ISI - ***BREXIT - exposure to the UK is small for our companies
Given the Brexit vote, we've received questions today on our companies' exposure to the UK. We've asked our companies. Below is what we learned (this is a work in a progress, we’ll follow up as we get more):
ABBV: ~3% of revenues
BMY: less than 5% of revenues
MRK: well under 5% of revenues
PFE: ~2% of projected 2016 revenues
LLY: exposure is minimal because not a top 5 market (EU as a whole is ~20% of revenues)
ZTS: ~3.5% of revenues
AMGN: waiting to hear back
BIIB: waiting to hear back
CELG: less than 1% of revenues
GILD: ~2.9% of revenues*
REGN: waiting to hear back
BMRN: waiting to hear back
VRTX: roughly ~2.5% of revenues**
First and for the fifth time - those who continue to bring up melanoma either have not talked to old or new management or are purposely trying to mislead. The melanoma trial - if you talked to the ex CEO - was never designed to proceed to Ph 3 nor did they ever contemplate approval in this area. It was designed as the easiest solid tumor to treat with IL-12+V and to 1) see if the Rheo Switch worked in Humans and 2) see if they could get systemic activity of the IL-12 and 3) show that the difficult IL-12 SAE's and Grade 3 toxicity that halted other IL-12 trials (powerful drug difficult side effects without the switch) could be handled.
The company considered the melanoma safety trial a success in that indeed proved the Rheo Switch worked in humans, showed efficacy and importantly showed a systemic response. It helped them design the Glioma trial and served its purpose. It was never contemplated as a trial to start a march to commercialization. Those positioning the melanoma trial as a failure and continuing to ask the status of it - well they have not talked to either the previous or current CEO about it - that is clear.
If you bother to talk to Cooper or I/R - they will tell you Merck is still testing the targets in preclinical, are excited about the partnership, are working closer with Cooper than ever before (head of Merck KGaA immuno-oncology ex Cooper colleague who Cooper ate lunch with often who is a big supporter of Cooper unlike his predecessor is not in Germany but in MA 20 miles from ZIOP and Cooper and they are expanding their R&D building). Kirk has told people Merck is excited and happy about the partnership. Merck told everyone from the start they will not announce the targets until the Ph 1 starts for competitive reasons. We know from Kirk's comments they are not "me-too CD-19 targets".
Breast data since January the company has guided not to expect evaluable Breast Data until late in the yr - probably at the December San Antonio Breast conference or maybe SNO. I think one of the missteps was having abstracts on Breast in Q4 and Q2 at ASCO - which for those not following the company closely - built up a false expectation that there would be evaluable data. Never was the expectation for those who followed the company comments.
Merck KGaA situation is a little slower than we hoped - that happens and if you look at what is most exciting in the three publications this yr - 2 from Rosenberg (one co-authored by Cooper) - you see the bind Merck KGaA is in with their limited scope CAR T deal. Merck taking longer in preclinical which in retrospect makes sense since they are trying something besides the standard CD-19 target - so you want some preclinical work to design the Ph 1 right - also since Merck's deal requires large payments that could total $3.8 billion if they take 8 targets but is limited to the less powerful CAR T without TCR, neoantigen advantage in solid tumors, off the shelf NK Cells (the things Rosenberg and others published on this yr and are raving about) - it is likely Merck would like to include some of these things in their trials - which is out of scope of original CAR T contract and would require some negotiation.
