Business context and reporting period
The supplied filing is Intrexon Corporation’s Form 10-K for the fiscal year ended December 31, 2013, not a filing clearly identified as PRECIGEN, INC. Investors should verify the issuer and accession details. Intrexon operated as a synthetic-biology company commercializing technologies through exclusive channel collaborations (ECCs) in healthcare, food, energy, environmental sciences and consumer markets. No commercial products had been enabled by its technologies as of year-end.
Intrexon had 20 active ECCs, one research collaboration, 208 employees and 149 research-and-development employees at December 31, 2013. AquaBounty became consolidated after Intrexon increased its ownership above 50% in March 2013; BioPop was consolidated beginning October 2013.
Financial performance and position
| Metric | 2013 | 2012 | Change |
|---|---|---|---|
| Total revenue | $23.8 million | $13.8 million | +72.5% |
| Collaboration revenue | $23.5 million | $13.7 million | +71.6% |
| Research and development expense | $48.2 million | $64.0 million | -24.8% |
| General and administrative expense | $33.6 million | $24.9 million | +35.0% |
| Operating loss | $58.0 million | $75.2 million | Improved by $17.1 million |
| Net loss attributable to Intrexon | $39.0 million | $81.9 million | Improved by $42.9 million |
| Net loss attributable to common shareholders | $57.4 million | $103.9 million | Improved by $46.5 million |
| Basic and diluted loss per share | $1.40 loss | $18.77 loss | Improved; share count increased substantially |
| Net cash used in operating activities | $53.7 million | $61.5 million | Improved by $7.8 million |
Operating margin was approximately negative 244%, and net loss attributable to Intrexon was approximately negative 164% of revenue. The filing does not present a conventional gross margin because the company’s primary activity was collaboration-based research and development.
- Cash and cash equivalents were $49.5 million; short-term and long-term investments were $188.6 million.
- Equity securities of collaborators were carried at $141.5 million and generated a $10.4 million unrealized gain in 2013.
- Total assets were $469.5 million, compared with $151.6 million at year-end 2012.
- Deferred revenue was $73.6 million, including $72.2 million from upfront and milestone payments.
- Long-term debt was $1.7 million, primarily related to AquaBounty. Capital lease obligations were approximately $40,000.
- Total liabilities were $88.1 million and total equity was $381.3 million at year-end.
- The company had an accumulated deficit of $376.4 million and no history of profitability.
Fourth-quarter information
| Three months ended December 31 | Q4 2013 | Q4 2012 |
|---|---|---|
| Total revenue | $7.1 million | $6.6 million |
| Operating loss | $17.7 million | $12.3 million |
| Net loss | $13.0 million | $30.9 million |
| Net loss attributable to Intrexon | $12.2 million | Not separately presented in the cited quarterly table |
Material changes versus the prior comparable period
- Revenue increased primarily from growth in reimbursed research and development services, new and expanded ECCs, and recognition of deferred revenue following termination of one Synthetic Biologics field collaboration.
- Research and development expense declined due to workforce reductions, greater automation, reduced third-party research, lower laboratory-supply usage and consolidation of functions.
- General and administrative expense increased because of public-company costs, additional personnel, bonuses, legal and professional fees, insurance and costs associated with acquisitions and joint ventures.
- Other income shifted from a $6.4 million expense in 2012 to $17.7 million of income in 2013, primarily due to unrealized gains on collaborator equity securities and a $7.4 million gain from remeasuring the previously held AquaBounty investment when control was obtained.
- Financing materially strengthened liquidity: the company received approximately $146.9 million net from Series F preferred stock and approximately $168.3 million net from its August 2013 IPO. Preferred shares, including accrued dividends, converted into approximately 79.7 million common shares.
- Investing cash outflows rose to $223.7 million, largely because the company purchased $234.0 million of debt securities and $28.7 million of collaborator equity securities.
Guidance, outlook, commentary and risks
Management expected operating expenses and capital requirements to remain substantial and projected additional increases in research and development and public-company costs. Management stated that available cash, investments and expected collaborator receipts were expected to fund operating and capital requirements for at least the next 12 months, but acknowledged that additional capital might be required if plans or assumptions changed.
- The company had never generated royalty revenue from commercialized products and expected losses and negative operating cash flow to continue.
- ECC revenue depends on new collaborations, collaborator performance, milestone achievement and eventual product commercialization. Collaborators generally could terminate agreements on approximately 90 days’ notice.
- There was a remaining commitment of approximately $19.0 million to purchase ZIOPHARM securities, subject to conditions and timing outside Intrexon’s control.
- The company had commitments for operating leases of $11.2 million, a $1.5 million joint-venture contribution due within one year, and additional uncertain obligations under licensing and joint-venture arrangements.
- AquaBounty’s AquAdvantage Salmon remained subject to FDA regulatory approval, with timing uncertain. AquaBounty had only $1.9 million of cash at December 31, 2013 and might require additional funding.
- Major risks included regulatory approval, clinical and technical development, commercialization and scale-up, collaborator termination or underfunding, intellectual-property challenges, public opposition to genetically engineered products, market volatility in collaborator equity holdings, dependence on key personnel and the need for future financing.
- The company reported effective disclosure controls at year-end but, as a newly public emerging-growth company, did not include management’s internal-control assessment or an auditor attestation report.
Important facts for investors to verify
- Confirm that the filing belongs to the requested company: the source identifies Intrexon Corporation, while the request identifies PRECIGEN, INC.
- Reconcile the large improvement in net loss with non-operating items, especially the $7.4 million AquaBounty remeasurement gain and $10.4 million unrealized investment gain.
- Assess the quality and sustainability of revenue, including the $73.6 million deferred-revenue balance and the absence of commercial-product royalties.
- Review liquidity after considering the $53.7 million annual operating cash burn, collaborator investment purchases and contingent commitments.
- Evaluate dilution from the IPO, preferred-stock conversion, stock options and potential future equity financing.
- Track FDA action on AquaBounty, progress of collaborator programs and any ECC terminations or milestone payments.
- Review related-party transactions, including the ZIOPHARM relationship and arrangements involving affiliates of the chief executive officer.