Precigen, Inc.

Christopher Basta - IR R.J. Kirk - CEO Krish Krishnan - COO

Tycho Petersonat - J.P. Morgan Keith Markey - Griffin Securities Peter Lawson - Mizuho

Thank you. Good afternoon.

I am Chris Basta, Vice President of Investor Relations at Intrexon Corporation. Welcome to our fourth quarter and full year 2014 earnings conference call.

Joining me today on the call are Mr. R.J.

Kirk, Chairman and Chief Executive Officer, and Mr. Krish Krishnan, Chief Operating Officer.

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 the business, of Intrexon Corporation, 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, adjusted EBITDA earnings per share, and pro-forma adjusted EBITDA earnings per share. Reconciliations to GAAP measures are contained in the earnings press release, as well as on the Investor section on our website at www.dna.com.

Now I would like to turn the call over to Krish Krishnan, our Chief Operating Officer. Krish, the floor is yours.

Good afternoon, everyone and thanks for joining the call today. R.J and I are pleased with Intrexon's performance in the fourth quarter and first full year as the public company.

In 2014 we continue to make progress against our strategic operational objective and work to establish industrial leadership in select businesses. Within the health sectors which to date remains our most mature and advanced sector we’re working with the collaborators in a number of areas including cancer, orphan genetic disorders, blindness, infectious diseases, cartilage repair and the in biology mediated production of API.

Our Immuno-oncology program focusing on CAR-T therapies has been and continuous to be a key focus for our team. In January this year we completed an exclusive licensing pact with the MD Anderson Cancer Center along with our collaborator ZIOPHARM Oncology.

We believe the synergy between our technological platforms creates a powerful combination and a promising pipeline to fully realize the potential of CAR-T and other cell based therapies. We recently acquired ActoGeniX, a European clinical stage biopharmaceutical company focus on the development and commercialization of a new generation of biological drugs of ActoBiotics.

ActoBiotics represents a novel contact for oral administration of therapeutic proteins and they are design to be safer and more effective and injectable biopharmaceutical. We believe that while the application to this novel platform are substantial and apparent within the health segment it has significant utility to enable innovative solutions, up cart our other food, animal health and consumer sectors as well.

We don’t have enough time on this call to provide an update on every one of our collaborations, but we are significantly advancing most of these programs and I’ll provide a few highlights. Along with our progress and partnership with ZIOPHARM, we continue to be pleased through the development of our -- development that our partner Fibrocell is making.

We anticipate clinical data on the RDEB program in the second half of this year. We’re also on track with our ocular program for the treatment of breadth AMD in our joint venture with Sun Pharmaceuticals including plants that moved into the clinic in the next six to nine months.

2014 was also marked by significant progress in the active pharmaceutical ingredient, our API space, as we entered into an ECC with Sanofi and two separate ECCs with Amneal Pharmaceuticals to develop improved production processes for targeted API. We achieved solid progress on our Alkaloid Program with Genopaver which has now moved into the next phase of development.

As a reminder, while the majority of API produced like chemical synthesis or isolated from plant or animal cells Intrexon platform utilize this Microbial based expression to generate API through a single biological fermentation. Seeking more consistent scalable and cost effective production than current methods allowed.

So in total in the space we have four ongoing API projects and the acquisition of the Budapest labs early in 2014 has enhanced our economic and operational productivity in this phase. The size of the global API market is estimated to exceed 100 billion and two collaboration such as those described; we believe we can address a significant portion of the overall market.

We are encouraged by the outlook and health for the remainder of 2015, as we expect to see new major alliances form and anticipate that our existing ECC partners should be in the clinic with up to 10 novel therapeutic candidates. In the food sector, our acquisition of Trans Ova provides us with a leading platform in the bovine reproductive market in which there are two high value protein industries, dairy and beef.

Following the trends over plant action, we recently acquired the remaining stake in Exemplar Genetics which developed custom miniature swine models of human diseases. Miniature swine represent a powerful investigation of platform since the physiologically similar to humans and surpass many other limitations of human immune systems.

We can broad pipeline of transgenic swine models for research on [indiscernible], cancer, cystic fibrosis, cardiac arrhythmia, neuromuscular and neurodegenerative disorders; Exemplar’s platform is defined to enable most productive power in the generation of novel therapeutics for a range of disorders for our channel partners. Also last Friday we announced that we entered into an agreement to acquire Okanagan Specialty Fruits, OSF, the pioneering agriculture company behind the Arctic apple, the world’s first non-browning apple.

Include the acquisition Intrexon expect to expand it food programs to include trees yielding fruit that is more appetizing and convenient for consumers while providing economic benefit for the entire fruit supply chain. With respect to the remaining sectors I’ll just mentioned that in energy our intercom energy partners JV is tracking to a development plan and we’re pleased with our early efforts in the environment and consumer sectors.

