Good afternoon and welcome to the Intrexon First Quarter 2018 Investor Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I'd now like to turn the conference over to Tom Shrader. Please go ahead.

Good afternoon everyone. Welcome to Intrexon's first quarter 2018 investor conference call. I'm Tom Shrader, Vice President of Communications and Strategy at Intrexon. And I'm joined by Joel Liffmann, Senior Vice President of Finance; and Thomas Bostick, Intrexon's COO. R.J. Kirk, our CEO, will join us for the Q&A session. Forward-looking statements. During this conference call, we will make various forward-looking statements. Investors are cautioned that our forward-looking statements 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. Please read our Safe Harbor statement contained in the earnings press release as well as Intrexon's most recent SEC filings for a more complete description. This afternoon's press release and our discussions may reference certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDA per share. We use these financial measures as a more accurate estimate of our ongoing financial position. Reconciliations to GAAP measures are contained in the earnings press release as well as on the Investors section of our website. The format of today's call will include a review of Intrexon's progress last quarter and some more recent updates by myself and Tom Bostick and then a recap of our financial situation by Joel Liffmann. The call will end with a Q&A session. Again, our CEO, R.J. Kirk, will join us for the Q&A part of the call. Okay, next slide. So, just an intro to Intrexon's healthcare division. As a reminder, the most advanced human therapeutic efforts at Intrexon are now grouped into two wholly-owned subsidiaries; ActoBio Therapeutics for L lactis-based delivery of fully folded biological therapeutics; and Precigen for cell and gene-based therapies. These reorganizations were made as part of Intrexon's move to more fully develop our own discoveries…

Thank you, Tom. Next slide. Good afternoon. It's an exciting time for Intrexon's later-stage assets. I'll now update on the progress of our wholly-owned subsidiaries, Oxitec and Okanagan Specialty Fruits, followed by some additional progress for our subsidiaries, Trans Ova Genetics and AquaBounty Technologies. I'll start with our efforts in innovative vector control. Efforts to create innovative vector control solutions to combat the spread of mosquito-borne disease is getting more important all the time. And just last week, The New York Times have ID-ed CDC reports describing increases in insect vector diseases in the United States. Brazil continues to struggle during a challenging year with yellow fever. We believe our approaches at Oxitec are powerful and should be part of an integrated pest management program along with traditional methodologies for mosquito vector control. We have now been in the world of self-limiting insects for several years and we've learned a great deal. In an effort to advance our technology, improve operations and meet the needs of our customers, we're evolving our global operations. We're evolving to streamline our operations, focusing on the development of U.S. opportunity, advancing our innovation pipeline and pursuing targeted commercial and collaboration opportunities. Our R&D efforts continue to successfully optimize our technology, while our regulatory efforts are progressing in the U.S. and abroad. Next slide. We're happy to announce that we are about to launch the first field trial of our new second-generation mosquito strain, OX5034. As many of you are aware, our first-generation Friendly Aedes OX513 was designed to breed with local disease-spreading mosquitoes that produce nonviable offspring. In other words, OX513 collapses mosquito populations via nonproductive mating based on recurring releases over time. On the manufacturing side, OX513 mosquitoes are produced using a system where the nonbinding male mosquito larvae are separated for further…

First quarter revenues were $43.8 million, an 18% decrease from the prior year. The revenue decrease reflects our strategic decision to redeploy resources to internal programs and platforms and the future product opportunities they represent. This means we have fewer resources devoted to our ECC programs and hence, the revenue reduction. Product and service revenues combined were 3.7% lower in Q1 versus 2017. These revenues were almost entirely from our Trans Ova business where we continue to advance our proprietary bovine embryo product platform and business. Total reported operating expenses for the quarter were $92.3 million, up from $85.1 million in the first quarter of 2017. First quarter adjusted EBITDA was a loss of $19.7 million and compared with the loss of $7.1 million in 2017. We closed the first quarter with a consolidated cash position of approximately $120 million and we have common and preferred equity securities in our ECC partners with a value of roughly $180 million. I refer you to the earnings release and 10-Q for additional financial information. I'd now like to open up the call to questions.

