Precigen Inc (PGEN) 2016 Q1 法說會逐字稿

Good afternoon and welcome to the Intrexon first-quarter 2016 earnings conference call.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Christopher Basta. Please go ahead.

Thank you, operator. Good afternoon. I am Chris Basta, Vice President of Investor Relations for Intrexon Corporation. Welcome to our first-quarter 2016 earnings conference call. Joining me on the call today are Mr. Randal Kirk, Chairman and Chief Executive Officer; and Mr. Joel Liffmann, Senior Vice President Finance.

During this conference call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements with respect to revenues, earnings, performance, strategies, prospects, and other aspects of Intrexon's business are based on current expectations and are subject to risks and uncertainties. A number of factors could cause actual results or outcomes to differ materially from those indicated by such forward-looking statements. Please read the Safe Harbor statement contained in the earnings press release which was released earlier today, and is also available on our website under the Investors link as well as Intrexon's most recent SEC filings for a more complete description.

The press release references and our discussion this afternoon may reference certain non-GAAP financial measures including adjusted EBITDA, and adjusted EBITDA per share. Reconciliations to GAAP measures are contained in the earnings press release, as well as on the Investors section on our website at www.DNA.com.

Now I would like to turn the call over to Joel Liffmann, our Senior Vice President of Finance. Joel, the floor is yours.

Thank you, Chris. Good afternoon and thank you for joining our first quarter 2016 earnings call. We certainly appreciate the support and interest from our investors.

Earlier today, we issued a press release with our first-quarter earnings and we filed our 10-Q with the SEC. I hope that you have had the chance to review the reported financial results.

We will go into some detail on each of the following, but I would first like to summarize our first-quarter results as follows. One, we made solid progress with our existing exclusive channel collaboration and joint venture programs. Two, we added three new exclusive channel collaborations in the first quarter.

Three, we acquired EnviroFlight, which is developing a potentially high growth and sustainable technology in the food sector. Four, we activated our natural gas to isobutanol piloted plant. Fifth, we had a positive regulatory developments with our Oxitec subsidiary and with several of our teen therapy programs, and six, throughout all this time, we maintained our capital efficient discipline. These developments and more reflect the outstanding contributions by Intrexon's 700 plus employees.

I will now give a brief update on activities and developments within certain of our operating sectors and subsidiaries, beginning with the health sector. Intrexon's suite of technologies is enabling a number of gene cell therapies for our collaborators. Our targets represent a broad set of diseases including cancer, wet age-related macular degeneration, diabetes, arthritis, rare diseases, metabolic disorders, orphan skin conditions, infectious diseases, tissue repair as well as synthetic biology mediated production of APIs.

Importantly, our expanding portfolio of technologies serves as the foundation for a robust pipeline of new ECC programs that we're discussing with prospective and existing partners. We will, of course, report significant deals as they are closed.

This year is expected to be a breakout year for our health sector, from the perspective of moving programs into the clinic. In addition to the three clinical trials currently underway and subject to FDA approval, we continue to anticipate up to seven INDs and clinical trial initiations with our existing ECC Partners utilizing Intrexon's technologies. The first of these programs is FCX-007, developed in conjuction with our collaborator Fibrocell Science.

In April, Fibrocell received an allowance from the FDA to initiate its phase I clinical trial in adults. This is the first gene therapy product candidate using easy to administer, easy to grow fiberglass cells for the treatment of recessive dystrophic epidermolysis bullosa.

Our team at Intrexon deployed a number of technologies to engineer Fibrocell's fibroblasts into cellular factories that now create functional trimeric structure collagen 7, which patients with this monogenic disease cannot produce. We advanced this much-needed product for this debilitating disease into human trials in less than three years since the development work began.

The second team therapy candidate developed by Fibrocell is FCX-013, which received orphan drug designation from the FDA in April. For this program, Intrexon has engineered trans genes using our ultra vector platform to optimize Fibrocell's fibroblast cells to produce therapeutic biologicals under the control of our proprietary RheoSwitch therapeutic system. This therapy is being developed for linear scleroderma, a chronic autoimmune disease characterized by thickening of the skin and connective tissue.

Our approach has the potential to provide a controlled local treatment option for patients, mitigating adverse effects from the typical systemic therapy they currently endure. Fibrocell is advancing this gene therapy into pre-clinical dose ranging studies, and expects to submit an IND for FCX-013 in 2017.

Additionally during the first quarter, we announced a new ECC with Fibrocell for genetically modified fiberglass to treat chronic inflammatory and degenerative joint diseases, including arthritis. Unlike our first two projects with Fibrocell, which are focused on orphan diseases, these disorders impact more than 52 million people in the US alone.

Oragenics, another collaborator advancing its products to the clinic, announced positive results last week from a confirmatory animal studies supporting previous findings of safety. Along with preliminary efficacy in a phase IB clinical trial for the prevention and treatment of oral mucositis, utilizing the active biotic AGO13. Oragenics has initiated regulatory as well as CMC activities to further advance the AGO13 program, and expects to finalize a phase 2 clinical trial protocol in the near future in anticipation of meeting with the FDA.

During the first quarter, we also expanded the application of our ActoBiotics platform with the formation of Intrexon T1D Partners, a joint venture with a group of external investors. T1D Partners will develop ActoBiotics-based antigen specific immunotherapy to treat type one diabetes by delivery of therapeutic proteins directly to the gut mucosal tissues through a pill.

With respect to our collaborator Ziopharm, we continue to be excited by what we see. Ziopharm is on target to launch three clinical programs in 2016, in addition to the three ongoing clinical trials. By year's end, the breadth of it oncology platform will be increasingly evident as we expect active clinical programs in controlled IL-12 gene therapy and breadth in brain cancers, natural killer or NK cells against AML, non-viral CAR T-cell therapy targeting CD-19 for leukemia and lymphomas, and viral CAR T-cell therapy for myeloid malignancies.