Cooper is working more and more with NCI's Rosenberg so it appears a large TCR or other deal would have to include four parties with a myriad of IP issues - talked to a wall st veteran the other day and he was involved in a deal where one IP page in a deal document took months to get approved before deal went forward - imagine how complicated something would be if you had XON-ZIOP-NCI-Big Pharma.. Also in a month or so IL-12 Cohort 1 could have survival that leads to FDA discussions about registrational trial. And we know from KOL dinner that ZIOP has selected PD-1 partner likely not Merck KGaA (more PDL-1) and if they are starting this yr as disclosed recently then negotiations have to be on going. This alone would preclude open market purchases by those involved in the discussions. To me there are likely TCR, PD-1 and IL-12 separate negotiations going on. Kirk won't give anything away and the TCR deal would be particularly complicated. So no prediction if or when something gets done. But signs are they cannot and have not been able to buy. We should hear about who will provide the PD-1 for the combo trial - appears first will be an approved product and imo it is looking more and more like Merck US maybe Keytruda. I also think they will do a combo with non-approved PD-1s... the preclinical efficacy boost when PD-1 was added to IL-12 + V was exactly as Cooper predicted last June when he designed trial. Now we need to get the human trial started.
So I advise stop looking back at melanoma and start looking to the publications ( I post some things about them after this post) and the things more powerful than CAR T or areas like Off the Shelf NK science that Cooper has said to me on a phone call he thinks can make CAR trials more powerful (again that would be outside the scope of Merck CAR deal and require renegotiation). Its the TCR area where ZIOP-MDA-XON can more rapidly develop clinical grade TCR T-cells faster and cheaper than the competition. Or per the Rosenberg publication - the fact of MUCH cheaper non-viral TCR and some think much safer - where the Rosenberg publication cites ours as 1/10th the cost of the competition. And the OTS NK cell trial from MDA OTS (even though XON has the rights to Patrick S's NK companies NK cells - Cooper thinks MDA's are more suited). Or if you talk to Cooper - one of the things he is most excited is the neoantigen advantage he strongly believes will be the "keys to the kingdom" in the much more difficult and much more lucrative solid tumor area.....People can joke about that comment - I find the ones who do joke about it are the ones who have not met Cooper and looked in his eyes and see his true excitement when he says it. And the excitement is not about money - or stock price - he really believes it is the key to treating solid tumors.
So I agree lets talk fundamentals - I will repost some of the comments and slides of this yrs publications - problem is those most critical who want to talk fundamentals - they never opine or reply to the fundamental posts or the publications. They bring up melanoma instead as a red herring. Lets move forward. And as far as deals - they still are in discussions. As polo-grill says often deals take yrs - Kirk has a history of delivering deals well after many hoped - but then coming through - almost all well after when they were originally hoped for. The sector massacre likely delayed the ability to get what he wanted....but you can be sure he is still in heavy negotiation. He will come through. And for those who think you need massive data to do a deal - well the MD Anderson deal and the huge Merck KGaA CAR T deal proves that wrong. IMO the publications and early TCR and NK OTS and neoantigen advantage with Cooper discussing have people interested. When will Kirk get what he thinks for a TCR partnership or an IL-12 deal? Who knows. But don't count he or Cooper out yet. ZIOP is in its current form since Kirk said he would "fix ZIOP" when it was at $2 about 19 months. Cooper has been CEO about a yr - a yr in which the sector has been absolutely devastated but Cooper is quietly made an awful lot of progress - slower than many would like - but fundamentally ZIOP is in much better shape now than it was last July at its highs. The ability to stop taking an oral ligand to rapidly reverse the Serious Adverse IL-12 events and Grade 3 toxicity and then days later being able to restart the gene therapy by simply starting the oral ligand is more important than people think. Charles Peacock skiing a yr after the ZIOP IL-12 therapy started should remind us all what this is about. Adding a Big Pharma superstar like Geno G as XON President is also an incremental positive not being fully grasped by Wall St. I am convinced this time next yr there will be a much more positive tone on this board. Give Cooper 2 yrs instead of one - give Kirk a little more time for negotiations given the sector situation. There is enough Big Pharma companies in desperate need of immuno-oncology and a lack of unpartnered programs. Kirk and Cooper and Geno G will come through.
