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Edited Transcript of XON earnings conference call or presentation 1-Mar-18 10:30pm GMT

Q4 2017 Intrexon Corp Earnings Call

Glen Allen Mar 3, 2018 (Thomson StreetEvents) -- Edited Transcript of Intrexon Corp earnings conference call or presentation Thursday, March 1, 2018 at 10:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joel D. Liffmann

Intrexon Corporation - SVP of Finance

* Randal J. Kirk

Intrexon Corporation - Chairman and CEO

* Thomas Eugene Shrader

Intrexon Corporation - VP of Communications & Strategy

* Thomas P. Bostick

Intrexon Corporation - COO

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Conference Call Participants

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* Alexander Duke Schwartz

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Jason Nicholas Butler

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Michael Leonidovich Ryskin

BofA Merrill Lynch, Research Division - Associate

* Tycho W. Peterson

JP Morgan Chase & Co, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good afternoon, and welcome to the Intrexon Fourth Quarter and Year-end 2017 Investor Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Tom Shrader, Vice President of Communications and Strategy. Please go ahead.

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Thomas Eugene Shrader, Intrexon Corporation - VP of Communications & Strategy [2]

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Okay. Good afternoon, everyone. Welcome to Intrexon's Fourth Quarter and Year-end 2017 Investor Conference Call. I'm Tom Shrader, Vice President of Communications and Strategy of Intrexon; and I'm joined by Joel Liffmann, Senior Vice President of Finance; and Thomas Bostick, Intrexon's COO. R.J. Kirk, our CEO, will join us for the Q&A session.

During this conference call, we will make various forward-looking statements. Investors are cautioned that our forward-looking statements are based on current expectations and are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by our forward-looking statements. Please read our safe harbor statement contained in the earnings press release as well as Intrexon's most recent SEC filings for a more complete description.

This afternoon's press release and our discussions this afternoon may reference certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA per share. We use these financial measures as a more accurate estimate of our ongoing financial position. Reconciliations to our GAAP measures are contained in the earnings press release as well as on the Investors section of our website at www.dna.com.

The format of today's call will include some background along with a review of Intrexon's progress in 2017 by myself and Tom Bostick. We'll also recap some events from early 2018. This recap will be followed by a financial update from Joel Liffmann and the call will end with a Q&A session.

Next slide. As an overview to Intrexon's year, I'd invite investors to think of Intrexon less in terms of its areas of business focus such as health, food and energy and more in terms of its core expertise, the precise and, when necessary, regulated expression of genes in a wide collection of host cells and organisms.

As a further simplifying principle, I think it helps to think of our work as falling into 4 buckets: microbes, plants, non-human cells and human cells. Why are these buckets useful? Principally because they represent the areas within which Intrexon's scientists enjoy significant technical synergy, leading to experimental leverage.

For example, the day-to-day work of an ActoBio scientist working to express IL-10 and L. lactis to fight type 1 diabetes isn't that different than the activities of a San Francisco scientist working to express the enzymes that convert methane to liquid fuel. As we recap our year, I think it's useful to think about our progress in terms of these buckets because of the synergies and the idea that advances within the bucket are likely to be impactful throughout the bucket.

Next slide, please. So Intrexon in 2017. Within that framework, we view 2017 as a year of some of our most important achievements to date, including reaching profitable yields for the conversion of natural gas to 2,3-BDO as a precursor of rubber and also profitable yields of isobutyraldehyde. In addition, in 2017, we fine-tuned the pieces of our Point of Care CAR-T approach with ZIOPHARM that allowed us to partner with a major U.S. medical center in early 2018.

However, in addition to these 2 important advances, we view 2017 as a year of steady build for many of our core areas. For example, beyond 2,3-BDO, the yield of all of our methane bioconversion products continued to increase, including the grand prize, isobutanol. In addition, our agricultural technologies progressed far enough that we are now in partnering discussions with many of the major players in the field.

In health care, Precigen, ActoBio Therapeutics and our ECC partners, ZIOPHARM and Fibrocell, all started important new clinical trials. And finally, assets like Apples, Salmon and our Friendly Aedes mosquito all enjoy either regulatory successes or at least greater clarity in their required pathway to regulatory successes.

Intrexon cell and gene therapy is now Precigen. One of the key focuses for Intrexon in 2017 was building strong internal development capabilities in the health care space. Our health care assets within cell and gene therapy has now been organized as Precigen, and Helen Sabzevari has been named Precigen's president. Helen is an experienced drug developer.

Much of Precigen's pipeline is not yet public, and we don't expect significant disclosure for programs prior to reaching the clinic. But we had disclosed that Precigen will focus on oncology, autoimmunity and specific infectious diseases. In addition for many applications, we expect Precigen will leverage Intrexon's gene delivery tools to take multigenic approaches, especially in situations where single-gene approaches have shown signs of efficacy.

