SEC Filing - Precigen

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36042

INTREXON CORPORATION

(Exact name of registrant as specified in its charter)



Virginia		26-0084895
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

20374 Seneca Meadows Parkway
Germantown,	Maryland	20876
(Address of principal executive offices)		(Zip Code)

(301) 556-9900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report date)

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	XON	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2019, 162,070,609 shares of common stock, no par value per share, were outstanding.

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INTREXON CORPORATION

FORM 10-Q

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Item No.		Page
PART I - FINANCIAL INFORMATION
1.	Consolidated Financial Statements (unaudited):	5
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	5
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 and 2018	7
	Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018	8
	Consolidated Statements of Shareholders' and Total Equity for the Three and Six Months Ended June 30, 2019 and 2018	9
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	11
	Notes to the Consolidated Financial Statements	14
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	39
3.	Quantitative and Qualitative Disclosures About Market Risk	55
4.	Controls and Procedures	56

PART II - OTHER INFORMATION
1.	Legal Proceedings	57
1A.	Risk Factors	58
2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
3.	Defaults on Senior Securities	58
4.	Mine Safety Disclosures	58
5.	Other Information	58
6.	Exhibits	59
	Signatures	60

Intrexon^®, Trans Ova Genetics^®, Oxitec^®, EnviroFlight^®, ViaGen^®, ActoBiotics^®, and Design-Build-Test-Learn^® are our and/or our affiliates' registered trademarks in the United States and Precigen™, AquaBounty™, Okanagan Specialty Fruits™, Progentus™, ActoBio Therapeutics™, and Precigen Therapeutics™ are our and/or our affiliates' common law trademarks in the United States. This Quarterly Report on Form 10-Q, or this Quarterly Report, and the information incorporated herein by reference, contain references to trademarks, service marks, and trade names owned by us or other companies. Solely for convenience, trademarks, service marks and trade names referred to in this Quarterly Report and the information incorporated herein, including logos, artwork, and other visual displays, may appear without the ^® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks, and trade names. We do not intend our use or display of other companies' trade names, service marks, or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Other trademarks, trade names, and service marks appearing in this Quarterly Report are the property of their respective owners. Unless the context requires otherwise, references in this Quarterly Report to "Intrexon", "we", "us", and "our" refer to Intrexon Corporation.

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Special Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our strategy, future events, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management, and expected market growth are forward-looking statements. The words "anticipate", "believe", "estimate", "expect", "intend", "may", "plan", "predict", "project", "would", and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:


•	our strategy and overall approach to our business model;


•	our efforts to realign our business;


•	our efforts to hold or generate significant operating capital, including through partnering, potential asset sales, and operating cost reductions;


•	our ability to successfully enter new markets or develop additional products, whether independently or with our collaborators;


•	our ability to successfully enter into optimal strategic relationships with our subsidiaries and operating companies that we may form in the future;


•	competition from existing technologies and products or new technologies and products that may emerge;


•	actual or anticipated variations in our operating results;


•	our current and future joint ventures, or JVs, exclusive channel collaborations, or ECCs, license agreements and other collaborations;


•	developments concerning our collaborators and licensees;


•	actual or anticipated fluctuations in our competitors' or our collaborators' and licensees' operating results or changes in their respective growth rates;


•	our cash position;


•	market conditions in our industry;


•	our ability to protect our intellectual property and other proprietary rights and technologies;


•	our ability to adapt to changes in laws, regulations and policies;


•	our ability and the ability of our collaborators and licensees to adapt to changes in laws, regulations and policies and to secure any necessary regulatory approvals to commercialize any products developed by us or under our ECCs, license agreements and JVs;


•	the ability of our collaborators and licensees to protect our intellectual property and other proprietary rights and technologies;


•	our ability and the ability of our collaborators and licensees to develop and successfully commercialize products enabled by our technologies;


•	the rate and degree of market acceptance of any products developed by us, our subsidiaries, a collaborator under an ECC, or through a JV or license under a license agreement;


•	our ability to retain and recruit key personnel;

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•	the result of litigation proceedings or investigations that we currently face or may face in the future;


•	our expectations related to the use of proceeds from our public offerings and other financing efforts; and


•	our estimates regarding expenses, future revenue, capital requirements, and need for additional financing.

