Precigen Inc (PGEN) 2016 Q4 法說會逐字稿

Good afternoon and welcome to the Intrexon Corporation fourth-quarter and full-year 2016 conference call.

(Operator Instructions)

I would now like to turn the conference over to Christopher Basta please go ahead.

Good afternoon. I am Chris Basta, Vice President of Investor Relations for Intrexon Corporation. Welcome to our fourth-quarter and full-year 2016 earnings conference call.

Joining me on the call today are Mr. Randal Kirk, Chairman and Chief Executive Officer; Mr. Geno Germano, President; Dr. Andrew, Last Chief Operating Officer; and Mr. Joel Liffmann, Senior Vice President of Finance. Slides that will be presented on the call today can be viewed on the events conferences page in the Investors Section of our website dna.com by clicking on the link for Intrexon Corporation's fourth-quarter and full-year 2016 financial results conference call. 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 continuing the earnings press release, as well as on the investors section on our website. Now I would like to turn the call over to Geno Germano, Intrexon President. Geno, the floor is yours.

Thank you, Chris and good afternoon everyone. Thank you for joining our fourth-quarter and full-year 2016 earnings call. We sincerely appreciate your support and interest in the Company earlier today we issued our earnings press release and filed our 10-K with the SEC.

I hope you've had some chance to review the reported financial results. During the quarter our team continued to deliver solid progress across many of our 30 plus collaborations, we furthered the commercial activities of our subsidiaries, and advanced several of our marketable products. I'm going to begin my comments updating you on Intrexon's marketable products' portfolio and then move on to a discussion of the outlook of our health sector and then turn things over to Andy to discuss our divisions and some exciting development projects that are underway there and finally, Joel will cover our financial.

Starting off with our marketable products portfolio. As detailed on slide 4 of the presentation we saw progress on both the regulatory and production fronts with our Friendly Mosquitoes, our Arctic apples, as well as the AquAdvantage Salmon during 2016.

From a regulatory perspective we're pleased to see additional approvals for our Arctic brand from the USDA and ended the year with commercial pathways for lthree eading Apple varieties. The Granny Smith the Golden Delicious and the Fuji and we have others on the way. Our salmon also some regulatory approval from Health Canada opening a second large consumer market for AquAdvantage Salmon.

Finally our mosquitoes received support from leading organizations globally including the World Health Organization and Visa in Brazil and the FDA. On the production front we achieved our first commercial harvest of Arctic apples and planted approximately 70,000 more Arctic trees. We completed construction of our first large mosquito facility with the capacity to create three billion Friendly Mosquitoes annually. AquaBounty added a plant in Canada to assist in scaling production capacity.

Moving on to our outlook for 2017 for Oxitec. We believe we have the best vector control solution to combat what is now increasingly recognized the most dangerous mosquitoes species known to man, the Aedes aegypti mosquito. We anticipate expanding our engagements in existing countries including Brazil and the Cayman Islands.

We're also intensely focused on initiating new contracts in the United dates and additional countries. One recent development on regional expansion at the commencement of large-scale trials in India. Under our current plan we anticipate moving to open field trials in late 2017 or early 2018 paving the path to a large commercial opportunity there. To put the size of the Indian market into perspective, consider that dengue alone not including zika or the recent outbreaks of chikungunya, infects an estimated 5.8 million people in India annually with costs exceeding $1 billion a year.

In the Cayman Islands the Cayman's government recently issued a statement on the ongoing Friendly Aedes project there detailing strong results and noting that the program is firmly on track. As reminder this is the first phase of an anticipated island-wide treatment that began in July 2016. In Brazil the continued success of our programs are very encouraging.

The positive results are exemplified by the overwhelming support of 92% of the community in recent polls and are also increasingly being recognized across the country with true additional regions. Based on our business development pipeline we anticipate the egg capacity in our Piracicaba factory may be fully for spoken for new contracts in 2017.

In summary we expect ongoing negotiations to lead the broader adoption of Oxitec solutions and we have begun discussions to build our first large-scale egg factory to efficiently cover global expansion.

Okanagan Specialty Fruits is set to begin its first commercial rollout of fresh life Arctic apples in the fall of 2017. In our view the consumer benefits of this unique product will drive a significant reflection in the adoption of sliced apples and apple products. We believe this business can eventually reach $1 billion per year in revenue with attractive margins and return on investment.

We have 300,000 trees under contract to be planted this year and over 500,000 more for 2018. Importantly we expect the Arctic apple will have a meaningful margin advantage over currently sliced apple products because we eliminate the chemicals and production costs for preservative coatings. AquaBounty is now a US listed company as well positioned to pursue a substantial aquaculture opportunity.

As we discussed in our last call in November, production of AquAdvantage Salmon in land-based tanks not only avoid the excessive use of antibiotics and vaccines in farming Atlantic Salmon but also avoids exposure to ocean-based parasites such as sea lice, that commonly affect fish grown in the sea cages. AquAdvantage Salmon will be raised and controlled indoor environment of the predictable production schedule. The solution offers a high quality product which can be produced closer to consumers than salmon imported from Chile and Norway.

All of these characteristics are attracted to sellers in the multi-billion dollar Atlantic Salmon market. AquaBounty has already been approached by a number of large distributors and has had positive discussions with retailers as well. AquaBounty and Intrexon are highly engaged in site selection discussions and we expect AquaBounty to solidify a site and begin construction of its first land-based RES system in the United States this year.