Ziopharm also recently announced that the American Society of Gene and Cell Therapy that its pre-clinical results provides a strong scientific rationale for evaluating the combination of RheoSwitch controlled expression of IL-12, with an immune checkpoint inhibitor for glioblastoma. Ziopharm plans to initiate a commendation study of this approach with the MD Anderson Cancer Center this year. With respect to the program's targeting myeloid malignancies in AML, Ziopharm has already filed on one of those with the Recombinant DNA Advisory Committee and we look to hear more from our Partner on both of these programs as the year progresses.

Ziopharm's leading effort in the non-viral cell therapy space is the sleeping beauty transposon transposase system for genetically modifying T-cells with application in both CAR T and TCR cell therapies. The low cost and simple manufacturing process for this technology attracted Intrexon to this platform, and our teams are working to further develop this promising technology.

The second generation sleeping beauty design with an improved stalk expressing a CAR targeting CD-19 for leukemia and lymphomas is already in the clinic. And as Ziopharm recently disclosed at AGSET, we have further improved the design of this engineered CAR T therapy once again, and pre clinically the propagation of CAR T-cells after 14 days improved its anti-tumor effect and persistence.

At the upcoming ASCO meeting in early June, Ziopharm will be providing an update on its clinical trials for breast and brain cancer utilizing ADRGS IL-12. This viral vector was developed by Intrexon and utilizes our proprietary RheoSwitch technology. ADSRTS IL-12 is the first gene therapy to enter the clinic with a switch controlling the expression of this powerful IL-12 cytokine.

IL-12 is a potent anti-cancer immuno cytokine but also carries the potential for significant immune-mediated toxicities. The ability to turn IL-12 expression on and off via an orally administered pill opens the door to its meaningful therapeutic potential.

To date, over 50 patients have been treated in clinical trials. Which as reported, have shown local and systemic IL-12 on target anti-cancer activity as well as proper versatile of IL-12's toxic effects on the immune system through removal of the activating ligands. We look forward to hearing more about the ground-breaking efforts of our collaborator, Ziopharm, with its novel approach to controlled gene therapy.

Another program headed towards the clinic utilizing our RheoSwitch platform is our pioneering gene therapy for wet AMD, an estimated $6 billion market that continues to grow. This will be the first gene therapy to control a vector expression in the ocular domain for the treatment of this chronic disease, and this novel approach uses our RheoSwitch technology to control gene expansion through an eye drop or an oral pill.

Our pre-clinical studies have shown a positive reduction in the laser and to the CNV area of approximately 50%. We're excited to get this patient-friendly solution into the clinic, and expect our joint venture Sun Pharmaceuticals to file an IND in 2016.

Finally in health, we entered into ECCs with two start ups backed by the Harvest Intrexon Enterprise Fund. Through the proprietary technologies of Intrexon, Relieve Genetics will focus on a breakthrough non-opioid gene therapy approach for neuropathic pain. And Exotech Bio will utilize a novel exosome-based platform for delivering therapeutic RNA to treat selected cancer indications.

The programs that I just discussed are neither a complete list of our pipeline, nor an exhaustive description of the technologies being used in our work. They are, however, at the front end of a broad pipeline headed toward the clinic, and conform to our business model which allows us to avoid the massive ramp in cash burn, typical when entering the clinic with one product, let alone up to 10. At the same time, we have retained a significant economic interest in these programs in the form of milestones, royalties and profit interests.

In the food sector, we acquired the business of EnviroFlight, whose scalable production of black soldier fly larvae opens a door to a plentiful source of high-quality, high-nutrient feed for the agriculture and livestock industries. We're pursuing this sizable market opportunity in a joint venture with Darling Ingredients Inc, the world's largest publicly traded developer and producer of sustainable natural ingredients from bionutrients.

Our majority-owned subsidiary, AquaBounty, the developer of the AquaAdvantage salmon, was delayed for one year because of an act of Congress that now compels the FDA to consider whether this already approved product should somehow be specially labeled. Whether it is ultimately labeled differently or not, we believe that the AquaAdvantage salmon is the best fish in the $14 billion per year sea, and we shall succeed in seeing this healthy, wholesome and more environmentally friendly fish in supermarkets as soon as possible.

Our Okanagan subsidiary continues to make progress in its preparations towards commercial introduction of its proprietary non-browning apple. Okanagan remains on track to plant roughly 75,000 Arctic Apple trees this year, with plans and inventory for over 300,000 trees to be planted next year.

We believe that Okanagan is implementing one of the most ambitious growing campaigns in the history of the apple industry. The company continues to receive positive feedback from produce buyers as it prepares for market introduction in 2017. Okanagan also submitted regulatory documents for the new Cultivar Arctic Fuji to the USDA and FDA, with approvals targeted before the end of this year.

In the energy sector, we announced our 500-liter pilot plant for our proprietary gas-to-liquids bioconversion is operational. This is an important step in the path towards commercialization of isobutanol from natural gas. We continue to expect to achieve the [yield]necessary precise selection of the demonstration plant to begin by the end of the year with our Partner Dominion Resources, and we remain on target for a potential commercialization of this drop in fuel in 2018.

Also of note, our scientists have engineered and started the construction of plasmid vectors to deliver new instruction sects to our methanotrophs to produce 14 butanediol, also known as 14BDO. This chemical is used to manufacture spandex, polyurethane, plastics as well as polyester.

