PRECIGEN, INC. - FORM 10-Q - November 9, 2015

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 001-36042
 INTREXON CORPORATION
(Exact name of registrant as specified in its charter)
Virginia
 
26-0084895
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
20374 Seneca Meadows Parkway
Germantown, Maryland
 
20876
(Address of principal executive offices)
 
(Zip Code)
(301) 556-9900
(Registrant's telephone number, including area code) 
(Former name, former address and former fiscal year, if changed since last report date) 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
As of October 31, 2015, 116,397,980 shares of common stock, no par value per share, were outstanding.


INTREXON CORPORATION
FORM 10-Q
TABLE OF CONTENTS
 
Item No.
 
Page
1.
 
 
 
 
 
 
2.
3.
4.
 
1.
1A.
2.
6.
 
Intrexon®, Arctic®, UltraVector®, RheoSwitch Therapeutic System®, RTS®, Better DNA®, Trans Ova Genetics®, Multiply Success® and LEAP® are our and/or our affiliates’ registered trademarks in the United States and ActoBiotics™, BeyondBio™, AttSite™, mAbLogix™ and TopAct™ are our common law trademarks in the United States. This quarterly report and the information incorporated herein by reference contain references to trademarks, service marks and trade names owned by us or other companies. Solely for convenience, trademarks, service marks and trade names referred to in this quarterly report and the information incorporated herein, including logos, artwork, and other visual displays, may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks and trade names. We do not intend our use or display of other companies' trade names, service marks or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Other trademarks, trade names and service marks appearing in this quarterly report are the property of their respective owners.


2


Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding our strategy, future events, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "predict," "project," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:
 
•
our current and future exclusive channel collaborations ("ECCs"), license agreements and other collaborations and agreements;
•
developments concerning our collaborators and licensees;
•
our ability to successfully enter new markets or develop additional products, whether with our collaborators or independently;
•
competition from existing technologies and products or new technologies and products that may emerge;
•
actual or anticipated variations in our operating results;
•
actual or anticipated fluctuations in our competitors' or our collaborators' and licensees' operating results or changes in their respective growth rates;
•
our cash position;
•
market conditions in our industry;
•
our ability, and the ability of our collaborators and licensees, to protect our intellectual property and other proprietary rights and technologies;
•
our ability, and the ability of our collaborators and licensees, to adapt to changes in laws or regulations and policies;
•
the ability of our collaborators and licensees to secure any necessary regulatory approvals to commercialize any products developed under the ECCs and license agreements;
•
the rate and degree of market acceptance of any products developed by a collaborator under an ECC or through a joint venture or license under a license agreement;
•
our ability to retain and recruit key personnel;
•
our expectations related to the use of proceeds from our public offerings and other financing efforts; and
•
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.
Forward-looking statements may also concern our expectations relating to our subsidiaries and other affiliates. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. "Risk Factors," that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.

3

You should read this Quarterly Report on Form 10-Q, the documents that we reference in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 2014 and the documents that we have filed as exhibits to our filings with the Securities and Exchange Commission completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


4

PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements

5

Intrexon Corporation and Subsidiaries
Consolidated Balance Sheets
(Unaudited) 
(Amounts in thousands, except share data)
September 30,
2015
 
December 31,
2014
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
125,433

 
$
27,466

Short-term investments
90,864

 
88,495

Receivables
 
 
 
Trade, net
25,153

 
14,582

Related parties
28,801

 
12,622

Note
—

 
1,501

Other
1,912

 
559

Inventory
22,338

 
25,789

Prepaid expenses and other
7,930

 
3,759

Total current assets
302,431

 
174,773

Long-term investments
136,266

 
27,113

Equity securities
76,623

 
164,889

Property, plant and equipment, net
42,201

 
38,000

Intangible assets, net
256,284

 
65,947

Goodwill
166,866

 
101,059

Investments in affiliates
3,790

 
3,220

Other assets
5,426

 
1,271

Total assets
$
989,887

 
$
576,272

Liabilities and Total Equity
 
 
 