Next slide, Point of Care CAR-T cells and the new oncology. One of the most important efforts at Intrexon in 2017 was getting ready for human clinical trials with a Point of Care CAR-T cell. This is a therapeutic immune cell that can be re-delivered to patients within a couple of days of harvesting. Our point of care approach is designed to remove the need for lengthy and costly centralized cell manufacturing.

Our approach that involves in-hospital manufacturing should reduce both the delay in treatment of very sick patients and the associated treatment cost of these therapies. Technically, our point-of-care manufacturing approach involve removal of virus-based engineering steps. These steps require high levels of containment and are not generally available in hospitals. This goal was achieved by our use of nonviral Sleeping Beauty technology.

In addition, our approach required that engineered cells don't need to be amplified ex vivo before delivery to the patient. We delivered this step by introducing a second gene beyond the tumor-targeting receptors into our CAR-T cells, namely our proprietary membrane-bound IL-15.

As we have previously reported, we've signed 1 major academic partner for this program, and we now have term sheets out to additional hospitals very versed in conventional CAR-T therapy. The first IND should be filed soon. We believe we will dose the first patient in the second quarter of 2018. We're not providing details of the trial design, but our slides have indicated that the target is CD19.

A word on that choice. We believe that membrane-bound IL-15 could be key to attacking solid tumors with immune cells. But for our first trial, we're choosing CD19 based on the consideration that the best way to test something novel is in an area where success is well-defined.

The deal terms are confidential but we have reported that they involve yearly fees to Intrexon, a per-patient fee to Intrexon as well as double-digit royalties on the final realized reimbursement for the CAR-T therapeutics.

So next slide. So overall, we believe Precigen's approach to combinational -- combination therapies fits modern oncology. You should expect more detail on Precigen's pipeline later in the year. However, it's already safe to say many of the approaches will be multigenic combination therapies in keeping with the current focus of immune system-mediated medicine.

A clear example of that focus is the fact that there are now 1,000 ongoing clinical trials with checkpoint inhibitors in combination with other therapies. So it's pretty clear that these molecules are seen as important backbones, but not the whole treatment solution.

At Intrexon, we have long invested in delivery technologies required to make multigenic approaches a reality. For example, in 2017, we acquired GenVec, a leader in adenovirus-based gene delivery along with its portfolio of guerrilla adenoviral vectors that are expected to have reduced immunogenicity. These approaches allow for payloads as large as 30 kilobases to be delivered to cells.

Just to put that in perspective, these payloads are 5 to 10x those possible with current approaches. In addition, Intrexon has a great deal of experience with at-site-based gene integration technologies that also allow large payloads to be specifically integrated into cells. So we have 2 independent technologies focused on the delivery of large gene segments, and the potential utility of these payload applications is shown in the figure.

The schematics on the slide indicate a CAR-T cell equipped to express 2 independent immunomodulators, a construction well within the reach of our delivery technologies. Also shown is the same treatment regimen delivered by -- conventionally with 3 separate therapeutics and the associated very high cost. So overall, we believe we're on the cutting edge of the development of medicines involved in combination approaches. And we are fully aligned with the sentiment that even with the remarkable results seen to date, costs will eventually need to stop escalating.

Next slide. So moving away from oncology. Xogenex is multigene expression solutions for heart failure. Again, Precigen has what we consider to be a relatively derisked effort in cardiac gene therapy, specifically in heart failure. In this program, Intrexon has engineered vectors to deliver genes from each of the major classes of proteins implicated in repair of cardiac tissue. So each of these classes has shown some signs of efficacy. In isolation, we think we can deliver all 3.

The data below shows cell data showing appropriate levels of expression followed by preclinical data in an animal showing significant cardiac benefit. This trial is IND -- the IND has been filed in November and is now considered accepted, and we expect to dose the first patient in the first half of '18. First half of '18 represents a modest delay from earlier expectations and is really the result of our PI increasing the number of hospitals involved in the trial, but we should still be in the clinic in the first half of '18.

Next slide. Fibroblast-based therapies. Synthetic biology atop harness biology. These programs are in partnership with our longtime ECC partner, Fibrocell. And Fibrocell works to develop therapeutic proteins with human fibroblasts. They had a very solid year. For their first therapeutic, FCX-007, the company reported Phase I safety data and efficacy data in RDEB patients that resulted in the FDA greenlighting the Phase II portion of this trial involving pediatric patients. So based on the safety and efficacy data, the FDA okayed the treatment of young children.

For their second therapeutic, FCX-013, Fibrocell filed its initial IND for linear scleroderma, and that trial has the potential to start in 2018. Both these applications require complex protein replacement strategies and make use of autologous fibroblasts engineered to express correctly folded complex gene products.

Okay. Next slide. The next slide is a snapshot of Precigen's clinical portfolio. Much of it is in collaboration with ZIOPHARM and you know it well, so I'll just make a few points on the programs indicated in red. The combination trial in glioblastoma, including both a PD-1 antibody and regulated IL-12, we view as very important because safely combining these 2 powerful immune modulators is an important step for many of our programs.