Remember Cooper said their neoantigen advantage in TCR (more powerful than CAR T) will be the keys to the kingdom in solid tumors. First approved will be IL-12 in GBM with the amazing rheo switch
Important post from IV - this is key - patients will have overall survival advantage in another month or so. They will get registrational go ahead by FDA and from the MTSL and Griffin note - it appears Merck wants this -which makes sense as their lead PD-1 would get a nice efficacy boost and assure approval. There is a reason they hired a big Cooper fan former colleague who he ate lunch with daily and moved him not to Germany but 20 miles away from ZIOP HQ in MA and are adding to the building and adding R&D 20 miles from ZIOP
Differnetiator: No company has ever been able to RAPIDLY REVERSE IL-12 SAE's & Grade 3 Toxicities by simply discontinuing the daily oral ligand.....& then days later be able to RESTART THE GENE THERAPY by resuming daily pill.
No company has ever been able to RAPIDLY REVERSE IL-12 SAE's and Grade 3 Toxicities by simply discontinuing the daily oral ligand.....and then days later be able to restart the gene therapy by resuming the daily pill. No one. It certainly is a differentiator over simple expression or a suicide switch where you have to kill the gene therapy completely (therapy is shut down forever/discontinued) and a certain differentiator from something like the Duke polio trial where once in the polio is not controlled at all.
Adam F is out of bullets-talking about the old pre-Cooper trials more than the fabulous new data, no mention of MDA, Merck, NCI or Rosenberg publications...silly
First a reminder Adam has been negative on ZIOP since $2 and missed the run to $14s before the sector knockdown. And although the sector massacre has devastated biotech since the Hillary tweet, ZIOP is outperforming the XBI again this yr and was up 64% last yr vs an XBI that was up 13%. He attacks RJ Kirk related equities and is almost always wrong...Who can forget this article on Kirk's Clinical Data (CLDA) when the stock was about $17…went down to $14's in month…When this article came out CLDA was about $17 a share. This article helped cast doubt and said CLDA's drug would likely not be approved (it was approved shortly thereafter) and like XON stock after the SA piece fell for weeks - bottoming near $14….Again about 2 months after this article CLDA was acquired by Forrest Labs for $30 and a CVR that had a possible max payout of $6….the stock DOUBLED from the Adam F article date ($17) to $34
YAHOO DOES NOT ALLOW LINKS SO SEE INVESTORVILLAGE ZIOP MESSAGE BOARD POST NUMBER 52033
NOTICE ADAM ALSO THIS TIME DOES NOT ALLOW COMMENTS TO BE POSTED UNDER TODAY'S ZIOP STREET.COM ARTICLE...Last week I tried to publish comments to counter his negative mailbag comments but he selects what not to publish. Today he is allowing NO comments under his purposely misleading article that leaves all of the below out.
Its Deja Vu all over again. Like the CLDA article, this article is silly - the former ZIOP CEO Lewis (Not current MD Anderson superstar immuno-oncology expert Dr Cooper) started the two old trials and never intended to go after approval in melanoma....it was designed to see if Veledimex could control the IL-12 and to see if it had a systemic response. Learnings from those two trials were taken to design this so far very successful glioma trial - his biggest complaint seems to be we did not get all the data in the abstract. Guess what - that is how ASCO works - you have to save detail for the actual presentation...of course he does not tell readers that ZIOP gave investors more than 80% of the companies with abstracts by giving updated data in a press release. So ZIOP gave way more of an update and detail than most. Also his continued harping on ORR and tumor shrinkage shows he has done little due diligence. It appears all of the first cohort have had their tumor removed. Adam in his tweets and article harps on no ORR - but ignores the patients are living longer than the expected median survival in a Ph 1 trial designed to give safety and max dose information not efficacy but yet at the lower dose patients are living longer than the estimated median survival and the data is still maturing. Also Adam acts like holding back some detail for the actual ASCO presentation is unusual. Truth is ASCO expects it and ZIOP actually UPDATED the older abstract data with months more of updated data and detail. In reality, ZIOP gave more additional updated data since the abstract in their PR than probably 95% of the other companies with ASCO abstracts. ZIOP disclosed way more data and updated data than most companies. They should be lauded not criticized for keeping some detail (as encouraged by ASCO) for the actual presentation in a few weeks.
