Welcome to the Intrexon Corporation Second Quarter and First Half 2016 Earnings Conference Call. All participants will be in listen only mode. [Operator Instruction] Please note this conference is being recorded. I would now like to turn the conference over to Christopher Basta. Please go ahead.

Good afternoon. I am Chris Basta, Vice President of Investor Relations for Intrexon Corporation. Welcome to our second quarter 2016 earnings conference call. Joining me on the call today are Mr. Randal Kirk, Chairman and Chief Executive Officer; Mr. Geno Germano, President and Mr. Joel Liffmann, Senior Vice President, Finance. 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 Intrexon's business 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 discussions this afternoon may reference certain non-GAAP financial measures including adjusted EBITDA and adjusted EBITDA per share. Reconciliations to GAAP measures are contained in the earnings press release as well as on the Investors section on our website at www.dna.com. Now, I would like to turn the call over to Geno Germano, Intrexon's President. Geno, the floor is yours.

Thank you Chris. Good afternoon everyone and thank you for joining our second quarter and first half 2016 earnings call. We certainly appreciate the support and interest in our company. Earlier today we issued a press release with our second quarter earnings and we filed our 10-Q with the SEC. I hope you have had the chance to review the reported financial results. And before I get into discussion of the quarter and our outlook for the remainder of 2016, I would take this opportunity to discuss the few observations that I have since joining Intrexon as President about two months ago. For starters, our technology platforms are outstanding and enable us to pursue exceptional opportunities across all five of our market sectors. The company is executing well against aggressive plan for the robust pipeline of 30 plus collaboration already in place. Progress towards commercialization of several important products is becoming more visible each quarter and I’ll touch on some of these in just a moment, of course all of this is being driven by contributions from the talented employees across in Intrexon. Additionally after spending 30 years in big pharma where developing on drug candidates generally succeed to fail in a more or less black and white manner. It's very exciting for me to working with the innovative platform technology that have broad application across multiple market segments. Once we make our technology platforms work for one application the next application is somewhat de-risked and our ability to engineer new products perhaps expanding several of our sectors, utilizing that technology as enhanced. To provide you some examples, a few of these platforms in house today include our L lactis platform, where our ability to engineer this microbes produce a variety of bio-effectors is now become well established. We already…

Operator, we'll take question.

[Operator Instructions] Our first question is from Tom Shrader of Stifel.

Two questions out of 202, but you made the comment that the methanotroph efficiencies are nearing those of yeast, what is that mean? I mean they start with different things, they make different things, can you give us a sense of what you’re quoting there?

Well, really what it means is that we're able to engineer the microorganism as well as you can engineer yeast, which is -- it has more, we’re more experienced with. So we're getting to the point where we have confidence in our ability to engineer the outcomes that we're looking for.

So it's sort of total carbon as numerically the total carbon conversion is the same or just not sure what's metric that's quoting?

Tom, this is RJ. What it means is we're getting to the point in our knowledge of the metabolic pathways of the organism itself. The methanotroph that is becoming as predictable and as facile as yeast is.

It wouldn’t be appropriate to make a direction comparison carbon-to-carbon as you know because methanotroph by definition is taking in a completely source.

Okay and then just one sort of large picture question, you renegotiated the ZIOPHARM relationship, you have a pretty dynamic new head of ZIO, who has got a lot of ideas of its own, is the plan still for everything Intrexon does in oncology to go through that mechanism, you have kind of, your own large immune-oncology for it. Is it still all going to be through ZIOPHARM or is the change in royalty may be assigned -- you will do things outside, just curious if you’re comfortable talking about, where that might go?

As we discussed in the past it is a very broad field that ZIOPHARM enjoys and to be clear to the best of my recollection the field is something like in vivio expression of anticancer effects for the purpose of cancer therapeutic or prophylactic effect there was a subsequent amendment that removed those motifs that would target primarily on infectious organism, even given all that it’s a very broad grander field, it doesn’t post on ZIOPHARM obviously, a corresponding diligence obligation. So while I can’t today make a prediction. So whether whatever by narrowed, I can say today, most of the things we’re working on in cancer are in partnership with ZIOPHARM.