In addition, the ongoing AML trial is a first attempt at treating this disease and uses conventional approaches. However, AML and its extremely sick patients represents an exciting place for our point-of-care technologies. So as a result, the AML trial, although it's important in its own right to validate the target, also plays an important part of our learning curve.

Okay. Next slide. Moving away from Precigen to our second health care business unit, disease tissue-specific delivery via L. lactis is now ActoBio Therapeutics. Much of the remainder of Intrexon's human therapeutic activity is now organized as ActoBio Therapeutics. Pieter Rottiers has been named as ActoBio's CEO and has an extremely experienced management team. Some of the key people at ActoBio have worked on this platform for 25 years.

The platform is based on disease site-specific delivery of active therapeutic moieties. We believe ActoBio represents a novel delivery approach, but a relatively derisked overall approach because many of the active therapeutics they are delivering via L. lactis are already known to be active as systemic therapeutics.

Importantly, the ActoBiotics platform delivers these therapeutics directly to diseased tissue and has the potential to be more efficacious and safer. In addition, the ActoBio approach opens the door to low cost of goods combination therapies, again, a common thread to our approaches. The ActoBio -- on this slide is the ActoBio pipeline with 2 clinical trials expected to be ongoing throughout 2018 and the first important clinical data is expected in 2019.

Next slide. This is important background data. ActoBiotics therapeutics produced mucosal surfaces are active. So although certainly a novel approach, we believe our existing data from preclinical studies and clinical trials derisk the ActoBio pipeline and support the overall mechanism.

For example, therapeutics known to be active systemically, ActoBiotics delivery has been shown to be active for: 1, mucosal healing in the mouth and this is based on clinical data, and Phase I data is shown at the top of the slide; and then preclinically for immunomodulators in the G.I. system. And this feature has been shown both for cytokines, the lower figure, as well as an anti-TNF nanobody in studies that aren't published yet.

Next slide. Okay. Our updated scorecard for health care. With that overview, I'll restate what we believe are our most important health care accomplishments for 2017 and early 2018. First, Precigen and ActoBio Therapeutics were organized and staffed throughout the year. Second, a credo with the NCI was signed to explore the use of Sleeping Beauty technology in order to target tumor neoantigens. More details on this program are likely to come from our partner, ZIOPHARM; third, our first hospital partnership deal was signed for Point of Care CD19 CAR-T. Again with ZIOPHARM, more details are expected and more deals are expected throughout 2018.

Fourth, the Xogenex heart failure IND was filed in November 2017 and the first patient is expected to be dosed in the first half of 2018. Fifth, ZIOPHARM initiated a CD33 CAR-T trial in AML and a pediatric GBM trial delivering regulated IL-12. Sixth, Fibrocell initiated a Phase II pediatric trial in RDEB and a Phase I trial in linear scleroderma.

Seventh, ActoBiotics started the Phase II oral mucositis trial and filed the IND for its type 1 diabetes trial. And finally, the GenVec acquisition was completed. This was an important step for all of our multigenic approaches.

I'll now turn to a brief overview of our methane bioconversion program. Our methane bioconversion program is our program to turn natural gas, the lowest cost and most available source of carbon, into more valuable and useful energy forms and chemical forms. Our approach was conceived internally and entirely developed by scientists at Intrexon.

Next slide. Large markets for relatively simple products. Here, I wanted to spend a minute reminding people that the conversion of methane to relatively simple 4- and 5-carbon products is very valuable. As you can see from this slide, even the smallest of our internal markets are worth more than $2 billion and most are many times that value.

An additional point I'd make here is that there are many slightly more complex specialty products we could focus on in the future. However, we have principally worked to date on large market fuels and chemicals, partially because once we're able to send large amounts of carbon flux into our first products, these additional products are expected to be relatively straightforward.

With that brief background, here are our more important recent accomplishments in the energy sector. An important update and an important thing to keep in mind in the energy sector is we're getting better at things. On the top of this slide are the yield curves for 3 different products: isobutanol, 2,3-BDO and isobutyraldehyde. And what's really clear is that the curves have gotten much steeper.

As Intrexon scientists have gotten more experienced, getting to useful yields has gotten very rapid. Additional recent accomplishments including following -- the following: in the money yields were reached this year for 2,3-BDO and isobutyraldehyde. Those are some of our most important milestones for the year.

We've also developed an industrial process. And what I mean by that is we can now run these reactions for 1,200 hours, a requirement for any sort of industrial process. In addition, our 500-liter pilot plant has been operational for 16 months and has completed multiple hundred-hour runs at this large scale. We make quality product. Intrexon recently produced 2,3-BDO of 99% purity at the pilot scale and test conversion to 1,3-butadiene is underway.