We will now begin the question-and-answer session. [Operator Instructions] And today's first question will come from Tycho Peterson with JP Morgan. Please go ahead.

Hey thanks. Maybe starting with the healthcare business, can you just update on point-of-care CAR-T cells? And there's nothing about those brain tumor trials, can you maybe just talk as to where those stand?

Yes. So, with regard to the latter, they announced today that they're putting their plans on Phase III on hold over -- because they want to do some CMC work. We're actually doing that work. And I don't know what guidance they are providing, but later this year, that should get underway in our view. With regard to point-of-care CAR-T, as we mentioned on the -- during the presentation part of the call, Tycho, the first IND is in and we're awaiting the time we can get underway with -- in the clinic.

Okay. And then any update on the Precigen spin? Is that on the back burner in the near-term?

Well, to be clear, we've never said we were going to spin. The tax attorneys tell me the day that I say that publicly is the date we have to write down because it has tax implications, among others. But clearly, we have established both ActoBio Therapeutics and Precigen as standalone companies that are wholly-owned subsidiaries of Intrexon. Part of this is in line with what we always wanted Intrexon to be and what it, in fact, is now becoming, which is an enabler of enterprise. We think the number of opportunities for us to create value is -- well, certainly, we don't see the end in sight on that. And so part of the discipline will be -- and that was -- that's reflected in our moving away from our ECC model in which we partner very early-stage programs. Two, monetizing and this could include equitizing, at least having the opportunity to do that with our mature programs and platforms. So, later this year, we'll be able to provide more clarity on both Precigen and ActoBio Therapeutics. But -- so we definitely have some plans around each of these, and we're very excited about both of these ventures.

Okay. And then two other quick ones. On cash burn, it looks like that came down a little bit. Are you doing anything around restructuring or kind of resizing to control the burn? It looks like you've got about three quarters of cash left, too. So, if you could just comment on that, that'd be helpful.

Yes, we're feeling very comfortable about our financial resources at the present time. As I mentioned, we have active discussions going on. So for example, concerning our energy platform, we call it MBP, methane bio conversion platform, and these are being managed by Moelis & Company. And we have a lot of people in the data room and a lot of activity around this. So, we're really not concerned today about our financial resources. We feel very good about the -- our transition to a company that will be able to successfully monetize portions of its late-stage programs and platforms.

Great. Last one on energy. You've overcome the technical hurdle, as you highlighted, for isobutanol. Can you just talk on timelines, the next steps in terms of a pilot plan and then, ultimately, commercialization?

Yes. So, as we've -- as Tom Shrader mentioned earlier, the most advanced program in terms of commercialization will, in fact, be 1,3-butadiene, which comes from our fermentation product, 2,3-BDO. But the technical obstacle to which you allude really related primarily to isobutanol. And that is something that has stymied us for several months. We're thrilled that the team seems to have overcome this. We're not yet in a position to tell you because now suddenly we can see the delta on the changes that we make on a weekly basis to these organisms. And so now suddenly, we will be awash in data, and this data was difficult to obtain before. So it's not possible for us today to diarize on when we'll be ready to, for example, break ground on the site for the production of isobutanol. This was always -- ever since pre-IPO, frankly, even when this was just a plan and we were doing just the work in -- the bioinformatics work and elucidating the pathway to this organism, this was our first target. And I know you remember this from the IPO, Tycho. And so you were at the organizational meeting, and so you and I were the only -- I think the only people here who -- well, I think Don may remember as well -- the only people here who will remember this. But you remember, your underwriters council literally stopped the room when our energy team presented on isobutanol with the following comment, if this works, nothing else matters. And it's not really true that I believe that nothing else matters, I think several of -- many of the things we're doing are of vital importance. I think what that observation was really pointing up was just the financial significance of being able to produce isobutanol, which is 98% of the energy density of gasoline that you can transport through at precisely the same facility is actually where the small adjustment to our fuel injectors. We could actually just use it as a gasoline substitute, assuming regulatory approval or you're in a market where that would allow that. But the point is it's a great starting point for gasoline. And the size -- just the revenue size of that market, it's something like $900 billion in total. So, we're very excited about this development. Not in a position today to tell you precisely where we are in terms of isobutanol yields on account of this other than we suddenly see a 40% increase above where we were. So, a lot of excitement at our energy team and we're excited and grateful to count them as colleagues.