And so it is already in ability for them to sort of Opt out if the pipeline gets too big, because of the diligence requirement?

That would have to be a negotiated matter.

Our next question is from Jason Butler of JMP Securities.

Just first one on the, the update on the Oxitec pilot project in Brazil and you spoke that the 91% drop in dengue cases, can you just speak to how, when you’re working with the government from different countries right now, they are asking to design these kind of studies and what they are looking for a specifically and are you seeing a corresponding drop in both mosquito count and disease in the areas, that you’re looking at?

As to the best of our knowledge, this is the only study that has made that comparison, that has made the comparison between reduction and mosquitoes and reduction in disease incidents.

Okay great and when you think of the design of these studies, do you think that this kind of study is what governments are looking for to get confidence in efficacy?

No I think that entomologists and research oriented scientist will certainly be interested in some of our applications and doing epidemiologic studies. In fact we have ongoing dialogs with a number of the international and also nationally based, organizations that would like to do these studies in tandem with our deployment. You shouldn’t use the price to see those. On the other hand, I don’t think that it’s a -- don’t think that people are looking for as a condition president, certainly this is not the palace with the FDA, I mean our trail that hopefully will beginning underway and the keys is focusing on the endpoint of reduction in mosquitos, the thing on the implement of reduction in mosquitoes. But on the other hand, I will just mention, the relationship between disease vector control, this is not a new thing right? The relationship between vector control and disease incidences is actually historically pretty wide to acknowledge, I mean there is a reason in that -- the historic reason why the CDC is located in Atlanta, Georgia I doubt few people on this call -- I doubt many people on this call will know the reason and the reason is they were formally the malaria control board. And they essentially wiped malaria out of the United States through disease vector control.

Great that’s helpful. And just a quick question on the IEP pilot plan, can you just review for us your goal for scale up for 2016? And do you still expect to be at commercial scale in 2018?

It's hard to nail down expectations in this field. Geno and I spend a lot of time with Bob Walsh Head of our Energy sector, we think that this is probably our largest single team deployed to one single object in the entire company. It's a fantastic team, but as Bob is fond of pointing out to Geno and I, look when you are doing a world's first instant things it's not always a linear progression or as he said, it’s not a straight line. So I can't today tell you exactly what's dates, we will be at various yield points. But we can observe that we have made tremendous progress, the numbers are tracking very well. And we do still anticipate the timing that you mentioned, that’s our goal. But I can't tell for sure that we will hit that goal. And for the reason stated, obviously our scientist are dealing with technical issues actually they discover technical issues that no one else had ever encountered before, some of them they solved, some of them remain to be solved. But our -- overall our performance is very good and our yields continue to improve.

Great, helpful. And just a last bigger picture question from me, thinking about the crop protections spin out and that structure, can you just speak to what was specifically you sound appealing both to Intrexon and you, do you feel would be appealing to shareholders in that structure and if it's the structure you think has a flexibility in other industries?

It will have applicability from time-to-time, but let's review and it's a very good question. So why did we find this compelling case, in this case to really somewhat depart from our normal business model in order to surround a project with its own enterprise management team, its own balance sheet, in fact its own -- ultimately we intend and expect its own publically traded security. The reason was as follows. We actually have relationships with companies on our collective platform in agriculture, we have relationships with companies pertaining to the GM insects for the reduction agricultural pests and we were fielding numerous in bound enquiries on both platforms, pertaining to agriculture. We realized that there will be economies of scale and production in regulatory, in commercial and commercialization and that the use of either of this platforms, they continued use and the continued development of each of this platform will accrue more knowledge to us. So we recognized that in order to capture the economies of scale that would flow if you kept them all in one place, than rather than partnering out individual insects and that kind of things, it will make more sense to put them in house, put them in this case ICP and recruit an executive team that is focused on that enterprise. So while we can't say we'll never do it again, I can't say that we'll always think to do it either. I think the fact and circumstances of this case really drove us to this conclusion and because of some accounting and tax accounting matters that are really somewhat beyond, its understanding that we'll be able to make this dividend to our shareholders on a highly tax favored basis. And as we demonstrated last year in the case of our dividend of $190 million worth of platform shares, I think its incumbent on a management team to deliver value to shareholders when it can't. And so this really accomplished every -- it accomplished multiple objective in one project. So we've very keen on it and we're excited about its prospects.

