Good day. And welcome to the Intrexon First Quarter 2015 Financial Results Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I’d now like to turn the conference call over to Mr. Christopher Basta, Vice President of Investor Relations. Mr. Basta, the floor is your sir.

Thank you, operator. Good afternoon. I am Chris Basta, Vice President of Investor Relations for Intrexon. Welcome to our first quarter 2015 earnings conference call. Joining me on the call today are Mr. Randal 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, 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 Web site 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 I 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 Web site at www.dna.com. Now I’d like to turn the call over to Krish Krishnan, our Chief Operating Officer. Krish, the floor is yours.

Thank you. Good afternoon, everyone and thanks for joining the call today. R.J and I are pleased with Intrexon's performance in the first quarter of 2015. We’ve continued to make solid progress against our strategic and operational objectives and work to further establish industrial leadership across all our sectors. Within the health sectors, as you maybe aware, we’re working in a number of areas including cell and gene therapies for cancer, orphan genetic disorders, blindness, infectious diseases, tissue repair as well as in the biology mediated production of APIs. The opportunity to make a difference in patients lives protein and cell therapy approaches is one that are fully vested in and together with our collaborators, we’re positioned to have a number of programs entering the clinic over the next 6 to 12 months. We look forward to sharing data around these efforts when it becomes available. Our immuno-oncology program focusing on adoptive T cell therapies has continued to build momentum this year. In March we entered into an exclusive collaboration and license agreement to develop and commercialize CAR-T therapies with the biopharmaceutical business of Merck KGaA. Utilizing Intrexon's RheoSwitch platform, and proprietary suite of technologies to engineer T cells, this collaboration aims to develop leading-edge CAR-T products that empower the immune system in a regulated manner. More recently we signed a CRADA with the National Cancer Institute. Through the CRADA, Intrexon and NCI intend to develop RheoSwitch controlled IL-12 cancer therapy for the treatment of patients with solid tumor malignancies. The ability to direct and control IL-12 via gene therapy post tremendous promise and we are pleased to be working with one of the pioneers in immunotherapy Dr. Steve Rosenberg to bring this combined approach to the clinic. We’ve also completed two acquisitions during the first quarter. The first is…

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question we have comes from Keith Markey with Griffin Securities. Please go ahead.

Hi. Thank you for taking my question. One simple one I had, I’m not familiar with the sizes of pilot plans for gas production and biomass conversions. And I was just wondering what is the size of the pilot plan for such a project?

Hi, Keith. This is R.J. I’m not sure either. So I will have to get back to you on that.

Okay. Thanks.

The news, the real news is, typically it’s a pilot plant which is ongoing now. It’s under construction. I think the real news today is that we actually have -- we formed a relationship with a major gas company that will build when we both agree to do so at their own expense our first demo plant.

Right. Okay. And I assume that, well I was trying to use a pilot plan, so I’ve sort of a, I guess, as to what kind of scale you need to start to think about? Thank you.

Keith, I will get back to you shortly. We just don’t want to state the wrong number.

Okay. Thanks. Also if I understand this correctly you’ve issued some ZIOPHARM stock that you owned to shareholders, correct?

Yes. Today we are announcing that we are declaring a dividend of all the ZIOPHARM shares that are held by Intrexon.

That’s a very intriguing idea. I just was wondering, just in speculation throughout the investment community from time-to-time that you might actually at some point acquire ZIOPHARM. I gather this would rule out any idea of acquiring the company. Does that make -- is that reasonable to think that way?

No. It doesn’t rule out. So according to all the lawyers, and first of all let me preface this by saying we have no ongoing discussions with ZIOPHARM concerning merger. But obviously given the significant economics that we share, it’s a prospect that could at some point be attractive in the future. But it’s also the case that there are other parties for whom ZIOPHARM acquisition might be very attractive in the future as well. In either case, our dividending these shares to our shareholders actually would simplify any such transaction.

Right. And that makes sense. And then one last question similar -- along the similar vein. And I was wondering, if you might -- as you anticipate similar distributions of other collaborators stock, if and when their shares appreciate significantly as ZIOPHARM’s has?