Current liabilities
 
 
 
Accounts payable
$
4,546

 
$
6,267

Accrued compensation and benefits
14,475

 
7,736

Other accrued liabilities
7,918

 
5,731

Deferred revenue
32,006

 
16,522

Lines of credit
475

 
2,273

Current portion of long term debt
1,314

 
1,675

Current portion of deferred consideration
16,212

 
7,064

Related party payables
147

 
214

Total current liabilities
77,093

 
47,482

Long term debt, net of current portion
7,796

 
8,694

Deferred consideration, net of current portion
8,710

 
13,421

Deferred revenue, net of current portion
144,248

 
96,687

Deferred tax liabilities
21,550

 
—

Other long term liabilities
867

 
699

Total liabilities
260,264

 
166,983

Commitments and contingencies (Note 16)

 

Total equity
 
 
 
Common stock, no par value, 200,000,000 shares authorized as of September 30, 2015 and December 31, 2014; 116,359,041 and 100,557,932 shares issued and outstanding as of September 30, 2015 and December 31, 2014, respectively
—

 
—

Additional paid-in capital
1,233,497

 
843,001

Accumulated deficit
(510,015
)
 
(458,236
)
Accumulated other comprehensive loss
(5,195
)
 
(4
)
Total Intrexon shareholders' equity
718,287

 
384,761

Noncontrolling interests
11,336

 
24,528

Total equity
729,623

 
409,289

Total liabilities and total equity
$
989,887

 
$
576,272

The accompanying notes are an integral part of these consolidated financial statements.

6

Intrexon Corporation and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
 
(Amounts in thousands, except share and per share data)
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Collaboration and licensing revenues
$
34,726

 
$
12,656

 
$
66,690

 
$
32,257

Product revenues
9,446

 
4,115

 
32,645

 
4,124

Service revenues
8,945

 
4,261

 
32,157

 
4,261

Other revenues
250

 
165

 
615

 
196

Total revenues
53,367

 
21,197

 
132,107

 
40,838

Operating Expenses
 
 
 
 
 
 
 
Cost of products
11,215

 
4,224

 
31,654

 
4,310

Cost of services
5,451

 
2,316

 
17,316

 
2,316

Research and development
21,598

 
14,851

 
121,286

 
41,343

Selling, general and administrative
23,019

 
14,853

 
74,320

 
43,870

Total operating expenses
61,283

 
36,244

 
244,576

 
91,839

Operating loss
(7,916
)
 
(15,047
)
 
(112,469
)
 
(51,001
)
Other Income (Expense), Net
 
 
 
 
 
 
 
Unrealized and realized appreciation (depreciation) in fair value of equity securities
(30,453
)
 
(37,089
)
 
64,392

 
(48,944
)
Interest expense
(310
)
 
(230
)
 
(1,012
)
 
(309
)
Interest income
567

 
202

 
1,211

 
349

Other income (expense), net
589

 
(79
)
 
530

 
(110
)
Total other income (expense), net
(29,607
)
 
(37,196
)
 
65,121

 
(49,014
)
Equity in net loss of affiliates
(2,429
)
 
(1,619
)
 
(6,565
)
 
(3,510
)
Loss before income taxes
(39,952
)
 
(53,862
)
 
(53,913
)
 
(103,525
)
Income tax benefit (expense)
923

 
—

 
(806
)
 
(23
)
Net loss
$
(39,029
)
 
$
(53,862
)
 
$
(54,719
)
 
$
(103,548
)
Net loss attributable to the noncontrolling interests
816

 
1,137

 
2,940

 
2,895

Net loss attributable to Intrexon
$
(38,213
)
 
$
(52,725
)
 
$
(51,779
)
 
$
(100,653
)
Net loss attributable to Intrexon per share, basic and diluted
$
(0.34
)
 
$
(0.53
)
 
$
(0.47
)
 
$
(1.02
)
Weighted average shares outstanding, basic and diluted
112,244,129

 
99,888,203

 
109,244,641

 
98,711,564

The accompanying notes are an integral part of these consolidated financial statements.