Okay. Thank you.

The next question comes from Jason Butler with JMP Securities. Please go ahead.

Hi, thanks. Thanks for taking the questions. So, first, just a follow-on, on the isobutanol and the MBP platform. The partnering discussions that you have ongoing right now, should we think about this as being separate processes for the different molecules? And if so, what would be the gating items for a partnership for isobutanol specifically?

Yes. So, you remember how we talked about this initially and when we first announced that we'd hired Moelis & Company, Jason. And it was because when our energy team reported to us that it looked like they were in the money on 2,3-BDO, I realized that we're not really smart enough to assess what our options are, so we better hire an energy and chemical-savvy banker to help us. We met with about four banking teams on this particular assignment. We're thrilled with the performance of Moelis & Company by the way. And so the direct answer to your question is, all of the above, just to answer very directly. The people who are involved in the process, some of them are, for example, major chemical companies who have particular interest in particular molecules, frankly, some of which we had never -- we've never worked on. And so now we're running bioinformatics models on those molecules. But then we also have IOCs that, as you might imagine, who have, I think, interest in liquid fuels and lubricants of ours, and other players who have other orthogonal interest in the benefits of such a platform. If you consider the abundance of natural gas in the world today, the fact that natural gas actually sells at, at least $1 discount to the spot price in many parts, even in the United States; and outside the United States, even lower or if you back-figure what natural gas is actually bringing at the wellhead for people who are integrated and shipping LNG. So, if you're selling LNG in Asia for $7 or $8 then, implicitly, you're actually receiving maybe $0.50 to $0.75 per million BTU. This is against a spot price of $3, right, $0.50 to $0.75 per million BTU at the wellhead today. And that shouldn't be surprising when you consider the vast reserves of natural gas that exists both in the United States and around the world. So, by the way, we're thrilled with the latest oil price increases because it's making our -- its driving our economics even more powerfully. So, yes, I'm sorry for the answer, it's just we're pretty excited. And the short answer to your question is that we have multiple parties engaged in this process and each type of party has a different interest.

Okay, great. And the second question on Exemplar, can you just talk about what the next steps here are? Obviously, the FDA exercised the enforcement discretion. What happens next? What are the time lines to actually being able to use the MiniSwines experimentally? And then are you getting any inbound interest? Or what level of inbound interest are you getting from the industry, academia to study and validate the preclinical models?

That's great question. So, we are getting lots of inbound interest. I think you'll see an increasing amount of news flow around Exemplar. The guys at the table here are getting ready to kick me for saying. Nir Nimrodi tells me that this business will actually turn from loss to profit this year. That's our expectation. I'm getting evil looks from our General Counsel, but that's what we believe. So, yes, this has been -- this has just been a great business to be involved in. It's opening up a lot of opportunities for the rest of Intrexon. And yes, we're receiving interest both from academia and industry on custom disease model creation and also in the field of regenerative medicine.

Okay, great. Thanks for taking the questions.

Thanks Jason.

The next question comes from Derik De Bruin with Bank of America. Please go ahead.

