Financial Data and Key Metrics Changes - Second quarter revenues were $36 million, a decrease of $9.3 million from the prior year, while year-to-date revenues were $59.3 million, down $25.6 million from the previous year [21] - Total operating expenses for the quarter were $73.4 million, reflecting a 23% decrease year-over-year, and year-to-date operating expenses were $155.4 million, down 17% from the prior year [22] - The company ended the second quarter with a cash balance of $125.8 million and expects to maintain the same cash balance by year-end as of April 3, 2019 [22] Business Line Data and Key Metrics Changes - Precigen is advancing its clinical and preclinical portfolio, including the UltraCAR-T therapeutic platform, with ongoing trials for PRGN-3006 and PRGN-3005 [4][5] - The majority-owned subsidiary Triple-Gene is evaluating INXN-4001 for heart failure, with dosing completed in the first cohort of patients [7][8] - ActoBio Therapeutics is progressing with AG019 for type 1 diabetes, having initiated enrollment for the next patient cohorts [9] Market Data and Key Metrics Changes - Okanagan Specialty Fruits has planted 955,000 new Arctic Apple trees, expecting a five-fold increase in production compared to 2018 [12] - Oxitec's pilot project in Brazil demonstrated an average of 89% peak suppression of Aedes aegypti mosquito populations, indicating strong performance in controlling mosquito-borne diseases [14][15] Company Strategy and Development Direction - The company is focusing on becoming a more strategic healthcare company, with Precigen identified as the top priority [26] - Intrexon is pursuing several transactions, including the sale of Exemplar Genetics and Trans Ova Genetics, to streamline operations and reduce costs [19][20] - The company has decided not to pursue the full initial target of $70 million in operating cost reductions, opting instead to focus on maintaining cash balance [18][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the company's objectives for the year and emphasized the importance of shareholder value [47] - The company is committed to enabling enterprises and believes that its Methane Bioconversion Platform has significant potential despite the decision to transfer it to a new entity [25][28] Other Important Information - The company has partnered with Surterra Wellness for cannabinoid production, utilizing its proprietary yeast fermentation platform [11] - Oxitec has submitted an Experimental Use Permit to the EPA for its second-generation mosquito technology, aiming for a U.S.-based pilot project in 2020 [16] Q&A Session Summary Question: Details on the Methanotroph platform ownership and costs - Management indicated that they aim to secure maximum upside for shareholders while eliminating the need for Intrexon to fund the program further [25] Question: Highlights of PRGN-5001 data - Management deferred detailed data discussion to a future call, expressing excitement about ongoing developments [29] Question: Impact of Arctic apple production increase on revenue - Management stated it is too early to quantify revenue impact but expects to secure purchase orders due to increased supply [31] Question: Status of Trans Ova sale - Management confirmed plans to close the transaction by the fourth quarter, emphasizing the cyclical nature of the field [33][35] Question: Operating expense cuts and focus areas - Management refrained from quantifying specific cuts but reiterated confidence in maintaining cash balance through cost reductions [36] Question: Upcoming healthcare milestones - Management referred to their health-related deck for upcoming milestones, including data readouts for various trials [40] Question: Cost and commercialization of mosquito technology - Management indicated ongoing discussions with potential partners and emphasized the potential for lower production costs [42] Question: Shareholder sentiment on selling revenue-generating assets - Management reported strong support from shareholders for the strategic focus on healthcare, despite selling revenue-generating assets [44]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Filing Details](index=1&type=section&id=Filing%20Details) This document is a Quarterly Report on Form 10-Q for Intrexon Corporation, covering the period ended March 31, 2019, identifying the company as a large accelerated filer - The filing is a Quarterly Report on Form 10-Q for the period ended March 31, 2019[2](index=2&type=chunk) - Intrexon Corporation is identified as a **large accelerated filer**[4](index=4&type=chunk) - The company's common stock (XON) is registered on the Nasdaq Global Select Market[5](index=5&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section highlights that the report contains forward-looking statements subject to substantial risks and uncertainties, and actual results may differ materially from expectations - The report contains forward-looking statements involving substantial risks and uncertainties[10](index=10&type=chunk) - Actual results or events could differ materially from the plans, intentions, and expectations disclosed[13](index=13&type=chunk) - The company does not assume any obligation to update forward-looking statements, except as required by law[14](index=14&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements) Presents Intrexon Corporation's unaudited consolidated financial statements for Q1 2019, including balance sheets, statements of operations, comprehensive loss, shareholders' equity, and cash flows, with detailed notes [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a slight decrease in total assets and total equity, while total liabilities increased from December 31, 2018, to March 31, 2019 Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | March 31, 2019 | December 31, 2018 | Change (2019 vs 2018) | % Change | | :-------------------------- | :------------- | :---------------- | :-------------------- | :------- | | Total Assets | $709,864 | $716,177 | $(6,313) | -0.9% | | Total Liabilities | $375,041 | $337,455 | $37,586 | 11.1% | | Total Equity | $334,823 | $378,722 | $(43,899) | -11.6% | | Cash and cash equivalents | $106,544 | $102,768 | $3,776 | 3.7% | | Short-term investments | $75,090 | $119,688 | $(44,598) | -37.3% | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2019, the company reported a significant decrease in total revenues and an increased net loss compared to Q1 2018, mainly due to reduced collaboration and licensing revenues Consolidated Statements of Operations Highlights (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | Percent Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------ | :------------- | | Total Revenues | $23,335 | $39,666 | $(16,331) | -41.2% | | Collaboration and licensing revenues | $5,970 | $19,848 | $(13,878) | -69.9% | | Product revenues | $4,857 | $7,152 | $(2,295) | -32.1% | | Service revenues | $11,383 | $12,247 | $(864) | -7.1% | | Total Operating Expenses | $82,038 | $92,317 | $(10,279) | -11.1% | | Operating Loss | $(58,703) | $(52,651) | $(6,052) | 11.5% | | Net Loss | $(62,136) | $(47,409) | $(14,727) | 31.1% | | Net Loss attributable to Intrexon | $(60,709) | $(46,165) | $(14,544) | 31.5% | | Net Loss per share, basic and diluted | $(0.40) | $(0.36) | $(0.04) | 11.1% | [Consolidated Statements of Comprehensive Loss](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a comprehensive loss of **$(61.8) million** for Q1 2019, an increase from $(41.5) million in the prior year, primarily reflecting the higher net loss Consolidated Statements of Comprehensive Loss (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(62,136) | $(47,409) | | Other comprehensive income (loss) | $332 | $5,862 | | Comprehensive loss | $(61,804) | $(41,547) | | Comprehensive loss attributable to Intrexon | $(60,422) | $(40,244) | [Consolidated Statements of Shareholders' and Total Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20and%20Total%20Equity) Total equity decreased from $378.7 million at December 31, 2018, to $334.8 million at March 31, 2019, mainly due to the net loss incurred during the period Consolidated Statements of Shareholders' and Total Equity Highlights (Amounts in thousands) | Metric | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Total Intrexon shareholders' equity | $313,029 | $362,855 | | Noncontrolling interests | $21,794 | $15,867 | | Total equity | $334,823 | $378,722 | | Accumulated deficit | $(1,391,254) | $(1,330,545) | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2019, the company experienced increased cash usage in operating activities, a shift to cash provided by investing activities, and a substantial decrease in cash from financing activities Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Cash Flow Activity | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(43,234) | $(29,888) | | Net cash provided by (used in) investing activities | $33,592 | $(7,456) | | Net cash provided by financing activities | $6,927 | $88,262 | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $(3,219) | $51,832 | | Cash, cash equivalents, and restricted cash, End of period | $106,963 | $127,377 | [Notes to the Consolidated Financial Statements](index=15&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed information on the company's organization, significant accounting policies, mergers, joint ventures, revenue recognition, investments, debt, equity, and other financial matters [Note 1. Organization](index=15&type=section&id=Note%201.%20Organization) Intrexon Corporation uses synthetic biology to program biological systems for various applications, operating directly or through collaborations and joint ventures - Intrexon Corporation focuses on synthetic biology to address disease, environmental challenges, and sustainable food/industrial chemicals[42](index=42&type=chunk) - Key wholly-owned subsidiaries include Precigen (biopharmaceuticals), ActoBio Therapeutics (microbe-based biopharmaceuticals), Trans Ova Genetics (bovine reproductive technologies), Oxitec (biological insect control), and Okanagan Specialty Fruits (non-browning apples)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - As of March 31, 2019, Intrexon owned approximately **44% of AquaBounty Technologies, Inc.** and consolidated its financial statements due to contractual control over its board of directors[49](index=49&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=15&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the basis of presentation for interim financial statements, highlights a going concern uncertainty, and details accounting policies for investments, leases, and segment information - The company has incurred operating losses since inception and expects them to continue, leading to substantial doubt about its ability to continue as a going concern[52](index=52&type=chunk) - As of March 31, 2019, the company had **$181.6 million** in cash, cash equivalents, and short-term investments, which is not sufficient to fund operations for one year[52](index=52&type=chunk) - The company adopted ASC 842 (Leases) effective January 1, 2019, recognizing approximately **$43.5 million in Right-of-Use (ROU) Assets** and **$45.5 million in lease liabilities**[64](index=64&type=chunk) - The company operates in one segment, focusing on synthetic biology technologies, with long-lived assets and revenues derived from foreign countries[62](index=62&type=chunk) [Note 3. Mergers and Acquisitions](index=20&type=section&id=Note%203.%20Mergers%20and%20Acquisitions) In September 2018, Intrexon acquired Harvest's ownership in CRS Bio, Genten Therapeutics, and Relieve Genetics for $30 million in convertible promissory notes and $15.5 million cash - In September 2018, Intrexon acquired Harvest's ownership in CRS Bio, Genten Therapeutics, and Relieve Genetics for **$30 million in convertible promissory notes** and **$15.5 million cash**[71](index=71&type=chunk) - The transaction resulted in a write-off of **$10.078 million in deferred revenue** and expensing of **$8.721 million in in-process research and development**[72](index=72&type=chunk) [Note 4. Investments in Joint Ventures](index=20&type=section&id=Note%204.%20Investments%20in%20Joint%20Ventures) The company has several joint ventures, including Intrexon Energy Partners and EnviroFlight, primarily focused on leveraging its methane bioconversion and ActoBiotics platforms - Intrexon has joint ventures such as Intrexon Energy Partners and Intrexon Energy Partners II, focused on methane bioconversion technology[74](index=74&type=chunk)[76](index=76&type=chunk) - The company's investment in EnviroFlight, a venture for animal and fish feed production, was **$15.829 million** as of March 31, 2019[79](index=79&type=chunk) - In November 2018, Intrexon acquired 100% of Intrexon T1D Partners for **$18.97 million in common stock**, leading to a write-off of **$8.517 million in deferred revenue** and immediate expensing of **$10.453 million in in-process R&D**[81](index=81&type=chunk) [Note 5. Collaboration and Licensing Revenue](index=22&type=section&id=Note%205.%20Collaboration%20and%20Licensing%20Revenue) Collaboration and licensing revenues decreased significantly by **70% to $5.97 million** for Q1 2019, primarily due to reacquisition of rights from key collaborators Collaboration and Licensing Revenues (Amounts in thousands) | Counterparty | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------ | | ZIOPHARM Oncology, Inc. | $1,166 | $5,377 | $(4,211) | | Ares Trading S.A. | $0 | $2,423 | $(2,423) | | Intrexon T1D Partners, LLC | $0 | $1,328 | $(1,328) | | Harvest start-up entities | $2,723 | $3,197 | $(474) | | Total | $5,970 | $19,848 | $(13,878) | - The **70% decrease in collaboration and licensing revenues** was primarily due to the reacquisition of rights from ZIOPHARM and Ares Trading, and the termination of an ECC with OvaScience, Inc[206](index=206&type=chunk) Deferred Revenue (Amounts in thousands) | Category | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Collaboration and licensing agreements | $65,135 | $63,284 | | Total deferred revenue | $71,191 | $69,764 | [Note 6. Short-term Investments](index=23&type=section&id=Note%206.%20Short-term%20Investments) Short-term investments, primarily U.S. government debt securities, decreased to **$75.09 million** at March 31, 2019, from $119.688 million at December 31, 2018 Short-term Investments (Amounts in thousands) | Category | March 31, 2019 Fair Value | December 31, 2018 Fair Value | | :-------------------------- | :------------------------ | :------------------------- | | U.S. government debt securities | $74,738 | $119,340 | | Certificates of deposit | $352 | $348 | | Total | $75,090 | $119,688 | - All available-for-sale investments were due within one year based on contractual maturities as of March 31, 2019[91](index=91&type=chunk) [Note 7. Fair Value Measurements](index=24&type=section&id=Note%207.%20Fair%20Value%20Measurements) The company measures certain financial assets and liabilities at fair value, categorizing them into Level 1, 2, or 3 of the fair value hierarchy Financial Assets Measured at Fair Value (Amounts in thousands) | Category | Level 1 | Level 2 | Level 3 | Total March 31, 2019 | | :-------------------------- | :------ | :------ | :------ | :------------------- | | U.S. government debt securities | $0 | $74,738 | $0 | $74,738 | | Equity securities | $1,474 | $315 | $0 | $1,789 | | Other | $0 | $508 | $248 | $756 | | Total | $1,474 | $75,561 | $248 | $77,283 | - The fair value of Convertible Notes was approximately **$122 million** as of March 31, 2019, classified as Level 2[100](index=100&type=chunk) - Contingent consideration liabilities, measured at Level 3, remained at **$585 thousand** as of March 31, 2019[101](index=101&type=chunk) [Note 8. Inventory](index=26&type=section&id=Note%208.%20Inventory) Total inventory decreased to **$19.896 million** at March 31, 2019, from $21.447 million at December 31, 2018, with livestock being the largest component Inventory Breakdown (Amounts in thousands) | Category | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Supplies, embryos and other production materials | $4,729 | $4,729 | | Work in process | $3,186 | $4,391 | | Livestock | $10,051 | $10,167 | | Feed | $1,930 | $2,160 | | Total inventory | $19,896 | $21,447 | [Note 9. Property, Plant and Equipment, Net](index=26&type=section&id=Note%209.%20Property%2C%20Plant%20and%20Equipment%2C%20Net) Net property, plant and equipment increased to **$136.357 million** at March 31, 2019, from $128.874 million at December 31, 2018, with construction and other assets in progress showing a notable increase Property, Plant and Equipment, Net (Amounts in thousands) | Category | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Land and land improvements | $12,475 | $12,490 | | Buildings and building improvements | $20,387 | $20,371 | | Equipment | $76,716 | $74,555 | | Construction and other assets in progress | $24,123 | $18,880 | | Total property, plant and equipment, net | $136,357 | $128,874 | - Depreciation expense for the three months ended March 31, 2019, was **$3.573 million**, up from $3.456 million in the prior year[103](index=103&type=chunk) [Note 10. Goodwill and Intangible Assets, Net](index=26&type=section&id=Note%2010.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) Goodwill increased slightly to **$150.755 million**, while net intangible assets decreased to $125.868 million at March 31, 2019 Goodwill and Intangible Assets, Net (Amounts in thousands) | Category | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Goodwill | $150,755 | $149,585 | | Patents, developed technologies and know-how | $114,216 | $117,349 | | Total intangible assets, net | $125,868 | $129,291 | - Amortization expense for intangible assets decreased to **$3.004 million** for Q1 2019 from $4.926 million for Q1 2018[106](index=106&type=chunk) [Note 11. Lines of Credit and Long-Term Debt](index=27&type=section&id=Note%2011.%20Lines%20of%20Credit%20and%20Long-Term%20Debt) Total long-term debt, net of current portion, increased to **$214.010 million** at March 31, 2019, including $200 million in Convertible Notes issued in July 2018 Long-Term Debt (Amounts in thousands) | Category | March 31, 2019 | December 31, 2018 | | :-------------------------- | :------------- | :---------------- | | Convertible debt | $205,829 | $203,391 | | Notes payable | $4,435 | $4,551 | | Royalty-based financing | $2,151 | $2,085 | | Total long-term debt, less current portion | $214,010 | $211,235 | - The **$200 million Convertible Notes** issued in July 2018 have an effective interest rate of **11.02%** and mature on July 1, 2023[111](index=111&type=chunk)[116](index=116&type=chunk) Future Maturities of Long-Term Debt (Amounts in thousands) | Year | Amount | | :--- | :----- | | 2019 | $418 | | 2020 | $31,148 | | 2021 | $25,452 | | 2022 | $464 | | 2023 | $201,512 | | 2024 | $445 | | Thereafter | $2,670 | | Total | $262,109 | [Note 12. Income Taxes](index=30&type=section&id=Note%2012.%20Income%20Taxes) For Q1 2019, the company reported a U.S. taxable loss of approximately **$91.6 million** and has significant NOL carryforwards largely offset by a valuation allowance - For the three months ended March 31, 2019, the company had a U.S. taxable loss of approximately **$91.6 million**[123](index=123&type=chunk) - The company recorded a deferred tax benefit of **$508 thousand** for Q1 2019[123](index=123&type=chunk) - As of March 31, 2019, the company had U.S. federal net operating loss carryforwards of approximately **$460.7 million** and foreign loss carryforwards of approximately **$158.876 million**[124](index=124&type=chunk) [Note 13. Shareholders' Equity](index=30&type=section&id=Note%2013.%20Shareholders'%20Equity) AquaBounty completed a public offering in March 2019, generating **$6.611 million**, and Intrexon has a share lending agreement for 7.48 million common shares - AquaBounty completed an underwritten public offering in March 2019, generating net proceeds of **$6.611 million**[129](index=129&type=chunk) - Intrexon loaned **7,479,431 shares** of its common stock under a share lending agreement, which are not included in the denominator for loss per share unless the borrower defaults[126](index=126&type=chunk)[128](index=128&type=chunk) Components of Accumulated Other Comprehensive Loss (Amounts in thousands) | Component | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | Unrealized loss on investments | $(14) | $(61) | | Loss on foreign currency translation adjustments | $(28,311) | $(28,551) | | Total accumulated other comprehensive loss | $(28,325) | $(28,612) | [Note 14. Share-Based Payments](index=31&type=section&id=Note%2014.%20Share-Based%20Payments) Stock-based compensation expense decreased to **$9.054 million** for Q1 2019, with 11.7 million stock options and 2.29 million RSUs outstanding Stock-Based Compensation Expense (Amounts in thousands) | Category | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $1,845 | $3,258 | | Selling, general and administrative | $7,136 | $8,002 | | Total | $9,054 | $11,362 | Outstanding Stock Options and RSUs (Shares) | Metric | March 31, 2019 | | :-------------------------- | :------------- | | Stock options outstanding | 11,705,841 | | RSUs outstanding | 2,288,017 | [Note 15. Operating Leases](index=35&type=section&id=Note%2015.%20Operating%20Leases) Following ASC 842 adoption, operating lease costs for Q1 2019 were **$2.526 million**, with total lease liabilities of **$44.963 million** Operating Lease Costs (Amounts in thousands) | Category | Three Months Ended March 31, 2019 | | :-------------------------- | :-------------------------------- | | Operating lease costs | $2,526 | | Short-term and variable lease costs | $1,048 | | Total lease costs | $3,574 | Maturities of Lease Liabilities (Amounts in thousands) | Year | Amount | | :--- | :----- | | 2019 | $6,789 | | 2020 | $10,120 | | 2021 | $9,476 | | 2022 | $8,684 | | 2023 | $7,275 | | 2024 | $7,135 | | Thereafter | $27,348 | | Total | $76,827 | | Present value adjustment | $(31,864) | | Total lease liabilities | $44,963 | [Note 16. Commitments and Contingencies](index=37&type=section&id=Note%2016.%20Commitments%20and%20Contingencies) The company had **$16.542 million** in purchase commitments and faced increased royalty rates for Trans Ova's semen-sorting products due to legal proceedings - Outstanding contractual purchase commitments totaled **$16.542 million** as of March 31, 2019, mainly for commercial non-browning apple trees[144](index=144&type=chunk) - In March 2019, the district court increased the royalty rate on Trans Ova's semen-sorting products to **18.75%** and applied a weighted, blended royalty of **12.63%** to in vitro fertilization services utilizing reverse-sorted semen[145](index=145&type=chunk) - An estimated **$0.1 million of royalty expense** was recorded for Q1 2019 due to the recalculated underpayment to XY from February 2016 through December 2018[147](index=147&type=chunk) [Note 17. Related Party Transactions](index=38&type=section&id=Note%2017.%20Related%20Party%20Transactions) The company engages in various transactions with related parties, including Third Security, LLC, which provides professional services for a monthly fee paid in common stock - Third Security, LLC, an affiliate of the CEO, provides services for a fee of **$800 per month**, payable in fully-vested shares of Intrexon common stock[151](index=151&type=chunk) - The company accrued **$2.078 million** for services rendered by Third Security for Q1 2019[151](index=151&type=chunk) - The company holds investments in Fibrocell Science, Inc. preferred stock and convertible notes, valued at **$248 thousand** and **$156 thousand** respectively, as of March 31, 2019[156](index=156&type=chunk)[157](index=157&type=chunk) [Note 18. Net Loss per Share](index=40&type=section&id=Note%2018.%20Net%20Loss%20per%20Share) Basic and diluted net loss per share attributable to Intrexon for Q1 2019 was **$(0.40)**, with 36.15 million potentially dilutive securities excluded as anti-dilutive Net Loss per Share Attributable to Intrexon | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss attributable to Intrexon | $(60,709) | $(46,165) | | Weighted average shares outstanding | 152,948,058 | 127,693,336 | | Net loss per share, basic and diluted | $(0.40) | $(0.36) | Anti-Dilutive Securities (Shares) | Security Type | March 31, 2019 | March 31, 2018 | | :-------------- | :------------- | :------------- | | Convertible debt | 22,025,046 | 0 | | Options | 11,705,841 | 11,546,434 | | Restricted stock units | 2,288,017 | 1,052,182 | | Warrants | 133,264 | 133,264 | | Total | 36,152,168 | 12,731,880 | [Note 19. Subsequent Events](index=40&type=section&id=Note%2019.%20Subsequent%20Events) AquaBounty's April 2019 public offering is expected to lead to Intrexon's deconsolidation of AquaBounty in Q2 2019 due to loss of control - AquaBounty completed a public offering in April 2019, resulting in Intrexon's anticipated deconsolidation of AquaBounty in Q2 2019 due to loss of control[162](index=162&type=chunk) - Intrexon's board approved an amendment to increase authorized common stock from **200 million to 400 million shares**, subject to shareholder approval in June 2019[163](index=163&type=chunk) - A new 2019 Incentive Plan for Non-Employee Service Providers was adopted, pending shareholder approval, to attract and retain non-employee service providers[164](index=164&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the company's financial condition and results, highlighting its synthetic biology focus, evolving strategy, and detailed analysis of Q1 2019 performance [Overview](index=41&type=section&id=Overview) Intrexon is a leader in synthetic biology, applying engineering principles to biological systems, with an evolving strategy from ECC-type collaborations to more controlled relationships and acquisitions - Intrexon is a leader in synthetic biology, programming biological systems to alleviate disease, remediate environmental challenges, and provide sustainable food and industrial chemicals[167](index=167&type=chunk) - The company's strategy has shifted from exclusive channel collaborations (ECCs) to relationships providing more control and ownership over development and commercialization, including JVs and internal early-stage programs[171](index=171&type=chunk)[173](index=173&type=chunk) - In April 2019, the company announced a realignment of operations into two units, Intrexon Health and Intrexon Bioengineering, to better deploy resources and focus on healthcare[175](index=175&type=chunk) [Our operating subsidiaries](index=42&type=section&id=Our%20operating%20subsidiaries) Intrexon operates several key subsidiaries, including Precigen, ActoBio Therapeutics, Trans Ova Genetics, Okanagan Specialty Fruits, and Oxitec, with AquaBounty expected to be deconsolidated in Q2 2019 - Precigen is a discovery and clinical stage biopharmaceutical company focused on gene and cellular therapies[177](index=177&type=chunk) - ActoBio Therapeutics is developing microbe-based biopharmaceuticals for local delivery of therapeutics[178](index=178&type=chunk) - AquaBounty Technologies, Inc., a majority-owned subsidiary, is expected to be deconsolidated in Q2 2019 as Intrexon will no longer have contractual control over its board of directors[183](index=183&type=chunk) [Mergers, acquisitions, and technology in-licensing](index=43&type=section&id=Mergers%2C%20acquisitions%2C%20and%20technology%20in-licensing) The company augments its proprietary technologies through mergers, acquisitions, and in-licensing, seeking complementary technologies to expand product applications and create value - The company acquires technologies through mergers or acquisitions to expand its suite of proprietary technologies and leverage them in new or existing ventures[184](index=184&type=chunk) - This strategy aims to expand the breadth or efficacy of products/services through the application of Intrexon's technologies[184](index=184&type=chunk) [Financial overview](index=43&type=section&id=Financial%20overview) Intrexon has incurred significant losses since inception and expects continued losses, with future revenues dependent on partnering mature programs, collaboration advancements, and market commercialization - The company has incurred significant losses since inception and anticipates continued losses for the foreseeable future[185](index=185&type=chunk) - Revenues are primarily derived from collaboration and licensing agreements, and product and service sales[186](index=186&type=chunk)[190](index=190&type=chunk) - Collaboration revenues are expected to decrease considerably due to reacquisition of rights from collaborators in 2018[191](index=191&type=chunk) [Cost of products and services](index=44&type=section&id=Cost%20of%20products%20and%20services) Costs of products and services primarily include labor, supplies, livestock, feed, and facility charges, with fluctuations in livestock and feed prices not significantly impacting operating margins - Cost of products and services primarily includes labor, supplies, livestock, feed, and facility charges[192](index=192&type=chunk) - Fluctuations in livestock and feed prices have not had a significant impact on operating margins[192](index=192&type=chunk) [Research and development expenses](index=44&type=section&id=Research%20and%20development%20expenses) Research and development expenses decreased by **11% to $33.062 million** for Q1 2019, primarily due to lower depreciation and amortization and reduced personnel costs Research and Development Expenses (Amounts in thousands) | Category | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Expansion or improvement of our platform technologies | $6,927 | $3,794 | | Specific applications of our technologies in support of current and prospective partners | $9,284 | $18,314 | | Development of our product and service offerings | $10,811 | $8,012 | | Other | $6,040 | $7,147 | | Total research and development expenses | $33,062 | $37,267 | - Research and development expenses decreased by **$4.2 million (11%)** for Q1 2019, mainly due to a **$2.0 million decrease in depreciation and amortization** and a **$1.3 million decrease in salaries and benefits**[209](index=209&type=chunk) - The company expects R&D expenses to increase in the future due to proprietary program development, hiring additional personnel, and increased costs for consultants and laboratory supplies[196](index=196&type=chunk) [Selling, general and administrative expenses](index=45&type=section&id=Selling%2C%20general%20and%20administrative%20expenses) Selling, general and administrative (SG&A) expenses decreased by **16% to $33.594 million** for Q1 2019, primarily due to reduced compensation expenses related to performance and retention incentives Selling, General and Administrative Expenses (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | Percent Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------ | :------------- | | Selling, general and administrative | $33,594 | $39,737 | $(6,143) | -15.5% | - SG&A expenses decreased by **$6.1 million (16%)** for Q1 2019, primarily due to a **$4.8 million decrease in salaries, benefits, and other personnel costs**, and decreased share-based compensation[210](index=210&type=chunk)[211](index=211&type=chunk) [Other income (expense), net](index=45&type=section&id=Other%20income%20%28expense%29%2C%20net) Total other income (expense), net, decreased by **$6.0 million (166%)** for Q1 2019, primarily due to a decrease in dividend income and an increase in interest expense from Convertible Notes Total Other Income (Expense), Net (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | Percent Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------ | :------------- | | Total other income (expense), net | $(2,371) | $3,616 | $(5,987) | -165.6% | - The decrease was primarily attributable to a decrease in dividend income after returning ZIOPHARM preferred shares in October 2018 and an increase in interest expense from Convertible Notes issued in July 2018[212](index=212&type=chunk) [Equity in net income (loss) of affiliates](index=46&type=section&id=Equity%20in%20net%20income%20%28loss%29%20of%20affiliates) Equity in net loss of affiliates decreased by **33.3% to $(1.640) million** for Q1 2019, reflecting the company's pro-rata share of operating results from its equity method investments Equity in Net Loss of Affiliates (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | Percent Change | | :-------------------------- | :-------------------------------- | :-------------------------------- | :------------ | :------------- | | Equity in net loss of affiliates | $(1,640) | $(2,460) | $820 | -33.3% | - The company accounts for investments in joint ventures and Harvest-backed start-up entities using the equity method[202](index=202&type=chunk) [Results of operations](index=46&type=section&id=Results%20of%20operations) Overall, the company's net loss increased by **31.1% to $(62.136) million** for Q1 2019, driven by a significant 41.2% decrease in total revenues, partially offset by an 11.1% reduction in total operating expenses Summary of Results of Operations (Amounts in thousands) | Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Dollar Change | Percent Change | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------ | :------------- | | Total Revenues | $23,335 | $39,666 | $(16,331) | -41.2% | | Total Operating Expenses | $82,038 | $92,317 | $(10,279) | -11.1% | | Operating Loss | $(58,703) | $(52,651) | $(6,052) | 11.5% | | Net Loss | $(62,136) | $(47,409) | $(14,727) | 31.1% | - Collaboration and licensing revenues decreased by **$13.9 million (70%)** due to reacquisition of rights from significant collaborators[206](index=206&type=chunk) - Product revenues decreased by **$2.3 million (32%)** due to lower customer demand for pregnant cows and cloned products[207](index=207&type=chunk) [Liquidity and capital resources](index=48&type=section&id=Liquidity%20and%20capital%20resources) The company faces substantial doubt about its ability to continue as a going concern due to recurring losses and insufficient cash to fund operations for the next year - As of March 31, 2019, the company had **$106.5 million in cash and cash equivalents** and **$75.1 million in short-term investments**, totaling **$181.6 million**[213](index=213&type=chunk) - Net cash used in operating activities increased to **$(43.234) million** for Q1 2019 from $(29.888) million for Q1 2018, primarily due to increased clinical program expenses and reduced R&D reimbursements[215](index=215&type=chunk)[218](index=218&type=chunk) - Net cash provided by financing activities decreased significantly to **$6.927 million** for Q1 2019 from $88.262 million for Q1 2018[215](index=215&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern within one year due to recurring losses and insufficient capital[225](index=225&type=chunk) [Contractual obligations and commitments](index=51&type=section&id=Contractual%20obligations%20and%20commitments) As of March 31, 2019, the company had total contractual obligations of **$390.355 million**, with significant amounts due in 2020, 2021, and 2023, primarily related to convertible debt and operating leases Contractual Obligations and Commitments (Amounts in thousands) | Obligation Type | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :---------------- | :----------- | :--------------- | :----------- | :----------- | :---------------- | | Operating leases | $79,619 | $10,909 | $20,059 | $16,057 | $32,594 | | Purchase commitments | $16,542 | $5,697 | $10,845 | $0 | $0 | | Convertible debt | $255,515 | $0 | $55,515 | $200,000 | $0 | | Cash interest payable on convertible debt | $31,500 | $7,000 | $14,000 | $10,500 | $0 | | Long-term debt, excluding convertible debt | $6,594 | $565 | $1,053 | $1,971 | $3,005 | | Contingent consideration | $585 | $0 | $585 | $0 | $0 | | Total | $390,355 | $24,171 | $102,057 | $228,528 | $35,599 | - Remaining capital contribution commitments to joint ventures were **$14.6 million** as of March 31, 2019, not included in the table due to timing uncertainty[229](index=229&type=chunk) - Research and development commitments with third parties totaled **$9.8 million**, not yet incurred[230](index=230&type=chunk) [Net operating losses](index=51&type=section&id=Net%20operating%20losses) As of March 31, 2019, Intrexon had approximately **$460.7 million** in U.S. federal net operating loss (NOL) carryforwards and **$158.9 million** in foreign loss carryforwards, largely offset by a valuation allowance - As of March 31, 2019, the company had approximately **$460.7 million in U.S. federal NOL carryforwards** and **$158.9 million in foreign loss carryforwards**[232](index=232&type=chunk) - The net deferred tax assets related to these NOLs are offset by a valuation allowance due to the company's history of net losses[232](index=232&type=chunk) - Certain NOLs are subject to limitations under Section 382 of the Internal Revenue Code[233](index=233&type=chunk) [Off-balance sheet arrangements](index=52&type=section&id=Off-balance%20sheet%20arrangements) The company confirmed that it did not have any material off-balance sheet arrangements during the periods presented, other than purchase commitments - The company did not have any off-balance sheet arrangements, other than purchase commitments, during the periods presented[234](index=234&type=chunk) [Critical accounting policies and estimates](index=52&type=section&id=Critical%20accounting%20policies%20and%20estimates) There have been no material changes to the company's critical accounting policies and estimates from those described in its Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to critical accounting policies and estimates since the Annual Report on Form 10-K for December 31, 2018[236](index=236&type=chunk) [Recent accounting pronouncements](index=52&type=section&id=Recent%20accounting%20pronouncements) Information regarding recent accounting pronouncements and their impact on the consolidated financial statements is provided in Note 2 to the Consolidated Financial Statements - Details on recent accounting pronouncements are provided in Note 2 to the Consolidated Financial Statements[237](index=237&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to market risks, including interest rate risk, stock price risk from investments in publicly traded companies, and foreign currency exchange risk - The company's cash, cash equivalents, and short-term investments totaled **$181.6 million** as of March 31, 2019[239](index=239&type=chunk) - A hypothetical **100 basis point increase in interest rates** is not expected to materially affect the fair value of interest-sensitive financial instruments[239](index=239&type=chunk) - The fair value of the company's **44% investment in AquaBounty common stock was $18.0 million** as of March 31, 2019[240](index=240&type=chunk) - A hypothetical **10% change in foreign currency exchange rates** is not expected to have a material impact on consolidated financial statements[241](index=241&type=chunk) [Item 4. Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes in internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2019[242](index=242&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2019[243](index=243&type=chunk) [PART II - OTHER INFORMATION](index=54&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) Trans Ova is involved in ongoing patent infringement and licensing disputes with XY, LLC, resulting in increased royalty rates and an estimated $0.1 million royalty expense for Q1 2019 - In March 2019, the district court increased the royalty rate on Trans Ova's semen-sorting products to **18.75%** and applied a weighted, blended royalty of **12.63%** to in vitro fertilization services utilizing reverse-sorted semen[246](index=246&type=chunk) - An estimated **$0.1 million of royalty expense** was recorded for Q1 2019 due to the recalculated underpayment to XY from February 2016 through December 2018[247](index=247&type=chunk) - Other patent litigation between Trans Ova and XY, LLC is administratively closed, pending XY's appeal of court rulings[248](index=248&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) The company's business realignment into Intrexon Health and Intrexon Bioengineering may not be successful, potentially increasing capital requirements, costs, or harming operating results - The company's business realignment into Intrexon Health and Intrexon Bioengineering may not be successful and could increase capital requirements or harm operating results[252](index=252&type=chunk) - Implementation of this strategy and leadership changes could lead to strategic and operational challenges, management distractions, impaired employee relations, inefficiencies, or increased costs[252](index=252&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities and use of proceeds to report[254](index=254&type=chunk) [Item 3. Defaults on Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20on%20Senior%20Securities) There were no defaults on senior securities to report for the period - No defaults on senior securities to report[255](index=255&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[256](index=256&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - No other information to report[257](index=257&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements, certifications, and the Interactive Data File (XBRL) - Exhibits include the 2013 Amended and Restated Omnibus Incentive Plan, Restricted Stock Unit Agreement, Fourth Amendment to Services Agreement, and certifications by the CEO and CFO[259](index=259&type=chunk) - The Interactive Data File (XBRL) for the quarterly period ended March 31, 2019, is attached as Exhibit 101.0[259](index=259&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 20374 Seneca Meadows Parkway Germantown, Maryland 20876 (Address of principal executive offices) (Zip Code) FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 OR ¨ 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 ...

Intrexon Corp (XON) Q4 2018 Earnings Conference Call February 28, 2019 5:30 PM ET Company Participants Steven Harasym - VP of IR Joel Liffmann - SVP of Finance Bob Walsh - SVP of Energy and Fine Chemicals Nir Nimrodi - Chief Business Officer Thomas Bostick - COO R.J. Kirk - CEO Conference Call Participants Jason Butler - JMP securities Derik De Bruin - Bank of America Operator Good day everyone, and welcome to the Intrexon Fourth Quarter 2018 Financial Results Conference Call. [Operator Instructions] I woul ...

| --- | --- | --- | --- | --- | --- | |--------------------------------------------------------------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | Precigen Company Update | | | | | | | Helen Sabzevari, PhD President, Precigen | | | | | | | 9 January 2019 JP Morgan 37th Annual Healthcare Conference | | | | | | | | | | | | | | | | | | | | Forward-looking statements Precigen, Inc. is a subsidiary of Intrexon Corporation (Nasdaq: XON). Some of the statements made in this ...