Yes, we’d always consider it. So let me say about that, that we fundamentally recognize that one of our main objectives is to make money for our shareholders. And so we’re always going to be looking for opportunities to do that. But that said, I don’t want to say that this is our -- this is going to be a practice that we will always follow when shares appreciate. So let me give you an example just as a way of distinction. The shares we have in our joint venture with Sun Pharma in ophthalmic disease are really 50% of the economics of that deal and it’s really through the share ownership that we have the strategic interest in that -- in those programs. So that was not the case here. In the case of ZIOPHARM, look we as explained in the press release, we acquired those shares in lieu of cash upfront and milestone cash payments for the technology access fee and also milestones and we also purchased some shares, almost $50 million worth of shares since 2011. And these shares really at the present time exist collaterally to our strategic interest. So our strategic interest really relates to our ability to harvest as Krish mentioned the back-end economics that are there in that deal is very significant back-end economics in everything that ZIOPHARM is doing. We are very excited about this and while we think that the shares are actually likely in my opinion to continue to appreciate. It’s a very tax efficient structure for us and we can get into that later, but I will say by the way with regard to the tax efficiency, let me say, anyhow consult your tax advisor and we will have details -- even further details out about this around the distribution date. But that said, we’re really pleased, it was really opportunistic Keith, in that the shares are not the way that we enjoy our strategic interest at ZIOPHARM, so they have become financial asset. Precisely because we think that they’re going to continue to appreciate, given the -- given our tax analysis, we see a terrific opportunity at this time to distribute these shares to Intrexon shareholders in a very efficient way. The tax -- the actual tax payment for the Company will be trivial and the tax effect that we think to our shareholders -- for qualified shareholders will be highly advantageous. If we waited until they appreciate further, that may no longer be true. So we thought this was a -- just an opportune time to do that and that’s why we’re doing it. So really what I’m saying is we will always analyze this on a case-by-case basis.

Great. Thank you very much for the detailed discussion on that. Thank you.

Next we have Andrew D Silva of Merriman Capital.

Hey, good afternoon. Thanks for taking my call. I just have a quick couple of questions for you. First off, it’s just a rev rec question with Merck. Are you recognizing upfront milestone payments on a net basis or will you be recognized again the gross paid basis and end up paying ZIOPHARM out of your cost of goods?

We will have to get back to you on that. I’m not sure how the GAAP accountants are going to treat that.

Okay. And then …

I had mentioned though there is nothing in the first quarter which is what we're talking about here today that has anything to do with this. You will see this in the second quarter. So, but we will try -- we will get back to you with our thoughts about that as they develop.

Okay. Thank you. And then with Trans Ova, can you maybe explain the market a little bit better to me. I know you're pretty much working with the female side of the market predominantly. Am I correct in understanding the female side is substantially smaller than the male side and that the main objective here is just to bridge the gap between the two sides utilizing your technology? And then if so, maybe elaborate a little bit on how that's possible?

Okay. So first of all, the Trans Ova group is the largest producer in the United States of bovine embryos of all -- of either sex. So that it’s not really limited to female. But I think what you’re thinking about is our joint-venture with OvaScience which as one component includes this application to animal husbandry. The reason we found that so compelling is because if you think about it, bovine semen in the United States is something like a $1 billion per year market. And the reason for that is that semen is actually quite plentiful and cheap to get. But if you follow the science behind OvaScience and the work that we're doing with them in our ECC toward OvaTure, there is a natural adjunct application in animal husbandry, because if you could level the playing field to some extent you could introduce the prospect of frankly your proceeding as you say from the female side. There are many species, think about dairy cows for example, there are many species for which if you were proceeding from the egg side of the equation rather than from the spermatic [indiscernible] you would have a tremendous advantage. So the point is, look there is no market today for eggs, but there is a $1 billion market for just bovine and they’re obviously -- this is applicable to many species, bovine semen. So we are very excited about the application of this technology, but this is only one aspect of the technology that we have available to us that we are applying at Trans Ova group today.

Okay. Got it. And I guess sticking with the technology platforms that you have going right now, you acquired the ActoBiotics platform. I know there is a couple therapies that will hit clinical trials this year, but as far as the technology grows, is it somewhat similar to the RheoSwitch and that its an oral and that it can be modified gene expression and then maybe elaborate on its importance to you guys and what application or ECCs you're currently working with, do you expect -- could utilize it?

Yes, we are very excited about this platform. So this was developed by a company called ActoGeniX, in Ghent, Belgium. And that team is now part of Intrexon and welcome to them if they’re on the call. But we’re very happy with this transaction, because this is an entire platform based on -- have we publicized that what the organism is? Or shall we just say …?

We have, yes.