7

Intrexon Corporation and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Unaudited)
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
(Amounts in thousands)
2015
 
2014
 
2015
 
2014
Net loss
$
(39,029
)
 
$
(53,862
)
 
$
(54,719
)
 
$
(103,548
)
Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gain on investments
230

 
4

 
249

 
95

Foreign currency translation adjustments
(3,102
)
 
39

 
(5,374
)
 
(28
)
Comprehensive loss
(41,901
)
 
(53,819
)
 
(59,844
)
 
(103,481
)
Comprehensive loss attributable to the noncontrolling interests
778

 
1,111

 
2,874

 
2,874

Comprehensive loss attributable to Intrexon
$
(41,123
)
 
$
(52,708
)
 
$
(56,970
)
 
$
(100,607
)
The accompanying notes are an integral part of these consolidated financial statements.


8

Intrexon Corporation and Subsidiaries
Consolidated Statements of Shareholders' and Total Equity
(Unaudited)
 
(Amounts in thousands, except share data)
Common Stock
 
Additional
Paid-in
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Accumulated
Deficit
 
Total
Intrexon
Shareholders'
Equity
 
Noncontrolling
Interests
 
Total
Equity
Shares
 
Amount
 
 
 
 
 
 
Balances at December 31, 2014
100,557,932

 
$
—

 
$
843,001

 
$
(4
)
 
$
(458,236
)
 
$
384,761

 
$
24,528

 
$
409,289

Stock-based compensation expense
—

 
—

 
26,388

 
—

 
—

 
26,388

 
161

 
26,549

Exercises of stock options and warrants
909,437

 
—

 
12,208

 
—

 
—

 
12,208

 
—

 
12,208

Shares issued to nonemployee members of the Board of Directors
10,106

 
—

 
480

 
—

 
—

 
480

 
—

 
480

Shares issued in public offerings, net of issuance costs
9,922,256

 
—

 
328,234

 
—

 
—

 
328,234

 
—

 
328,234

Shares issued as consideration of license agreement
2,100,085

 
—

 
59,579

 
—

 
—

 
59,579

 
—

 
59,579

Shares issued in acquisitions
2,552,151

 
—

 
126,863

 
—

 
—

 
126,863

 
—

 
126,863

Acquisition of noncontrolling interest
307,074

 
—

 
9,412

 
—

 
—

 
9,412

 
(10,978
)
 
(1,566
)
Adjustments for noncontrolling interests
—

 
—

 
(249
)
 
—

 
—

 
(249
)
 
499

 
250

Noncash dividend
—

 
—

 
(172,419
)
 
—

 
—

 
(172,419
)
 
—

 
(172,419
)
Net loss
—

 
—

 
—

 
—

 
(51,779
)
 
(51,779
)
 
(2,940
)
 
(54,719
)
Other comprehensive income (loss)
—

 
—

 
—

 
(5,191
)
 
—

 
(5,191
)
 
66

 
(5,125
)
Balances at September 30, 2015
116,359,041

 
$
—

 
$
1,233,497

 
$
(5,195
)
 
$
(510,015
)
 
$
718,287

 
$
11,336

 
$
729,623

The accompanying notes are an integral part of these consolidated financial statements


9

Intrexon Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Nine Months Ended 
 September 30,
(Amounts in thousands)
2015
 
2014
Cash flows from operating activities
 
 
 
Net loss
$
(54,719
)
 
$
(103,548
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
12,202

 
6,870

Loss on disposal of property, plant and equipment
519

 
170

Unrealized and realized (appreciation) depreciation on equity securities
(64,392
)
 
48,944

Amortization of discount/premium on investments
298

 
1,121

Equity in net loss of affiliates
6,565

 
3,510

Stock-based compensation expense
26,524

 
14,872

Contribution of services by shareholder
—

 
1,485

Shares issued to nonemployee members of the Board of Directors
480

 
486

Shares issued as consideration for license agreement
59,579

 
—

Provision for bad debts
1,562

 
74

Deferred income taxes
374

 
—

Other noncash items
305

 
244

Changes in operating assets and liabilities:
 