Now I would like to take a moment to discuss our subsidiary Oxitec, a company that had pioneered the targeted an innovative approach to control mosquitoes that spread disease, as well as for the control of agricultural pests that damage crops. Oxitec's lead vector control program is centered on the dangerous aedes aegypti mosquito, an invasive species in the principal vector for transmitting a number of difficult diseases, namely Zika Virus, Dengue and Chikungunya.

We believe that we have the only proven, environmentally friendly, scalable vector control solution for the aedes aegypti that is ready and available today. Over the past few months, Oxitec Solution has advanced from a regulatory perspective, having received a special temporary registration from Anvisa in Brazil, as well as a preliminary finding of no significant impact from the US FDA for an investigational field trial in the Florida Keys.

In addition, Oxitec received a positive recommendation in support of its solution from the World Health Organization. And the Pan American Health Organization declared that it will provide technical support to countries that wish to implement our solution.

At disclosed on our last quarterly call, we are engaging with agencies of numerous governments and non-governmental organizations concerning the potential use of Oxitec Solution to reduce or eradicate populations of this dangerous insect. Last week, we announced the implementation of a multi-phase project in the Cayman Islands, and we expect our ongoing negotiations with relevant authorities in other countries to lead to broader adoption in the very near future.

Separate from their health pipeline, we recognize the tremendous potential in Oxitec's crop protection platform when we acquired the company in 2015. In order to best capitalize on this potential, we last week announced the formation of Intrexon Crop Production. A wholly-owned subsidiary dedicated to the biological control of agricultural pests and diseases, including insects and fungi.

Through the utilization of Oxitec's diverse, self-limiting gene platform for insect control as well as our ActoBiotics system for the expression of targeted biologicals, Intrexon Crop Protection's approach is designed to precisely target single pest species and thereby avoid many off-target effects of conventional pesticide applications on the broader ecosystem.

Intrexon Crop Protection fills a meaningful gap in crop protection for high-value products. Where existing approaches are increasingly inefficient, due to safety of an insect resistance to chemicals, as well as pest resistance to GM crops. Improving agricultural productivity in an environmentally friendly manner while driving value for growers and consumers alike, represents a significant opportunity for which we believe Intrexon Crop Protection is well positioned. Its platform has already led to collaborations with two leading players in the agricultural industry. As stated in our press release today, we intend to spin off a portion of Intrexon Crop Production to our shareholders, subject to various conditions including the registration of the subsidiary pursuant to the Securities Exchange Act of 1934.

At this point, we have covered progress made in our health, food, and energy sectors and several of our subsidiaries. Based on the work of our teams in our consumer and environmental sectors and our other subsidiaries, I expect to have additional progress to report on in the coming quarters. In addition, as mentioned in our last call, we expect to partner some of our mature-stage assets in 2016, and discussions involving each of Trans Ova, Okanagan, AquaBounty and Oxitec continue.

I will close with a few comments our financials. During the quarter, our revenue totaled $43.4 million, for an increase of over 28% year over year. Adjusted EBITDA was $1.9 million, and we recovered 92% of cash operating expenses through technology access fees, cost recovery and product and service revenues.

We view growth in our technology access fees as in milestones as a key indicator of overall success, and as of the first quarter of 2016 these collectively have reached $260 million since inception. With over 30 collaborations, approximately $336 million in cash and equivalents, equity securities with a market value of approximately $61 million, a portfolio of operating subsidiaries with outstanding management teams and business prospects. We exited the first quarter of 2016 with strong momentum, and in a solid position to execute our strategies in this year and beyond.

With that, we will open the call for questions and answers.

(Operator Instructions)

Tom Shrader, Stifel.

Good afternoon. Thank you for taking my 58 questions.

I guess just in order, how specific are you or how sure are you of the salmon delay? Are you waiting for some legislation? Or is that an approximate year?

The reference is to an act of Congress that was actually the spending compromise that I'm sure you read about a few months ago. And by force of law, it will expire in one year. But of course, Congress could renew it, assuming the President would sign it. It would take both houses.

Okay.

So this was a rider to the Appropriations Bill, which was sponsored -- the rider was sponsored by a senator from the great state of Alaska. And it requires the FDA to spend, if you read the text of it, it requires the FDA to spend $150,000 to assess whether our fish should be labeled in some way that is different from other salmon.

Okay. And then, second question. In the energy partner world, is success and isobutanol and success in 14BDO, are they highly interrelated?

To get one, is it easy to get the other? Is the big thing to get enough carbon where you want it to go? Or are these very independent products where success of one might not mean success of the other?

Okay, first, I wish Bob Walsh were here to answer your question with technical detail. But my understanding, Tom, is that the answer is, it is somewhat both answers. In other words, are there early pathways in the process that are common to them both, yes.

The later pathways are different, obviously and we have some terrific insilico models, bioinformatic models on this organism, which is what we had before we even began wet wear on this exercise. And I will say those models have held up very, very well so far.

And based on our models, we believe that 14BDO was an extremely well-chosen target. So I think you visited our facility -- our lab in South San Francisco, correct?

Yes.

So we have been hiring there to build out the 14BDO team. But we like we like all the progress we are seeing so far there.

Okay.

I think what you are getting at is, what our security level overall on the methanotrophic bioconversion platform?

Yes, sure. I would love to know where you are and a yield that --

We're not going to tell you that. But I can tell you, look, we are not going to choose targets that our models tell us are very, very difficult to achieve. This is not -- we are not tilting at windmills here.

When we began to work on the isobutanol, we believed that we would be able to make isobutanol which of course we are doing. We believed that we could approach a theoretical approach theoretical yield in terms of carbon conversion and that is certainly the case for 14BDO as well.

Okay, and then last question. So the expansion into insects that might be involved in crop protection, did Oxitec create a lot of these already? Is most of the work here development, or are you actually still at the drawing board trying to figure out what insects to engineer?