Now moving on to our health sector. We experience some timing disappointments in 2016 with several milestones but still achieved solid progress across most programs. At the forefront with the encouraging overall survival data from Ziopharm and its lead gene therapy candidate AD-RTS IL-12 in recurring neoplastoma.

These data are especially exciting considering represent a clear demonstration of utility the Intrexon's RheoSwitch technology which we believe has the potential for broad utility in oncology and many other therapeutic applications. As you are likely aware as Ziopharm has also been driving an effort to reduce the time and costs associated with manufacturing and delivery of CAR T-cells with the goal of making them a bedside point of care option for cancer patients.

They've recently reported progress in this endeavor and presented promising early data with the achievement of a complete positive Phase 1 trial utilizing a second generation sleeping beauty design. Additionally at the preclinical stage, Ziopharm shared some exciting data on third-generation sleeping beauty CAR T-cells, color expressing a CV-19 specific CAR and membrane-bound IL15 which achieved production time of less than two days and resulted in impressive anti-tumor effects in this mouse model of leukemia. This short production time highlights the potential of non-viral approaches versus viral approaches and CAR-T and other XVIVO cell therapies from a manufacturing perspective.

In rare diseases our collaborator Fiber Cell initiated a phase 1/2 trial with FCX007. Gene therapy for the ultra orphan indication of recessive dystrophic epidermolysis bullosa or RDEB, a debilitating genetic disorder. Fiber cell also received orphan drug designation from the FDA for FCX 013 for the treatment of linear scleroderma. Whatever other collaborators Oragenics also received fast track designation for their leading clinical candidate AGL13 that is heading into a Phase 2 trial and utilizes our ActoBiotics platform.

Lastly, in 2016 we expanded our health programs via new collaborations develop treatments for celiac disease, chronic rhino sinusitis, neuropathic pain, and cancer indications. Moving on to slide 9 as you can see here recent developments include an end of Phase 2 meeting with Ziopharm in the FDA for AD-RTS IL-12 in recurring glioblastoma. Ziopharm expect to announce the meeting outcome during the first quarter with a goal of initiating a pivotal clinical trial in 2017.

Also we are excited by our second CRADA with the NCI and the esteemed Dr. Steven Rosenberg, a pioneer and immunotherapy. CRADA is for the development of immunotherapies for patients with advanced cancers using an apologist PD-L's, genetically modified using Sleeping Beauty to express TCRs targeting neoantigens. We look forward to working on the CRADA with Dr. Rosenberg's team tapping into sleeping beauty's unique potential to express neoantigen specific TCRs to develop individualized immunotherapies for cancer patients with solid tumors.

We're pleased to report that the first RDEB patient was dosed last week whether FCX007 gene therapy in a Phase 1/2 trial being run by our collaborator Fiber Cell Science. We expect to see a initial human data before the end of September 2017. As detailed under anticipated milestones, you can see that we expect to see our platform enabled gene cell therapeutic candidates make meaningful progress this year in the transition into human trials and oral mucositis, infectious disease, rare diseases, ophthalmology, and cardiac disease.

On slide 10 we laid out for you a more detailed clinical development outlook for 2017 to provide a better understanding of how we're positioned within our health sector. This table shows a few things of importance, most significantly is the Company's positioning to begin to make a difference in the lives of a substantial number of patients across a variety of unmet clinical needs. Of prominence is the understanding that Intrexon's research and development work is for the most part complete once INDs have been filed.

At that point our partners and collaborators advance our technology enabled therapeutics into and through the clinic. The only time this is not the case is under a joint venture or subsidiary where we share the costs and in return receive a much higher potential return in the back end, as you can see the bottom of this table. While we cannot project eventual commercial sales at this juncture we believe the power of the Intrexon model for our shareholders from a cost and royalty perspective is substantial.

One final takeaway before hand the call over to Andy, is this is the beginning of our transition from bench to clinic. As you can see on slide 11 we've a deep pipeline of additional health programs including type I diabetes, type II diabetes, and many more. With that said I will now turn it over to Dr. Andy Last, for an overview of our divisions and select development platforms.

Many thanks, Geno. Before I began let me state as Chief Operating Officer of Intrexon, I oversee the multiple technology divisions and operating subsidiaries and have been tasked with driving execution outcomes and improving efficiency and effectiveness in the application of the Company's assets. One of our key assets, clearly is the deep team we have approximately 600 scientists. And in my roll, I have the good fortune of seeing the tremendous work of these talented employees.

Today I will cover some of the groundbreaking projects underway across several of Intrexon's divisions. Firstly, in our agricultural bio-division I will highlight two of our ongoing projects that are on the cutting edge of science and synthetic biology. The first is the Florian on-off gene Switch for flaring control and selective activation of specific plant genes mediated through the topical application of an activator.

Slide 13 provides a snapshot of a time release video showing control of flaring through Florian and details the diverse range of beneficial agriculture applications including the large commercial opportunity in improving yield and quality of select forage crops. The second disruptive innovation in our ag-bio division is the ongoing work in the regeneration of plant cells. This proprietary approach considerably exceeds results of standard growth for protocols and enables a high throughput plant culture platform that can be used for speeding up the development cycle of efficient transformations and mass propagation.

We project the commercial opportunities of high throughput plant regeneration to be quite significant, for example, speeding up genetic DNA in crops and for rapid development of plants that produce valuable ingredients. In our human therapeutics division our team is consistently pushing back the edges of genetic engineering.