All right. So this is an engineered L. lactis, which has been engineered in a number of ways. From the first thing is that it -- in order to be grown relies on a metabolize that it’s not present in nature. So therefore the engineered organism is incapable of replication once it’s in the environment. So it gives you the opportunity to deliver protein therapeutics whether these are -- these would be mAbs or other therapeutic proteins into the lower GI. In organism that continuously expresses them and would be delivered to the patient in the form of a pill. The pill would simply contain the desiccated bacterium, engineered bacterium itself. So the two clinical and they're already been in the clinic by the way, the two clinical programs kind of one is TFF I think and the other one is anti-TNF alpha. And -- has that not been disclosed before? Okay. So, we think about it. I mean, anti-TNF alpha as a motif I think in pharma it’s probably the number one therapeutic motif in terms of revenue. I think that anti-TNF agents do something like $20 billion a year cumulatively, something like that. They all have very significant side effects -- very significant heightened cancer risks because they are injected IV [indiscernible] in any event they are systematically circulated. What this technology and the lead clinical program provides the ability to express the anti-TNF-alpha scFv during transit through the lower GI. So for example, as an intervention of this therapeutic to address aortic [ph] valve disease, this looks to us to be quite compelling. So these programs were pretty advance, I’d say they’ve both been in the clinic, but what really gets us excited about this platform is that, we are weekly coming up with more ideas, more…

I can hear that in your voice. Is there a possibility, I know this probably ways down the road but a possibility for that to correlate over to IBS or there’s three different variations that IBS-C, IBS-D, and I think IBS-CD, are there -- is that a possibility that the ActoBiotics platform could offer solutions to those problems?

Absolutely.

Okay.

So the team there was always focusing on pretty much, I won't say all but many GI diseases both orphan and common. And that was the focus of the company, but another aspect that they’ve demonstrated in their partnership for example with [indiscernible] genes which is quite interesting. Which is that they have shown that this a very interesting approach to introduce tolerization. So, you could think in terms of allergy -- anti-allergy to be specific because in terms of allergy and -- other applications they would be promoted by tolerization. So other indications I should say. So it’s quite compelling.

Okay. And just the last question, as far as your ECC pipeline goes. In the past you’ve stated the queue what's filling up, but larger companies obviously Merck came in recently, do you still believe that that’s true as far as the overall pipeline. It’s still filling up more and more with larger maybe more cash rich companies?

Yes it is.

Okay. All right. Thank you very much. That’s all I have

Next we have Tycho Peterson at J.P. Morgan.

Hi, guys. This is Tejas on for Tycho. So first of all you’re on the energy agreement, congratulations. Can you help us think through, I know you don’t want to get into too many sort of numbers here. But can you help us think through timelines and just a broad framework for the agreement and whether this is the right template that you see in place for similar agreements in the future with other energy companies?

Yes, so the timeline I’m not in liberty to discuss other than to say that we expect to complete the pilot plans by year end, but with regard to your second question which is the one that I care most about, and I mean even prior to you’re asking it and that is, I think what you’re really saying is, is this consistent with the business model that we have discussed around this energy program and the answer is, it absolutely is.

Okay.

In other words, I think what you really saying is, is this replicable around the world in a way that its consistent with our business more i.e. in which the people who have the gas and the facilities will build these facilities under tolling arrangement so that we will buy gas from them own the organism and own all of the output, and the answer is, yes.

Got it. And then in terms of your CAR-T programs, I know you said in the past that you have five therapies that you expect to enter the clinic with MD Anderson in 2015. How does the Merck collaboration play into this? So, will Merck get a forthright to pick two of those candidates? Is that the right way to think about it?

Yes, it is. And the two is minimal. So they actually have the opportunity to pick more. So, I mean, I think the agreement is actually, the agreement is on file. So you can take a look at that. But basically they have -- they will be soon electing two and/or more. And then as we proceed either they can elect more or we can take them targets. You should think about this in terms of target exclusivity however. So it’s entirely possible that you could see a number of therapeutics -- clinical candidates actually in the clinic in parallel against the same targets. And that’s part of what we achieve with the relationship that we have with MD Anderson is an ability to rapidly do the translational medicine to sort that out so that by the time we really expand the clinical trial to a pivotal trial we really have a lot of confidence in the one that we’re expanding. But then, if we come up with one that they don’t initially elect then we have the right to develop that, they have an opt in up to a certain stage of development. And they will pay us a little bit of a price for not having elected it initially but -- and then thereafter we will be free to prosecute that ourselves if they didn’t opt in at that time.