 
 
Receivables:
 
 
 
Trade
(12,014
)
 
3,443

Related parties
(11,182
)
 
(5,168
)
Note
1

 
—

Other
6,390

 
(41
)
Inventory
3,451

 
582

Prepaid expenses and other
(4,005
)
 
(679
)
Other assets
(3,817
)
 
89

Accounts payable
(3,560
)
 
(1,197
)
Accrued compensation and benefits
5,895

 
545

Other accrued liabilities
1,323

 
(820
)
Deferred revenue
52,400

 
18,636

Deferred consideration
(943
)
 
—

Related party payables
(67
)
 
(192
)
Other long term liabilities
168

 
(234
)
Net cash provided by (used in) operating activities
23,337

 
(10,808
)
The accompanying notes are an integral part of these consolidated financial statements.

10


Intrexon Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Nine Months Ended 
 September 30,
(Amounts in thousands)
2015
 
2014
Cash flows from investing activities
 
 
 
Purchases of investments
(181,572
)
 
(60,478
)
Maturities of investments
70,000

 
98,245

Purchases of equity securities and warrants
(17,080
)
 
—

Acquisitions of businesses, net of cash received
(114,480
)
 
(67,117
)
Acquisition of noncontrolling interest
(1,566
)
 
—

Investments in affiliates
(4,699
)
 
(2,105
)
Purchases of property, plant and equipment
(9,841
)
 
(5,190
)
Proceeds from sale of property, plant and equipment
420

 
151

Proceeds from notes receivable
1,500

 
—

Net cash used in investing activities
(257,318
)
 
(36,494
)
Cash flows from financing activities
 
 
 
Proceeds from issuance of shares in a private placement
—

 
25,000

Proceeds from issuance of shares in public offerings, net of issuance costs
328,234

 
—

Advances from lines of credit
13,719

 
678

Repayments of advances from lines of credit
(15,517
)
 
(4,213
)
Proceeds from long term debt
81

 
268

Payments of long term debt
(1,032
)
 
(156
)
Payments of deferred consideration
(6,252
)
 
—

Proceeds from stock option exercises
12,208

 
1,274

Payment of stock issuance costs
—

 
(256
)
Net cash provided by financing activities
331,441

 
22,595

Effect of exchange rate changes on cash and cash equivalents
507

 
(98
)
Net increase (decrease) in cash and cash equivalents
97,967

 
(24,805
)
Cash and cash equivalents
 
 
 
Beginning of period
27,466

 
49,509

End of period
$
125,433

 
$
24,704

Supplemental disclosure of cash flow information
 
 
 
Cash paid during the period for interest
$
1,119

 
$
47

Cash paid during the period for income taxes
1,165

 
—

Significant noncash financing and investing activities
 
 
 
Note receivable as consideration for upfront fee from collaborator
$
5,000

 
$
10,000

Stock received as consideration for collaboration agreements
4,667

 
5,225

Stock issued in acquisitions, net
126,863

 
51,682

Stock issued to acquire noncontrolling interest
9,412

 
—

Noncash dividend to shareholders
172,419

 
—

Deferred consideration payable related to acquisition
11,440

 
20,115

Purchases of equipment included in accounts payable and other accrued liabilities
533

 
—

The accompanying notes are an integral part of these consolidated financial statements.