Slide 15 provides some detail around new leading edge work in developing non-viral approaches to T-Cell immunotherapy including CAR-T and TCR. The top half of the slide shows we believe to be the largest multi-gene program in a T-cell delivered through a single non-viral vector. The genetic software package in this case is roughly 12 KB and includes the RheoSwitch system, the expression of CAR, and the control manufacture of membrane-bound [cytokine] I/O 15. As you can see here the addition of [Viledamex] leaves dramatic induction of I/O 15 expression and a complete loss of that expression when Viledomex is removed.

This achievement was made possible by continued development of our, at site recombinant platform, and paves the way for delivering even more powerful and flexible multi-gene systems. An important point here is that this furthers our capability and industrializing CAR-T and TCR therapies and enables us and our partners to leap-frog competitors in this fast-moving field. In the bottom half of the slide you can see control of the CAR expression as well as membrane-bound bio 15 productions through the RheoSwitch platform utilizing the Sleeping Beauty system.

This unique capability through our gene switch enables an unrivaled control approach in CAR-T Cell therapy. We intend to move this distinctive approach from bench to bedside in the near future.

Another significant undertaking with great through implications in the world of gene therapy is our work in cardiac disease. To date many gene therapy directed at heart disease have had limited impact. One of the underlying themes supporting this is that cardiac disease is a complex multi-genic disorder. We've taken this challenge head-on with what we believe to be the world's first multi-gene approach with our proprietary platform. This effort requires a significant amount of genetic engineering and our scientists utilize multiple tools including our expanding [at site] platform to accomplish this feat. We intend to move this program into the clinical setting by year-end.

Next our comments on Intrexon's ActoBiotics division in the platform we use broadly across health and agriculture applications. Here we been able to take a micro-organism that is safe for consumption by humans and genetically engineer it to produce a number of powerful biological effectors that can be administered either orally or topically. In health oral antibiotic therapeutics have the potential to treat many different diseases.

We have a number of collaborations already in place including type I diabetes, type II diabetes, oral mucositis, celiac disease, graft vs host disease, and chronic rhino sinusitis. We're very pleased with the progress we're making and we're working on exploring additional partnerships with this versatile platform. With respect to agriculture, up to 16% of global food production is lost to crop damage annually due to insects and the ongoing increase in pest resistant exacerbates this problem creating a major need for new crop protection technologies.

We're excited to announce that during the fourth quarter that initial studies validated the efficacy of see a double-stranded RNA expressed through the ActoBiotics platform for insect control applications. Our collaboration with a leading global ad company has moved to the next stage of development and we hope to have more to report on this during 2017.

In our animal sciences division we continue to blaze a path biotechnology and the role the fish farming. Unlike agriculture where biotechnology has provided significant impacts to meet the expanding challenge of feeding the world's growing population. The first real contribution to the $150 billion agriculture industry from advanced biotechnology is AquaBounty's platform which Geno covered earlier. Beyond salmon, tilapia represents one of the most significant products in agriculture today.

As detailed here our foundational work has led to a substantial increase in tilapia fillet way to 53% and Philly Filet yield at 27% versus conventional farmed tilapia. In addition, our animal science division is building upon the expertise of trends over to elucidate and improve efficiency with controlled genetics. A key technology platform we are working on is pioneering the utilization of egg precursor cells in cattle reproduction.

As seen here our scientists our scientists were able to achieve developmental competence in a bovine model as seen through the maturation of bovine egg precursor cells into structures characteristic of mature eggs. We also observe, parthenogenesis activation, demonstrating the potential for fertilization of these cells. Despite advances in genetic cattle though existing fertility of approaches such as IVF and embryo transfer, cattle continues to lag all other high protein food sources for the feed conversion ratio of 8 to 1.

This compares to [pork] of 3 to 1 and chicken at 2 to 1. This egg PC platform therefore may substantially increase the availability of eggs from female cattle, thereby increasing the power of genetic selection to meaningfully improve productivity in the dairy and beef industries. One of several tools we are developing to transform trends over into a high-growth, high-margin business.

I'd like to finish importantly on our industrial products division, which as many of you know, is working on what could be one of the world's most valuable biotechnology platforms if we achieve our goal of creating a number of fuels and chemicals through a simple fermentation process using inexpensive natural gas as feed stock. After many of work the team is created a genetic toolbox that makes methanotroph engineering for Intrexon similar to establish yeast or Ecoli platforms. As shown on slide 21 this toolbox has led to rapid advances in utilizing the methanotroph to create several valuable chemicals and fuels.

The yield levels shown here are for three of the six chemicals we have produced namely: isobutyraldehyde, 23BDO, and isobutanol. All were achieved in the second half of 2016. Currently our most significant target with this platform in terms of potential revenue is isobutanol as a gasoline additive.

From a numbers perspective every 1% of the gasoline mix equals roughly $8 billion in potential isobutanol sales. We estimate isobutanol could represent as much of 10% to 15% of the gasoline mix without any change to existing infrastructure, including CARs. From yield perspective we're engineering around the roadblock that we estimate puts us roughly six to nine months behind our initial schedule and we anticipate we may be in a position to reach the site selection levels by the third quarter.

With respect to isobutyraldehyde and 23BDO, both of these represent billion dollar plus opportunities in the acrylics and synthetic rubber businesses respectively. We are very optimistic with the rapid headway we have achieved. The progress on these molecules also shows the potential for isobutanol as they a share a common pathway.