Hey guys. Thanks. This is Mike Ryskin on for Derik. I have a couple of questions on some of the portfolio for you. One is on the second-generation mosquito you announced today. It seems really interesting. I was curious, you mentioned that it allows the self-limiting gene to persist for up to 10 generations. I was just wondering what you could -- why you could -- why would it stop after 10 generations and what happens at that point. Does the gene get kicked out? Or what would happen in a field trial in that scenario? And then also, what's the -- obviously, you talked about improved COGS from this process. Can you talk about how that would affect some of the financials, both for you and for whichever party you work on this with?

Yes, both questions are appropriately paired. So, to be honest with you, I didn't understand why it would die out either. So, I actually had to do a spreadsheet to actually put in the formula myself to figure it out. But let's just go through an example. So, an Aedes aegypti female will lay something like -- please correct me if I'm -- any of this is wrong, so -- but an Aedes aegypti female will lay around 500 eggs, and normally 250 of which, on average, will be male; 250 female. So, with the second-generation product, 5034, the 250 females will die before they reach adulthood. Those are the ones that spread disease -- bite humans and spread disease. What's really cool about the second generation is that, of the 250 males, 125 of them will be normal males, but 125 of them will actually be just like their fathers, okay? Then each of the--

So, not all the males inherit the pass-on self-limit gene, only half. Got it.

You got it, you got it. So, it's a Mendelian distribution, and it's not dominant. And that's the reason it eventually will die out. And you remember -- I mean this is part of our overall philosophy. We want to have the lightest touch we can have on the environment that accomplishes the objective in the most responsible way. And I think this takes us as close as we would ever really want to come today to gene drive, which really would be permanent and could go through the entire population worldwide. It takes us as close as -- on economics, it takes us as close as we need to get to gene drive without the -- let's say, the risks, potential risks, of a gene drive approach. So, we're pretty excited about this technology. I should just mention that we never really talked about it before, but pretty much all of our agricultural pests actually use this generation of technology, okay? So, we actually do have a lot of experience with this. And so our expectations, I think, for a success with 5034 are appropriate. But we're -- we've got very good scientists, and we're very careful. And so we await the field trial results. So, what this does basically is to supply a lot more bang for the buck as compared with 513. You won't have to release as many mosquitoes and you won't have to do the over-swarming, so--

Yes. Can you provide -- so on that point, can you provide any info on how much this reduces your -- the amount you need to release per area per unit?

We could, but it would only be based on laboratory data and extrapolation. So, I'd really -- we really rather wait. Especially since we're getting started just here in a couple of weeks, we'd really rather wait for the field data, so we can really do a head-to-head comparison.

Got it. That makes sense. Looking forward to the Internet data. A quick follow-up on one of the other business lines. The Arctic apples that you mentioned, the ApBitz snacks, why would that particular--

Have you tried them? Jason, have you tried them?

No, I have not.

All right. They're available on Amazon, it's nice.

Yes. We tried some of the other -- the fresh-sliced apples. I was wondering why you went with the ApBitz snacks. And are the fresh-sliced apples still in the queue? And also just about the distribution channel. Is Amazon the path forward? What contributed to the decision there? Are there going to be alternate channels?

Yes. As you heard from General Bostick's discussion about the sort of geometric growth and production of apples, right, what it post for Okanagan is the necessity to penetrate higher margin segments first. And sometimes higher-margin is, fortunately, for us, lower unit volume. So, while the initial focus had always been pre-sliced apples, which is in the U.S. is around a $600 million business, we think that can be a $1 billion business when the product is improved as it is via the Arctic apple. But in the meantime, they discovered that simple -- well, I say simple, they figured out how to do it, but anyway, drying of these apples that are cut in like -- I would describe the shape as French fries, is that appropriate, so sort of cut like French fries, it's absolutely a delicious experience. And I just love the labeling, contents; apples. I mean even that is remarkable because there are no chemicals and no preservatives of any kind. And it is just a delightful experience. That's the reason I asked if you tasted it. So, this is probably a lower volume, but higher margin profit opportunity for Okanagan to penetrate. And it was just a great way to expose this product to the public and really collect their feedback. It has been overwhelmingly positive and we're really excited. I like to put it just on a simple basis which is that I don't know any one yet who's tried an Arctic apple and ever wants the other kind again. That's maybe a little bit of an overstatement, but it's pretty consistent with our observation. So, anyway, I'd encourage you to try the ApBitz. It's an exciting product.

