SEC Form 10-Q Summary
Filing entity: Intrexon Corporation, although the request metadata identifies Precigen, Inc. The filing covers the quarter and six months ended June 30, 2015, and the interim financial statements are unaudited.
Business Context and Reporting Period
Intrexon describes itself as a synthetic biology company developing biologically based products and processes through exclusive channel collaborations, licensing agreements, joint ventures and acquisitions. Its activities span healthcare, food, energy, environmental and consumer applications. No commercialized products derived from its collaborations had been reported as of June 30, 2015.
Revenue also included operations acquired through Trans Ova, including bovine reproductive technologies, livestock sales and related services; Okanagan Specialty Fruits; ActoGeniX; AquaBounty; and other subsidiaries.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2015 | Three Months Ended June 30, 2014 | Six Months Ended June 30, 2015 | Six Months Ended June 30, 2014 |
|---|---|---|---|---|
| Total revenue | $44.9 million | $11.8 million | $78.7 million | $19.6 million |
| Operating loss | $(17.4) million | $(18.1) million | $(104.6) million | $(36.0) million |
| Net loss | $(41.5) million | $(52.9) million | $(15.7) million | $(49.7) million |
| Net loss attributable to Intrexon | $(40.7) million | $(52.0) million | $(13.6) million | $(47.9) million |
| Loss per share, basic and diluted | $(0.37) | $(0.53) | $(0.13) | $(0.49) |
| Net cash used in operating activities | Not separately presented | Not separately presented | $(29.6) million | $(4.2) million |
Six-month revenue consisted of $32.0 million of collaboration and licensing revenue, $23.2 million of product revenue, $23.2 million of service revenue and $0.4 million of other revenue. Gross margin by consolidated business line was not clearly presented; product and service costs totaled $32.3 million for the six months.
Research and development expense was $20.4 million for the quarter and $99.7 million for the six months, including a $59.6 million noncash charge for shares issued to MD Anderson for an exclusive technology license. Selling, general and administrative expense was $23.7 million for the quarter and $51.3 million for the six months.
At June 30, 2015, cash and cash equivalents were $98.9 million, short-term investments were $67.4 million, and equity securities were $101.9 million. Total assets were $792.9 million, total liabilities were $306.0 million, accumulated deficit was $471.8 million, and total equity was $486.9 million.
Total debt, including current and long-term portions, was $9.5 million, excluding the separately presented $20.9 million of deferred consideration. Available credit under disclosed revolving lines was approximately $5.8 million at Trans Ova and $0.04 million at Exemplar.
Material Changes Versus the Prior Comparable Period
- Total revenue increased 280% for the six months, primarily because of acquired product and service businesses and increased collaboration activity.
- Collaboration and licensing revenue increased 63% to $32.0 million for the six months, reflecting new and expanded collaborations, including the Ares Trading/Merck arrangement and Intrexon Energy Partners.
- Operating loss widened to $104.6 million from $36.0 million, principally because research and development expense increased $73.2 million and SG&A increased $22.3 million.
- Net loss improved because the company recognized an $81.4 million realized gain upon distributing all of its ZIOPHARM shares to shareholders, together with gains in the equity securities portfolio.
- Operating cash use increased to $29.6 million from $4.2 million. Financing activities provided $118.4 million, including $110.0 million of net proceeds from a January 2015 public offering and $10.4 million from stock option exercises.
- ActoGeniX and Okanagan were acquired in 2015 for aggregate consideration of approximately $113.4 million, including cash and common stock. Intangible assets and goodwill increased materially as a result of acquisitions.
- The company issued 2.1 million shares valued at $59.6 million to MD Anderson for licensed technologies and increased its ownership of AquaBounty to approximately 63%.
Outlook, Risks, Contingencies and Unusual Items
Management stated that existing cash, investments, expected collaborator receipts and subsidiary revenue should fund operating expenses and capital expenditures for at least the next 12 months. The company also stated that it has incurred significant historical losses, expects continued losses and may require additional financing. No specific revenue or earnings guidance was provided.
- Future liquidity depends on collaboration payments, product and service revenue, possible royalties, regulatory approvals, acquisitions, investments and capital markets access.
- The company had $180.0 million of deferred revenue, including $163.1 million from upfront and milestone payments, which will be recognized as performance obligations are satisfied.
- Intrexon had a remaining capital commitment of $21.8 million to Intrexon Energy Partners.
- Contractual obligations disclosed in the principal table totaled $41.9 million, including operating leases, deferred consideration and long-term debt. Additional contingent commitments were excluded because timing or payment amounts were uncertain.
- Trans Ova was defending a licensing and patent infringement action brought by XY, Inc.; management stated that the claims were believed to be without merit but could not assure a favorable outcome.
- Equity securities are subject to substantial market volatility. The company reported $101.9 million of such securities at June 30, 2015, with changes in fair value recorded in earnings.
- The company distributed its ZIOPHARM holdings as a special stock dividend, creating a large realized gain but no operating cash inflow.
- Subsequent to quarter-end, the company announced an agreement to acquire Oxitec Limited for approximately $80 million in stock and $80 million in cash, subject to closing conditions.
- The company reported effective disclosure controls and procedures. Internal-control assessment continued to exclude certain recently acquired operations during the permitted integration period.
Investor Verification Checklist
- Confirm the correct issuer: the supplied filing is for Intrexon Corporation, not Precigen, Inc.
- Assess the sustainability and cash conversion of collaboration revenue, particularly revenue recognized from deferred upfront payments and reimbursements.
- Separate recurring operating performance from the $81.4 million ZIOPHARM distribution gain and other volatile equity-security fair-value changes.
- Review the cash impact and integration risks of the ActoGeniX, Okanagan and proposed Oxitec transactions.
- Verify remaining joint-venture commitments, deferred consideration, debt maturities and the potential AquaBounty royalty repayment obligation.
- Evaluate the patent litigation involving Trans Ova and other contingent obligations, including potential ViaGen payments.
- Review the company’s reliance on future financing, collaborator payments, regulatory approvals and commercialization by third parties.