Got it. And then in terms of the ZIOP special dividend R.J. I know you mentioned on the call that at some point in the future you might consider the option of buying them out. But if that was the case then why sort of give us ownership of those shares at this point if you expect them to appreciate down the line and consider them a potential target?

Yes, it’s a really good question. We had significant conversations with lawyers about this, securities lawyers and I will say that including some of your own colleagues by the way bankers, I hope to say that, this really does simplify our ability to do that in the case in which we wish to do so.

Got it. Okay.

It just makes for a cleaner deal; it would be absolutely clear that all the shares that are out there could vote in a transaction for example. So, in other words there are complications if you were to proceed with the situation that we have currently that wouldn’t exist post dividend.

Okay. And then one final one for me, I know you said at the beginning of the year that you expect to recognize some revenue from environmental and consumer this year. How are you tracking in terms of that goal and where should we -- what are the sort of external developments that investors can track in terms of progress towards that?

Yes, that’s a really good question. So, I was going to -- I was hoping somebody would ask me since I’ve been using a grey card scheme to relate how we think things are going and so let me put in that context. For the year to date I would give us a good solid B maybe even a B-plus but not an A, and here is why? We think in health we’re totally smoking red hot at A. In energy it’s an A, in food it’s an A, but consumer and environment continue to lag. These sectors we have a lot of things we want to do in the sector, maybe because we’ve just been so busy with health and energy and food, I mean frankly when I read this press release my first thought was, no wonder I’m so tired. We’ve been pretty busy, although we’re having a lot of fun. But all that said, it could be the fact that we were distracted on these other matters, because in both environment and consumer are lagging, we’re making some progress. I mean you see, you saw the deal with Suzano Papel in eucalyptus, and you could look this -- and the deals that we signed are making good progress and we actually have in-house a number of projects that are tracking very well experimentally, but let me say that I don’t think we have an issued press release on this, and I doubt we will. But we have a new Head of Consumer who’ll be joining us in the very near future. So I think partly by leadership and partly through proper resource -- properly re-sourcing those efforts we’ll see both environment and consumer growing nicely in the near future.

Got it. Thanks guys.

Next we have Peter Lawson, Investor.

Hi, R.J. Just back on the distribution from -- Of ZIOPHARM shares, did you get any pressure from Merck or any others to kind of do that distribution?

I don’t think I can kind of go and comment on that. You know me Peter, so it’s not like we would respond to that kind of thing anyway. But I think I understand what you’re saying. Does this distribution suite some people better than others, and so -- and I think you can use your own imagination to answer that question. But I can't tell you, our rationale is exactly the one I described and this is not responsive to any external suggestion.

And are there trigger points other ECCs where you could -- where you potentially redistribute the shares back?

Sorry, I didn’t hear the first part of the question. Are there others in which we may do this?

Yes. And the trigger points that would do?

Like I said, we would always access them on a case-by-case basis. I mean, I gave an example Peter to explain a case in which we probably would not do it. So, I mean think about for example, like I said that’s on Pharma JV. I think it’s actually a buy sell provision in that, so we might end up finding ourselves on either side of that transaction -- on that clause or whatever a section of the agreement someday. But be that as it may, it wouldn’t be our idea to distribute that to our shareholders for the same reasons. And I wouldn’t -- I’m not saying we would never do it, I’m just saying that the reasons would be very, very different from the ones that are present here in the ZIOPHARM distribution. ZIOPHARM is a very interesting case. I mean the first thing I would observe is look, this was our first ECC. We really took; it was a bit of an experiment. We committed to -- we took the stock instead of cash. We even bought some stock and now we think this is a very capably managed company. In my personal view definitely intrinsically we’re more than a market valuation. We think again my personal opinion; I think it’s very likely to appreciate. And given our projected profitability for 2015 and the size of this dividend as measured in dollars today it was a very tax efficient opportunity for us to get these shares over to our shareholders and of appeal principally because our strategic interest in the ZIOPHARM ECC is a very, very large number measured in that percentage of operating profit and plus an ability to participate in license revenues. So given that our strategic interest is more or less the same, the shares simply became a financial asset and look, we’re not Intrexon is not an investment fund. So, we definitely just took -- it’s opportunistic. We took the opportunity to make the decision to dividend those shares out to our shareholders. So what I’m really saying is what I said before. We will always access these on a case by case basis. We’ll always look for tax efficiency. We’ll look for strategic interest. As you know we intend on growing Intrexon to become a very large company, and I think we’re executing very well. And we fundamentally recognized that our job is to make our shareholders money. So, this is consistent.