11

Intrexon Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Unaudited)
(Amounts in thousands, except share and per share data)
1. Organization and Basis of Presentation
Intrexon Corporation ("Intrexon"), a Virginia corporation, forms collaborations to create biologically based products and processes using synthetic biology. Intrexon has domestic operations in California, Florida, Maryland, and Virginia, and foreign operations in Belgium and Hungary. There have been no commercialized products derived from Intrexon's collaborations to date.
Trans Ova Genetics, L.C. and Subsidiaries ("Trans Ova"), a provider of bovine reproductive technologies and other genetic processes to cattle breeders and producers, is a wholly owned subsidiary of Intrexon with primary operations in Iowa, Maryland, Missouri, Oklahoma, and Texas (Note 3). ViaGen, L.C. ("ViaGen"), a provider of genetic preservation and cloning technologies, is a wholly owned subsidiary of Trans Ova. Exemplar Genetics, LLC ("Exemplar"), a provider of genetically engineered swine for medical and genetic research, is a wholly owned subsidiary through the combined investments of Intrexon, Trans Ova, and ViaGen.
Intrexon Produce Holdings, Inc. ("IPHI") is a wholly owned subsidiary of Intrexon. Okanagan Specialty Fruits, Inc. ("Okanagan"), a company which developed and received regulatory approval for the world's first non-browning apple without the use of any flavor-altering chemical or antioxidant additives, is a wholly owned subsidiary of IPHI with primary operations in Canada (Note 3). Fruit Orchard Holdings, Inc. ("FOHI") is a wholly owned subsidiary of IPHI with primary operations in Washington.
Oxitec Limited ("Oxitec"), a pioneering company in biological insect control solutions, is a wholly owned subsidiary of Intrexon with primary operations in England and Brazil (Note 3).
As of September 30, 2015, Intrexon owned approximately 63% of AquaBounty, a biotechnology company focused on improving productivity in commercial aquaculture.
At September 30, 2015, Intrexon owned approximately 51% of Biological & Popular Culture, Inc. ("BioPop").
Intrexon Corporation and its consolidated subsidiaries are hereinafter referred to as the "Company."
These consolidated financial statements are presented in United States dollars and are prepared under accounting principles generally accepted in the United States of America ("U.S. GAAP").
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements reflect the operations of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.
Unaudited Financial Information
The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with U.S. GAAP. Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted. These interim consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for fair statement of the Company's financial position as of September 30, 2015 and results of operations and cash flows for the interim periods ended September 30, 2015 and 2014. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2015, or for any other future annual or interim period. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

12

Revenue Recognition
The Company generates revenue through contractual agreements with collaborators (known as exclusive channel collaborations, "ECC" or "ECCs") and licensing agreements whereby the collaborators or the licensee obtain exclusive access to the Company's proprietary technologies for use in the research, development and commercialization of products and/or treatments in a contractually specified field of use. Generally, the terms of these agreements provide that the Company receives some or all of the following: (i) upfront payments upon consummation of the agreement, (ii) reimbursements for costs incurred by the Company for research and development and/or manufacturing efforts related to specific applications provided for in the agreement, (iii) milestone payments upon the achievement of specified development, regulatory and commercial activities, and (iv) royalties on sales of products arising from the collaboration or licensing agreement.
The Company's collaboration and licensing agreements typically contain multiple elements, or deliverables, including technology licenses, research and development services, and in certain cases manufacturing services. The Company identifies the deliverables within the agreements and evaluates which deliverables represent separate units of accounting. Analyzing the agreements to identify deliverables requires the use of judgment. A deliverable is considered a separate unit of accounting when the deliverable has value to the collaborator or licensee on a standalone basis based on the consideration of the relevant facts and circumstances for each agreement.
Consideration received is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price. When available, the relative selling price for each deliverable is determined using vendor specific objective evidence ("VSOE") of the selling price or third-party evidence of the selling price, if VSOE does not exist. If neither VSOE nor third-party evidence of the selling price exists, the Company uses its best estimate of the selling price ("BESP") for the deliverable. The amount of allocable consideration is limited to amounts that are fixed or determinable. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units. The Company recognizes the revenue allocated to each unit of accounting as the Company delivers the related goods or services. If the Company determines that certain deliverables should be treated as a single unit of accounting, then the revenue is recognized using either a proportional performance or straight-line method, depending on whether the Company can reasonably estimate the level of effort required to complete its performance obligations under an arrangement and whether such performance obligations are provided on a best-efforts basis. As the Company cannot reasonably estimate its performance obligations related to its collaborators or licensees, the Company recognizes revenue on a straight-line basis over the period it expects to complete its performance obligations.
The terms of the Company's agreements may provide for milestone payments upon achievement of certain defined events. The Company applies the Milestone Method for recognizing milestone payments. Under the Milestone Method, the Company recognizes consideration that is contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
(1)
The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the entity's performance to achieve the milestone;
(2)
The consideration relates solely to past performance; and
(3)
The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.
In the event that a milestone is not considered substantive, the Company recognizes the milestone consideration as revenue using the same method applied to upfront payments.
Research and development services are a deliverable satisfied by the Company in accordance with the terms of the collaboration and licensing agreements and the Company considers these services to be inseparable from the license to the core technology; therefore, reimbursements of services performed are recognized as revenue. Because reimbursement (i) is contingent upon performance of the services by the Company, (ii) does not include a profit component, and (iii) does not relate to any future deliverable, the revenue is recognized during the period in which the related services are performed and collection of such amounts is reasonably assured. Payments received for manufacturing services will be recognized when the earnings process related to the manufactured materials has been completed. Royalties to be received under the agreements will be recognized as earned.