Many of them are quite well along in terms of development. We actually have a deck on our website that details the stage of development of several of them. I think maybe six, I think six of them are disclosed.

I think as we move forward, you can expect to see more disclosures around these things. But I believe the med fly, for example, is actually being deployed in the field today.

Given the number of times the chemical pesticide industry has claimed that they have defeated the med fly, we are really thrilled about and failed by the way, we are really thrilled about this one. There's quite a bit of published data, peer-reviewed published data, for example, is of the diamondback moth, and I think that was field tested out of Cornell. If memory serves.

And so those data are published. They are quite impressive. This targets an insect that causes between $4 billion and $5 billion worth of damage to the world's lettuce, cabbage and kale crops.

So there are several others. There are actually more than six, in total. So I think the short answer to your question is, several of them are actually developed to some point, and some of them are actually developed to an advanced level as well.

Okay, thank you for all of the answers. Thanks, Tom.

Jason Butler, JMP.

Thanks for taking the questions. Just two from me. First, on the wet AMD program, I'm wondering if you can say at this point whether the first clinical trial will be in healthy subjects or patients. And if it is in patients, is there a potential to see any efficacy data from the initial study?

We are not at liberty -- and remember this is the joint venture that we have with Sun Pharmaceutical Industries, and we are not at liberty today to discuss the clinical trial -- the planned clinical trial protocols.

Great.

What we are telling you is that we will file the IND this year, that is our expectation. I certainly get the relevance of your question, it is an important question and I look forward to being able to answer it. But today, we cannot.

Okay, great. And then on EnviroFlight, can you talk about what the path here is to commercialization? And any color on any timelines or market sizing you can give?

Yes. We think this is going to be potentially a very, very large business. So let me set up the situation for -- let's just take one of the markets, and there are several.

But obviously the main market, as we have discussed, is the protein feed supplementation market. What sensitized us to that was our involvement in aquaculture. Where over time, and we've over time over the last let's say three decades four decades maybe, you have seen the number one proteins feed supplement which was fishmeal be utterly almost entirely displaced by soy proteins.

So figure soy protein costs $0.20 a pound or something. Fishmeal, it continues to be in high demand and several of these markets actually require fishmeal. Aquaculture is one of those, by the way.

So you can't really grow salmon, for example, on a diet of 100% soy protein. So it still has to be supplemented with some fishmeal.

And I haven't checked -- it has been quite a while since I checked, but I know this sells for dollars per pound today. And the trendline is for only increased prices, because long story short, Marine extraction is like the ultimate non-biosustainable practice you could imagine.

And I think everybody on the call realizes that the number of fish available from the sea are declining so rapidly, it is just horrifying. You could look at it this way. Our children will know fish, at the present rate of extraction, our children will know fish to be a luxury good. Our grandchildren will know fish to be something they see in aquariums and museums, unless we bring technology into the picture.

So we have done that on the AquaAdvantage side, on the AquaBounty side in terms of producing fish that can be sustainably and industrially produced on land. On the feed side, this actually addresses a critical need. Because what I really wanted you to realize is, there is really no good protein feed supplement in between those two price points.

There is nothing that nutritively approaches the quality of fishmeal that doesn't cost $4 or $5 a pound on its way to $7, $9, $11 per pound. So we discovered EnviroFlight because we actually went hunting. We were looking to see if anybody had figured out how to scale at very large scale production of insect larva.

Because if you check this out, they are not only incredibly proteinaceous they are also very high in lipid content. And I don't want to get in too much detail, but I will just say nutritionally, it is absolutely a wonderful thing. In fact, I will tell you that my 6-year-old son and I have actually enjoyed some of these black soldier fly larva ourselves. We find them completely satisfactory, and actually pretty tasty.

So we went looking for this, and we actually looked at pretty much everybody we could identify in the world who has been working in this field. And we were absolutely amazed by the achievements that have been made industrially at EnviroFlight.

You asked about a regulatory. So it should keep be more in mind that a lot of food ingredient labeling and regulation regards insect parts as an impurity. So of course your question is, what do you have to go through in order to be able to sell this product as a feed supplement.

We discovered that EnviroFlight has actually made very, very good progress with several regulatory agencies. Their data docear are extremely good.

This is another thing, by the way, that one reason we wanted to joint venture this with Darling Ingredients is because in order to validate this as a process that you could really scale to huge size with multiple plants around the world and really make this a big business, we wanted to be able to standardize the food input. And so this is not the kind of thing where you could just take restaurants, graphs or something like that, and just drop it into this production environment.

You really need to be able to standardize the feed ration for the black soldier live larva. And that is one of the key things that Darling brings to this field. They are very, very adept at this, taking a very heterogeneous mix of biological inputs and turning it into a very standard output.

So really excited about this project. Great business. There are really no, other than just building the first production plant and getting going, there are no technical obstacles in this picture of which we are aware today. Although we do anticipate that we will see the normal ones that you could expect to see when you take something to vast industrial scale.

Great. Thank you for the very thorough input there.

Tycho Peterson, JPMorgan.

Hey, guys, it's Steve Jess on for Tycho. So first question here in terms of spinning off crop protection, can you talk a little bit about just the strategic rationale of doing that and having it exist as a separate entity versus the way you were doing it earlier?

Sure. I don't mind sharing some of the strategic rationale. We have actually specifically mentioned it in I think our press release, so I probably won't be able to go beyond the bounds of that.

But generally, I'm sure you appreciate the environment for this field. I know it is not exactly in your normal wheel house, but I think everybody knows that Syngenta is being acquired by ChemChina for $43 billion, Dow is merging with DuPont, I could go down the list of competitors. But I would just say it is an increasingly rarefied field.

