Analysts have dropped their profit estimates for synthetic
biotechnology firm Intrexon, and investors seem to be taking it
) stock has soared this year, mainly on investor hopes of better
results to come later from royalties as collaborators using its
technology eventually bring products to market.
Analysts don't expect the Germantown, Md.-based firm to post
an annual profit until 2015. They had earlier predicted it would
be profitable this year.
In the week ending Jan. 17, the consensus for 2014 fell from a
forecast loss of 6 cents a share to a loss of 29 cents, according
to a poll from Thomson Reuters. Yet Intrexon stock jumped 23%
that week, continuing a stunning climb that began at the end of
Shares have since dipped -- biotechs are notoriously volatile
-- but with Tuesday's 7% intraday rise, Intrexon is still up 47%
The recent bout of investor enthusiasm began after Intrexon
announced Dec. 30 that it had entered into a
research-and-development collaboration withJohnson & Johnson
) consumer and personal products division for advancing new skin
and hair care products.
"Clearly it was one of the most important deals they've done,"
said Keith Markey, an analyst at Griffin Securities. "Obviously
the market is thrilled.
"J&J not only validates that Intrexon is capable of
getting a deal with a large blue chip company, but it also
validates the technology."
Deft With DNA
As a leading player in the nascent field of synthetic biology,
Intrexon designs, builds and regulates genes and cellular
It applies engineering principles to biological systems to
enable DNA-based control over the function and output of living
Its proprietary technology helps other companies develop
products and processes in several fields, including health care,
food, energy and the environment.
Now with J&J, consumer products are part of the mix.
Mizuho Securities analyst Peter Lawson compares Intrexon to
semiconductor companiesIntel (
) orARM Holdings (
) in that its chief product is really access to its technology.
Partners take on the commercialization risk.
So far, Intrexon's collaborators have not brought one product
to market. So Intrexon has not received any royalties.
But it generates revenue from upfront licensing fees, cost
reimbursements and milestones. Revenue in 2013 is expected to hit
$26 million, double that of 2012, and is seen growing to $59
million this year.
"We're talking about a technology that is still in its early
stage. In terms of commercializing products, it will take a few
years for that to happen," said analyst Ying Huang of
Analysts expect the first commercialized product will likely
be genetically modified salmon through Intrexon's collaboration
with AquaBounty Technologies, which aims to cut farming time in
AquaBounty's submission of a new animal drug application to
the Food and Drug Administration has faced long delays. But
analysts say approval could come this year.
Even with approval in the U.S., analysts expect sales to be
slow going in the early years until consumers warm to the idea of
eating genetically modified fish.
Products to treat medical conditions are seen as more
promising revenue generators. Investors are "anticipating more
contracts in the medical field," said Markey, based in part on
CEO Randal Kirk's background and interests.
Experience At The Helm
A seasoned biotech entrepreneur, Kirk is revered in some
circles as a biotech guru. He was named chairman of Intrexon in
2008, 10 years after Intrexon's founding. He became CEO a year
Kirk previously was chairman of New River Pharmaceuticals, a
biopharma company he founded in 1996 and sold in 2007 toShire (
) for $2.6 billion.
He also was chairman of the board of biotech firm Clinical
Data from 2004 until its sale toForest Laboratories (FRX) in 2011
for $1.2 billion.
Despite Kirk's penchant for exits, "I don't think the
near-term business plan is to sell Intrexon," Huang said. "He
brought it public in 2013 and probably wants to develop the
business for the next three to five years."
Of Intrexon's 13 exclusive channel collaborations, several are
in health and medicine, including one withZiopharm Oncology
(ZIOP). One of Ziopharm's clinical trials is for a DNA-based
candidate to treat advanced melanoma.
Another key collaboration is withFibrocell Science (FCSC),
which is focused on treating a rare, genetically based blistering
disorder. Others includeSynthetic Biologics (SYN) for infectious
diseases andOragenics (OGEN) for antibiotics and probiotics. Kirk
is a stakeholder in all of those small biotech outfits.
"It's difficult to say which one will be first to get to
market, but if pushed I'd probably say either Synthetic or
Oragenics," Markey said, noting that antibiotics usually have
faster approval times than other drugs. "Any of these could be
very large royalty generators."
Appeal Across Industries
Consumer products under the helm of J&J will be easier to
commercialize than new drugs for complex therapies for cancer and
rare diseases, since they don't have to go through a long
approval process, Markey says.
Energy is another potentially big area for Intrexon. Through
genetic engineering of living organisms, work is being done to
convert natural gas into liquid fuel for industrial uses and
Intrexon has been in active talks with energy companies for
some time, says Huang.
He noted that management "has been working hard to get a deal
done in the near future."
It would be Intrexon's first collaboration with an energy
Four of Intrexon's exclusive channel collaborations were
forged since its August IPO, as were two joint partnerships.
Besides the J&J deal, Intrexon has inked one with Rentokil,
one of the world's largest pest control and biological cleaning