As disclosed in our Q3 call we have initiated partnerships discussions for one of these targets and expect to be in position to announce success on this front during 2017. With that overview of some of the transformative molecular and cellular technology within the divisions of Intrexon, let me end with one comment on the structure of the company. This foundational work at the division level flows to these sectors of Intrexon which are centered on collaborations or direct marketplace to get these innovations to the commercial marketplace.

Our 30 plus collaborations are scratching the surface of what is possible and we are committed to expanding the number higher in 2017 and beyond as we continue to build a world leading company. With that I will finish and I will now turn the call over to Joel Liffmann for a brief review of financials during the fourth quarter.

Thank you, Andy. Our fourth-quarter and full-year financial results reflect the progress across our company that Geno and Andy just discussed. I'd like to briefly call out a few items.

Today reported fourth-quarter and full-year revenues for $46 million and $191 million respectively. Increases of 11% and 10% over the same period last year. In 2016 we continue to add new exclusive channel collaborations in joint ventures and increase the RND services provided to our collaborators.

The full year revenue increase was driven by 25% increase in collaboration and licensing revenue and these revenues grew by 31% in the fourth quarter. Product revenues declined about 17% in fourth quarter and by 12% for the full-year as their trends over subsidiary continued to feel the impact of depressed beef and dairy commodity pricing. Service revenues which are can primarily from trends over were flat in 2016 versus 2015.

Deferred revenues which will be recognized in future periods as we perform under our ECC and JV agreements were $310 million at year-end versus $198 million at the start of the year. This increase is driven primarily by the June amendment to our Ziopharm collaboration. As you just heard from Geno and Andy we are making substantial investments in our marketable products portfolio as well as our joint venture partnerships.

In addition we continue to invest in our technology platform as evidenced by the pending acquisition of [Genentech]. In our earnings release we reported adjusted EBITDA as newly defined. For the fourth-quarter and full-year adjusted EBITDA was a loss of $5.8 million and $26.6 million compared with prior losses $12.9 million and $20.7 million.

As a management team we evaluate our use of capital by combining adjusted EBITDA with the change in deferred revenues. This metric for 2016 was a positive $89.9 million versus $53.4 million in 2015. I would also like to point of that we continue to execute very well on our capital efficient model.

We measure our capital efficiency as the ratio technology access fees plus cost recovery and product and service revenues divided by our cash operating costs. In 2016 we received total consideration equal to 129% of our consolidated cash operating expenses. For the third consecutive year we grew our business across many dimensions.

We prudently managed our use of capital and continued to build what we expect to be a very substantial back end economic interest in the 30 plus collaborations bringing new products to development. We ended 2016 with a consolidated cash position of $243 million and we also hold equity securities and preferred stock in our ECC partners valued on a combined basis at approximately $153 million. Notably we recently invested $25 million in AquaBounty believe that AquaBounty that well positioned to capitalize on its own business opportunities.

We subsequently distributed a portion of our AquaBounty shares to entrust in shareholder while maintaining majority ownership of interest. This is our second extraordinary dividend distribution to our shareholders and reflects our commitment to create share holder value while we continue the development of the products and Andy and Geno just discussed.

A great deal more detail can be found in the 10-K file today with the SEC. I'll now turn the call back over to Geno.

Thanks, Joel. So in summary, we're capitalizing on our leadership position in engineering of biology to develop high-value bio solutions. We're positioned to deliver meaningful returns to our shareholders through our scalable capital efficient model.

What we be expect to be the successful execution of current and future opportunities. At this point we will turn it over for questions.

Thank you.

( Operator instructions )

Our first question comes from Keith Markey at Griffin Securities.

Hello thank you for taking my questions. I was wondering if you might give us an update on the status of Intrexon crop protection and I will have a follow-up.

Okay. On ICP we announced -- I don't remember when last year, but probably made last year, that we were going to file a form 10 into a partial spinoff on that. The reason behind it was that we realized that we had two very strong and differentiated platforms, really leading platforms that can address the huge market of crop protection.

The first platform is the SLI technology from Oxitech and you'll note on our website we have -- I can't remember how many species five or six, ag pest species and various stages of development, one of them is now going into field trials in Australia. The other platform -- by the way the reason for that side of the platform is so valuable is because so many insects are developing resistance to pesticides. Using that SLI technology of Oxitec will enable us to we believe decrease the populations of these ag pests in a very environmentally safe manner. Far safer than pesticides ever could hope to be.

The second platform, as Andy mentioned, is our ability to express double-stranded RNA from ActoBiotics platform [in Belgium] through engineered ilactis. As Andy mentioned we've demonstrated very encouraging data in the application of that technology toward some particular pests.

We combined these two platforms in an entity and the reason was, we saw a need -- we will probably get this later in the call with another example -- we saw a need to supply an enterprise management to this program. We were receiving inbound inquiries about partnering individual insects and we realized that this business will actually be more efficient if they're all held together because the technology is comparable from species to species; and what you will learn in one of them certainly will enable you to move more efficiently in another model.

We decided to do that, and although we did announce we were going to file from 10, we got to work on the form 10 and the form 10, is I guess as of today's financials now the financials are out dated, so we have to update the financials but the form 10 is pretty much ready to file. We're holding up on it, frankly and the reason we're holding up is because this program has drawn partnering interest for multiple parties. We think it may be better for Intrexon shareholders to pursue this in a joint venture or some similar relationship with a major company and worldwide crop protection, so we benefit from their infrastructure.