Adam postulates that most of ZIOP's market cap is because of RJ Kirk. Partially right. ZIOP traded an old drug for the rights and 50% of the profits of every XON human cancer drug XON invents. And XON allows ZIOP a very slow cash burn because it pays for all of ZIOP's preclinical and drug discovery expenses, all of the rheo switch and hundred other switches in development, all of the salaries and benefits of over 100 discovery PhD's employed at XON as well as all of the salary and benefits of Dr Broder, Dr Reed and RJ Kirk himself. But of course ZIOP is actually undervalued not overvalued and Adam makes no mention of the brilliant CAR T deal for up to 8 targets with Merck KGaA a $35 billion pharma company - which if milestones are hit on 8 targets could bring in $3.8 billion dollars. Also underestimates the deal with MD Anderson the largest cancer clinic in the world and the National Cancer Institute and gene immuno-oncology expert Dr Steven Rosenberg and his recent publications praising the ZIOP-MDA science which is cheaper and safer than competitors. Also missing in the constant talk about competitor CAR T chronologic lead is the discussion of the more powerful areas Dr Cooper and ZIOP and MD Anderson are excelling in such as TCR with development of clinical grade T cells (faster and cheaper than competition), NK cells Off the shelf trial about to start with NK cells OTS from MDA, the neoantigen advantage ZIOP has in solid tumors, etc....Some of this is addressed in the three scientific publications Adam does not address at all in his hit piece.
Yes this Stret.com article grossly underestimates the quality of Intrexon's preclinical drug discovery and switch work and the science going on with MD Anderson/ZIOP/XON/NCI
1) Partner MD Anderson is the LARGEST CANCER CLINIC IN THE WORLD.
YAHOO DOES NOT ALLOW LINKS SO SEE INVESTORVILLAGE ZIOP MESSAGE BOARD POST NUMBER 52033
Partner National Cancer Institute is the most important US cancer agency and partner Dr Rosenberg at NCI is one of the most respected gene therapy experts in the world – the recent star of the PBS cancer Series.Just two days after announcing the Merck KGaA deal, Intrexon signed a CRADA (Cooperative Research and Development Agreement) with the prestigious National Cancer Institute to investigate RheoSwitch® controlled IL-12 cancer therapies using T-cell receptors (TCR) derived from peripheral blood. The lead investigator on this collaboration will be none other than the legendary Dr. Steven Rosenberg - the gene therapy superstar who was prominently featured on the highly acclaimed PBS Ken Burns series - Cancer - the emperor or all maladies.
YAHOO DOES NOT ALLOW LINKS SO SEE INVESTORVILLAGE ZIOP MESSAGE BOARD POST NUMBER 52033
Already this yr alone Dr Rosenberg of NCI has authored TWO articles related to XON/ZIOP/MD Anderson gene therapy science:
A March 5 2016 article Dr Rosenberg co-authored with ZIOP CEO Dr Cooper in Molecular Theory March 5 scientific publication per slide 15 of Jeffries Cooper Presentation - "Stable, Nonviral Expression of Mutated Tumor Neoantigen-specific T-cell Receptors Using the Sleeping Beauty Transposon/Transposase System"
YAHOO DOES NOT ALLOW LINKS SO SEE INVESTORVILLAGE ZIOP MESSAGE BOARD POST NUMBER 52033
Earlier this yr Dr Rosenberg was an author in the important article TCR: Targeting private somatic mutations (neoantigen)-Nature Medicine (Dr Steven Rosenberg) - Prospects for gene-engineered T cell immunotherapy for solid cancers-Non-viral great promise - ONE TENTH the cost of therapies from JUNO or KITE....while competitors play in the me-too CD-19 space Cooper and Rosenberg are leapfrogging them in TCR, neoantigen targeting of solid tumors and off the shelf NK cells....