Finally, the high quality -- this recent high-quality product run was extremely important as it allowed us to complete the engineering of a FEL-2 engineering package that detailed a 40,000-ton per year facility. This is still called a small-scale plant in the industry, but it's a commercially meaningful facility. And based on the runs to date, we believe we know how to design it.

And then the final point is that partnering discussions are ongoing. So with that overview of the health care and energy sectors, I'll turn it over to Tom Bostick to discuss our other businesses.

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Thomas P. Bostick, Intrexon Corporation - COO [3]

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Thank you, Tom. Health care and energy remain important areas for Intrexon, but several other programs in the general area of engineered plant and animal cells are important and all advanced nicely in 2017. I'll quickly review our 3 core programs in growing better plans. Then I'll cover what we view as the natural partners of our programs in agriculture, as well as our attempts to protect crops from pests that are increasingly resistant to conventional control mechanisms. Following that overview, I'll give an update on these programs, including our efforts to protect humans from disease-causing pests.

Next slide. On the agriculture side of Intrexon, most people are aware of our work with apples. Our subsidiary, Okanagan Specialty Fruits, now has 3 approved varieties of nonbrowning apples and our version of golden delicious apples, Arctic Golden, was sold on a very limited basis in 2017. The differentiating feature in all of these apple varieties is that because they brown much more slowly, they can be sold pre-sliced without preservatives.

Our apples are probably the only apples that can be sold this way because other apples turn brown extremely fast, on the order of hours rather than weeks. Our 2017 crop was large enough to get controlled consumer feedback that was extremely positive and supports our program and progress to aggressively plant our apples.

The second line on this slide is an indication of 4 other products that are advancing through the development phase. In each case, there is a strong rationale that slowing the browning cycle will lead to a better-tasting and more natural alternative.

The third line in this slide shows some data from our second agricultural platform. This technology is an increasingly mature research that we have coined Botticelli as like the birth of Venus. No gamete stage is involved in the growing cycle. Despite the glib name, it's a serious technology since the biggest period to rapidly improving plant genetics is the time required for test plants to grow.

Botticelli shortens that time considerably. In 2017, this platform moved from an internal research tool to a significant focus in partnering conversations. In more technical terms, Botticelli is a proprietary method to elicit a genotype-independent pluripotent response in plant cells or tissues that allows high-throughput plant regeneration.

The approach has 2 important applications: first, the efficient propagation of plants that produce valuable ingredients; second, significantly improved transformation and mass propagation in commercial crops. In this latter area, we have generated proof-of-concept data in 2 important crops: lettuce and tomato.

Again, on the third row of this slide, the left 2 petri dishes show lettuce tissue growth. On the far left is an example of standard tissue growth protocol. And next to it is lettuce using the Botticelli proprietary method during the same amount of time. Then the right 2 petri dishes show a similar example with tomato tissue growth.

Next slide. The final platform we employ in the agricultural space is called Florian. Florian allows for the on-demand expression of plant traits. As might be anticipated, it's an agricultural application of our switch technology that, in principle, can control a genetically defined trait. A particularly colorful example is shown on this slide, where the Florian switch is controlling a color gene. When the Florian switch is off, the flower color is purple. And when the Florian switch is on, the flower color is white.

The commercial driver for our approach includes the general issue that advantageous traits in a plant such as drought resistance are not always advantageous. For example, a plant expressing drought protection genes is very likely to grow poorly in normal conditions. On the next slide, we show a more serious application that is currently in testing.

Next slide. The control of traits in plants was shown in the last slide with a playful example involving flower color. There are much more commercially important examples that we have already demonstrated such as the control of flowering. In some forage crops, flowering is not a positive outcome since it reduces the plant's focus on creating biomass and requires the field to be cut back before significant flowering occurs in order to reinitiate the growing phase.

In alfalfa, a grower does not want the plant to flower because it decreases the yield and forage quality. However, flowering is still needed for seed production. Florian allows for the best of both worlds. Without Florian, on the top half of this slide, the field grows without flowering; and on the bottom half of this slide with Florian on, flowering allows the seed production for the seed companies. We are involved in partnering discussions with this technology.

Next slide. The flip side of our attempts to improve food production via genetic control is our efforts to combat the pests that destroy crops. Our company called Intrexon Crop Protection is developing 2 key platforms to address crop pests: self-limiting insects using the technology very similar to our successful mosquito platform; and ActoBiotics, which uses a foodgrade bacterium to deliver a suite of pest management actives. Again, we're involved in partnering discussions with both technologies.

Next slide. I will now provide an updated scorecard in a few key areas. We have our third nonbrowning apple, the Arctic Fuji Apple, approved in the United States and Canada. Our apple tree program gained momentum as we planted 266,000 trees in 2017 and are on track to plant approximately 4 million trees by 2020. Florian and Botticelli partnering talks are in progress with multiple partners.

4 SLI-derived insect technologies have the green light for field trials. We have achieved partner milestones for an SLI-based approach for controlling fall armyworm. And with the Friendly Aedes mosquito, the regulatory process has moved to the EPA.