The next question comes from Tycho Peterson of JPMorgan.

Maybe just starting on [indiscernible], RJ or Geno can you give us a sense of capacity and how quickly you can ramp to meet demand on the larger scale? And then any real world implications from the FDA finding and matter of fact there are a fair amount of consumer pushback from locals the pilots are being contemplated?

You're talking about the scalability of what precisely?

Your Oxitec capacity, how quickly can you ramp?

Well right now in order to treat a new territory we would put in completely vertically integrated plant that will proceed from egg production to the rearing of the larvae and pupae and then actually sort of headquarter of the insect release. So I think the startup time on this plant is around five months from start to finish to get into business. We're examining plants today that will allow us to accelerate that as our discussions around the world become broader in their geographic reach, we've learned that this particular mosquito has eggs viability of at least six months which means that should be possible for us to build a centralized or maybe two or three semi-centralized, if you like, egg production facilities to supply the world demand and in that case we would be able to deploy more quickly than in five months.

Next question is from Ryan MacDonald of Wunderlich Securities.

Just quickly on following up from that previous answer about the 2 to 3 centralized products production facility, is the facility that you're currently building the extended facility in Brazil, is that one of -- would that be considered a centralized production facility?

No, it's a fully integrated facility.

Can you just describe that -- or I guess extend upon the difference between the two, sorry?

Yes, so what we just today as we produced the eggs and then we rear those eggs into larvae and pupae in our production environment and then depending on the release method, we package them into the release packages for release in the field. So that's what a fully integrated facility does. What we're seeing is that we think that we could -- we may be able obtain some significant economies of scale through centralized egg production because these eggs are viable for at least six months. So that means we could centralize the egg production portion, which is actually the hi-tech part, and then we could, in the field do the lower tech part, which will be the rearing of the insects and there release. So the real answer is today, in answer to Tycho’s, it’s five months, five months is five months, right? But what we’re pointing to is the fact that we have a team that is working on this now to see if we can get that number down. Significantly by building, initially one, and then we’ll move to others centralized egg production facilities.

[Operator Instructions] Our next question is from Derik de Bruin of Bank of America Merrill Lynch.

I have another Oxitec question. So with regards to the field trial in Florida, what were the additional requirements before the trial could commence? Now that the FDA has issued a finalized [indiscernible], our understanding is that there will be a referendum on municipality in November, is that the last hurdle or is there something else that you need to do before you commence, do you have any additional criteria and what’s the readout on the trial, is it six months?

We’re unaware of any further hurdle, and I’m actually sure when the readout is, it’s in the study design. I will observe a kind of -- sort of time period that you mentioned does -- has shown in our trials conducted elsewhere, a very significant knock done of the [indiscernible]. But I’m not sure exactly when the read out is, it should be on something on that time scale.

The next question is from Keith Markey from Griffin Securities.

I was just wondering, if the demand for the Trans Ova products and services varies significantly with the price of cattle herds and meat prices?

On the existing business, as Geno indicates it’s very much subject to the cyclicality of that type of market. But you should bear in mind that it wasn’t because of that market that we made this acquisition. We made this acquisition because we believe that we could obtain a more advanced understanding of the reproductive biology of the bovine species and that we could apply engineering in order to make frozen bovine embryo [technical difficulty] product for us at a much lower cost than is possible today. So we continue to work towards each of the objects, in the biology and in the engineering and we’re very encouraged by everything that’s going on there. But look, I’m a business person first and last, I’m the last person in the world to walk away from some numbers, the numbers are the numbers, but I just want everyone to bear in mind that it wasn’t an interest to go into cattle farming or ranching, that was the underlying reason for this particular acquisition. This acquisition allowed us to obtain the best expertise in the world in vitro fertilization and high throughput creation of frozen bovine embryos that can be shipped anywhere in the world. That as a gating item is an essential platform and now we’re applying more advance reproductive biology and engineering to that task to see if we can really make this leading platform for the improvement of bovine genetics both dairy and beef. And ultimately if we really succeed on this thing it could compete significantly in the field of reproductive biology. In other words, if we can get these the cost of these embryos, knowing their genetics down to a price point that is low enough then this could become a significant play in how you make new cows.

