Good afternoon, and welcome to the Intrexon Third Quarter 2017 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Basta, Vice President of Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon. I am Chris Basta, Vice President of Investor Relations for Intrexon Corporation. Welcome to our third quarter 2017 earnings conference call. Joining me on the call today are Mr. Randal Kirk, Chairman and Chief Executive Officer; Dr. Andrew Last, Chief Operating Officer; and Mr. Joel Liffmann, Senior Vice President of Finance. Slides that will be presented on the call today can be viewed on the Investors section of our website, dna.com by clicking on the link for Intrexon Corporation third quarter 2017 financial results conference call. During this conference call, we’ll 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 discussion 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. Now, I would like to turn the call over to Andy Last, Intrexon's Chief Operating Officer. Andy, the floor is yours.

Thank you Chris and good afternoon everyone. Thank you for joining our third quarter 2017 earnings call. Your support and interest in Intrexon is appreciated. Earlier today we issued our earnings press release and filed our Form 10-Q which we hope you had a chance to review. Since our last quarterly call, they have been a number of significant events and advancements in the industries Intrexon serves and within our portfolio as the engineering of biology continues to expand the reach of biotechnology within human health, agriculture and into new sectors such as energy and environment. First and foremost, in the world of gene and cell therapy, the FDA has recently granted the first two approvals in an emerging class of CD19 CAR-T therapies for select cancer indications. We congratulate the thought leaders involved. These approvals of viral-based CAR-T set the stage for our next generation approach to design in T cells as they near the clinical stage. Our non-viral manufacturing builds upon the success of viral CAR-T therapy with two meaningful differentiators; reduced cost and time. The team has been steadfastly improving upon the foundational Sleeping Beauty platform acquired in early 2015. The result is the first CAR-T therapy that can be generated and administered in less than two days or as we and our collaborators ZIOPHARM, call it, point-of-care CAR-T therapy. Our first engineered point-of-care motif is a CD19 CAR-T that co-expresses the powerful cytokine IL-15 and a switch for its control that we intend to move into the clinic in 2018. In addition to the manufacturing benefits, this combination of T cell persistence via our membrane bound IL-15 and it's control viral gene switch will provide expanded access to these therapies for patients in need and the evolution of CAR-T therapy into an affordable care setting. In…

Thank you, Andy. Our third quarter financial results reflect an ongoing shift of several wholly owned programs to the commercialization stage. As Andy just described we are investing in opportunities such as gene therapy’s non-browning apples, self-limiting insects as well as fuels and chemicals. In each case we do so with the expectations of potential revenues and profits. At the same time we are seeing an increasing number of our collaborators enter the clinical stage with gene therapy candidates that Intrexon's research and development team has helped to develop. This success is of course welcome and an important precursor to potential milestone and royalty revenues. It should be noted that the scope of artwork and the associated cost recovery revenue declined as a result. In short, we have evolved our business model from predominantly early stage programs to include full ownership of a portfolio of products and business enterprises, with large commercial potential. Accordingly, metrics such as cost recovery ratios have become less relevant as the bulk of the investments being made are in unpartnered internal assets. As we have previously stated, we're actively pursuing collaborations with some of our more mature assets in large markets. The investment banking engagement on the methanotroph bioconversion process is just one example of several engagements we have underway. Now onto the quarterly numbers, today reported third quarter revenues of $46 million representing decrease of 6% year-over-year. Collaboration and licensing revenues were 61% of total revenue versus 62.5% a year ago. Product and service revenues which primarily reflect our Trans Ova business, decreased by 1.8% versus last year's third quarter. SG&A expense was $39.3 million, an increase of $5.5 dollars from a year ago reflecting headcount growth, employee compensation and benefit cost increases and stock-based compensation expense. Research and development expense increased by 26% to $36.5 million. And we are continuing to invest in our multiple platform technologies and internal development capabilities. Our increased investment in general and administrative expense and research and development reflect the ongoing shift in our business mix that I mentioned a moment ago. Adjusted EBITDA for the quarter was a negative $16.4 million compared with a prior year loss of 3.75 million. At the end of the third quarter, deferred revenues were $276 million and we had consolidated cash and liquid investment position of $108 million. We also held equity securities and preferred stock in our UCC partners valued at $175.4 million. after the quarter we entered into a $100 million preferred stock equity facility that Intrexon can access at its discretion. We have not drawn down on that facility and have no intention to do so for the foreseeable future. More detail regarding our results can be found in the 10-Q filed with the SEC today. I’d now like to ask the operator to open the call for questions and answers.