On the financial front, giving the fourth quarter our revenue total $31.1 million an increase of over 336% over the fourth quarter of 2013. Net income was $18.8 million or $0.19 per share.

Cash consideration received for research and development services otherwise known as cost recovery in the fourth quarter covered 53% of cash operating expenses exclusive of the operating expense of the majority on consolidated subsidiaries and this number was close to 50% for the full year 2014. Also for the full year 2014 total consideration received for technology access fees and cost recovery covered 111% of cash operating expense again exclusive of the operating expense of the majority unconsolidated subsidiaries.

So in summary, we continue to strive to preserve shareholder capital, while we anticipate receiving significant back end economics from a variety of products across multiple industries and sectors. Thank you and we'll open the call for Q&A.

Hey thanks, I wanted maybe to start off with a couple on MD Anderson announcements and as we think about that the CAR-T initiatives, can you maybe just talk about some of the improvements you can make to that program to improve clinical response and any specifics you can provide around who will run the CAR-T trials? Where the manufacturing will be?

And whether the next studies will utilize your technology?

That's a lot of question Tycho. So, I think your first was how does our technology aim what they already have doing on?

Exactly, through clinical response.

Yes, so as you seen from the clinical data has been provided by our partner ZIOPHARM, the use of one of our switches in the clinic is demonstrated to actually work and we always liked this biological effect or IL-12 because it's a real pressure test for a switch because even in an [indiscernible] expression of therapeutic window for this particular cytokine is very potent and overdose is very toxic. The therapeutic window is incredibly narrow.

So the point is we've demonstrated in many, many experiments now in two coming to three clinical trials that we can induce and regulate protein and/or bioactive RNA expression in vivo. So obviously this technology when applied to CAR-T has multiple potential uses.

So for example, the ability to regulate the amount of T-cell affinity for our target can be very, very useful. The ability to induce and regulate immunologic adjuvant like IL-12 for example could also prove very useful and we don't want to get in more detailed and certainly don't want to get out ahead of our partner but I think that gives you a flavor for what we can do.

So with regard to the switch added to the fleet inducer somewhat gives us an ability to actually transact the CAR-T the T cells rather without the use of virus plus additional technologies, I remember you're being in [indiscernible] so you've seen our UltraVector platform I have joke I’ve been saying to people in the field including CEOs of companies that are entirely based on CAR-T and it goes as follows: isn't that amazing that the first time you created a vector that successfully targeted a receptor that became preventively optimal and they all get the joke by the way. I don't know how many people on this call will but my point is we're very, very good at engineering biology of that type and other types.

We don't create single vectors and/or just do them serially until one works and then say we're done. So obviously an ability to really optimize what the thing that you're expecting, the ability to induce and regulate it, the ability to use our AttSite technology, which is another differentiator to actually modularize genome or cell so that you could have created pre-established landing pads for transgene events transgenic events are completely unique to our knowledge and we think the combination of these technologies really give us in our view the leading technology platform, obviously we're not chronologically underneath but we do think we have the best technical suite to compete in this phase.

And then just to follow up to -- from your perspective only aligning with ZIOPHARM here why not do licensing agreements with CAR-T players I guess given inherent risk around somebody’s therapy is working in D zone and eventually being commercialized?

By no means do I want to rule that out, so I think our partner has intimated that -- I know we’re not out of head of them in this case -- has intimated that we are in fact in discussion with multiple companies around the globe in this area and we want to stay open and collaborative, I agree with you Tycho it would make sense to collaborate and I expect that we probably will.

And then just quickly on Trans Ova the $100 million fruit projection this year is that all trends over or is that factoring in the apple business and anything else? Then secondly can you comment on off margin I think you’ve said 10% in the past for Trans Ova last couple of quarters it looks like it was more like 20% so I was just wondering what your thoughts are there?

Yes, so Trans Ova I don’t know, we don’t report segmentally like this, so but I’ll say Trans Ova had very, very good growth in 2014 and on the trend line that they are on, I shall not be surprised if they alone account for 100 million in revenues. So -- but we wouldn’t [diarize] around even that we do expect the upper advantage to be approved in the near future, we wouldn’t diarize around revenue for 2015 for that because after all as soon as we start providing the smolt which is what they call baby fish to our growing facilities it will take 16 to 18 months to produce our market ready fish.

So obviously we’re not even internally diarizing revenues for AquaBounty. The Okanagan Specialty Fruits is similar it's like -- it will take two or three years to get into revenues with that, we’re still a pretending acquisition, so I don’t want to talk a lot about it personally say that we’re very, very happy with it, we think it gives us an opportunity to have a market leading position in a very high growth category one that we can really enable to grow much faster.