13

From time to time, the Company and certain collaborators may cancel their agreements, relieving the Company of any further performance obligations under the agreement. When no further performance obligations are required of the Company under an agreement, the Company recognizes any remaining deferred revenue.
The Company also generates products and services revenue through sales of advanced reproductive technologies, including bovine embryos derived from the Company's embryo transfer and in vitro fertilization processes and from genetic preservation and sexed semen processes and applications of such processes to other livestock, as well as sales of livestock used in production. Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) services have been rendered or delivery has occurred such that risk of loss has passed to the customer, (iii) the price is fixed or determinable, and (iv) collection from the customer is reasonably assured.
Research and Development
The Company considers that regulatory and other uncertainties inherent in the research and development of new products preclude it from capitalizing such costs. Research and development expenses include salaries and related costs of research and development personnel, including stock-based compensation expense, and the costs of consultants, certain in-licensed technology rights, facilities, materials and supplies associated with research and development projects as well as various laboratory studies. Indirect research and development costs include depreciation, amortization and other indirect overhead expenses.
The Company has research and development arrangements with third parties that include upfront and milestone payments and primarily relate to collaborations. At September 30, 2015 and December 31, 2014, the Company had research and development commitments with third parties that had not yet been incurred totaling $6,576 and $2,183, respectively. The commitments are generally cancellable by the Company at any time upon written notice.
Cash and Cash Equivalents
All highly liquid investments with an original maturity of three months or less at the date of purchase are considered to be cash equivalents. Cash balances at a limited number of banks may periodically exceed insurable amounts. The Company believes that it mitigates its risk by investing in or through major financial institutions with high quality credit ratings. Recoverability of investments is dependent upon the performance of the issuer. At September 30, 2015 and December 31, 2014, the Company had cash equivalent investments in highly liquid money market accounts at major financial institutions of $93,158 and $16,598, respectively.
Short-term and Long-term Investments
At September 30, 2015, investments include short-term and long-term investments in U.S. government debt securities and certificates of deposit. The Company determines the appropriate classification as short-term or long-term at the time of purchase based on original maturities and management's reasonable expectation of sales and redemption. The Company reevaluates such classification at each balance sheet date. The Company's written investment policy requires investments to be explicitly rated by two of the three following rating services: Standard & Poor's, Moody's and/or Fitch and to have a minimum rating of A1, P1 and/or F-1, respectively, from those agencies. In addition, the investment policy limits the amount of credit exposure to any one issuer.
Equity Securities
The Company holds equity securities received and/or purchased from certain collaborators. Other than investments accounted for using the equity method, the Company elected the fair value option to account for its equity securities held in these collaborators. These equity securities are recorded at fair value at each reporting date and are subject to market price volatility. Unrealized gains and losses resulting from fair value adjustments are reported in the consolidated statement of operations. The fair value of these equity securities is subject to fluctuation in the future due to the volatility of the stock market, changes in general economic conditions and changes in the financial conditions of these collaborators. These equity securities are classified as noncurrent in the consolidated balance sheet since the Company does not intend to sell these equity securities within one year.
The Company records the fair value of securities received on the date the collaboration is consummated or the milestone is achieved using the closing, quoted price of the collaborator's security on that date, assuming the transfer of consideration is considered perfunctory. If the transfer of the consideration is not considered perfunctory, the Company considers the specific facts and circumstances to determine the appropriate date on which to evaluate fair value. The Company also evaluates whether