Great. Thanks. Appreciate it.

The next question comes from Alex Schwartz with Stifel. Please go ahead.

Hi team. Congrats on the progress. I just want to continue with the point-of-care CAR-T trial. So, ZIOPHARM announced today that the IND has been submitted specifically by MD Anderson. And I'm just thinking about, given your business model and that these hospitals hold a regional license, will they each have to file their own IND, conduct their own clinical trial and submit NDAs? Will they have to work in parallel to get their CAR-T product approved? Or will the hospitals be able to share data in pursuing approval? Kind of how do you see the clinical development path for the point-of-care CAR-T trial evolving?

That is a brilliant question. And so let me mention to you that we're all sitting here in our nation's capital today, and we've had conversations with United States government personnel on the question you just raised this very day. So, the truth is we don't know what the future will include. I would say initially, yes, INDs will be filed just like the one that MD Anderson filed. But in terms of pooling data, we're -- look, I don't want to get ahead of ourselves and tell you about conversations with the government agencies. But let me just say our expectation is that we would be allowed to pool data in the future, although we don't have that committed to a written agreement yet. And then there are other regulatory possibilities as well. One of my suggestions is that once you have -- and assuming we're successful on this and assuming we and ZIOPHARM are able to demonstrate this. So, once you have multiple targeted point-of-care CAR-Ts being demonstrated in multiple sites, then I think the question could become what is the most appropriate regulatory regime for such a platform technology. And we have today in our national government at least, I think for the first time in my career -- and I've spent my entire career in life sciences -- we have, for the first time, a genuine openness to have those kinds of dialogues. So, we're pretty excited about the possibilities. But unfortunately, we can't tell you for sure what the future will be, and we certainly have to acknowledge that it will be data-driven. So, obviously, the more compelling the data, then the more slack we might find is possible in the system. But it's one of the things that -- and I'm finding this across the various government agency people we speak with that are absolutely first-rate people, they always have been. In my entire career, I've always thought the staff people great in pretty much every agency we've ever dealt with. It's only when the politicians get involved that things become more challenging. But we're finding -- I would say the greatest appreciation I have ever seen for the fact that science is evolving very rapidly against the substrate of legacy administrative, regulatory and political regimes. And that is of -- that's really noticed especially in the current administration. And we see recognition of this fact and we see a lot of desire to improve it. So, we're very, very -- we're very encouraged by all the dialogues we've having. Just can't -- I just -- I'm just not prescient, so I can't answer your question precisely.

Okay. No, that's helpful here how you're thinking about it. So, thank you for taking the question.

Thank you.

The next question comes from Robert Breza with Northland Capital Markets. Please go ahead.

Hi, good afternoon everybody. Most of my questions have been answered -- or asked and answered. Maybe just how should we think about the revenue model with lower ECC revenues? And how should we be thinking about the financial model going forward just so we can kind of model things going out over the next four to six quarters?

