Intrexon Corporation: Intrexon Announces Third Quarter 2014 Financial Results

Tickers: XON
Intrexon Announces Third Quarter 2014 Financial Results
GERMANTOWN, Md., Nov. 13, 2014 /PRNewswire/ -- Intrexon Corporation (NYSE: XON), a leader in synthetic biology, today announced its third quarter results for 2014. 

Business Highlights and Recent Developments:

  • Closed the acquisition of 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 North America. The combined tools and expertise of Intrexon and Trans Ova should enable the companies to accelerate efficiency in related food and protein production. 
  • Established an Exclusive Channel Collaboration with Sanofi Chimie, a wholly owned subsidiary of Sanofi, to develop an enhanced production process for a specific family of marketed Active Pharmaceutical Ingredients leveraging Intrexon's proprietary technology suite plus Sanofi's expertise and innovation in yeast metabolism and industrial chemistry to increase overall yield.
  • Expanded relationship with Amneal Pharmaceuticals LLC, a large U.S. generic drug manufacturer, with a second product collaboration utilizing Intrexon's novel microbial-based expression system to develop a consistent, scalable, and cost-effective production process for a targeted Active Pharmaceutical Ingredient.
  • Established an Exclusive Channel Collaboration with Histogenics, a regenerative medicine company focused on developing and commercializing products in the musculoskeletal space, for the generation of allogeneic chondrocyte cell therapeutics to repair damaged articular hyaline cartilage in humans.
  • In collaboration with Fibrocell Science, announced plans to file an investigational new drug application with the U.S. Food and Drug Administration in the first half of 2015 for GM-HDF-COL7 (genetically-modified human dermal fibroblast expressing collagen VII), the drug candidate for the treatment of recessive dystrophic epidermolysis bullosa (RDEB), a debilitating skin disorder.
  • Trans Ova's wholly owned subsidiary, Viagen Inc., and its business partner, Wuhan Chopper Biology Co., Ltd., received approval to operate a domestic business within China utilizing its toolkit to improve genetics in the porcine and bovine markets.
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Third Quarter Financial Highlights:

  • Total revenues of $21.2 million, an increase of over 250% over the third quarter of 2013;
  • Net loss of $52.7 million, including noncash charges of $44.8 million, attributable to Intrexon, or $(0.53) per share;
  • Adjusted EBITDA of $1.6 million, or $0.02 per share; and
  • Cash consideration received for research and development services covered 59% of cash operating expenses (exclusive of operating expenses of consolidated subsidiaries).
Year-to-Date Financial Highlights:

  • Total revenues of $40.8 million, an increase of 146% over the nine months ended September 30, 2013;
  • Net loss of $100.7 million, including noncash charges of $71.9 million, attributable to Intrexon, or $(1.02) per share;
  • Adjusted EBITDA of $8.8 million, or $0.09 per share; and
  • Total consideration received for technology access fees and reimbursement of research and development expenses covered 125% of cash operating expenses (exclusive of operating expenses of consolidated subsidiaries).
"We continue the successful execution of our plan to earn a vast array of significant economic stakes in many products that we expect to see commercialized by our ECC collaborators across diverse industries, while balancing currently our financial inputs and outputs," commented Randal J. Kirk, Chairman and Chief Executive Officer of Intrexon.  "Encouragingly, we see the benefits of our capital efficiency, an increasing awareness on the part of significant multinational players of our superior technology platform and the timeliness of bioindustrial engineering as key to solving many critical needs across all of our active sectors - Health, Food, Energy, Consumer and Environment - all coalescing to propel us toward the realization of our vision to lead the enablement of the second generation of biotechnology."

Mr. Kirk continued, "Looking forward, considering the significant transactions upon which we currently are engaged, the programmatic progress being made under our existing collaborations and our team's steady performance improvements, we are optimistic and confident that we have the opportunity of making all involved with Intrexon proud of their association with the company.  No one at Intrexon takes this opportunity lightly so we are committed to execute commensurately."

Third Quarter 2014 Financial Results Compared to Prior Year Period
Total revenues were $21.2 million for the quarter ended September 30, 2014 compared to $6.0 million for the quarter ended September 30, 2013, an increase of $15.2 million, or 253%.  Total revenues include $8.4 million of Trans Ova product and service revenues since August 8, 2014, the date of the acquisition.  Collaboration revenues increased $6.6 million due to (i) the recognition of deferred revenue for upfront payments received from 11 collaborations or expansions thereof signed by us between October 1, 2013 and September 30, 2014, (ii) recognition of research and development services performed by us pursuant to these new collaborations, and (iii) increased research and development services performed by us for collaborations in effect prior to October 1, 2013 as a result of the progression of current programs and the initiation of new programs with these collaborators. 

Total operating expenses were $36.2 million for the quarter ended September 30, 2014 compared to $18.1 million for the quarter ended September 30, 2013, an increase of $18.1 million, or 100%.  Total operating expenses for the quarter ended September 30, 2014 include $6.4 million of Trans Ova costs of products and services revenues since the date of the acquisition.  Research and development expenses were $14.9 million for the quarter ended September 30, 2014 compared to $10.7 million for the quarter ended September 30, 2013, an increase of $4.2 million, or 39%.  Salaries, benefits and other personnel costs increased $2.5 million due to (i) increases in research and development headcount to support the new collaborations discussed above and (ii) stock-based compensation expenses for stock option grants we made to research and development employees in March 2014.  Lab supplies and consultants expenses increased $1.1 million as a result of the increased level of research and development services provided to our collaborators.  Selling, general and administrative expenses were $14.9 million for the quarter ended September 30, 2014 compared to $7.4 million for the quarter ended September 30, 2013, an increase of $7.5 million, or 101%.  Salaries, benefits and other personnel costs increased $4.5 million due to (i) our hiring of additional employees needed to operate as a public company, (ii) the inclusion of Trans Ova employees since the date of acquisition and (iii) stock-based compensation expenses for stock option grants we made to general and administrative employees in March 2014.  Legal and professional expenses increased $1.7 million primarily due to costs associated with merger and acquisition activity and legal costs associated with AquaBounty's stock listing in the United States.  

