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 September 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 October 31, 2019, 162,682,637 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 September 30, 2019 and December 31, 2018	5
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2019 and 2018	7
	Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2019 and 2018	8
	Consolidated Statements of Shareholders' and Total Equity for the Three and Nine Months Ended September 30, 2019 and 2018	9
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2019 and 2018	12
	Notes to the Consolidated Financial Statements	15
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	41
3.	Quantitative and Qualitative Disclosures About Market Risk	59
4.	Controls and Procedures	59

PART II - OTHER INFORMATION
1.	Legal Proceedings	60
1A.	Risk Factors	61
2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
3.	Defaults on Senior Securities	61
4.	Mine Safety Disclosures	61
5.	Other Information	62
6.	Exhibits	62
	Signatures	63

Intrexon^®, Trans Ova Genetics^®, Oxitec^®, Okanagan Specialty Fruits^®, EnviroFlight^®, ViaGen^®, ActoBiotics^®, and Design-Build-Test-Learn^® are our and/or our affiliates' registered trademarks in the United States and Precigen™, Progentus™, and ActoBio 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 and our ability to exercise more control and ownership over the development process and commercialization path;


•	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, including the expected timing and results of investigational studies and preclinical and clinical trials, 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;

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•	our ability to retain and recruit key personnel;


•	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)	September 30, 2019		December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	44,428	$	102,768
Restricted cash	—		6,987
Short-term investments	45,285		119,688
Equity securities	16,320		384
Receivables
Trade, net	20,413		21,195
Related parties, net	2,588		4,129
Other, net	1,970		2,754
Inventory	17,295		21,447
Prepaid expenses and other	9,033		6,131
Total current assets	157,332		285,483
Equity securities, noncurrent	6,515		1,798
Property, plant and equipment, net	122,706		128,874
Intangible assets, net	107,141		129,291
Goodwill	147,949		149,585
Investments in affiliates	17,487		18,859
Right-of-use assets	43,211		—
Other assets	2,564		2,287
Total assets	$	604,905	$	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)	September 30, 2019			December 31, 2018
Liabilities and Total Equity
Current liabilities
Accounts payable	$	7,395		$	13,420
Accrued compensation and benefits	9,862			10,687
Other accrued liabilities	13,664			20,620
Deferred revenue, including $4,205 and $6,945 from related parties as of September 30, 2019 and December 31, 2018, respectively	12,764			15,554
Lines of credit	569			466
Current portion of long-term debt, including $30,974 to related parties as of September 30, 2019	31,433			559
Current portion of lease liabilities	6,224			—
Related party payables	44			256
Total current liabilities	81,955			61,562
Long-term debt, net of current portion, including $25,000 and $55,290 to related parties as of September 30, 2019 and December 31, 2018, respectively	184,034			211,235
Deferred revenue, net of current portion, including $51,900 and $52,227 from related parties as of September 30, 2019 and December 31, 2018, respectively	66,360			54,210
Lease liabilities, net of current portion	38,182			—
Deferred tax liabilities, net	5,732			7,213
Other long-term liabilities	221			3,235
Total liabilities	376,484			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 September 30, 2019 and December 31, 2018, respectively; 162,511,940 and 160,020,466 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively	—			—
Additional paid-in capital	1,745,177			1,722,012
Accumulated deficit	(1,483,654		)	(1,330,545		)
Accumulated other comprehensive loss	(33,102		)	(28,612		)
Total Intrexon shareholders' equity	228,421			362,855
Noncontrolling interests	—			15,867
Total equity	228,421			378,722
Total liabilities and total equity	$	604,905		$	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 September 30,						Nine Months Ended September 30,
(Amounts in thousands, except share and per share data)	2019			2018			2019			2018
Revenues
Collaboration and licensing revenues, including $3,428 and $11,952 from related parties during the three months ended September 30, 2019 and 2018, respectively, and $14,350 and $41,740 during the nine months ended September 30, 2019 and 2018, respectively	$	6,185		$	14,324		$	21,252		$	51,622
Product revenues	5,852			6,829			18,528			23,549
Service revenues	9,924			10,414			39,707			40,379
Other revenues	1,082			881			2,877			1,839
Total revenues	23,043			32,448			82,364			117,389
Operating Expenses
Cost of products	8,263			8,877			25,729			28,046
Cost of services	6,550			6,449			21,860			21,127
Research and development	31,480			44,885			99,060			124,072
Selling, general and administrative	24,741			38,708			79,818			112,872
Impairment loss	626			—			626			—
Total operating expenses	71,660			98,919			227,093			286,117
Operating loss	(48,617		)	(66,471		)	(144,729		)	(168,728		)
Other Expense, Net
Unrealized and realized appreciation (depreciation) in fair value of equity securities and preferred stock, net	(3,068		)	(7,287		)	2,634			(27,565		)
Interest expense	(4,471		)	(3,999		)	(13,140		)	(4,240		)
Interest and dividend income	885			6,107			3,280			17,323
Other income, net	2,772			1,452			673			571
Total other expense, net	(3,882		)	(3,727		)	(6,553		)	(13,911		)
Equity in net loss of affiliates	(1,647		)	(2,870		)	(5,034		)	(9,880		)
Loss before income taxes	(54,146		)	(73,068		)	(156,316		)	(192,519		)
Income tax benefit	512			14,322			1,615			19,535
Net loss	$	(53,634	)	$	(58,746	)	$	(154,701	)	$	(172,984	)
Net loss attributable to the noncontrolling interests	—			1,422			1,592			4,113
Net loss attributable to Intrexon	$	(53,634	)	$	(57,324	)	$	(153,109	)	$	(168,871	)
Net loss attributable to Intrexon per share, basic and diluted	$	(0.35	)	$	(0.44	)	$	(1.00	)	$	(1.31	)
Weighted average shares outstanding, basic and diluted	154,596,257			129,518,989			153,770,785			128,843,991