What we see systematically and globally is that chemical pesticides are working less and less well every year. The response of producers to a great extent, has been to use more of them to compensate. Needless to say, this is not environmentally sound, and there is considerable environmental pressure to reduce the applications of these chemical pesticides.

There are a couple existing pesticides on the market that around the world are being withdrawn from the market, due to environmental concerns. And certainly, it would be fair to observe that the chances of someone coming to market with a chemical pesticide in today's regulatory environment are actually pretty low.

So against that backdrop, and then just one other thing. We happen to own, by far, the most advanced genetically modified insect platform in the world. And because of the number of genetisists and entomologists that we have there, we know that the biomarkers for pesticide resistance across the insect species that are agricultural pests and human disease factors are very well known today.

So we can see, genetically, what is going on in these insects, and they are rapidly developing tolerance to the main pesticides that are being used today. So clearly, there is a great demand for high-value biological-based solutions. The path that I think the most sophisticated companies are on is to use some type of RNAI, DSRMA for example.

In the agricultural field, it is just like the human health field. The issue then becomes, how do you get the RNAI into the appropriate cells at a price that you could afford.

So we have that capability because of the ActoBiotics platform. But more importantly, we have a platform based on the self-limiting gene technology at Oxitec that we think shows tremendous promise. Marvelous specificity with respect to the target species, and environmentally, seemingly neutral to every other species.

So the opportunity became do we partner -- and as we have alluded to, ICP, already, because of the activities that we have on the ActoBiotics platform and at Oxitec already has two major agricultural partners. The real question looking at our deal queue was, do we partner out these opportunities pest by pest, or would it make sense to actually house them all in one place and put an enterprise management team in there?

So I recognize that it is something of a departure from our normal business model. But frankly, our normal business model has always been qualified by a desire to do what is best for our shareholders. So when we look at the opportunity to put an excellent enterprise team, and by the way we just happen to have one, so this is our plant science team led by Dr. Shaffer Potopaulie who came to us from Monsanto who is heading this effort up, and he has got a terrific team there in Davis, California.

So the combination of that team, plus the agricultural applications of the Oxitec platform, plus the agricultural applications of the ActoBiotics platform that we operate out of our lab in Belgium. Plus frankly, some our work is done by our team in Budapest, really produced a very compelling case to create a standalone business. Because after all, the development, the production, the commercialization and the regulatory, for each of these are going to be very, very similar if in many cases almost identical.

So it is an opportunity to benefit from economies of scale that we wouldn't have if we partnered each pest out separately. So that is what got us thinking in this direction.

So and then once we do that, we realized that -- and the reason I mentioned that the ratification of the universe in the entire crop protection space is so that you realize that at the very moment in time, when the world demands for crop protection is at an all-time high. The availability of crop protection technologies is declining.

The utility of existing crop protection capability currently is declining. So it is a tremendous opportunity to produce a new company, and that is what we are taking advantage of.

Got it. And then one question on exemplar and the enforcement and discretion from the FDA there for the mini swine model. How far away are we from seeing use in clinical trials by a large biopharmaceutical company? What are some of the puts and takes there in getting to that stage, and what does Intrexon exemplar need to do to get that?

First, I think you will see publications on our LDLR Yucatan mini swine in the near future anyway. But you should bear in mind, there are really two businesses here through which Exemplar may be employed.

One is, yes indeed, we could make Yucatan mini swine size disease models established disease models, if you like. So where you would want something that is metabolically and maybe in some other respects more similar to a human to test -- as a comparator to what maybe previously you only had a MIRIAM model. And those will be I think, freely for sale as this pipeline comes to market.

The other one I think is really more interesting, which is when you consider that there are something like the number is approximately 7,600 monogenic diseases that have been chronicled. When you consider that the number of monogenic diseases that have actually been the subject of some sort of therapeutic candidate is in the dozens. I would point out that the reason for that delta often is that these are rare diseases and because they are rare diseases, often the phenotype is not fully elucidated. Meaning, we actually don't know enough about the disease to really figure out a therapy.

So I think the other interesting application of this technology is we can have an animal that is disturbingly similar to man, and actually create the monogenic disease in the animal and use this to actually elucidate the pathology phenotypically in a way that would not be possible before. And the reason I mentioned this is because these animals, we will be making -- and actually we already have one of these I think one of the partnerships that (inaudible) So I will tell you, these animals will be made in partnership with a therapeutic developer that has a deep sense of a deep desire to understand the pathology phenotypically and therefore, you shouldn't necessarily expect to see publications based on these animals, in other words we have the ability to keep the disease model proprietary.

Genuinely, simply in order to elucidate the disease pathology at a level that is superior to what could be demonstrated by buying things that are already published. So we're talking about the custom disease models, and that is a very active part of Exemplar's pipeline.

Got it. One quick one on energy. I know you have spoken a lot about the improvement in the yields that you have achieved. And you also talked about is a 500-liter pilot plans at the moment.

Can you talk about your current output in gallons per day, and how you have seen that trend over time? And at what point -- what are the milestones that you are tracking internally before you and Dominion decide to take it to the next level?

Yes. First quantitatively, we have not disclosed that information, and we are not going to. We have always guided to the same milestones, however publicly and these are the ones that Joel commented on during his remarks. That when you see Intrexon Energy Partners and Dominion Resources go forward with site selection for the world's first commercial plant, that should signal to you that we believe that we're in the money. We are not yet there, but we are tracking according to plan and we are very, very excited by what we are seeing.

If it were a football game, I would say we are in the red zone. So that is why we can so confidently state that we think our investors and we tell our Board this, so I'm sure you know we think this is true. We believe that we will see this this year, and we are very, very excited about this opportunity.