Thank you. Just sticking with ZIOPHARM, is there any additional, any data coming out of ASCO for the desire of total MD Anderson CAR-T cell play?

Yes, I’m going to differ to -- I’m going to differ on that. So Dr. Cooper would be the person to query on that score. I can tell you that both their team and our team and we have a lot of people working on this are flat out on quite a number of programs and we’re very, very excited about the prospects here. But as far as timing on data, Dr. Cooper would be the person to ask.

And then just finally, just if you look across the entire portfolio, when is the first Intrexon product that gets commercialized using Intrexon technology?

Well, it depends on what you mean by Intrexon technology.

Such as the fact, not the client technology -- not the client products but more so technology that’s generated to generate one of your products.

Okay. Yes, in that case I would say the most likely candidates would be the API, would be of several API projects which are designed to either help an incumbent lower its COGS or to help a generic company have a first to file capability and we continue to engage an increasing number of companies on both of those kinds of opportunities. And if you make an API in a sell line, you don’t actually need. If it meets the USP specs you don’t actually need an FDA approval. So if you think about, some of these APIs do a $1 billion plus worth of revenues and, so we have backend economics on all those. So I would expect, -- if your definition of Intrexon technology are things that we developed from scratch inside of Intrexon without an acquisition. Then I think those will probably be the first revenue -- product revenue items.

Could you take a step at when you think that would happen, is that 2016 or ’17 event?

Yes.

That’s ’16 or ’17?

I’m sorry. Was there another question?

No, it’s just -- would it be a 2016 event or 2017 event?

I think I’d rather just let our numbers do our talking rather than getting ahead of ourselves and -- in this particular area you should bare in mind, I mean especially with first to file generics that you have -- once they are geared up and ready to go, then they have -- then they have some patent litigation to do usually. So, who knows when that really turns into product revenue. It really -- or maybe they end up becoming an authorized generic or what have you. So it’s really impossible for us to predict how long that timeline plays out. Sometimes its short, sometimes it’s longer. But I can tell you that we’re very pleased with our progress and we’re definitely in the money, several of these in terms of production values. So, it’s really a function of externals, I’m not trying to be coy. What I’m really trying to tell you is that the answer to your question is subject to external events over which at Intrexon have no control.

Okay. Can I just clarify one thing? So, your desired dividend in your mind shows that if you within Intrexon as you distribute it back to shareholders and that can potentially free you up to acquire because you were at, with a large stake in one of your partners that would remove voting lines so it would prevent an acquisition, is that the right way to think about this?

No, not quite. So, perhaps I was too subtle, and -- no, we got a question on this call that related to whether our dividend and new shares meant that we are foreclosing the possibility of us acquiring ZIOPHARM and the answer to that is absolutely not. In fact it would just be the other way around. It actually would simplify that process in the event we would actually be interested and square if off to do that. But the reasons for the dividend are those that I’ve stated twice and I think are detailed actually in the press release.

Got you. Okay. Thank you.

At this time it looks like we will go ahead and conclude our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks. Gentlemen?

Thank you. I'll be very brief today. So I'll just say as I indicated earlier Krish and I are very pleased with the execution of our team year-to-date. We think that 2015 is going to be a wonderful year for our company and we couldn’t be -- well I guess we could be, as I already mentioned there are couple of areas we are working on, but I will say we’re very pleased. We are very pleased. We think that Intrexon is a unique company. I saw this actually in an SEC document, I don't know if you -- has our proxy statement being filed yet? In our proxy statement, you will see there are compensation committee in their search with -- we working with one of the best top consultants in the land tries to find what our peer group was, unfortunately we have such an extraordinary org that they were comfortable saying Intrexon doesn’t have a peer group. And believe me we don't mean that in an arrogant way. In fact, I think we are very humble and as my dad used to say that I should be, I have a lot to be humble about. So -- but we do think we’re a unique company. And I think the events you see reported in the press release and in our Q here, are beginning to really show that this is turning into the sort of company that we’ve had in mind, and so we’re very pleased about this. We’ve a very clear vision and we’re executing very well. So I’d just like to thank all of our team members for their diligence and thank our shareholders for their support.

And we thank you sir and to the rest of the management team for your time today. The conference call is now concluded. Again, we thank you all for attending today’s presentation. At this time you may disconnect your lines. Thank you and have a great day everyone.