Thank you. And that one point I think you were even talking about advancing the same approach to other species and can you tell us a little about whether not you are moving in that direction as well?

We have some projects going on in pigs both in the United States and in China. But our first target is in the bovine species. If you think about our overall food strategy, we’ve talked about this before, its protein feed animals -- food animals rather and specialty crops. So if you look across the entire stand approaching food animals there are two opportunities that immediately loom large, one is AquaCulture and I think that one is pretty obvious, the economics of AquaCulture especially when you bring it on land and do it in a recirculating aquatic system it is a truly game changing. And as Geno mentioned I think he shared numbers with you just a moment ago, it's just a phenomenal opportunity especially given the asset we have in the AquAdvantage salmon. The other one is in the bovine species because when we cost with cattlemen around the world and this is true up to the present time, the number one thing they want is improved genetics. So this is true worldwide and it's ultimately because the feed conversion ratio on the cow really hasn’t moved. In the last 50 years the feed conversion ratio on the chicken has dramatically improved and consumers really, I think we're all spoiled by just what a marvelous industry that is. If we could achieve that kind of delta in bovine, then this is an enormous, absolutely enormous opportunity. So as we said we are excited about it, it looks like the worthwhile objective for our efforts and we’re continuing to pursue it.

The next question is from Andrew D'Silva at Merriman Capital.

Just one quick question here. A couple of calls ago you mentioned you have completed the development of an API with one of your ECC partners and I was wondering if there is any additional insight you could provide on that, have you started to generate revenue from the commercialized ECC product, or you have any other APIs that are in your queue ending their development of stage?

Two questions there, although we’ll [multiple speakers]. No, we can't disclose who the customer was or where they are on it, but I’ll say that was made for delivery of the cell line to the customer. I can tell they are scaling it now and they intend to use it. But I don’t have greater color than that to offer you on that. With regard to when the next one, we are actually hopeful of seeing the next one completed in the near future, I can't give the exact date. But I think one of the largest one that we have been working on for some time, a very ambitious target is showing very good results of the present time and both the team and partner are very excited, Geno and I had report from them recently on this. But I don't think we're in a position to give a date certain as we to when that project will wrap up.

Next question is from Tycho Peterson of JPMorgan.

Just one follow-up RJ, can you talk about the rationale for amending the ECC with ZIOPHARM and testing you operating profit there?

It's actually related to the question we had earlier on this topic. I think there was some Tom Shrader, right. So ZIOPHARM in order to fully execute its diligence obligation on our fields, in other words really to do all of the things that we could do in this field, needs to be able to finance itself. And we became concerned and as ZIOPHARM became concern that under our 50% operating profit obligation that that could prove difficult and realistically Geno and I talked about this, this is a good and we spoke and we had a very candid conversation with our Board about it. So as you might imagine this was a very well-considered item as other Board and at ZIOPHARM’s Board, certainly by the management team before that. We think that it was very much in our interest to do the amendment. If you ask my personal opinion, I think within our interest to do the amendment as zero consideration. But the lawyers tell me that I am not allowed to have that personal opinion, so let me tell you our corporate opinion, it was a very fair transaction on both sides. It wouldn’t have been very difficult for ZIOPHARM really to form the kind of -- as I mentioned, to form the kind of capital, they probably will need as they get a lot of these cell therapies in the clinic. Their expenses will increase and I think investors at that time might baulk at ponying up the kind of money ZIOPHARM would have to raise, if they're running multiple Phase 2 and 3 trials, as we really anticipate they will be doing in the future. The second thing is, again this is really just a personal observation, but as you know Tycho I’ve been involved in the sale of the few companies, and we should all recognize that under that kind of obligation ZIOPHARM would essentially never be a target, would never really be an acquisition target under a 50% operating profit obligation to Intrexon. So we do think it was in our interest across the board to make this -- to agree to this amendment and I do think that it really serves the interest of both parties very well.