Forward-looking statements may also concern our expectations relating to our subsidiaries and other affiliates. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in Part II, Item 1A. "Risk Factors," that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, JVs or investments that we may make.

You should read this Quarterly Report, the documents that we reference in this Quarterly Report, our Annual Report on Form 10-K for the year ended December 31, 2018, the other reports we have filed with the Securities and Exchange Commission, or SEC, and the documents that we have filed as exhibits to our filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Intrexon Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



(Amounts in thousands, except share data)	June 30, 2019		December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	58,162	$	102,768
Restricted cash	—		6,987
Short-term investments	67,641		119,688
Equity securities	—		384
Receivables
Trade, net	24,496		21,195
Related parties, net	7,095		4,129
Other, net	2,866		2,754
Inventory	18,192		21,447
Prepaid expenses and other	4,712		6,131
Total current assets	183,164		285,483
Equity securities, noncurrent	21,503		1,798
Property, plant and equipment, net	120,401		128,874
Intangible assets, net	112,526		129,291
Goodwill	149,916		149,585
Investments in affiliates	18,093		18,859
Right-of-use assets	41,558		—
Other assets	8,027		2,287
Total assets	$	655,188	$	716,177

The accompanying notes are an integral part of these consolidated financial statements.

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Intrexon Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



(Amounts in thousands, except share data)	June 30, 2019			December 31, 2018
Liabilities and Total Equity
Current liabilities
Accounts payable	$	8,563		$	13,420
Accrued compensation and benefits	9,034			10,687
Other accrued liabilities	11,701			20,620
Deferred revenue, including $7,053 and $6,945 from related parties as of June 30, 2019 and December 31, 2018, respectively	16,593			15,554
Lines of credit	387			466
Current portion of long-term debt	468			559
Current portion of lease liabilities	4,813			—
Related party payables	74			256
Total current liabilities	51,633			61,562
Long-term debt, net of current portion, including $55,743 and $55,290 to related parties as of June 30, 2019 and December 31, 2018, respectively	212,479			211,235
Deferred revenue, net of current portion, including $51,195 and $52,227 from related parties as of June 30, 2019 and December 31, 2018, respectively	66,542			54,210
Lease liabilities, net of current portion	38,757			—
Deferred tax liabilities, net	6,332			7,213
Other long-term liabilities	222			3,235
Total liabilities	375,965			337,455
Commitments and contingencies (Note 16)
Total equity
Common stock, no par value, 400,000,000 and 200,000,000 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 161,917,424 and 160,020,466 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	—			—
Additional paid-in capital	1,737,449			1,722,012
Accumulated deficit	(1,430,020		)	(1,330,545		)
Accumulated other comprehensive loss	(28,206		)	(28,612		)
Total Intrexon shareholders' equity	279,223			362,855
Noncontrolling interests	—			15,867
Total equity	279,223			378,722
Total liabilities and total equity	$	655,188		$	716,177

The accompanying notes are an integral part of these consolidated financial statements.

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Operations

(Unaudited)



(Amounts in thousands, except share and per share data)	Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in thousands, except share and per share data)	2019			2018			2019			2018
Revenues
Collaboration and licensing revenues, including $7,110 and $13,148 from related parties during the three months ended June 30, 2019 and 2018, respectively, and $10,922 and $29,788 during the six months ended June 30, 2019 and 2018, respectively	$	9,097		$	17,450		$	15,067		$	37,298
Product revenues	7,819			9,568			12,676			16,720
Service revenues	18,400			17,718			29,783			29,965
Other revenues	670			539			1,795			958
Total revenues	35,986			45,275			59,321			84,941
Operating Expenses
Cost of products	9,176			10,639			17,466			19,169
Cost of services	8,218			7,895			15,310			14,678
Research and development	34,518			42,049			67,580			79,187
Selling, general and administrative	21,483			34,427			55,077			74,164
Total operating expenses	73,395			95,010			155,433			187,198
Operating loss	(37,409		)	(49,735		)	(96,112		)	(102,257		)
Other Expense, Net
Unrealized and realized appreciation (depreciation) in fair value of equity securities and preferred stock, net	5,632			(19,182		)	5,702			(20,278		)
Interest expense	(4,358		)	(142		)	(8,669		)	(241		)
Interest and dividend income	1,031			5,746			2,395			11,216
Other expense, net	(2,605		)	(93		)	(2,099		)	(881		)
Total other expense, net	(300		)	(13,671		)	(2,671		)	(10,184		)
Equity in net loss of affiliates	(1,747		)	(4,550		)	(3,387		)	(7,010		)
Loss before income taxes	(39,456		)	(67,956		)	(102,170		)	(119,451		)
Income tax benefit	525			1,127			1,103			5,213
Net loss	$	(38,931	)	$	(66,829	)	$	(101,067	)	$	(114,238	)
Net loss attributable to the noncontrolling interests	165			1,447			1,592			2,691
Net loss attributable to Intrexon	$	(38,766	)	$	(65,382	)	$	(99,475	)	$	(111,547	)
Net loss attributable to Intrexon per share, basic and diluted	$	(0.25	)	$	(0.51	)	$	(0.65	)	$	(0.87	)
Weighted average shares outstanding, basic and diluted	153,749,929			129,299,584			153,351,208			128,500,897