So for now we're going to delay the filing of the form 10. What is your second question Keith?

Yes, sure it's on like a very positive development in the partnering front. Thank you. Then taking a look at slide 20, I think it's slide 14 where your showing the message that you're using for accelerating plant regeneration, that sort of thing.

A looks to me like you are talking about, at least in one case, possibly working with herbs and in the other case I can't tell what it is. Does this involve any kind of a genetic modification of something like a plant stem cell in order to create the new plant and the improved, I guess, regenerative capability of the plant?

You see that hint in the bold type right underneath the pictures where it says pluripotent. I don't think were giving too much away by saying as it does involve plant stem cells. However, our scientists and IP attorneys have warned us profusely about divulging too much about this but I will tell you the reason it's here because we find it incredibly exciting.

This reminds me of PCR, so many on the call probably know how PCR was developed by [Carrie Most]. (Inaudible) As a research tool and I think that was the objective of our team in Davis in developing this. They thought, gee, we can propagate so much more quickly -- I think this is like 500 times faster something like that -- whatever. It's not quite 500 I'm being told, but anyway it's a lot faster. Okay, withdraw that.

It's a lot faster and so, as a research tool it was quite compelling but what really got us excited as business guys is, gee, if you can do this you can ask yourself, do you need to plant at all. So think about the enhanced ability to rapidly create plant cell cultures both non-GMO and GMO in order to obtain what would otherwise be a botanical -- it's the would be I guess, botanical extract technically. But you wouldn't have to grow the plant to do it so this could be a lot more efficient.

The other thing that's exciting as we can imagine, I'm sure many people on the call can imagine, we can imagine some applications of this technology in which the plant cell culture would actually be the end product. We have a lot to evaluate here and we are just getting our arms around this but we were pretty stunned with the data. And we all agreed that on the EMC call -- we have this EMC call every Monday morning and on the EMC call in which these data were reported we're very happy to award this the scientific achievement of the week award. The reality is this would've been the scientific achievement of the year award but for a competitor that came from our lab in Germantown, I'm sure we'll probably draw a question on.

Okay, thank you very much.

The next question is from Tom Shrader at Stifel.

Good afternoon. Thanks for the update as always. I just was wondering if I can get a little color on the isobutanol roadblock.

Can you give us a sense of how you have visibility into how long it will be? Or just anything you can say there because of it's really only six months away it's a big deal. I'm kind of wondering how big the error bars are, if that's a fair question?

We talked about this Tom before, and the real problem when you're doing world first instance work of this complexity it really relates to your ability to construct a timeline that is reliable. If you hire us to build your McDonald's store you can exact a penalty from us for every hour that we are late because it's been done 50,000 times before. It's not a very high paying proposition, but you get the issue.

What we're finding is that with some of these really complex synthetic biology exercises, for each progressive step up we encounter two problems that man has ever seen before, so it's difficult to dierize, however, that's my perspective. The perspective of the team as Andy reported is that they're very confident --I've spoken with them. They're very confident of ultimate success here the model say that they should succeed in they're very confident that they're path on and the problems of the working on right now is the linchpin problem.

That's right.

For my money, I would dierise on what Andy said in terms of time.

Okay and it's not a follow-up it's another question. In the world of fish is the whole game here to work on species for your technology will allow land-based farming? Is that all you are looking at or would you look at ocean farming?

We would. Andy showed you some data on our tilapia work. That's very interesting species because the volume of tilapia is enormous. The amount of protein, animal protein, it supplies to a lot of the population of the earth is highly significant because it's low cost, efficiently produced, and these things can be grown almost anywhere.

Depending on the strain of tilapia there are highly salt-tolerant tilapia. Tilapia was once actually farmed farm in the Salton Sea in the Mojave, which as you probably know it's more saline than the ocean.

Ocean sea cages are not out of the question. I can't say we were involved in anything like that Intrexon, would be very careful on the environmental side because we do have environmental concerns about ocean sea cages which is the reason we decided to spend at AquaBounty part of the productivity gained that the Aqua Advantage Salmon represents. By spending it to acquire product features that will actually make the fish more desirable, such as being antibiotic free, sea pathogen free, vaccine free, etc. And still be able to deliver the product (inaudible).

Predictable sustainable quantity of production which the buyers are very interested in.

Year-round and close to market. Those are features in the taste test we've done with chefs that really rank very highly. To be honest, we've done this now I think at AquaBounty a couple of times with some pretty famous chefs who always, because they don't want to be terrorized by anti-GMO -- they always sign a contract that says we can't release their names.

The truth is we come out on top and we mainly come out on top because the condition of the fish is so pristine and it's so fresh. I think the ultimate success of the AquAdvantage Salmon is going to be very similar to that, we're already seeing for anybody who's tried an Arctic apple which is it's just better; consumers are going to like it better.

Okay. Perfect thanks.

The next question is from Jason Butler at JMP Securities.

Hello, thanks for taking the question. Just a follow-up on the energy division. The advancement of 23BDO seems to be pretty rapid, can you talk about what the next steps for that program are?

Yes, as Andy mentioned -- Andy mentioned I think or Geno -- they did, so we are in partnering discussions around that one I don't want to muck up our partnering discussions so I will tell you that the next step.

Okay. Great and then for crop protection you mentioned starting a field trial for ActoBiotics, can you talk little bit about what that entails and what -- how you assess success in moving forward for that program?

You mean any crop protection area?

Correct.