On this last bullet, I'd like to provide a little more detail. In early October, following new guidance issued by the FDA Center for Veterinary Medicine, regulatory jurisdiction for Oxitec's Friendly mosquito, OX513A, was moved under the jurisdiction of the Environmental Protection Agency as a biopesticide product. This move was seen as positive since it is scientifically more appropriate to evaluate potential environmental health and safety aspects of our product as a biopesticide rather than an animal drug.

Moreover, the EPA's guidelines and requirements for the evaluation of these technologies are familiar, well-known and transparent and subject to well-articulated timelines. However, this move to EPA also meant we were required to begin the regulatory process again with a new agency. We are currently proceeding down 2 parallel paths to release our product into the environment in the United States.

Firstly, we have completed a Section 3 commercial approval filing based on field trials previously conducted outside of the United States. Based on the recent filing of our Section 3, we anticipate a regulatory decision on our commercial approval early in 2019, if not before.

Secondly, in the event that we need to supplement our efficacy data with U.S. data, we've also applied for an experimental use permit, an EUP, to begin a field trial in the Florida Keys. We are targeting an area of the Keys where recent flooding suggests this next mosquito season may be unusually severe. It's worth noting that experimental trials conducted under an EUP are also taking place in Florida for an alternative form of self-limiting mosquito. However, we believe that we have a more effective and potentially less expensive solution and the local willingness to try self-limiting mosquitoes is a positive.

Now Joel Liffmann will provide a financial update.

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Joel D. Liffmann, Intrexon Corporation - SVP of Finance [4]

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Thank you, Tom. The financial results that were reported today reflect the considerable scientific partnering and commercial progress that Tom Shrader and Tom Bostick just described. I'd like to point out that as we closed out 2017 and implemented our plan to internally develop several of our most promising opportunities, we undertook an analysis of our entire portfolio of ECCs, technologies and other assets.

As you'll see in our fourth quarter and year-end results, we terminated an ECC which produced an accelerated recognition of previously deferred revenues, and separately, we recorded an impairment charge against goodwill and intangibles.

Each of these are nonrecurring and noncash items, but we may again have accelerated deferred revenue recognition in 2018 should we terminate additional ECCs as we focus our efforts on each of our maturing and our in-house early-stage programs.

Now getting to the numbers. First (sic) [fourth] quarter and full year revenues were $77 million and $231 million, respectively, increases of 67% and 21% over the prior year periods. These results include approximately $29 million of revenue recognition from the termination of one of our ECCs, which we report as a component of collaboration and licensing revenues, which grew by 32% over the prior year.

Our Trans Ova business contributed substantially all of our product and service revenues in 2017, and combined, these grew by 14% and 5% in the fourth quarter and full year versus the prior year periods. Throughout 2017, we saw improvements in the Trans Ova business, and we continue to have expectations for a high return on the investments we are making in transforming this business from a bovine reproductive service to proprietary product supplier to the dairy and beef cattle industry.

Total reported operating expenses, including the impairment charge that I mentioned, for the fourth quarter and full year were $103.5 million and $368.9 million, increases of 32% and 17% over the prior year periods. Excluding the previously discussed impairment loss, adjusted EBITDA for the fourth quarter was a gain of $13.7 million versus a prior year loss of $5.8 million.

For the full year, adjusted EBITDA was a loss of $11.8 million and compared with the loss of $26.6 million in 2016. Our management team is executing against the broad set of opportunities at hand with focus and financial discipline. We ended 2017 with a consolidated cash position of approximately $75 million, and we held common and preferred equity securities in our ECC partners with a value of $176 million.

In early January, we completed a secondary stock offering that raised gross proceeds of $86 million. I refer you to the earnings release and 10-K for additional financial information. And we will now open the call up to questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Jason Butler with JMP Securities.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [2]

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Thank you for the very thorough and clear presentation. So first one -- first question on Xogenex, can you just talk about the goal of the Phase I trial in heart failure? For example, are you including pharmacodynamic endpoints that could be predictive of clinical benefit?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [3]

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Well, as you can see from the slide -- Jason, R.J. here. As you can see from the slide that Tom showed you, and of course, that does come from animal models. But yes, we're looking at ejection fraction, for example.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [4]

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Okay. Great. And then for...