The accompanying notes are an integral part of these consolidated financial statements.

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Comprehensive Loss

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(Amounts in thousands)	2019			2018			2019			2018
Net loss	$	(38,931	)	$	(66,829	)	$	(101,067	)	$	(114,238	)
Other comprehensive income (loss):
Unrealized gain on investments	59			—			106			2
Gain (loss) on foreign currency translation adjustments	26			(12,153		)	311			(6,293		)
Comprehensive loss	(38,846		)	(78,982		)	(100,650		)	(120,529		)
Comprehensive loss attributable to the noncontrolling interests	199			1,489			1,581			2,792
Comprehensive loss attributable to Intrexon	$	(38,647	)	$	(77,493	)	$	(99,069	)	$	(117,737	)

The accompanying notes are an integral part of these consolidated financial statements.

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Shareholders' and Total Equity

(Unaudited)



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
Balances at March 31, 2019	160,615,416	$	—	$	1,732,608		$	(28,325	)	$	(1,391,254	)	$	313,029		$	21,794		$	334,823
Stock-based compensation expense	—	—		56			—			—			56			5			61
Shares issued upon vesting of restricted stock units	345,378	—		—			—			—			—			—			—
Shares issued as payment for services	956,630	—		4,857			—			—			4,857			—			4,857
Adjustments for noncontrolling interests	—	—		(72		)	—			—			(72		)	72			—
Deconsolidation of subsidiary	—	—		—			—			—			—			(21,672		)	(21,672		)
Net loss	—	—		—			—			(38,766		)	(38,766		)	(165		)	(38,931		)
Other comprehensive income	—	—		—			119			—			119			(34		)	85
Balances at June 30, 2019	161,917,424	$	—	$	1,737,449		$	(28,206	)	$	(1,430,020	)	$	279,223		$	—		$	279,223



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
Balances at March 31, 2018	129,239,376	$	—	$	1,492,916	$	(9,737	)	$	(867,374	)	$	615,805		$	18,317		$	634,122
Stock-based compensation expense	—	—		8,814		—			—			8,814			32			8,846
Shares issued for exercises of stock options and warrants	5,311	—		47		—			—			47			562			609
Shares issued as payment for services	177,101	—		2,546		—			—			2,546			—			2,546
Adjustments for noncontrolling interests	—	—		33		—			—			33			(33		)	—
Net loss	—	—		—		—			(65,382		)	(65,382		)	(1,447		)	(66,829		)
Other comprehensive loss	—	—		—		(12,111		)	—			(12,111		)	(42		)	(12,153		)
Balances at June 30, 2018	129,421,788	$	—	$	1,504,356	$	(21,848	)	$	(932,756	)	$	549,752		$	17,389		$	567,141

The accompanying notes are an integral part of these consolidated financial statements

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Shareholders' and Total Equity

(Unaudited)



