Biotechnology is a notorious minefield for investors. For
every successful drug that survives the approval process, dozens
more simply flame out. Millions of dollars of capital evaporate
every time a clinical trial fails to produce positive
Yet a select group of biotech visionaries manage to strike it
big -- time and again. They have a knack for spotting
biotechnologies that ultimately prove their mettle through the
Food and Drug Administration's rigorous process. And few have
shown the gift of biotech insights like Randal J. Kirk.
Kirk has built his fortune by focusing on drugs that have
blockbuster potential. And he's shown the patience to stick with
them -- for years, if needed -- until his vision is realized. The
payoff: He netted a $1.2 billion profit in 2007 when
acquired New River Pharmaceuticals for $2.6 billion. New River
had developed Vyvanse, a key drug in the treatment of attention
deficit hyperactivity disorder (
Four years later, Kirk struck gold again as
Forest Labs (NYSE:
paid him $600 million for his majority stake in Clinical Data,
which had developed Viibryd, an anti-depressant drug that hit the
market in 2011.
Since then, Kirk has remained off the radar. Sure he's been a
major shareholder and director of small biotech firms such as
Ziopharm Oncology (Nasdaq:
Fibrocell Science (AMEX:
Halozyme Therapeutics (Nasdaq:
Synthetic Biologics (NYSE:
. His name routinely pops up on insider buying lists associated
with these companies. But his real passion is for a company
that's he's been nurturing for half a decade and recently took
public in an initial public offering (IPO).
, has been developing a set of tools that enable scientists to
step inside the human gene and alter its basic structure. The
company isn't concerned about coming up with a blockbuster drug.
It wants to provide the tools for other biotech firms to make
major breakthroughs. So what exactly is Intrexon looking to
accomplish? The company is in the field of synthetic biology,
which alters the core mechanisms of action taking place inside
Make no mistake, this is an approach that will take time to
pay off. Intrexon must sign partnerships that promise upfront
licensing fees along with product-based royalties. In that
respect, Intrexon is starting to gain steam:
In October 2012, Intrexon inked a deal with Fibrocell to supply
the UltraVector platform to Fibrocell's dermatology and
In May 2013,
Soligenix (OTC: SGNX)
licensed Intrexon's UltraVector technology to help develop drugs
to treat melioidosis, an inflammatory disease that is the
third-leading cause of death in Asia after HIV and
On Oct. 1, Intrexon inked a deal with India's Sun Pharma to
target cell-based approaches to combat ocular diseases that lead
to partial or total blindness.
On the same day, Intrexon also announced a collaboration with
Oragenics to develop microbes that will target oral and
And just this week, on Oct. 23, Intrexon and Ziopharm announced
an extension of their ongoing collaboration to develop drugs that
alter the basic functioning of cancer cells.
Intrexon is also spending heavily to advance the core DNA
manipulation technology. For example, it has been advancing a
technique to alter DNA in vitro, which holds the promise of
eliminating birth defects and diseases while fetuses are still in
Intrexon has also been pursuing techniques that might one day
help manipulate hydrocarbons, on a cellular level, to produce
higher fuel content. On top of all this, Intrexon is also
identifying opportunities to develop heartier and more nutritious
crops, fruits and vegetables that are also more disease
But investors need to have a long-term outlook with this
company. In the near-term, few of these developments are likely
to have a huge impact on Intrexon's income statement. Wall Street
analysts just picked up coverage of the recent IPO, and frankly,
their near-term views seem too aggressive. Expectations of $75
million in revenue this year and $145 million in revenue next
year are overly optimistic.
That may explain why shares have cooled off from the initial
post-IPO surge. Look for analysts to lower their revenue
estimates when third-quarter results are released in a few
Still, this is a business model that has revolutionary
potential. And in light of Randal Kirk's track record in the
biotech industry, investors with multi-year investing horizons
may reap handsome rewards.
Risks to Consider:
With a market value of nearly $2 billion, this stock is no
bargain in the context of near-term results. Moreover, Kirk has a
history of taking several years to unlock the value of his
companies, so patience will be required.
Action To Take -->
Shares could dip on the release of third-quarter results as
analysts move to lower near-term revenue forecasts, so this is a
stock to research now, and prep to buy when the numbers have been
released and digested.
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