If you think about it (inaudible), this is very, very close to gasoline. We talk about it as a drop in fuel as if it is like ethanol or something like that, that is not the case. The reality is, is this is 98% of the energy density of gasoline. It is no more corrosive, which means it can be shipped -- transported in the same way as gasoline. Eventually, we could imagine a world, if you could imagine a world, in which isobutanol would actually displace gasoline. That would not be our first choice because everybody would have to get new fuel injectors in order to do that.

But we do think that and we do know frankly, if you have isobutanol that you've produced at a satisfactory cost, if you hand it to a gasoline blender to make gasoline, you will get gasoline. And that will be our first market. We think we will be selling gasoline, and we will have a biotech margin on one of the world's largest industrial commodity products.

Robert Breza, Wunderlich Securities.

Thanks for taking my questions. Quickly, RJ, as you think about piggybacking on the last question, reaching commercialization on the isobutanol, how should we think about reaching real revenue or an inflection point around the Oxitec Zika Virus outbreak? There's obviously there has been a lot of press, and you have made some significant announcements in terms of your approvals. How do we think about the commercialization to an inflection point around revenues of the Zika Virus? Thanks.

It is a very fair question, Rob. I would just as a thought experiment, I would invite you to think along the following lines. If you think about what a recombinant vaccine costs, and if you imagine that we could, let's say, we could price at around that on a per person per year basis. And assume that we would like ten-year contracts in the markets in which we deploy.

So I think we have an advantage in this case over vaccines for the following reasons. At that price point, pick one of the viruses say Dengue. So assume that we're -- our price per person is on par with say what the recombinant Dengue vaccine.

So this means you would be getting all the other arboviruses for free as a payor. You will be getting Zika, Chikungunya, yellow fever for free. You will be getting the comps of distribution and administration, obviously, which is far from far from trivial, for free. You will be getting 100% compliance effectively, for free.

And you will be -- and also you will be getting all the arboviruses that are yet to come. I don't know if you read the JAMA article that was published yesterday about this sudden flare-up of yellow fever in Africa, but I can tell you that our team is very, very concerned about this. Because the world has never been in worse condition in terms of the footprint of the aedes aegypti mosquito.

So I don't want to be alarmist about this, but see how this plays out. But the point is, getting rid of the disease vector has been the number one way (inaudible) that has dealt with these issues in the past.

We had malaria in the -- by the way, I don't know if anybody on the call knows this. The original name of the CDC was the Malaria Control Board, that is why it is in Atlanta. How they wiped malaria out of the United States was by giving it the disease vector. It was wiped out in Europe in the 1960s.

I guess the question is how do we get these government officials off their lazy butts to write a check, I guess, is the real question?

Thank you for that question. So let me tell you where we are right now. We are in our nation's capital speaking to you now.

And while I can't -- I'll just stand by our press release and by Joel's comments in terms of the kinds of dialogues we're having. But I can tell you, as compared to this call three months ago, doors that were difficult and you wondered if they were even maybe locked, suddenly seemed to be swinging our way. Three months ago, I was very frustrated -- just as an American citizen, I was frustrated, today, I am very encouraged.

The meetings that I have here in Washington over the next couple of days are with very, very high-ranking officials of the US government and several other governments. And what we are seeing around the world now is actually impressing me, and I couldn't say that three months ago. Three months ago, I was frustrated, you could probably tell.

So I do think that people are realizing that vector control is the solution. It is the solution that they really need, that we really need. We firmly believe that we have the only field proven tested environmentally safe solution.

And the reason I compared it to the biotherapeutic is so that you would know that it is actually affordable. In terms of the benefit that this technology should convey, it is quite affordable. So we are really keen on this project., and very, very dedicated to this task.

Derek de Bruin, Bank of America Merrill Lynch.

It is actually Mike on the line for Derek. Thanks for taking the call. I have a question for you.

My phone is dropping off. I apologize if you answered this during the prepared remarks. What was behind the Trans Ova product revenue decrease? You mentioned the lower customer demand, could you go into a little bit more detail about that?

I can't, and I will tell you why. I don't actually pay that close attention to Trans Ova product revenue. So let me remind -- no, I'm serious, let me remind you why.

We didn't acquire Trans Ova because we just wanted to own that business as such. We acquired Trans Ova because we thought it's a marvelous platform upon which we could deploy our technology to drive this business into much greater heights. So the business as practiced at Trans Ova, it is a wonderful operation and I think David Faber and that entire team do a wonderful job.

If you look at them in terms of market share, if you look at them in terms of their accomplishments, the number of ranked bulls in their field that came from their technology, it's like 15 out of 16 year after year. So they do a marvelous job, but that alone was not the basis for our acquisition here.

The basis for our acquisition was the realization that among all protein feed animals, the one that needs genetic improvement, what the cattlemen call genetic gain. The most is the bovine species. I remind you that we pay today about 25% measured in constant dollars of what our grandparents paid for a chicken.

This was done through two means. Number one, genetic standardization and improvement, which was then enabled applications of industrial engineering. Because once you have that standardization, then you can standardize the housing, the transportation, the storage, the food ration, the health regime, the downstream processing can then become automated. Needless to say, almost none of that has happened in the bovine species, either in the $180 billion per year beef industry or the $180 billion per year dairy industry.

So we saw this as a tremendous opportunity to, as a vehicle, to sell improved genetics. We are working very hard on this. We really think, in terms of two scenarios.

Scenario one, you could think, and this one we think has a very high probability of success in our view. We believe that Trans Ova can become, and they already are by the way responsible for I think more genetic gain in the dairy industry than any other player on the planet. We think we can extend globally, and we think we can extend into beef and we think we can produce greater genetic gain utilizing our technology. If we do that, this is going to be a very, very nice business with a very, very nice margin and revenues that I will always know. So I apologize for not knowing Trans Ova revenues today.

But I'm just telling you, we saw it as a perfectly adequate business, a good business as it was with a great team. You couple the number one expert in the world at the artisanal practice of producing bovine embryos with technology should be a winning combination. Then the one with less probability of success, it's more of an outlier, but if we can drive the costs of producing these bovine embryos down and we believe we can, but right now, I can't say we have done it. But we are working on it.

If we can drive them down to a sufficient price point, then this business is not merely a genetics business. It is actually a business that is competing in the field of bovine reproduction. And then that goes to another scenario, which would call it for what it is, this would be a multi-billion-dollar business at that point.

So this was always our intention at the time we bought this business. I think I've talked about this before. And those are the revenues that I'm interested in.

So I will tell you, I track the technical and scientific progress along the two scenarios that I just described much more closely then I do Trans Ova's current revenue. I'm just thrilled they don't cost us money, put it that way.

Andrew D'Silva, Merriman Capital.

Just a couple quick questions. Just wanted to piggyback actually on the Trans Ova genetics question. Can you provide an update with how you are progressing with increasing the yield of supreme cow embryos? And are you reaching the milestones that you initially thought of when you parted?

Yes. I would rather not talk about that today. We would rather actually achieve the milestones and bring things to market and tell you about it then, if that is okay.

Keith Markey, Griffin Securities.

Thank you for taking my questions. I have two. It sounds very much like you are moving forward on an international basis with the Oxitec mosquitoes and might be able to get it to the Mexican business area soon. I was wondering, can you expand your capacity above and beyond what your white paper on Oxitec that was recently published that talked about more trying to (inaudible) year end 2017?

Well, yes. In two ways, I just want to look at my colleagues here to see. So one of the ways I cannot discuss, but there is another thing that you should be reminded that the technology -- the overall in terms of a global footprint, does scale pretty well. In the case of the aedes aegypti mosquito, this would not be the case for other claves of mosquitoes but there is a very fortunate fact that relates to the aedes aegypti mosquito and that is that the eggs have viability for form ups.

So what this will enable us to do is, as we scale globally, is to have a big egg production facility. And then on a local basis or should say regional basis, have eclosion and release done locally.

Today, so far, we have been doing, except every place in except one market, Cayman was actually done on the basis I just described. So with the sole exception of that case, we have actually done local production and eclosion and release. So there are some global economies when we create a factory that will produce the eggs -- all of the eggs required in one location. Does that answer your question?

The other question I had was based upon regulatory decisions of other products. I was wondering if you might be able to give us a reasonable timeline for final testing and commercialization of a product such as the diamondback moth.

Okay. So these are these are regulated by FDA under the [INAT], so it is the same regulation that applies to our mosquito. It's the same set of relations that applies to the OX513A mosquito, concerning which the FDA recently published a finding of no significant impact. So it's all is a fairly established animal drug approval process.

Eric Criscuolo, Mizuho.

Good afternoon. I didn't hear anything about the API programs in the script or I didn't see it in the press release. So could you maybe provide some commentary onto where those are and how they are progressing?

Absolutely. So again, we have partnered -- the ones are partnered which is all the ones we have at the mature stage, we can't comment. I believe we previously have disclosed that we have made a cell line delivery to one of our partners. So we've actually completed our work.

With respect to a very major undertaking, we are making, I think, very, very good progress. And our Partner -- I know that our Partner is extremely pleased, but I'm trying to think about what we can say in terms of timing. Let's get back to you on that one.

One of them, I don't mind telling you, one of them actually is I do know something about because it was deliberately chosen for its sheer technical complexity and size of total addressable market. And that one I do know the timing on. We anticipate having some news out on -- and this one was originally done, it was commissioned, we actually started work on -- does anybody remember, about two years ago.

And this one was deliberately chosen because to our knowledge, this would represent the most sophisticated synthetic biology undertaking achieved -- undertaken by anyone to our knowledge. And we expect to have data out on this one, I think we are currently targeting September.

Derek de Bruin, Bank of America.

Thanks, guys. I just had a quick follow up from earlier. You were talking about the works in the Florida Keys with the FDA finding no significant impact. In fact, and also the commercialization in [Brazil] and the Cayman Islands that you announced just last week, I believe.

Noticing a trend that the two active runs of Oxitec being in the Cayman Islands and in Brazil. Both of those locations had fire fuel trials. I'm just wondering how much that factors into your ability to negotiate commercial agreements so that you have the trial set in that specific area, is that just a coincidence? Or is that something that you think that is something that you think is a really tangible boost to your negotiations and your conversations with government officials? And should we expect something similar going down the road from the Florida field trial?

That is a really good question. Your question really has two faces. And I think one of them, I can definitely validate.

Which is, obviously, on the regulatory side, it certainly gives those countries more confidence, because they actually participated in the field trial. And so if you look at our work in Panama, for example, in which our scientists have published with the scientists of Gorgas Institute and they work hand in hand on the field trial itself.

This was the case in the Caymans between our scientists and the scientists of the MCRU in Cayman. So I think in terms of early regulatory approvals, certainly it does help that people on their side of the deal have got firsthand experience. We are really looking at all of the issues up front, really helped to design the experiments in order to address the questions they had and so forth.

Going forward, however, I don't believe this is the case. So we have numerous parties now who are looking at the data that we have generated in other markets. And they are not asking us to replicate -- well frankly, I don't mean this in any disparaging way anybody who may be listening here in town, the only country for which that would be applicable is the United States.

Which they may want to just look at data produced within the United States and I think everybody who knows the world of therapeutics knows how largely that is true, a American thing. But around the world, it is not is not true to any significant degree. So I think what you say though is certainly true in terms of regulatory approvals in the early markets, the early adopters. It does give us a leg up there.