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [5]

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Think about it. Nobody's going to do a study like this in healthy normals, right? So we'll be dealing with significantly impaired patients. And of course, we expect the Phase I to really let us know if we're proving out efficacy at least to our satisfaction at that point.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [6]

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Okay. Great. And then the second question on the Botticelli platform. Can you give us any numbers around the improvements in speed of development or yield? Or essentially how can we quantify what the value-add is here? And then can you just confirm, is the partnering effort here separate and distinct to the partnering effort for Florian?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [7]

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The answer to the second question is yes, it's separate and distinct. And the answer to the first question is I can help a little. So from -- in other words, I can't state what the total value is, but I can tell you as a matter of just benchmarking against known methods of propagating plantlets without going to seed. We believe we are currently, at least in lettuce, 150x faster. Now what does this mean? As Tom mentioned in his comments, there are really 2 -- we see 2 immediate applications of this technology. One is to accelerate for people in ag bio, right, people who are developing plant traits, to get results much more quickly. And that's why we have such broad interest in this technology. It was really what inspired our team to create this technology. But once we had it and the results seem so dramatic, we're still trying to wrap our heads around other ways to use this technology in specialty crops in which -- I mean, if you think about it, let's use lettuce as an example. So if you were growing lettuce in, let's say, a hydroponic greenhouse or something like that, a controlled environment they call it today, in a controlled environment, maybe you get 8 crops per year. If you can get rid of the requirement to produce seeds and germinate seeds, then you could produce -- you could increase productivity by say, 50% in that environment in that crop. And that's the one -- as Tom mentioned, that's the one on which we have the greatest amount of data. I think we've done over a dozen different species of lettuce. And then we have less mature work in tomatoes. We don't know how many crops this technology will work in, but we have ongoing programs to find out.

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Jason Nicholas Butler, JMP Securities LLC, Research Division - MD and Senior Research Analyst [8]

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Again, if I could just add 1 quick question there. Can you give us any sense of what the time or cost or development hurdles are to testing each one of these new projects as it were? And essentially, what is the limitation to asking questions for new species?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [9]

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I'm afraid I can't help you. I know that it varies. I know that it varies from species to species, Jason. And for some of them, the application and significance is much more than would be the case for others. But that said, in a production -- for example, in a production platform, obviously, this technology to produce corn is useless, right? But to achieve a stable corn trait for one of the companies that is active in that field, we think it's highly useful.

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Operator [10]

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Next question is from Derik De Bruin with Bank of America Merrill Lynch.

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Michael Leonidovich Ryskin, BofA Merrill Lynch, Research Division - Associate [11]

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This is Mike Ryskin on for Derik actually. A couple of questions. First one on the energy platform. You mentioned some key highlights, cash positive yields in a couple of programs, the 99% purity in 2,3-BDO. I was just wondering what the next steps were for these 2 leading platforms. You talked about partnership discussions ongoing, but is there incremental benefit about -- around getting higher yield? Is there incremental benefit around getting higher purity? Or what's the focus for this year as you work on it internally? Is it to scale up production, have higher powered plants -- bigger plants, et cetera?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [12]

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I would say higher yield is the goal here. It's pure enough. We're out for testing. But especially once you're in profitability, right, because any improvement to yield is pure profit, right. It also -- and this is actually an important question because as the yield gets better, the details of the plant change. And so you don't want to build the plant at -- design for 1 yield only to arrive at another. So I think there's a lot of information, and the fact that we were able to complete the engineering package that tells you how far we are down the line. There's some information in that comment.

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Michael Leonidovich Ryskin, BofA Merrill Lynch, Research Division - Associate [13]

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So if I could ask a follow-up on that then. So even though you've achieved cash positive yields, how long is the runway until you -- I don't want to say max yield but an area where you're going to say, "Okay. This is good enough. Let's scale up the plant at this point." Is this a multiyear runway? Is this something that is achievable in the next several quarters? What's the remaining upside?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [14]

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I think we've said we will break ground on a plant this year. So we're not there yet, but we're confident enough that we will be there in 12 months is I think the best answer I can give.

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Michael Leonidovich Ryskin, BofA Merrill Lynch, Research Division - Associate [15]

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Okay. And then really quickly on the Precigen platform if I could. Appreciate the heightened focus on the multigenic approach. That's very interesting. Could you talk about any -- I realize you may not want to disclose this, but anything you can say about any multigenic approaches you're looking at besides the Xogenex heart failure platform?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [16]

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Yes. Absolutely. So as you'll recall, all of our work in CAR-T is directed toward a Point of Care CAR-T capability. And all of these constructs are multigenic. Some of them are quite complex. You'll see more details about these as our partners begin initiating their clinical trials, and this is coming up in the very near future. But I can tell you just to give you some idea, each one of our gene programs that we are putting in the human primary T-cells is larger than that which our competitors could manage in a lentivirus. So they're all large, they're all more complex. So in order to have -- I mean, some of them have multiple switches and multiple open reading frames. And we -- it's consistent with what Intrexon always set out to do. We talked about our desire in the CAR-T space in 2013. We talk publicly about it and we think we've achieved that. So we have clinical data upcoming and we're looking forward with great excitement to those data because we think that will bear out the predictions that we had and the work we've done over the last several years in this field. But yes, all of these are multigenic constructs.

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Michael Leonidovich Ryskin, BofA Merrill Lynch, Research Division - Associate [17]

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And any color on why the graft-versus-host project was canceled?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [18]

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Focus. It's about focus. I mean, we and our partner, ZIOPHARM, believe that the point of care CAR-T is extremely compelling. And both companies are very tightly focused within that partnership, very tightly focused on the objective.