Total other income (expense), net is primarily composed of unrealized appreciation (depreciation) in the fair value of equity securities which was $(37.1) million for the quarter ended September 30, 2014 compared to $27.3 million for the quarter ended September 30, 2013.  The unrealized appreciation (depreciation) results from changes in the value of equity securities we hold in certain collaborators.

Year-to-Date 2014 Financial Results Compared to Prior Year Period
Total revenues were $40.8 million for the nine months ended September 30, 2014 compared to $16.6 million for the nine months ended September 30, 2013, an increase of $24.2 million, or 146%.  Total revenues include $8.4 million of Trans Ova product and service revenues since the date of the acquisition.  Collaboration revenues increased $15.7 million due to (i) the recognition of deferred revenue for upfront payments received from 11 collaborations or expansions thereof signed by us between October 1, 2013 and September 30, 2014, (ii) the recognition of research and development services performed by us pursuant to these new collaborations, and (iii) increased research and development services performed by us for collaborations in effect prior to October 1, 2013 as a result of the progression of current programs and the initiation of new programs with these collaborators. 

Total operating expenses were $91.8 million for the nine months ended September 30, 2014 compared to $56.9 million for the nine months ended September 30, 2013, an increase of $34.9 million, or 61%.  Total operating expenses for the nine months ended September 30, 2014 include $6.4 million of Trans Ova costs of products and services revenues since the date of the acquisition.  Research and development expenses were $41.3 million for the nine months ended September 30, 2014 compared to $35.6 million for the nine months ended September 30, 2013, an increase of $5.8 million, or 16%. Salaries, benefits and other personnel costs increased $3.8 million due to (i) increases in research and development headcount to support the new collaborations discussed above, (ii) stock-based compensation expenses for stock option grants we made to research and development employees in March 2014 and (iii) the inclusion of nine months of costs for AquaBounty employees in 2014 compared to approximately six and a half months in 2013.  Lab supplies and consultants expenses increased $2.6 million as a result of the increased level of research and development services provided to our collaborators. These increases were partially offset by a $1.1 million decrease in third party in-license fees due to the termination of an exclusive licensing agreement in May 2014.  Selling, general and administrative expenses were $43.9 million for the nine months ended September 30, 2014 compared to $21.3 million for the nine months ended September 30, 2013, an increase of $22.6 million.  Salaries, benefits and other personnel costs increased $13.4 million due to (i) our hiring of additional employees needed to operate as a public company, (ii) the inclusion of Trans Ova employees since the date of acquisition, (iii) stock-based compensation expenses for stock option grants we made to general and administrative employees in March 2014 and (iv) the inclusion of nine months of costs for AquaBounty employees in 2014 compared to approximately six and a half months in 2013. We also incurred stock-based compensation expense for options granted to our non-employee directors which increased $1.9 million due to changes in our director compensation plan which we adopted in conjunction with our transition to a public company.  Legal and professional expenses increased $4.6 million primarily due to costs associated with merger and acquisition activity, the formation of our joint venture with Intrexon Energy Partners, and legal costs associated with AquaBounty's stock listing in the United States.

Total other income (expense), net is primarily composed of unrealized appreciation (depreciation) in the fair value of equity securities which was $(48.9) million for the nine months ended September 30, 2014 compared to $5.7 million for the nine months ended September 30, 2013.  The unrealized appreciation (depreciation) results from changes in the value of equity securities we hold in certain collaborators.

Conference Call and Webcast
The Company will host a conference call Thursday November 13 at 5:30pm ET to discuss the third quarter 2014 financial results and provide a general business update.  The conference call may be accessed by dialing 1-888-346-3959 (Domestic US) and 1-412-902-4262 (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, UltraVector, LEAP 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.

For more information regarding Intrexon Corporation, contact:

Investor Contact:
Christopher Basta
Vice President, Investor Relations
Tel: +1 (561) 410-7052
Investors@intrexon.com

Corporate Contact:
Marie Rossi, Ph.D.
Senior Manager, Technical Communications
Tel: +1 (301) 556-9850
publicrelations@intrexon.com

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Intrexon Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


(Amounts in thousands)


September 30, 2014



December 31, 2013

Assets








Current assets








Cash and cash equivalents


$

24,704



$

49,509

Short-term investments



98,380




127,980

Receivables








Trade, net



15,267




790

Related parties



11,673




5,285

Note



10,000




-

Other



628




1,282

Inventory



16,674




-

Prepaid expenses and other



3,978




2,710









Total current assets



181,304




187,556

Long-term investments



51,388




60,581

Equity securities



97,806




141,525

Property, plant and equipment, net



35,596




16,629

Intangible assets, net



68,216




41,956

Goodwill



98,778




13,823

Investments in affiliates



4,146




6,284

Other assets



1,266




1,118









Total assets


$

538,500



$

469,472





Liabilities and Total Equity












Current liabilities








Accounts payable


$

3,575



$

1,057

Accrued compensation and benefits



6,697




5,157

Other accrued liabilities



5,024




4,217

Deferred revenue



13,950




7,793

Lines of credit



556




-

Current portion of long term debt



1,490




-

Current portion of deferred consideration



6,812




-

Related party payables



1,159




1,605









Total current liabilities



39,263




19,829

Long term debt, net of current portion



9,428




1,653

Deferred consideration, net of current portion



13,440




-

Deferred revenue



95,902




65,778

Other long term liabilities