In terms of commercial dealing, other than feeling a desire to be as cooperative as we can with partners with him the Oxitec team has been working in some cases, for years. There is really no commercial aspect, in other words we are not really going to give much of an early adopter premium because we know that other countries will just look at that price and it will come back to haunt us. So in general, we have got our ideas about pricing pretty much lined up with the way I described them earlier, if you think about the cost of a recombinant vaccine you could think something in that ballpark and then you readily realize the many advantages of this technology over a vaccine approach.

This concludes our question-and-answer session. I would like to turn the conference back to RJ Kirk for closing remarks.

Terrific. Thanks once again. I can tell you I always find these exercises to be a little bit constrained, because we have to build them based on news flow. And I find this regrettable, because I just want to underscore a chief point about this Company.

The Company's business was actually founded on the idea that we want to really maximize. We want to have the lushest portfolio of commercial, back-end commercial economics across as many industries and many products, products that we really believe in. Products that we truly believe will be valuable, as many as possible and that is the focus of this business.

So when it comes down to this call, and by the way, no criticism of the callers in fact, most of the questions we received today actually did relate to developmental progress. And so it shows that at least people on this call kind of get it. But I just want to say, but I'm constrained because I can't really talk that much about developmental progress outside of the things that we have disclosed.

So I'll just come back to the lead up point and it's a repetition frankly of the point that we made three months ago, which is we have always intended 2016 to be a breakout year for this Company. And what I mean by that is, across these three tracks that we have talked about.

Number one, of course we will continue to see growth, we're going to continue to see financial growth along the lines we have described, and operating under the financial business that Joel I think very ably described. The second thing is, you will see the first instances this year and he will be across a broad away array of undertakings of projects that were initiated inside of Intrexon and you will see this year, we have always targeted this year and we are very excited about what we will be able to say over the course of the year as these data come in.

Am I thrilled with every development program that we have, of course not. But we have projects, this isn't the FDA, is it, Don? We have projects that are probably six months behind, frankly, and these pain us greatly. In fact, my job is to inflict some of that pain.

So they do pain us greatly. There are others that are very much on track, and there are others yet that are actually ahead of schedule.

We work very, very hard I think I pointed this out. The majority of our efforts and the majority of the efforts of our entire team, the majority of frankly the number of employees are totally devoted to these efforts. So we have been building to this year for a long time.

And then nothing was mentioned today I think other than Joel's remarks. But over the course of the development of this Company, we have acquired some very significant commercial stage assets. And when I think about Intrexon late at night and I think about the multiple scenarios that exist for our developmental stage programs and so forth, I have to tell you I get excited about some, I get frustrated about others.

But I'm always excited by the fact that we seem to be, in my view, substantially undergirded by things that are already proven. The fact that we saw the value of an Oxitec, that we saw the value of an Arctic Apple, that we saw the value of an AquaAdvantage salmon is great. We didn't invent that stuff, any more than Genentech invented half of the maps for which they became famous.

It happens to be the case that when you are doing something as conscientiously and as devotedly as this team is doing, if you are not becoming pretty expert at assessing the other guy's stuff in that field, there is something wrong. So we will definitely continue to -- if we come across something like an EnviroFlight, we're definitely always going to do that.

So when I look at the mature stage things that we have, and frankly, EnviroFlight is almost at that level. Arctic Apple, when we had investor day, we passed out some Arctic Apples, we do this at every opportunity. I have never seen anybody yet who doesn't love them.

I was on CNBC a few weeks ago, and I think they aired the wrong segment. What I mean by that is, so I'm up there talking with Meg and Melissa, I think her name is. But thereafter, I got to pass those Arctic Apples around to the -- an enormously to the anchors and the bald guy that's on Shark Tank and all the crew and so forth.

Anyway, my point is, I wish they had filmed that part because if there's anything -- if I wanted to air something, I would want to air that. Which is that I haven't seen anybody yet try an Arctic Apple who doesn't totally flip. It is fantastic. And if you think about the fact that every apple you have ever eaten is a clone, these are not things that just grow wild. We cloned them all.

So you'd have to ask yourself, so what is the significance of this technology? Well the significance potentially is that this will completely revolutionize the entire worldwide apple industry. There is no Cultivar Apple that will not be better if it is an Arctic Apple.

So what is that worth? Gee, we will see what kind of management team we have that when possessed of that advantage, we will see how we execute. But I can tell you we think it is very, very significant.

So the thing that really gives me pause late at night and gives me comfort, I should say, among all the challenges that we have and so forth. Is when I think about the number of genuinely mature stage assets, the fact that we can and you will see some of these things occurring over the rest of this year, that we don't have to build up massive worldwide infrastructure. There are already people out there with massive worldwide infrastructure, low value add inputs.

So we think we can approach businesses like salmon and apples like a genuine biotech company -- and as I mentioned earlier, gasoline. Like a genuine biotech company. And if we can turn those products into biotech products and keep a biotech return with a biotech margin, that is what we are about and I'm very, very excited about that.

Finally, let me just comment, I have got to congratulate this team. With the recent distractions we have had, you can imagine what my e-mail was on a recent event a couple weeks ago out to the people. Which was, listen, just everybody continue, just continue. Just do what you are doing, because the only way that we could ever lose this contest is if we allow this (expletive) to distract us in any way. So I can tell you, there is nobody here who is distracted. We are completely excited.

This is the most fervent group of people I have ever known in any company. I have not been into every company, I'm sure at some point, Bill Gayson to Steve Omeren, Jason Merehold were quite fervent, but I just wasn't there. But I'll say in my experience, this is the most dedicated and fervent group of people I have ever seen. And I am really happy about that. So thanks.

This concludes our conference for the day. Thank you for attending. You may now disconnect.