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Operator [19]

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(Operator Instructions) Our next question is from Tycho Peterson with JPMorgan.

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Tycho W. Peterson, JP Morgan Chase & Co, Research Division - Senior Analyst [20]

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R.J., maybe just following up on the CAR-T discussion. Can you maybe talk about the pipeline for additional similar hospital deals to the ones you have -- the one you have and how many you think you could sign in the first half of this year, for example?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [21]

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Yes. I can't give an estimate on the second question, Tycho. But on the first one, we have term sheets out to other parties right now. We are recording considerable interest. I don't think that people have really realized how significant what we've done here in terms of inverting the business model. So these are leading cancer research and treatment centers, which you can suppose are the ones that are most familiar with the competitors' product. They're licensing this technology from us and going to bear the cost of these clinical trials. So we suggest that perhaps some of the finest cancer researchers and physicians who examine our data believe that this program was pretty compelling. But again, as I mentioned a couple of minutes ago, it's all about clinical data ultimately. And so we are looking forward to that, which is not too far away now.

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Tycho W. Peterson, JP Morgan Chase & Co, Research Division - Senior Analyst [22]

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And then can you talk on, I guess, the FEL-2 engineering package what that entailed and what that implies for the construction of the 40,000 ton production facility?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [23]

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Let's get you on the phone with Bob Walsh. He will be much better at explaining the details. But he once told me I was the only person in the world that didn't know what a FEL-2 engineering plan was, but I'm not sure that's correct. Let us hook you up off-line.

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Joel D. Liffmann, Intrexon Corporation - SVP of Finance [24]

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In his world, everyone knows.

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [25]

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He'll take you through it in detail, but thanks for the question.

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Tycho W. Peterson, JP Morgan Chase & Co, Research Division - Senior Analyst [26]

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All right. And then last 1 on OpEx, just kind of a higher-level question. As you guys have moved away from the ECC model, can you talk a little bit about where you're making your incremental investments? And I guess, when we should start to think about royalties and commercial sales starting to kick in to the model?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [27]

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Sure. Yes. So I think what you'll see initially, Tycho, and what we think is really going to be the big driver we hope to be and expect to be the big driver for us financially in 2018 is transaction money. And what I mean by that is, look, we publicly announced we have 4 partnering programs on mature platforms underway at the current time. And so I think the first thing we would expect because our target in each of these cases would be to achieve something like a joint venture. So I think the first thing you'd see would be the transaction money from these. But some of them are actually commercializable now and as they're mature, and so stay tuned.

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Operator [28]

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And our next question is from Alex Schwartz with Stifel.

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Alexander Duke Schwartz, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [29]

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My first question was with your Point of Care CAR-T trial, approximately how many cells do you infuse back into the patients? So we have a pretty good sense of how many cells your competitors infuse into their patients. How many are you looking to infuse? And any sense of how long your membrane-bound IL-15 cells are persistent in comparison to competitor cells?

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [30]

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I don't believe we've disclosed the data related to the second question. But I'm sure you -- the fact that you posed the question at all means I think you grasped one of the chief implications. And your first -- the first part of your question proves that you do. Obviously, we're not doing ex vivo cell expansion so the cell number is considerably smaller. And that's because our membrane-bound IL-15, we think, will drive sufficient cell proliferation in vivo to do the job. So the dose is -- and I don't think we've disclosed what it will be, but it will be orders of magnitude less than that, that is used by the current players.

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Alexander Duke Schwartz, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [31]

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Okay. Very good. And then just on your energy platform. So congrats on achieving cash positive yields with 2,3-BDO and isobutyraldehyde. Maybe can I just pose a question a little bit differently? Where are you in terms of yields achieved as a percentage of your targeted yields for these products? And then secondly, you previously talked about maybe some isobutanol technical hurdles. Looking at Slide 17, the isobutanol trend continues to go up. Have you ever comment and maybe just an update there, please.

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [32]

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Yes. So first with regard to isobutanol, we are not where we want to be. We press Bob all the time for -- to tell us that we are solidly in the money in isobutanol. And look, we're very conservative and Bob's even more so. So for example, we calculate the cost of natural gas in each of our financial calculations at the HH Index price, even though it's quite obvious that you can buy natural gas on a forward contract at considerably less than that. But -- so using say, $3 per million BTU as the cost of the input, we are not yet where we want to be on isobutanol. The team is showing, I think very recently, a very positive trend on the main technical hurdle that they've been working on. But we're not in a position today to provide numbers on that. I forgot the first part of your question. Oh, yes, where are we in relation to theoretical. Yes. So we are close enough that we think that we're going to actually get very, very close to theoretical, which is very exciting. Please bear in mind that the total -- the overall object of the Methane bioconversion platform is to turn these large commodities into genuine biotech products with genuine biotech gross margins. And that's our objective. And so when we say that we are in the money on something, we don't mean by a trivial amount. It's highly significant. It's extremely, extremely compelling, in my view. And that's the reason we think we are right for partnering.