So as mentioned, we have a partnership research collaboration with one of the world's largest crop protection companies and under the terms of that agreement we're not really allowed to divulge data but also as mentioned we expect to have further news on this later this year.

Okay, thanks for taking my question.

The next question is from Tycho Peterson at JPMorgan.

Thanks. First on the Oxitec now that you have approval for the pilot in Monroe, can you just talk about next steps both there and then also any update on the Aedes product in India?

Everybody's checking their notes, Tycho.

We actually know the answer it's just that our government affairs people have drawn a constraint around us. Geno, you want to take that?

So following the successful vote that we achieved in Monroe County the matter's actually been headed back to the Florida Keys -- the mosquito control board there where we received the approval for the trial. We're really happy about what we've now seen as more widespread public support for the Oxitec solution in that area; and we are working with the FDA and the board take the next step to initiate the trial with our technology. And we'll obviously update you in that trial gets kicked off.

Okay. Then on the project in India?

That's done through a partnership. I had a nice meeting with them in Mumbai about three weeks ago.

Great people.

They are making very good progress. I'm not sure what your question is about the partnership?

I was just looking for an update. And separately, you talked about structure alternatives from the healthcare vertical can you maybe just elaborate on what you mean with that project?

Our board is very -- we been talking at board level -- thanks for the question by the way because I was hoping essentially draw a question, even though I can't say a great deal. But let me say that clearly healthcare -- if you look at this company it's seemingly -- if you go by SIC codes it's seemingly a diverse company but in truth in terms of technology and science it's not a diverse. For people who don't realize that the technology between man and banana is 50% we could seem pretty diverse but biologically that's pretty close. Let me put it this way, man and banana are more closely related probably than banking and insurance, okay? If you want to use the biology to an SIC kind of comparison.

Nevertheless there are -- if you look at Intrexon let's say from top-down it really feels like two companies. I'm not saying it's going to become two companies, I will just say healthcare therapeutics in particular, is 150-year-old industry it has a certain way of thinking. It has discrete allocable capital experts, a lot of industrial conventions that are pervasive in the industry that don't necessarily apply to industries like the world's first genetically modified fish, and the world's first genetically modified insects, and so forth.

As we viewed this and we've been a discussion with our board about this for a year -- I think maybe a little over a year, I think we need to organize first as a matter of management and then later possibly structurally and possible through capital. Which means it could be come a different juridical person, so we're evaluating options. We've always been very transparent about this kind of stuff especially with you, Tycho. So we just wanted to -- we didn't want people to be surprised if we do anything here.

We've had numerous -- we've had numerous inbound inquiries about our healthcare business; we've had numerous people observe that our healthcare business is probably worth more than our market cap. When people say that we take it seriously. It makes us think that maybe Intrexon even at this early stage in our overall trajectory may suffer somewhat from conglomerate-itus, if you'll permit me that term. We definitely for management purposes are going to organize our healthcare business more likely ApipCo and partner less.

Frankly, we're jealous of some of the partnerships we've done, we're jealous of what the other side has in that deal. Some the negotiations we're having now -- ditto -- in healthcare and we've got, especially with Geno here, we've got the requisite expertise to develop that an enterprise management team around health.

What we're really serving notice of is this is how we're thinking and enjoys the support of our board. We're discussing this with our bankers, we'll involve tax counsel and at this point no promises but I just want to know how we're thinking and more to come -- more to come later in this year.

Okay. Thank you.

The next question is from Derik de Bruin at Bank of America.

Hello, good afternoon gentlemen.

You're right on time Derek because you are I think the number one analyst on this call who would endorse what I just said.

Okay. Actually as we're sitting here doing the call, on Bloomberg a headline just popped up about a potential SEC investigation, could you shed some color on that?

Yes, so we have -- as you know we've had -- we were the subject of a seeking out report and some shareholder litigation that's now been resolved. We think this relates to that, we're voluntarily cooperating with the SEC. We're very happy to do so. We've undergone a very thorough internal examination of all these issues and I will point you to the exact language, you should look at the total language that is in our 10-K, the subject. And we're just going to have to stand by that.

Okay, fair enough. I would take a look at the 10-K haven't had a chance to look at it yet. I guess a couple of quick follow-ups on this.

Is your relationship with Dominion still progressing as planned -- it's not the relationship roadblock, it's something technical, is that the issue? In the butanol?

The roadblock is purely technical.

In our view, for each of these targets off of that (inaudible) platform, it's just about yield. It's about hitting the necessary yield to be in the money on that target and when you are -- for people who do know something about the energy business the people who supply natural gas, I describe them as being techno-phobic, nothing against them, every industry has its own conventions but their techno-phobic, they're EPS sensitive, and they're CapEx promiscuous as compared with almost any other industry.

Getting an energy company to build the plant in order to have a permanent customer for its energy output, in this case natural gas output, is not a hard feat to accomplish. I'm recently back for example from a tour of the Middle East, my observation across the Gulf State is that the way they view these things, natural gas costs zero and CapEx costs zero. We're pretty enthusiastic about what we might be able to do with some of our targets off of this [methanotroph] bio conversion platform.

I think that's generally true around the world, frankly. Again it's not about -- it's not like pharma, right, where trying to find some big company to partner with you is a difficult proposition or dicey proposition. It's virtually guaranteed, in our view you hit the numbers and you have no shortage of takers and there isn't anything else really that matters.