And in this area since Okanagan, we just mentioned somatically you’ve seen the kinds of best we made in food and then our return expectations are those of therapeutic developers which is what Krish and I done for many years. The three other sectors that we’re in provide the same kind of ROI or we’re not interested, so we’re really not interested in doing very low value at work of any type or getting involved in a business that doesn’t provide a superlative return.

So, why apples or/and other stone fruit. There are two ways to differentiate a product obviously, right, one would be to make the same thing that the others have, that the competitors have more cheaply and there you could point to the upper AquaAlantic salmon as a case in point is the economics on the upper AquaAlantic salmon as compared with a wall type Atlantic salmon are extremely attractive.

So, if we can -- when that fishes market, we can target some of those economics, so for our shareholders I think we’ll do will be very well. Arctic apple really illustrates different case which is the case in which I don’t know how many people on the call may have actually purchased the prepared sliced apples that are offered in the market today, but its interesting experience.

First of all this is business that grows quite well, we’ve studied these companies, they do use chemicals in order to inhibit their browning and they use coal chain and number of methods to try to make them marketable. But to me they do not seem the same as a freshly type sliced apples to be very blunt about it.

So, my point is there is another way to differentiate even a commodity product and there is by adding features that consumers will value. When we look at the growth of prepared sliced apples for example in the segment and then we see recognize that they are not quite the same thing as a freshly sliced apple.

We see and the real opportunity to add value and that to offer and can translate to margin, so we’re really excited about that Tycho.

I have a couple of questions and I’ll start out with couple on Okanagan if you don’t mind I was just wondering will the same kind of technology that is behind the arctic apple these are applied to the fruits or vegetables that you mentioned the three others that apparently are in the pipeline or is there something else they have?

Keith, I don’t think we probably want to get into that, I will say they have a pipeline, we have a pipeline, we really like Neal Carter and his team a great deal. We’ve known Neal now for well over a year and have significant discussions with Neal and his team for that links at time.

So, we feel we know the business extremely well and I think going forward -- look we wouldn’t be doing this just to have a nice apple. When I get home from San Francisco on Saturday my 5 year old actually took made criticism and told me I think you paid too many dollars for an apple.

So, I explain to him well there is more to it and first of all it's not just an apple. And secondly yes, there are other applications of I won't say the same technology but comparable technologies in which you can really provide healthier and I don't want to say healthier because they won’t make a bug issue.

Let me just say more abundant food that is in its class that is healthy because and I'll assert that an apple slice is healthier I think in my view my personal opinion than potato chips and yes they're not on a [indiscernible] because they're not as convenient and they're not crispy and snappy and few of us really want to walk around with a paring knife in order to enjoy that. There are a number of opportunities like that we think in specialty areas that are actually more appealing than contributing way upstream some technology to somebody who have been a 13 year development cycle time on some serial grain.

I think that a great answers, thank you, that was what I was looking for, the other thing I was going to ask is given your business-to-business model, are you going to be felling small trees or just what is it that the product is going to look like, can we touch it sort of thing? And what kind of economics do you get or do you expect to get from those products being shipped.

With the salmon you’re selling eggs and clearly each one of them can ultimately give you a piece of royalty stream but how do you do that with the tree?

Well, there are multiple revenue models that are profitable. We do have plans about this Keith, it's a terrific question and I wish I could answer it today, but I think we're better off not doing so I'll say that we will optimize for ROI to our shareholders.

We've had extensive discussions with Neal Carter at Okanagan about this any I know we see eye to eye on the possibilities, but you shouldn't assume that you can’t get royalty than apple you actually can. I'm not saying that we'll do that but I'll say the reason I thought your question is good is because when you do that when you conferred something that really creates something that should translate into a consumer preference, capturing those economics really deserve the thought and we're doing that and we've a team of people on it and as they were working closely with Neal Carter at Okanagan about this and I think you’ll like the results but again it's a pending acquisition I don't want to really get too much into that.

Yes, I appreciate it, okay. Looks forward to that in time and then regarding the ActoGeniX, acquisition it had come with a small clinical pipeline and I was wondering are you counting their products as part of the 10 that are going to potentially be in the clinical with year-end secondly, thus do you plan to spin out that pipeline to another company perhaps in the near future?

Yes, again great question let me answer the second one first. The short answer is yes, that's our business model.

So, we partner products, when partnering the product opportunities we try to when that's possible, we do think that those two clinical stage assets are partner-able and I wouldn't be surprised to see that we do impact partner that. I forgot your first, the first part was?

And just wondered if they were counted in the 10 that we're?

If they're count in the 10? Well, we said up to 10, it could be more than 10 Keith, so I will say if we do count them then really content --.

Well that's great and the level of certainty, okay and then I was just wondering, you're working on a rare disease with Fibrocell RDEB and another one was with [indiscernible] to figure it’s attacks here, are there rare genetic diseases of interest that maybe you're already are working on and you're looking to partner out or are you working for a partners that might be have a particular area of interest in that space?