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 September 30,						Nine Months Ended September 30,
(Amounts in thousands)	2019			2018			2019			2018
Net loss	$	(53,634	)	$	(58,746	)	$	(154,701	)	$	(172,984	)
Other comprehensive income (loss):
Unrealized gain (loss) on investments	(25		)	(96		)	81			(94		)
Loss on foreign currency translation adjustments	(4,871		)	(914		)	(4,560		)	(7,207		)
Comprehensive loss	(58,530		)	(59,756		)	(159,180		)	(180,285		)
Comprehensive loss attributable to the noncontrolling interests	—			1,380			1,581			4,172
Comprehensive loss attributable to Intrexon	$	(58,530	)	$	(58,376	)	$	(157,599	)	$	(176,113	)

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 June 30, 2019	161,917,424	$	—	$	1,737,449	$	(28,206	)	$	(1,430,020	)	$	279,223		$	—	$	279,223
Stock-based compensation expense	—	—		5,423		—			—			5,423			—		5,423
Shares issued upon vesting of restricted stock units and for exercises of stock options	164,844	—		6		—			—			6			—		6
Shares issued as payment for services	429,672	—		2,299		—			—			2,299			—		2,299
Net loss	—	—		—		—			(53,634		)	(53,634		)	—		(53,634		)
Other comprehensive loss	—	—		—		(4,896		)	—			(4,896		)	—		(4,896		)
Balances at September 30, 2019	162,511,940	$	—	$	1,745,177	$	(33,102	)	$	(1,483,654	)	$	228,421		$	—	$	228,421



(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 June 30, 2018	129,421,788	$	—	$	1,504,356	$	(21,848	)	$	(932,756	)	$	549,752		$	17,389		$	567,141
Stock-based compensation expense	—	—		8,097		—			—			8,097			35			8,132
Shares issued upon vesting of restricted stock units and for exercises of stock options	39,281	—		141		—			—			141			—			141
Shares issued as payment for services	204,402	—		2,917		—			—			2,917			—			2,917
Equity component of convertible debt, net of issuance costs and deferred taxes	—	—		36,868		—			—			36,868			—			36,868
Shares issued pursuant to share lending agreement	7,479,431	—		—		—			—			—			—			—
Net loss	—	—		—		—			(57,324		)	(57,324		)	(1,422		)	(58,746		)
Other comprehensive income (loss)	—	—		—		(1,052		)	—			(1,052		)	42			(1,010		)
Balances at September 30, 2018	137,144,902	$	—	$	1,552,379	$	(22,900	)	$	(990,080	)	$	539,399		$	16,044		$	555,443

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	—	—		14,469			—			—			14,469			69			14,538
Shares issued upon vesting of restricted stock units and for exercises of stock options and warrants	796,859	—		63			—			—			63			250			313
Shares issued for accrued compensation	150,908	—		1,102			—			—			1,102			—			1,102
Shares issued as payment for services	1,543,707	—		7,987			—			—			7,987			—			7,987
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	—	—		—			—			(153,109		)	(153,109		)	(1,592		)	(154,701		)
Other comprehensive income (loss)	—	—		—			(4,490		)	—			(4,490		)	11			(4,479		)
Balances at September 30, 2019	162,511,940	$	—	$	1,745,177		$	(33,102	)	$	(1,483,654	)	$	228,421		$	—		$	228,421

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, 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	—	—		28,251			—			—			28,251			89			28,340
Shares issued upon vesting of restricted stock units and for exercises of stock options and warrants	66,314	—		262			—			—			262			812			1,074
Shares issued as payment for services	612,117	—		8,404			—			—			8,404			—			8,404
Shares and warrants issued in public offerings, net of issuance costs	6,900,000	—		82,374			—			—			82,374			5,616			87,990
Equity component of convertible debt, net of issuance costs and deferred taxes	—	—		36,868			—			—			36,868			—			36,868
Shares issued pursuant to share lending agreement	7,479,431	—		—			—			—			—			—			—
Adjustments for noncontrolling interests	—	—		(785		)	—			—			(785		)	785			—
Net loss	—	—		—			—			(168,871		)	(168,871		)	(4,113		)	(172,984		)
Other comprehensive loss	—	—		—			(7,242		)	—			(7,242		)	(59		)	(7,301		)
Balances at September 30, 2018	137,144,902	$	—	$	1,552,379		$	(22,900	)	$	(990,080	)	$	539,399		$	16,044		$	555,443

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)



	Nine Months Ended September 30,
(Amounts in thousands)	2019			2018
Cash flows from operating activities
Net loss	$	(154,701	)	$	(172,984	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	18,711			25,184
Loss on disposals of assets, net	1,875			4,110
Impairment loss	626			—
Write-off of in-process research and development acquired in asset acquisition	—			8,721
Unrealized and realized (appreciation) depreciation on equity securities and preferred stock, net	(2,634		)	27,565
Noncash dividend income	(38		)	(14,575		)
Amortization of discounts on investments, net	(949		)	(275		)
Equity in net loss of affiliates	5,034			9,880
Stock-based compensation expense	14,538			28,340
Shares issued as payment for services	7,987			8,404
Provision for bad debts	787			1,597
Accretion of debt discount and amortization of deferred financing costs	6,962			2,116
Deferred income taxes	(1,448		)	(19,335		)
Other noncash items	3,284			635
Changes in operating assets and liabilities:
Receivables:
Trade	241			399
Related parties	1,190			6,085
Other	462			(909		)
Inventory	4,775