Our process is so CapEx light, compared with any other way of achieving these targets in OpEx light compared with any other way. We think for any planning value that could reasonably be used, natural gas is going to be the cheapest source of industrial available carbon for the next 50 to 100 years and that's largely true in any gas producing territory. So we're really enthusiastic about this platform and we think it's going to become an important part of our value ascription.

If you'll allow me to squeeze one more in. You noted in the press release about the difficulties in the regulatory environment. We have a new administration in Washington who has some different opinions about regulatory advantages or the regulatory environment.

I guess, does the change in Washington even potentially delay things out further in terms of now that they've got a put new people in place and who knows what's going to happen with energy department or the EPA or the FDA or those things? I guess could you think about -- is the regulatory upheaval right now, that could potentially push things out?

I don't think so. I think it could be true for anybody who has top line issue, some kind of issue that involves multiple agencies that requires political involvement. It should be more in mind that these agencies are, in terms of the decisions that we ask for, they are -- the answers are determined by the review staff. And frankly, there's been something in the public domain on the so I'll just say look I think everybody knows that approval of the AquAdvantage Salmon was not held up by the Center for Veterinary Medicine of the United States Food and Drug Administration.

It was held up by the White House, so unless you get into some kind of political issue in which the politicians will intervene, I will ask the gentleman here if they've had contrary experience, but in general meeting to review staff these agencies are really good we've always had constructive relationships with FDA and USDA, and so forth. To a great extent the tide was already moving our way before the administration changed and I'm very happy to report -- I mean the only ongoing process that we have that did involve an interagency transfer of jurisdiction of one of our projects -- I don't want to into detail about that, but since we worked close to this it actually is occurring at a time of administrative change, we haven't had a single road bump.

The process is going on just as it was before, if anything probably accelerated. Again, the review staffs are very cooperative even on an interagency basis and I always say about engineered biology what could be better than investing in inevitability. We know that this is where we go, otherwise we're not going to be able to feed the planet, we're not going to be able to solve very many more unmet health needs, we're not going to have a better environment. So we have to engineer biology; it is not optional.

Over time as the companies like Intrexon deliver products to consumers that they appreciate, that have actual tangible benefit to consumers, I think acceptance will become more rapid. That said, we're very much in favor of science-based regulation. We definitely see some technology ideas out there that are floated from time to time by various people that we regard to be virtually irresponsible and I don't mean irresponsible in the sense of -- if they are responsible for saying it they are certainly entitled to promote whatever they like.

What I'm referring to is some of the ideas like gene drives, for example, you just won't see Intrexon getting involved in anything that you can't put back in the bottle. We think we have a serious responsibility to our shareholders and to society around bio safety and so we're very happy to -- we do believe that engineered biology should be subject to regulation and we're very cooperative with the regulators.

Thanks.

The next question is from Ryan MacDonald at Wunderlich Securities.

Hello, guys. Starting out with Okanagan's Specialty Fruits and the Arctic apple, can you provide us any feedback that you are getting early on as you're starting to test the product in the market or what kind of demand you're seeing, or consumer feedback you're getting thus far?

I can do better than that, make sure Chris has your address and we will send you some and you tell us how you like them.

Sounds good.

I'm serious, I'm both joking and serious at the same time. By the way, did everybody see the mic bit on squawk box that had the entire town to that program eating Arctic apples on camera -- so I was pretty pleased by that. The serious part is I haven't encountered anyone yet that I haven't had anyone with personal experience didn't love it and didn't immediately grasp it's consequences for the consumer.

People in the industry are really warming up to it now and we think that this is really going to revolutionize that entire industry. As far as the specific market research data to which you inquired, we're not going to publish market research data any more than Procter & Gamble publishes their market research data. I can tell you that we are encouraged by all the data that we have to date and as mentioned in our press release we'll be doing pretty fulsome market research testing, mostly around trying to establish the right price point in the fall of this year.

Got it. Going little bit deeper, I guess, into the question about the Florida trial. We know obviously the board or get approved in Monroe County and it's back with the board. Can you talk about what progress has been made if any on selecting a new site for the trial within Monroe County? Then also, do we need to wait at least in terms of the field trial starting until the summertime when mosquito season, I guess, would pick up again to see more significant results are more accurate results for any trial?

With regard to the second question as we've seen from our data in Caymans and elsewhere, you can see proxies for success in the larval count in practically any season in which IDC continued to proliferate, so there's that.

Overall if you think of our data across all the field trials over, what is it 10 or 12 years of field trials now? The really best measurement point is one year out so you're really capturing the full year anyway. Anyway, we're very encouraged by US regulatory path. We can't really discuss site selection because it's really a decision of the mosquito control board but we are making very solid progress there and we're very encouraged.

The next question is from Robert Breza with Northland Securities.

Thanks for taking my questions. Maybe a follow-up to Ryan's question regarding Oxitec, if you talk about in the prepared remarks on the press release your capacity is going to be fully committed in 2017, how do we think about the return on investment or what would be the incremental revenue the we should think about relative to this?

Then maybe, if you could talk, RJ, about what would your plans if you're going to be at capacity at 2017. How do we think about additional CapEx/spending for 2018? Thanks.

I think that the pricing -- it's almost irrelevant though, I could tell you we have a certain price model out there in what we're doing today because we're doing everything. Our negotiations in certain markets are going in a different direction and we will be updating you soon -- as soon as we sign one of these deals that we have under discussion now, on a different model. In terms of projecting forward, I think it would be useless to look at the economics that we have Perosecaba, they are favorable but they're small.