Yes, to all of the above. So, I mean think about it monogenic disease is alone I think the last number I heard from someone knowledgeable in this space is around 7,600 that are documented in the medical literature and that's just monogenic, there are remained multi-genic disease and they're remained genetic gene programs that can address diseases that are really only known typically that obviously involve massive genetic complexity.

So, yes there are number of opportunities are very, very high, our team has been working on several of these. Yes we’re in dialogue with several companies about several of these, so I would expect us to continue to make progress in gene and cell therapy.

Great, thank you very much.

Hi R.J., I wondered if you could just walk us through the efficacy around efficacy around the CAR-T technology. How quickly do you think excellent technology can increase the efficient to around that, what can roughly do to make that Intrexon do to make that enhancing technology, just too kind of improve the clinical responses that we saw at ASH?

Well, the first thing I would observe is that it's in the nature of this business, I think all the businesses, it's an arms race right, so that the clinical data that you saw at ASH, you shouldn’t support that is the limit of the technological demonstration that was made on the MD Anderson technology alone. In the same way that the clinical data that we out on an earlier version of the ActoGeniX platform, I can tell you is actually not illustrative of what we think that platform does in its current version, so in the same way I’ll tell you that we’re very confident that the data that would have come out of MD Anderson without us would be improving anyway.

Secondly, the product development cycle time even in this field where you get to the translation of medicine pretty quickly, it's still on the order of a year, so in terms of seeing in the clinic the combine technology is actually working is best thing in terms of 2016 timeline.

First time we see data kind of 16% you think you more than?

So, you are going to see improved data okay, in my opinion but -- and you're going to see improve data both from things that we’re doing and same they already had under way. But possible 4Q 2015 but I am trying to be safe and say 2016, but obviously will be ready by -- we’re targeting just let's say it's our aspirational goal to be at ASH at the end of this year.

Is there anything else, anything with this technology within the space you need or do you think you kind of done invested for the first set of data?

We continue to develop technologies in this space. So we had our regular Monday morning EMC calls this morning and learned about some really encouraging data.

So, we’re continuing to push forward we have a very large team working on this, we continue to expand it, we continue to set the bar higher. So, you can expect to see increasingly elaborate and increasingly more regulated controlled and potent therapeutic candidates.

And as you look across the entire portfolio, what are the lead products you think you would actually generate product within the market -- in the marketplace from the partnerships you have?

Do you mean across the board or across the entire portfolio?

Yes exactly.

We’re actually very excited, I mean we just kind of do it chronologically, we’re very excited about ZIOPHARM’s GBM trial which is good old go RTS-IL-12, so that will be going in the clinic very soon and we’re very excited about this particular therapeutic. As mentioned the Krish’s comments the RDEB trial which will be getting underway pretty soon is we think extremely important and highly encouraging and we think this will have data out on this later this year with clinically.

So you may recall that we have a joint venture with Dilip Shanghvi’s company Sun Pharmaceuticals in the field of alprazolam disease and we do expect that our first therapeutic candidate -- so these are gene programs that will go in eye, so there will only be one eye injection, one [indiscernible] injection which is then regulated by an activator [language] and the other with the expression of whatever is encoded in the gene program to be to be expressed we’ll then be regulated by an activate language could be dose orally or with eye drops and the first candidate, which we’re very excited about that it will be in the clinic this year as well.

As always, I have absolutely no prepared remarks as usual. But let me say 2014 was actually for us a very challenging year.

We actually were planning originally on IPO in 2014 to be very candid and when we saw the opportunities to IPO in 2013, we knew we really had to accelerate everything that we were doing and we did and so the first thing I’d like to do was really command our team because the work that they did in 2014, the progress they made in that length of the time was exemplary. That said as I wrote the team on new year’s eve, they’ll all know -- they’ll all remember this I gave them a grade of C I think and the reason for the grade has really nothing to do with their performance and the work that the team did on absolute basis but really on a relative basis because we remain just extremely excited about the opportunity that Intrexon has and we get an increasing amount of reinforcement and validation of our belief about just how vast our opportunity is, increasingly we see it's becoming more tangible every day that we can really be an industry leader, this company can be one of the great companies on this planet and this is what we are applying ourselves to.

When you consider our performance 2015 in light of that it was the minimum. That said however, when I see what we have queued up for 2015 when I see how the team is executing today and at the same time and we can take credit for the timeliness of what we're doing the kind of reception that not only we but I think everyone there is involved with the engineering to biology must be receiving, but certainly we see it from our perspective.

I think 2015 is really going to be a tremendously a vindicating year for all of us for our shareholders and everyone who’s set confidence in us so I want to thank everyone for that.