Off the Shelf NK cell trial this yr in AML & brain cancer early next...Target tumors with loss of HLA, killing is independent of specific known target antigen, Cytokines are "fuel" for NK cells
Meanwhile - adding ZIOP/XON IL-12 + veledimex to PD-1's (like Opdivo or Keytruda) have enhanced poor efficacy in glioma and resulted in 100% survival in preclinical tests recently disclosed (with human IL-12+veledimex data coming weds ASCO in glioma)
IL-12+V enhancing checkpoint (PD-1s like Opdivo) efficacy VERY important-complimentary to human data at ASCO perfectly fits Cooper June 2015 prediction & ties into Cooper's theory as to why Opdivo/Keytruda need IL-12+V - now add the + Cooper comments in the press release
Of course patient #1 in ZIOP Glioma trial blogs and his tumor is not growing back 11 months on drug (vs median survival expected 3 to 5 months) after failing other therapies
And of course the amazing results to date with 10 of 11 patients surviving past the estimated median survival expected on the lowest dose in a safety and max dose trial.
Yes this article grossly underestimates the quality of Intrexon's preclinical and drug discovery work which feeds ZIOP clinical trials and the expense reduction the agreement causes in the key early yrs and the science going on with MD Anderson/NCI/ZIOP/XON/Merck
Adam is out of bullets - had to go back to the pre-Cooper trials, not mention the Rosenberg publications or the partners above and the potential economics and try to confuse talking about ORR and tumor shrinkage when the first cohort has resection. Like last weeks XON attack expect this silly article to have little more than a brief half a day effect. We know the true story.
Forbes-Duke trial - 8 of 19 have died - 3 have achieved LT remission. They cannot control the polio. ZIOP has the first ever controlled IL-12 treatment & permeates BBB...
Was traveling so I finally just watched the 60 minutes piece (which was an update of an earlier segment I had seen with much of it from the first showing) - I'm told by one poster here we are down this week because of 60 minutes piece - if so that is actually a relief - they have no control of the polio virus - hope it works but I think the first ever controlled IL-12 treatment will be more promising for control and safety. Also lets see our survival tomorrow - 8 of 19 have died in their trial. This is promising but certainly no reason to sell ZIOP. Remember the disclosure on the 60 minutes piece the doctors are investors in the company that will bring this to market. Have to keep that in mind. Lets see our data tomorrow.
May 16, 2016 @ 03:04 PM 29,135 views
What '60 Minutes' Still Isn't Saying About The 'Miracle' Glioblastoma Drug
Arlene Weintraub ,
I cover the science and business behind drug development and health
Opinions expressed by Forbes Contributors are their own
Last night, the hit CBS CBS -0.35% news program 60 Minutes revisited a trial at Duke University that it had devoted two segments to early last year. Scientists at Duke are testing a modified form of the polio virus to treat glioblastoma, and the reason for the 60 Minutes update was that the research has recently been granted “breakthrough” status by the FDA—which may shave some time off the development pathway. The development of engineered viruses, or “oncolytic viruses,” to treat cancer is one type of immunotherapy that’s generating excitement in oncology circles.
The breakthrough status for Duke is good news, to be sure. Median survival for patients with glioblastoma who are treated with traditional chemotherapy is only about 14 months and two-year survival is 30%, according to the American Brain Tumor Association. The disease claims 12,000 people per year in the U.S. and was to blame for the death of Vice President Joe Biden’s son. Biden is now leading the government’s cancer “moonshot” initiative, and as part of that he visited Duke, where he met the first patient treated with the virus, Stephanie Lipscomb, who entered the trial in 2012 and is still cancer-free.
But winning breakthrough status from the FDA doesn’t guarantee that any treatment is actually a breakthrough. The Duke team has plenty of hurdles to overcome before the modified virus can become an approved treatment. In fact, the 60 Minutes segment revealed that one of the patients hailed as a miracle in last year’s broadcast, Nancy Justice, suffered a recurrence of her brain tumor and died on April 6 at age 60.
And it’s important to remember that Justice, Lipscomb and the other 19 patients treated so far were in a Phase I trial in which eight patients have died, three have achieved long-term remissions and the rest are still being monitored. That means it’s too early to judge how the virus will perform in a larger patient population.