It's not going to be our favorite model going forward, so I wouldn't project out from that I'd wait until we announce some of the deals that we think will be able to announce later this year. With regard to the second question as Andy mentioned or Gena mentioned, we are currently siteing meaning evaluating various sites for the construction of a very large egg production facility. If you think about mosquitoes, production of mosquitoes and frankly, two a half years ago I had no idea about how to produce the mosquito but we've all become pretty expert, so the high-tech part is producing the eggs.

Then the next stage is growing out the larvi and pubi and then next stage is releasing the mosquitoes. With Aedea Aegypti mosquitoe compared with say the Anopheles mosquito, that whole plate of mosquitoes is responsible for malaria, we have a huge advantage that really will enable us to go worldwide as we talked about this among ourselves, is kind of a Henry Ford moment. What if we could get the cost down so low that even the cheapest -- the poorest countries on the planet could afford this solution.

That's the direction of our thinking, in order to do that we think that we need to centralize the egg production. And here's the advantage is just we inherited this advantage and that is the Anapeles mosquito has egg viability for like two or three days. The Aedes Aegypti mosquito has a viability for one year and this coffee cup that I have in my hand would hold 6 to 7 million mosquito eggs. Something like that, maybe a little more. It's a big coffee cup, maybe 10 million. Really cheap transportation it's the high-tech part we can centralize that, General Bostic believes we can centralize that and drive considerable efficiencies and continue to develop more efficiencies as we go.

This will enable us to roll this out worldwide on a more rapid basis so that we won't have to build a big factory everyplace we're doing it because as Hayden Perry has told me on one occasion, you could do the grow out and the release in a pup tent if you had to. We're really encouraged but our plans in this area and we do see this is a worldwide opportunity, a very significant one.

Thank you.

This concludes the question-and-answer session. Would you like to make some closing remarks?

Sure. Let me just thank you for participating in our call and thank you for the support of our company. I want to thank -- I don't think I've ever thanked them before but I want to thank our Board of Directors which is just been incredibly supportive.

When I think about this company, I will just say -- I would invite anybody to really consider who these people are, for they do extraordinary work. They actually are an important part of our mission. When you look at their careers and you look at the other boards they sit on and so forth, you realize that these people are serving because they believe in the future of Intrexon, they believe in the objectives of the Company. I can't tell you how appreciative we all are to have their guidance and supervision. Throughout the company, I think Andy, we're up to around 1000 people?

Mid 900s.

We continue to grow organically and these teams are just doing incredible work. That's the reason we really wanted Andy to go through some of that with you today in celebration of their work. That's really where it is the rubber meets the road at Intrexon, so we have approximately 600, I think it's a little over 600 scientists hard at work.

I've been to some evening event with them I know everybody's here at had the same experience -- have had some evening events with them and it will be 8 PM and they'll say -- I have to go, I have to go back to the lab. Because the people in this company are fervent. They believe in the overall mission and so, my thanks goes to them as well. Then our very patient shareholders. Look, it hasn't been a very good year this last year and biotech generally or for Intrexon in particular, in terms of share price appreciation and obviously, we are very aware of that.

We hold a few shares in this company, we all do. Notwithstanding that though, as Joel described, when Joe was talking, I was thinking $6 million negative EBITDA for the quarter -- what was it, $20 some million for the year?

When you consider what Geno and Andy talked about in terms of the achievement for the year and I'm telling you this is a year that I graded as a C. I graded this year as a C, right, because I thought 2015 was a better year, 2014 was a better year and 2017, we are absolutely committed 2017 is going to be a much better year. Even at a C, when you consider a company that was able to do this much on a net cash burn of $26 million or something like that, I will tell you, I would make -- I'm not giving investment advice. I would just say I will make that investment every minute of every day.

That's a personal observation Mr. Don Lehr our Chief Legal Officer, not one that comes from (inaudible). But anyway, we're very pleased with the progress we're making; this is a long road. We'll have some really outstanding years and based on last year we'll have to say we have some disappointing years from time to time.

What were pretty the real disappointments to us this year other than being publicly and viciously attacked? I think we had three programmatic -- with three programs with the delays on them and so when we tell you the CD33 CAR-T we thought that was going to be in the clinic in 4Q, and now looks like it's we're going to file IND in 1Q, so that slipped. Isobutanol target, obviously were behind on that, as And said. What was it, 6 months?

6 to 9 months.

And I forget the third one. Oh yes, third one is wet AMD. We got some experimental results on wet AMD that told us that we should not progress within IND on that variant, so it's gone back to the bench and we're retooling that.

I recently met with the founder and CEO of Sun Pharmaceutical Industries are partner in (inaudible) disease. I can tell you that both sides are thoroughly committed to success in this area. We believe it's there as I mentioned in response to question from someone today, these are iterative. It was Tom.

These are -- the work of this type is iterative, you have to experimentally iterate. You're not all -- it's not always going to work perfectly the first time, you have to go back at it and back at it. Several of the examples you saw today did represent the success on some -- on an experiment like Florian, is a perfect example, we've been trying to get plans that we could -- which we could control flowering for five or six years and this was not the first effort. The pictures that you saw earlier, that did not come from the first effort. Anyway, just a great scientific team and my thanks to them and again, my thanks to our very patient shareholders you can be sure we are committed to making this really pay for you.

The conference is now concluded. Thank you for attending today's presentation, you may now disconnect.