; and (ii) increased research and development services for these collaborations and for the expansion 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 or which were terminated during 2015. Product revenues decreased $4.9 million, or 12%, and gross margin decreased from the year ended December 31, 2015. The decrease in product revenues and gross margin 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 and also due to a decline in average sales price of livestock previously used in production. Service revenues and gross margin on services were consistent year over year.
Research and development expenses decreased $35.3 million, or 24%, 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 $7.3 million due to (i) an increase in research and development headcount to support new and expanded collaborations and (ii) a full year of costs for research and development employees assumed in 2015 acquisitions. Lab supplies and consulting expenses increased $10.6 million as a result of (i) the progression into the preclinical phase with certain collaborators; (ii) the increased level of research and development services provided to collaborators; and (iii) a full year of compensation costs incurred for employees assumed in 2015 acquisitions. Depreciation and amortization increased $5.7 million primarily as a result of (i) the inclusion of a full year of depreciation and amortization on property, equipment and intangible assets assumed in 2015 acquisitions and (ii) a full year of amortization of AquaBounty's intangible assets which commenced upon regulatory approval in November 2015. SG&A expenses increased $33.3 million, or 31%, over the year ended December 31, 2015. Salaries, benefits and other personnel costs for SG&A employees increased $3.2 million due to (i) increased headcount, including the hiring of two new executive officers and additional business development professionals; (ii) a full year of non-cash compensation paid to the Company's CEO pursuant to the compensation agreement into which the Company entered in November 2015; and (iii) a full year of salaries, benefits and other personnel costs for employees assumed in 2015 acquisitions. These increases were partially offset by a decrease in performance-based cash incentives for our executive officers in 2016. Legal and professional expenses increased $18.6 million primarily due to (i) a full year of non-cash consulting expenses pursuant to the Company's services agreement with Third Security into which the Company entered 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 2015 acquisitions and other business development activities. In 2016, the Company also recorded $4.3 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, decreased $116.7 million, or 170%, from the year ended December 31, 2015. 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. These decreases were partially offset by preferred stock dividend income received from ZIOPHARM.
Conference Call and Webcast
The Company will host a conference call today Wednesday, March 1st, at 5:30 PM ET to discuss the fourth quarter and full year 2016 financial results and provide a general business update. The conference call may be accessed by dialing 1-888-317-6003 (Domestic US), 1-866-284-3684 (Canada), and 1-412-317-6061 (International) and providing the number 2431343 to join the Intrexon Corporation Call. Participants may also access the live webcast through Intrexon's website in the Investors section at http://investors.dna.com/events.
About Intrexon Corporation
Intrexon Corporation (NYSE: XON) is Powering the Bioindustrial Revolution with Better DNA to create biologically-based products that improve the quality of life and the health of the planet. Intrexon's integrated technology suite provides its partners across diverse markets with industrial-scale design and development of complex biological systems delivering unprecedented control, quality, function, and performance of living cells. We call our synthetic biology approach Better DNA®, and we invite you to discover more at www.dna.com or follow us on Twitter at @Intrexon, on Facebook, and LinkedIn.
Non-GAAP Financial Measures
This press release presents Adjusted EBITDA and Adjusted EBITDA 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 these measures to the most directly comparable financial measure calculated 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 Intrexon's current financial performance.
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