Yes, I think that's pretty easy. I would say we would not have made the transition that we made over the last now, I would say, year and a half, right, if we did not have a high degree of confidence that we could receive through monetization of partial interests at least in some of our mature programs and platforms that would be more than the money we would have received under our former ECC business model. Now, I can't provide more guidance than that because for two reasons. One is we don't know what we're going to get yet from any of these things. We're -- as I mentioned, we're in very active negotiations and discussions. The second thing is the various programs and platforms are not fungible, meaning -- just to use two examples, methane bioconversion is not a widget to which we can compare ActoBio Therapeutics. So, I can tell you that, well, Intrexon's going to produce two such widgets this year and two such widgets next year. They don't equivocate and they're not of equivalent value. And our strategies with regard to each of them may vary. In fact, they do vary. So, I can't give you real revenue guidance, meaningful revenue guidance. But in terms of our overall financing, you should bear in mind what our original discipline was why we chose it and why we felt that it was an appropriate time for us to convert as we always wanted to once we have such mature programs and platforms to the partial monetizations of those because it allows us to select rather than our partners. It allows us to select the new things that we're working on. And this is a huge advantage. It's really exciting. I can tell you the excitement among all of our -- especially the scientific teams, the staff is being worked to death practically in consequence of it. But we have so much going on now. And I've never seen -- I haven't seen the excitement level in our scientific teams that we have today at any prior time. So, hugely advantageous. And what I'm really alluding to here is that what we want to be is capital-efficient. We don't want to be forever diluting our shareholders. I know a lot of our shareholders think we should be selling stock because that's -- and at some appropriate time, we may do that. But it'll be in, I think and I hope, at a much higher share price than we have today. So, for the time being, I think we're feeling very good about our situation. And we want to maintain -- we want -- but we will long-term want to maintain capital efficiency.

Sure. No, I totally get the model in terms of there's going to be major step functions, and that's not a linear path, so I totally understand the point you made. And maybe just as a follow-up, when you think about -- if you were to prioritize -- as you think about all the opportunities there in front of you, R.J., when you think about the energy program, et cetera, what -- where are you spending your most time, maybe top two priorities?

Top two, meaning divided programmatically? I would say with--

Yes, I mean like energy--

Energy. I don't mind telling you, it would be energy and Precigen.

Got you. Perfect. Thank you gentlemen.

Thank you.

And our next question comes from Keith Markey with Griffin Securities. Please go ahead.

Hi Keith.

Hi, thank you. Hi. Thank you for taking my question. I was just wondering if you might be able to tell us, usually companies don't form a new subsidiary for no good reason. And so my question is, what is the rationale for creating progenus? Is it a branding strategy or possibly a new entity that's going to be taken into new markets and you felt that you needed a different subsidiary for that purpose?

It's an astute observation, Keith, but it's not one I can respond to other than to say it's -- the second part of your surmise is the correct one. It is going to allow us to enter new markets in -- with a slightly different business model at Trans Ova Group.

Interesting, okay. Thanks. And I was wondering if you had any thoughts about -- I'm not sure if I understood the enzyme that had to be dealt with that was basically slowing down production of the isobutanol. But does that enzyme have any kind of potential applications for environmental purposes?

I wish it did.

Okay, all right. Well, most of questions have already -- my other questions have been answered. Thank you so much.

All right. Thanks Keith.

At this time, this will conclude the question-and-answer session for today. So, I'd like to turn the conference back over to management for any closing remarks.

All right. Thanks. This is R.J. again. So, let me just -- I just have a couple of things to say. So first, again, we're really thrilled with the work being done by all of our scientists at this point. And we're seeing a lot of things. I can tell you, because of the things that we're seeing, we anticipate that the next near-term period and intermediate period will be a newsy one. So, you can anticipate that. We're thrilled with the work that our energy team has done. When I consider what they -- the work that they did on isobutanol to unlock this particular issue, I'm just reminded again that the number one determinant of success, in not just biotechnology but probably in any of our lives, is persistence. And I think many another team may have been discouraged, and we're just so proud of what our team's done there. Second, I should note that we've learned today -- late today, actually during this call, that on the Xogenex triple-gene therapy that, in fact, the first patient was dosed today and is now resting and doing well. So, I do want to extend our congratulations to the Precigen and Xogenex team for this historic achievement. I hope it's as beneficial to the patient and to the future patients as it is historic. So, again, as always, let me thank our investors as well as our team. Our investors are very active. They communicate with me and others and quite volubly. And we get a lot of great ideas from them. So, by all means, those of you who do occasionally write us, please keep doing so. I just want to mention that on this -- the last call that we had, we talked about our Botticelli technology, which…

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.