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Operator [33]

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This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks.

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Randal J. Kirk, Intrexon Corporation - Chairman and CEO [34]

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Okay. Yes. Well, first, let me say that as usual, I have to comment on the team. I mean, Warren Buffett has a phrase about tap dancing, tap dancing all the way to the office. And so the first thing I'd like to do is just express my gratitude for our place we occupy today; the place Intrexon occupies; the team that we have on board today, which is by far, the best team I've ever worked with. Our board, which I would contend is potentially -- well, I just -- I can't imagine how they could be better. They're highly supportive and extremely accomplished and very, very helpful to all of us.

Our scientists. Some of the work that you saw in the presentation today and bear in mind, we're not showing you everything we're doing as I mentioned in my little attribution in the press release. We really like the fact that we've achieved this inflection in our evolution so that we don't have to partner in a very public way early-stage programs and then talk about those. So we're doing a lot of early-stage work now. And some of this, I think, is extremely compelling and some of it will simply have to await data.

At Precigen, for example, we show a pipeline slide, and we -- I think the title is actually Disclosed Targets, right? Well, that's done with our knowledge that we have candidates that are in development now that were only initiated a couple of months ago that we expect to see in the clinic if everything continues to go the way it's going, that we expect to see in the clinic this year.

So all of these achievements are telling me that our scientific team of nearly 700 people working in our labs is just doing phenomenal work. And I tell them and I remind the guys at the table here with me and I tell our board, as far as I'm concerned, our #1 job is to enable their work to really make a tangible difference in the world. And so I want to thank them.

A word to our investors. I, too, am an investor. In fact, I think I'm the largest investor in Intrexon. And I can observe, both in the case of Intrexon and in some prior experiences I've had, I mean, some of you on this call were shareholders in clinical data when we were -- we thought the time was here for pharmacogenomics and that was 2004. And clearly, the time was not there for pharmacogenomics in 2004. But -- and the reason I mentioned that is because sometimes it can be painful to be early. And I think that Intrexon, from a pure -- from a shareholder perspective, it's certainly fair to say that we've exhibited that.

But the most important thing is whether or not you're going to win. And I hope that with what you've seen today and what you heard today and certainly this is our view, we think that we are going to win. And we think that 2018 is going to be a vindicating year.

I would just want the other investors and shareholders in Intrexon to remember what I remember every day, which is the reason that we became investors in Intrexon. And when you examine that proposition in that way, you realize that Intrexon has actually executed. I mean, go back and look through our entire nearly 5-year history as a public company now. We've actually executed what we hoped to do, and the large things have actually cut our way. And they've not only cut our way internally. Yes, we got on the money on methane bioconversion. There were times during -- prior to that time when we could seriously wonder if that was ever going to be achieved. It was, by far, the most audacious, ambitious biotech endeavor that I've ever seen.

And yet I -- we think we're there. But what's happened macro is that meanwhile, thanks to fracking, natural gas, the delta between the cost of carbon atoms on natural gas versus oil is such that you can think of natural gas as something like $14 or $15 a barrel in comparable -- just to put it in oil terms. So the macro events have cut our way and internal development has cut our way.

Similarly in cancer therapy. This point of care CAR-T, we had a name for it even -- that was even broader than Point of Care CAR-T. We had a name for it years ago. We called it modular inducible cancer immunotherapy, MICI for short, M-I-C-I. And when we look at this today, we see that we are actually attaining the realization of our desires of even 5 years ago to create that kind of platform, which we think is going to be hugely beneficial to cancer patients and also patients of autoimmune disorders and also infectious disease.

So that's what's happened internally. And again, clinical data, subject to clinical data, we can all look in the near future to see if we've really achieved what we believe that we have. Externally, however, with the amount of blood in the water transactionally on what we believe to be inferior technologies, it ought to give us some idea of how powerful this original idea was.

Listen, we -- when we began in this area, it was -- we thought of it as a category but practically, no one else did. And we were certainly aware of the work of Drs. Rosenberg and June. We talked about this on our IPO roadshow. But we didn't believe that those platforms were ever going to be truly industrializable. And frankly, that is still our view despite the transactional values they've attained. Now I'm not saying that to criticize anybody else's product or transactions. I'm saying it because -- just to illustrate the fact that the macro environment is informing that the path that we have set ourselves on was a good one and is a valuable one. Now, obviously, we have to succeed and that's really my point. As investors, fundamentally, it's about are we going to succeed?

Intrexon was intended and always has been intended and is intended today to be one of the leading companies, if not the leading company, in the field of engineered biology. And the way this team is executing today, I'm more than ever confident that, that is so. So thank you very much.

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Operator [35]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.