[Operator Instructions] The first question comes from Tycho Peterson with JP Morgan.

I'll start with the energy business. I know isobutene yield increased to 78% in the quarter. Does that mean you've overcome the technical hurdle that you touched on in the past and maybe if you could just update us on site selection timelines, is that still on track by year-end.

So we’re still as mentioned by Andy, we're still working on a technical hurdle on isobutanol. You should bear in mind I think you remember because you were involved at the time when this thing was nothing more than a bioinformatics model that we've created. As a matter of fact I know you - you should remember that because you were involved way back then, four years ago, at the time of our IPO. So when we are talking about targeted commercial yield, it’s informed by those models. And so that's what we think is the potential. So without getting into whether or not we are in the money today on isobutanol, the truth is as Bob Walsh has explained to me, look if you built a plant based on the characteristics of a particular organism at a particular point in time. And then later improve that organism, you'd find that you had built the plant incorrectly. So it's very important for us that we get out of the genetic engineering of the organism everything that we can. So that we can fully optimize and realize - fully optimize the production and yield to realize the maximum benefit of the technology. So the site selection that we referred to is does not pertain to isobutanol at this time. That's focused on 2, 3-BDO which is one step away from 1, 3- butadiene.

And then for a follow up on Oxitec, there's been some developments on the competitive front with EPA approving I guess MosquitoMate [indiscernible] had some news. Just any update on your perspective on how the competitive environment has evolved?

Well, we're very happy to not be regulated by the FDA. It was always a bit strange since we don't really have to judge our product on the basis of safety and efficacy in the mosquito. I'm not sure how that even works under the Federal Food, Drug and Cosmetic Act. So in any event, this has been rectified by the government under the coordinated framework. We were consulted and we're very happy that we were and we’re very happy with the result. So as Andy mentioned, we’ll be moving forward now with our applications at the EPA.

The next question comes from Tom Shrader with Stifel.

The 2,3-BDO comment about 60% of target yield, is that the same as in the money or why are those numbers not the same, the target yield and the money yield?

That was the point I was just trying to – hi, Tom, RJ. I was trying to get to with Tyco. So, we're very much in the money on 2, 3-BDO. But we're 60% of where we think we can go. I personally have -- I've personally been frustrated by this, because I'm thrilled to be so far in the money, so I go to Bob and I say, Bob, let’s build this plant, let’s get going. And he says, how much water do you want to boil, right. It's ridiculous. If we continue to improve the strain on the path we're on, he explains to me, right, then we'll find that that's not the plant we want, we want another plant. So the genomic engineering is actually a lot less expensive than building a lot of hardware and I think he's right, especially given the progress they're making, they're proving to us that he was right. So when we say 60% of target yield, if that means that was the yield that was predicted by our model, which has been holding up quite well. So, we have a lot of computational biology, you've been to our lab in San Francisco I think. We have a lot of computational biology and bioinformaticians there. The models that they've constructed have been holding up quite well as I said. And so, we have a lot of -- we attach a lot of credibility to their work and so we're going to continue to improve this yield. While we talk with partners, potential partners, on 2,3-BDO and on isobutyraldehyde.

I think you're not going to answer this question, but does your model tell you when you're going to get to this yield?

No. I will answer it. When you're doing a world first instance thing, you just don't know, Tom. You can't prioritize it. Look, if you could, it wouldn't be so high value to be honest with you. We're doing something -- we've already achieved so many things with regard to this platform that were previously undreamed of and we know that from the conversations we're having all over the world with very major players. This is very potentially the biggest thing that's ever happened in natural gas upgrading. I think if we're right on this thing, this could be the most valuable biotechnology to date. And on the numbers, it certainly seems to be shaping up that way. So, we’re doing something new never been done before, when are you going to get complete, when you're going to complete, I don't think anybody knows. But like I said, we are tracking well and we have three quarters in a row of steady improvement. If it stays on that pace, it won't take long. So we're really confident and really helpful.

Okay. And you quote the apple market as $500 million. Is that in little bags to consumers? Or there's also some big potential corporate customers there? What's that $500 million?

We want to stay in the little bags to customers, Tom, because that’s the huge margin opportunity.

That’s the current market size.

I like the way Neil Carter puts it, a whole apple is just too much of a commitment for an ordering consumer. It's more than you want.

But so $500 million is the little bag market?

Yes, sir.

Well, that’s the present -- if you think about it, the present market for presliced apples is actually estimated to be 600 million. We think that because this -- we think that this technology is so appealing and so favored by consumers that we will see the segment grow on account of it.

Well, okay. And last question, it might be a Cooper question, but your first trial with the IL-15 CAR-T, would that be a trial where you don't grow sales ex vivo? And you do -- would it be a 2-day trial? Or will the first trial be a more conventional 21 days to grow cells to show the cells work, and then you'd move to a 2-day trial? Can you talk about what the first trial would look like?

I agree with you, that is an LC question. I’m looking forward to not doing cell expansion as are you and that's the reason, to my mind, that’s the reason for the remembering about IL-15 and the work we've done there. So to make this truly point of care, you need to get away from both virus and ex vivo cell expansion. That should also remove the potential for cytokine release syndrome. That could get you into not requiring lymphodepletion, which means this technology could become safe. It could be practical, just about anywhere. It could be used first line. We're tremendously excited. I want to make just a short digression here. This is the fourth anniversary of our 1Q, the 1Q we filed as a public company. And since our share price is about the same as it was then, I decided to look back at that one, just to see how much has changed. And by the way, all of our listeners to do same as it was a real eye opener for me, even though I lived it 24 hours a day, 7 days a week. Just to see how far we've come and how much success we've achieved over these four years, but I just want to mention something about CAR-T, go back and look at our F1, all right and look at what we said about CAR-T. The truth is 90% of what we predicted was going to happen in CAR-T has in fact occurred. In other words, we knew that those things were going to be approved, we knew that they were going to work. We knew that they really represented the biggest therapeutic motive to come along since the math. Okay. So we have one more thing, because that was the whole point of what we call, ultra CAR-T in our S1. We have one more thing to do, which is solve the four problems that we've said that needed to be solved for this technology to actually mean really much at all in the world. And if we can solve all four of them and then we'll soon see if we have done that. This is going to be very big indeed. So we're very, very excited.

The next question comes from Jason Butler with JMP Securities.

The first one on the wet-AMD program. Can you give us any more color on the no-go decision there and specifically any learnings that are applicable to other programs that use the RTS system?

Sure, Jason. First of all, this is in the category of hits and misses and what we wanted to do is tell you, we don't hit on everything. This was a miss. We're not going to say why we missed or what we missed. There are people -- there are others out practicing what we put it -- there are others out practicing in the field. So competitively, we're just not going to report what the technical deficits were, but we think they’re significant and we don't see a clear way forward in that category at the present time.

And then in terms of the Oxitec's cage trial in India, can you just explain to us or walk us through the design of the trial, versus the field trials you are running in Brazil and just help us understand how you define success there versus percent reductions that you're seeing in the field trials in Brazil?

Jason, that's a great question and I wish any of the people at this table knew the answer. We do not know that study design, but Chris will get back to you on that yet.

The next question comes from Derik De Bruin with Bank of America Merrill Lynch.

It’s actually Mike Ryskin on for Derik. Had a quick question, following up on the -- your comments in terms of collaboration revenues and how you're phasing out some of the earlier projects here you're developing more internally. How should we expect that to proceed over the coming quarters and years, sort of looking out into the comments in terms of the preferred equity offering to security, you said, I think you said that you don't expect to draw on that in the near future and yet your cash and cash equivalents burn over the last quarter to support the increased R&D, are you expecting to control some of that extra OpEx or where is the gap in the cash coming from.

Yes. So as reported Derik, we have multiple mature programs and platforms that currently are being discussed with potential partners. So it's always been our desire. We've certainly made no secret of this. It's always been our desire and plan to evolve to a company in which we would not partner early stage programs, we would only partner late stage programs. The benefits of partnering in late stage are many, I mean, for one thing, the basis of the partnership changes from a financial partnership to a technical one. It changes to one in which each party is putting in even the non-monetary inputs can be quite significant because an established commercial partner for example already has a lot of infrastructure that we would have to create if we were trying to market ourselves. So the entire basis of those partnerships changes, their dollar value becomes more certain, more calculable and frankly, they’re just more significant. Okay. So it was always our desire to -- just to get to the point that we're at today in which we have many mature -- several mature programs that are relevant for partnering discussions and in which we are in fact engaged with potential partners. So the short answer to your question is look, we have a demonstrated track record of being very adverse to dilution. If you compare Intrexon to any other company in the peer group, let’s say class of 2013, I feel 2014, et cetera, again, this was brought back to me because I actually looked at the Q from four years ago. Let me tell you what our dilution is over those four years, 24%. I compared that to the dilution of the one hit wonder binary risks out there that trade for multiple billions of dollars and so…

Let me just add one comment, the warranting down of cost recovery revenues from our early stage ETC partners is the precursor to milestone and royalty revenues, as those products move through clinical trials. So it’s just the gap between stopping some of the inflow of cost recovery revenues and cashing in on the larger opportunity that comes from the programs we designed over the last four years with these companies.

And then right along those lines, a quick follow-up. I saw in your press release on a few weeks ago and again in the slide deck, you commented on the fall armyworm solution, you achieved a key milestone. Could you discuss what the milestone was? Was it something technical or somewhere moving along in terms of preparing to deploy, just any details on that?

Yeah. We're not at liberty to do so because as you referenced, we have a partner who has a vested interest in the entire field. And so we're not able to talk about it. I can tell you it was a technical achievement, but I can't tell you what it was. We’re feeling very good about that fall armyworm solution and let me just mention because I was at the – I was in Des Moines at the World Food Prize the week that we issued that press release and what I thought was, maybe the rest of the world didn't notice that we had issued a press release that we have, we think we have a very plausible, workable solution to fall armyworm, but everyone there did and there we had multinational agencies, NGOs, the top food companies in the world, the people who really care about feeding people in Africa for example and we were the hit of the party. So it just happens to coincide with -- as Andy mentioned, this is really getting to be a devastating problem. And suddenly, we're very popular on account of our possession of this having developing this asset.

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

RJ, maybe as you step back and look at the Energy Program and some of the milestones you hit today or I should say over the quarter, when you step back and speak to your adviser Moelis & Company, what are -- maybe how should we be thinking about the bigger picture as it relates to the energy program.

It’s a really good question. So as we think about it, there are really three ways to play and what we're trying to do, we’ll see if we succeed on this. It just depends on how we come out in the partnering discussions, but there are really three waves to play in this. There are parties who have a lot of gas or who have completely on market gas that has no current market or stranded gas or what have you and similarly, there are parties who have a lot of infrastructure gas, right and who move gas, pipeline companies and so forth. These parties are probably agnostic with respect to the molecule or how to play. In other words, I think such parties would be total processing agreements until the cows come home, if you'll pay them a CapEx recovery rate that they deem satisfactory and by their gas. That's at the lowest tier and I'll just say, we feel extremely confident that we could book those deals all day long. Above that there are chemical companies that have very significant, here just starting to feel like my background in pharmaceuticals actually could help us, because the people we're talking to on these single molecules are the chemical companies that have major market share already in that very chemical. And so they have the most reason to care. And so the possibility there at that one tier up from the first one I described is that we could contemplate doing a deal, an exclusive deal on a single molecule with a single worldwide player. Then above that, if you ascribe value to the sheer optionality, if you think, gosh, maybe we will really succeed big time on Isobutanol, maybe we'll finally go back to work on farnesene, C15. We’ve shown that we can make farnesene, we just have not spent any significant budget to see what the potential yield on that thing could be, but that's $1 trillion a year, farnesene, right. So that's sort of wrath of God money. If the international oil companies can think about something that is that landscape shifting, then the one tier above that, which was obviously, I would say, it’s our aspirational goal would be to partner with an international oil company on a global basis across the entire platform. So that's how we're thinking about it.

This concludes our question-and-answer session. I would like to turn the conference back over to Chairman and CEO, RJ Kirk for any closing remarks.

I don't have a lot to say today. I want to -- as always, I want to give gratitude to our team. We have now, Andy, it's slightly over 1000 diligently every day in the company. I want to tell them this is not for the investors on the call. I want to tell them that the share price has absolutely nothing to do with the work that they're doing or the success that they're achieving. I think we know why the share price is what it is and we, as a management team, know what we need to do in order to correct that. We are saying that we'll do our job, but personally, I just want to give thanks to the thousand plus folks in this company who worked so hard to make all this happen. We firmly believe and I will say more so than ever except that always complete confident about it, I think we all have, that’s why we are, that we're on to the biggest industrial vector of all time and we further are fortunate to be situated in a company that looks to us like it can lead the entire space. And frankly, if you’d asked me four years ago, what my number one wish would have been at that time, it would be to be able to say what I just said, because in order for that to be true, it would have meant that some of those early stage things that we were doing like the methanotroph bioconversion platform, which was just a model at that time would have had to have actually demonstrated success. So we did have a myth that we reported that they’re bound to happen. But if we can achieve -- in cancer, if we can achieve and against infectious targets using the same motifs in autoimmune and in energy and the self-limiting insect, I think it’s just an astonishingly productive platform. We’ll do very well indeed. So we're -- share price notwithstanding, I’ll tell you we're very gratified to be here. We're grateful to have the opportunity and grateful to have your interest and support. Thanks.

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