After disclosing that "there is substantial doubt about its ability to continue as a going concern" in its annual 10-K filing with the Securities and Exchange Commission, Intrexon (NASDAQ: XON) has seen its shares crash 47% this month, including an 18% decline on Monday.
An engineered biology company, Intrexon has captured a lot of investor attention over the past few years. Among the R&D projects it's announced are programs to improve on chimeric antigen receptor T-cell therapies, reduce mosquito-borne illnesses, and cultivate marijuana cannabinoids from yeast.
IMAGE SOURCE: GETTY IMAGES.
These projects have yet to produce a commercial success, and the steep cost associated with the flurry of activity is taking a toll on the company's balance sheet. On Feb. 28, management reported that revenue fell 31% year over year to $160.6 million in 2018 and that its cash and investments totaled $224 million on Dec 31.
The cash position is worrisome because its operating expenses totaled $429 million in 2018, after adjusting for one-time expenses associated with reacquiring in-process R&D from "former collaborators." Its selling, general, and administrative expenses alone totaled $138 million in 2018.
Based on the cash burn rate and the cash and investments available at year end, the company had to include language in its annual filing warning of risk of its inability to remain as a going concern.
Intrexon may have a lot of irons in the fire, but it appears to be running out of time. It needs to either kick-start revenue, raise cash with a share or debt offering, or significantly ratchet back its spending. If it doesn't, it could find itself on the way to bankruptcy court. That risk makes it too high-risk of a stock for most investors to considering owning.
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Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.