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
Balances at December 31, 2018	160,020,466	$	—	$	1,722,012		$	(28,612	)	$	(1,330,545	)	$	362,855		$	15,867		$	378,722
Stock-based compensation expense	—	—		9,046			—			—			9,046			69			9,115
Shares issued upon vesting of restricted stock units and for exercises of stock options and warrants	632,015	—		57			—			—			57			250			307
Shares issued for accrued compensation	150,908	—		1,102			—			—			1,102			—			1,102
Shares issued as payment for services	1,114,035	—		5,688			—			—			5,688			—			5,688
Shares issued in public offerings, net of issuance costs	—	—		—			—			—			—			6,611			6,611
Adjustments for noncontrolling interests	—	—		(456		)	—			—			(456		)	456			—
Deconsolidation of subsidiary	—	—		—			—			—			—			(21,672		)	(21,672		)
Net loss	—	—		—			—			(99,475		)	(99,475		)	(1,592		)	(101,067		)
Other comprehensive income	—	—		—			406			—			406			11			417
Balances at June 30, 2019	161,917,424	$	—	$	1,737,449		$	(28,206	)	$	(1,430,020	)	$	279,223		$	—		$	279,223



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Intrexon Shareholders' Equity			Noncontrolling Interests			Total Equity
Balances at December 31, 2017	122,087,040	$	—	$	1,397,005		$	(15,554	)	$	(847,820	)	$	533,631		$	12,914		$	546,545
Cumulative effect of adoption of ASC 606	—	—		—			(104		)	26,611			26,507			—			26,507
Stock-based compensation expense	—	—		20,154			—			—			20,154			54			20,208
Shares issued for exercises of stock options and warrants	27,033	—		121			—			—			121			812			933
Shares issued as payment for services	407,715	—		5,487			—			—			5,487			—			5,487
Shares and warrants issued in public offerings, net of issuance costs	6,900,000	—		82,374			—			—			82,374			5,616			87,990
Adjustments for noncontrolling interests	—	—		(785		)	—			—			(785		)	785			—
Net loss	—	—		—			—			(111,547		)	(111,547		)	(2,691		)	(114,238		)
Other comprehensive loss	—	—		—			(6,190		)	—			(6,190		)	(101		)	(6,291		)
Balances at June 30, 2018	129,421,788	$	—	$	1,504,356		$	(21,848	)	$	(932,756	)	$	549,752		$	17,389		$	567,141

The accompanying notes are an integral part of these consolidated financial statements

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended June 30,
(Amounts in thousands)	2019			2018
Cash flows from operating activities
Net loss	$	(101,067	)	$	(114,238	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	12,690			16,881
Loss on disposal of assets, net	1,286			5,585
Unrealized and realized (appreciation) depreciation on equity securities and preferred stock, net	(5,702		)	20,278
Noncash dividend income	(25		)	(9,914		)
Amortization of premiums (discounts) on investments, net	(693		)	—
Equity in net loss of affiliates	3,387			7,010
Stock-based compensation expense	9,115			20,208
Shares issued as payment for services	5,688			5,487
Provision for bad debts	344			789
Accretion of debt discount and amortization of deferred financing costs	4,532			—
Deferred income taxes	(981		)	(5,089		)
Other noncash items	3,166			205
Changes in operating assets and liabilities:
Receivables:
Trade	(3,743		)	(3,639		)
Related parties	(3,317		)	6,279
Other	296			(53		)
Inventory	3,096			432
Prepaid expenses and other	45			1,284
Right-of-use assets	2,639			—
Other assets	(1,202		)	102
Accounts payable	(3,686		)	(468		)
Accrued compensation and benefits	(347		)	7,597
Other accrued liabilities	(7,855		)	(1,165		)
Deferred revenue	8,890			(15,648		)
Lease liabilities	(2,675		)	—
Related party payables	67			(199		)
Other long-term liabilities	(585		)	218
Net cash used in operating activities	(76,637		)	(58,058		)

The accompanying notes are an integral part of these consolidated financial statements.

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Intrexon Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended June 30,
(Amounts in thousands)	2019		2018
Cash flows from investing activities
Purchases of investments	(37,163	)	(76	)
Maturities of investments	90,000		6,000
Proceeds from sales of equity securities	589		217
Investments in affiliates	(2,370	)	(8,510	)
Decrease in cash from deconsolidation of subsidiary	(7,244	)	—
Return of investment in affiliate	—		2,598
Purchases of property, plant and equipment	(25,423	)	(21,589	)
Proceeds from sale of assets	176		440
Net cash provided by (used in) investing activities	18,565		(20,920	)
Cash flows from financing activities