Here are some other key points to keep in mind about Duke’s cancer-fighting polio virus.
Polio is not the only virus that’s been shown to work against cancer. Several companies and academic groups are testing a variety of engineered viruses to fight cancer, including herpes, vaccinia (cowpox) and adenovirus. And in October, the first virus-based drug was approved by the FDA, Amgen AMGN -2.06%’s Imlygic (talimogene laherparepvec, or T-VEC) for the treatment of melanoma. It’s an engineered form of the herpes virus that’s injected straight into melanoma tumors, where it kills cancer cells directly and also recruits immune-boosting cells to the tumors to boost its potency. It’s far from a miracle—studies show that it works best in a small subset of patients who are in Stage III of the disease, but overall it improves survival by only a few months—which is likely why the FDA declined to fast-track the drug to market last year.
ZIOP – Shows Rather Impressive Preclinical Data at ASGCT, Up Next Human Data at ASCO
ZIOP was front and center at the 2016 Meeting of the American Society of Gene and Cell Therapy (ASGCT) in Washington D.C. last week. The company presented exciting preclinical data for IL-12 in combo with a PD-1 that showed 100% survival. The non-viral Sleeping Beauty (SB) system was also on display. In our view, this technology should be particularly important in leveraging T-cell receptors (TCRs) to target neoantigens in solid tumors which requires individualizing this immunotherapy, an approach that is possible with a customizable, easy-to-manufacture non-viral gene transfer system. ZIOP is poised for a clinical explosion as they expect to initiate or continue prosecuting up to six clinical trials across multiple platforms in 2016, and potentially a registration trial for IL-12 in malignant glioma patients in 2017.
Preclinical studies combining Ad-RTS-IL-12 + veledimex and checkpoint inhibitors in brain tumor models presented at ASGCT
In an oral presentation, ZIOP presented data from preclinical studies of Ad-RTS-IL-12 + veledimex combined with immune checkpoint inhibitors (iCPI) in GBM mouse models at ASGCT. Results demonstrated that survival of mice treated with Ad-RTS-IL-12 + veledimex and anti-PD-1 therapy was superior to either treatment alone, with a combination showing 100% survival. Because Ad-RTS-IL-12 and anti-PD-1 are clinically available, these data provide impetus for evaluating this combination immunotherapy in humans. ZIOPHARM plans to initiate a combination study in 2016 and is currently in discussions with partners to provide anti-PD-1 therapy. Given the hyper competitiveness of the PD-1 space, we expect a deal to be announced sooner than later. It is important to remember that PD-1s as a monotherapy only work in about one third of the potential patients leaving a huge opportunity for drugs that can address the other two thirds with combination therapy.
Preclinical study showing evolution of the Sleeping Beauty (SB) non-viral transposon-transposase system in a mouse model of leukemia presented at ASGCT.
In an oral presentation, MD Anderson researchers in collaboration with ZIOPHARM presented data from preclinical studies demonstrating the ability to address the challenges of streamlining the manufacture of cell based therapy by leveraging the non-viral SB system to reduce cell culture time. These data also demonstrated an improvement in the anti-tumor activity of the CD19-specific CAR by modifying the “stalk” of the CAR.
Encouraging data from Phase I brain tumor study to be presented at ASCO.
ZIOPHARM expects to present data from a multicenter, Phase I gene therapy study of Ad-RTS-IL-12 in patients with recurrent or progressive GBM or Grade III malignant glioma at the 2016 ASCO Annual Meeting in June (http://am.asco.org, June 2-7, Chicago).
Following reporting of encouraging data from the first cohort of the study at the initial dosing of Ad-RTS-IL-12 + veledimex, the Company announced last March that the first patient had been enrolled in the study’s second dose cohort – implying acceptable safety at the very least, if not responses as well. ZIOP has publicly said recently that they are encouraged by the survival results observed to date. In our view, this data has the potential to be a significant catalyst for the stock as these patients are very sick with no treatment choices and a life expectancy of as little as 10 weeks. Survival data in particular is the gold standard in cancer drug development and any positive survival signal will catch the attention of biotech investors, as this drug candidate could be in registration trials as soon as next year.
ZIOP is a BUY under 12 with a TARGET PRICE of 18
Today right at close we should get AGSCT presentation showing adding IL-12+Veledimex to Opdivo, etc enhances efficacy in glioma to 100% survival...
we know from Cooper and I/R its the APPROVED PD-1 drugs they tested but the abstract didn't name the drugs - while we know Kirk/Cooper are already in discussions with the PD-1 companies per the P/R - I would love it if the presentation included the names of the PD-1s.....would be a big bonus...see presentation 4 pm start per MTSL below...
Bioinvest Medical Tech Stock Letter...ZIOP – Poised to Shine at ASGCT With Oral Presentations & ASCO Next-cheaper CARs with SB to leap frog KITE/JUNO 1st gen...IL-12 PD-1 combo/SB cheaper CARs not in current valuationBuy
Yahoo not letting me post the entire note or the XON note - see Investorvillage ZIOP board for both must read notes
Bioivest Medical Tech Stock Letter...ZIOP – Poised to Shine at ASGCT With Oral Presentations & ASCO Next-cheaper CARs with SB to leap frog KITE/JUNO 1st gen...IL-12 PD-1 combo/SB cheaper CARs not in current valuationBuy
Wunderlich-The Spotlight Has Faded: 90-Page Report Lacks Substance. Successful partnerships overlooked. conjecture of the reports has little to no factual basis. Buy dip $50 target.
Technology: Enterprise Software
INTREXON CORPORATION (XON: $27.24) Rating: Buy
April 28, 2016 Price Target: $50.00
Rob Breza •Ryan MacDonald •
Wunderlich Securities, Inc.
1255 Battery StreetSuite 425 San Francisco, CA 94111
The Spotlight Has Faded: 90-Page Report Lacks Substance
o Summary. After reading through the follow-up report by Spotlight Research posted on Seeking Alpha, we break down what we believe to be Spotlight's major inaccuracies in each section. We remain confident in the multi-vertical growth prospects for Intrexon and would use any weakness as a buying opportunity in XON shares, all else being equal.
o Part 2 – The related party business model. XON’s ECC business model was established in earnest in 2011, designed to create focused investments while diversifying risks and leveraging XON’s technology across the different verticals. Spotlight Research claims a mismatch in reported revenue, which is fully disclosed in XON’s footnotes and does match if an interested party were to take the time to read the footnotes to understand that fees are often deferred to the balance sheet for many years. We believe the company's accounting policies are proper and adjusted EBITDA is a key metric to judge the company as revenues are deferred. PwC, a very well respected accounting firm, is XON’s auditor.
o Successful partnerships overlooked. The Spotlight Research report points out many negative partnerships. However, it fails to mention XON’s approximate $53M investment in Ziopharm, which resulted in an approximate $172M special dividend that has been distributed to investors, while they still retain a 50% royalty stream going forward.
Clearly, a 3.25x return for investors was a positive outcome and more returns are likely given the future revenue stream.
n Part 3 – biofuels are a pipe dream. We were able to speak to an investor who recently toured XON’s Isobutanol facility in South San Francisco and was able to independently verify that the pilot facility exists. We were not able to ascertain any production or engineering characteristics. However, the facility looks very similar to the Spotlight Research picture on page 22 of their report. We believe XON remains on track to achieve commercial revenue in early 2018.
o Part 4 – value of Trans Ova. Based on Spotlight’s research, Trans Ova was a good acquisition as XON only paid 1.8x forward revenues for the company. However, Spotlight claims that Trans Ova is now worth 20x revenues. We would not make the same interpretations regarding the value paid for Trans Ova to today’s market cap as Spotlight’s analysis in this area ignores the other revenue-generating segments of XON’s business, as well as future growth opportunities - but it has been considered a good acquisition.
o Part 5, 6, 7, & 8 – "google of life sciences." The conjecture in this part of the reports has little to no factual basis, in our opinion.