Our next question is from Ryan McDonald of Wunderlich Securities.

Just on the Okanagan business with the 70,000 trees now being planted, can you remind us when those would be reaching the market for sale in 2017?

Sorry, are asked me how long does it take to grow apples from a new tree just planted?

Just looking --.

Two years.

Okay two years, so then revenue opportunity there would not necessarily be until 2018?

Yes, on anything that you planted in 2016, then you have fruit in 2018, you have your first fruit. I wouldn't focus so much on the numbers today, you should bear in mind that what we're doing, we're actually brought an orchard now, I think are we buying or leasing the second orchard, we’re leasing the second orchard. In order to grow enough graphs wood and I think the last number that Geno mentioned in his comment which was I think 500,000 -- half a million graphs will have for this next year. That's really cool and so what you could expect is this kind of geometric progression. Obviously we think this is an outstanding asset, one that is truly, how can I put it, potentially eclipsing in the category. The Apple industry has been in a state of decline for many years and we think that this asset, this technology really addresses the main reason that is so. As Neal Carter who heads up his team and really created a Mac it really has said in Apple today, a whole Apple today represents more of a comments then a modern consumers really cares to make. He is not wrong, and so we think this is really wonderful technology. And so my point is, I wouldn’t focus on 70,000 tree; 300,000 trees; 500,000 trees, except to realize that this represents a geometric progression that we think will continue to expand in time for many years.

This concludes our question and answer session I would like to turn the conference back over to management for closing remarks.

Terrific, thanks for everyone for participating. I just want to close by mentioning one thing, this is almost to the day, you say the ninth. So our Company became a public Company three years and one day ago. So happy birthday to us, happy birthday to XON at least as a public Company and one of the most rewarding things of my entire carrier has been to watch this Company mature. We rolled out a novel business plan in January 2011, no one had ever heard of the exclusive channel collaboration, that were something we really -- I could go back even early and just the whole, the UltraVector architecture itself was still a novel and Tom Reed’s creation and Tom’s the founder of this company in ’98, we should acknowledge. So get our first business, we adopted an unusual business model, it was experimental, it was every bit as experimental as some of the underlying science. And we executed on that model in January 2011 and we built a very unusual organization, it’s not even shaped like other organizations, it’s a few quite a while to sell Geno on it as a matter of fact, he’s be the first to admit to you. He was fine with the once I told him that both the divisions and the matrix and the vector would stop at him, his is okay with that matrix as long as it all stops with him, so that’s cool. But my point about that structure is that’s really going to enable us to scale and we’re really seeing the benefits of that. Giving this a level of scalability that I frankly have not seen in any other business in the life sciences. So we began that and then, we had some targets, we had some…

Over 800.

Joel said over 800. And we continue to grow, on a good day I’ll look at these reports on HR and look at the background of these scientists and I am just blown away. And so we continue -- on a good day we will see five or six of these things, so very, very exciting. And then as we think about the higher executive ranks, we’ve really made some outstanding contribution recently that give me tremendous confidence that Intrexon is going to be a real figure in the world going forward. So very recently we announced that we have recruited Andy Last, who’ll be out new Chief Operating Officer, I think starting at the end of this month. He’s phenomenal, it's very difficult to find somebody with his level of character, with backgrounds across so many disciplines that are of relevant to Intrexon and on top of that and being a nice guy and being that intelligent, being the hardworking, he happens to British which will enable us to translate, because of course I can tell you, you can guess which division, as President Kennedy once observed, which division of ours we actually have the greatest level of communication problem with -- it's Oxitec of course, just kidding. Not entirely kidding. But I think was that Kennedy's line or in on it by a common language. So anyway very happy to have Andy on Board and we are all really looking forward to working with him. Then finally I want to mentioned to my right here Geno Germano, look I think most people know Geno is too modest to ever mentioned this and he’s never told me this, but I know for a fact. Geno was beyond doubt, probably the most highly recruited senior life sciences executive in the…

Thank you. Operator. End of Q&A: