Precigen(PGEN) - 2019 Q1 - Quarterly Report

FORM 10-Q Filing Information Filing Details 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] - Intrexon Corporation is identified as a large accelerated filer[4] - The company's common stock (XON) is registered on the Nasdaq Global Select Market[5] Special Note Regarding Forward-Looking Statements Forward-Looking Statements Disclaimer 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] - Actual results or events could differ materially from the plans, intentions, and expectations disclosed[13] - The company does not assume any obligation to update forward-looking statements, except as required by law[14] PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements 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 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 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 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 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 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 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 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] - 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][44][45][46][47] - 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] Note 2. Summary of Significant Accounting Policies 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] - 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] - 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] - The company operates in one segment, focusing on synthetic biology technologies, with long-lived assets and revenues derived from foreign countries[62] Note 3. Mergers and Acquisitions 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] - 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] Note 4. Investments in Joint Ventures 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][76] - The company's investment in EnviroFlight, a venture for animal and fish feed production, was $15.829 million as of March 31, 2019[79] - 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] Note 5. Collaboration and Licensing Revenue 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] 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 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] Note 7. Fair Value Measurements 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] - Contingent consideration liabilities, measured at Level 3, remained at $585 thousand as of March 31, 2019[101] Note 8. Inventory 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 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] Note 10. Goodwill and Intangible Assets, Net 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] Note 11. Lines of Credit and Long-Term Debt 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][116] 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 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] - The company recorded a deferred tax benefit of $508 thousand for Q1 2019[123] - 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] Note 13. Shareholders' Equity 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] - 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][128] 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 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 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 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] - 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] - 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] Note 17. Related Party Transactions 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] - The company accrued $2.078 million for services rendered by Third Security for Q1 2019[151] - 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][157] Note 18. Net Loss per Share 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 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] - 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] - A new 2019 Incentive Plan for Non-Employee Service Providers was adopted, pending shareholder approval, to attract and retain non-employee service providers[164] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][173] - 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] Our operating subsidiaries 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] - ActoBio Therapeutics is developing microbe-based biopharmaceuticals for local delivery of therapeutics[178] - 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] Mergers, acquisitions, and technology in-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] - This strategy aims to expand the breadth or efficacy of products/services through the application of Intrexon's technologies[184] Financial overview 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] - Revenues are primarily derived from collaboration and licensing agreements, and product and service sales[186][190] - Collaboration revenues are expected to decrease considerably due to reacquisition of rights from collaborators in 2018[191] Cost of products and services 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] - Fluctuations in livestock and feed prices have not had a significant impact on operating margins[192] Research and development expenses 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] - 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] Selling, general and administrative expenses 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][211] Other income (expense), net 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] Equity in net income (loss) of affiliates 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] Results of operations 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] - Product revenues decreased by $2.3 million (32%) due to lower customer demand for pregnant cows and cloned products[207] Liquidity and capital resources 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] - 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][218] - Net cash provided by financing activities decreased significantly to $6.927 million for Q1 2019 from $88.262 million for Q1 2018[215][221][222] - 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] Contractual obligations and commitments 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] - Research and development commitments with third parties totaled $9.8 million, not yet incurred[230] Net operating losses 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] - 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] - Certain NOLs are subject to limitations under Section 382 of the Internal Revenue Code[233] Off-balance sheet arrangements 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] Critical accounting policies and estimates 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] Recent accounting pronouncements 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - A hypothetical 100 basis point increase in interest rates is not expected to materially affect the fair value of interest-sensitive financial instruments[239] - The fair value of the company's 44% investment in AquaBounty common stock was $18.0 million as of March 31, 2019[240] - A hypothetical 10% change in foreign currency exchange rates is not expected to have a material impact on consolidated financial statements[241] Item 4. Controls and Procedures 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] - No material changes in internal control over financial reporting occurred during the three months ended March 31, 2019[243] PART II - OTHER INFORMATION Item 1. Legal Proceedings 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] - 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] - Other patent litigation between Trans Ova and XY, LLC is administratively closed, pending XY's appeal of court rulings[248] Item 1A. Risk Factors 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] - Implementation of this strategy and leadership changes could lead to strategic and operational challenges, management distractions, impaired employee relations, inefficiencies, or increased costs[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults on Senior Securities There were no defaults on senior securities to report for the period - No defaults on senior securities to report[255] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[256] Item 5. Other Information There is no other information to report for the period - No other information to report[257] Item 6. Exhibits 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] - The Interactive Data File (XBRL) for the quarterly period ended March 31, 2019, is attached as Exhibit 101.0[259]