14

any discounts for trading restrictions or other basis for lack of marketability should be applied to the fair value of the securities at inception of the collaboration. In the event the Company concludes that a discount should be applied, the fair value of the securities is adjusted at inception of the collaboration and re-evaluated at each reporting period thereafter.
Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset and liability. As a basis for considering such assumptions, the Company uses a three-tier fair value hierarchy that prioritizes the inputs used in its fair value measurements. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1:
 
Quoted prices in active markets for identical assets and liabilities;
 
 
Level 2:
 
Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly; and
 
 
Level 3:
 
Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available.
Concentrations of Risk
Due to the Company's mix of fixed and variable rate securities holdings, the Company's investment portfolio is susceptible to changes in interest rates. As of September 30, 2015, gross unrealized losses on the Company's short-term and long-term investments were immaterial. From time to time, the Company may liquidate some or all of its investments to fund operational needs or other activities, such as capital expenditures or business acquisitions. Depending on which investments the Company liquidates to fund these activities, the Company could recognize a portion, or all, of the gross unrealized losses.
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of trade receivables. The Company controls credit risk through credit approvals, credit limits and monitoring procedures. The Company performs ongoing credit evaluations of its customers, but generally does not require collateral to support accounts receivable.
Equity Method Investments
The Company is party to three strategic joint ventures (Note 4). The Company accounts for its investments in these joint ventures and for its investment in Thrive Agrobiotics, Inc. ("Thrive Agrobiotics") (Note 5) using the equity method of accounting since the Company has the ability to exercise significant influence, but not control, over the operating activities of these entities.
The Company determined that it has significant influence over one of its collaborators, Oragenics, Inc. ("Oragenics"), as of September 30, 2015, and over two of its collaborators, Oragenics and ZIOPHARM Oncology, Inc. ("ZIOPHARM"), as of December 31, 2014, based on its ownership interests, representation on the board of directors of the collaborators and other qualitative factors. The Company accounts for its investments in Oragenics and ZIOPHARM using the fair value option.
The fair value of the Company's equity securities of Oragenics was $13,475 and $7,192 as of September 30, 2015 and December 31, 2014, respectively, and is included as equity securities in the respective consolidated balance sheets. The Company's ownership percentage of Oragenics was 24.2% and 24.4% at September 30, 2015 and December 31, 2014, respectively. Unrealized appreciation (depreciation) in the fair value of the Company's equity securities held in Oragenics was $2,404 and $(5,487) for the three months ended September 30, 2015 and 2014, respectively, and was $6,283 and $(11,890) for the nine months ended September 30, 2015 and 2014, respectively.
In June 2015, the Company distributed all of its holdings in ZIOPHARM to the Company's shareholders in the form of a special stock dividend (Note 13). Upon disposition, the Company realized a gain of $81,401 for the three months ended June 30, 2015. As of December 31, 2014, the Company's ownership percentage of ZIOPHARM was 15.7% and the fair value of the Company's equity securities of ZIOPHARM was $83,099 and is included as equity securities in the December 31, 2014 consolidated balance sheet. Unrealized depreciation in the fair value of the Company's equity securities held in ZIOPHARM was $22,783 and $27,864 for the three and nine months ended September 30, 2014, respectively.

15

Summarized unaudited financial data as of September 30, 2015 and December 31, 2014 and for the three and nine months ended September 30, 2015 and 2014, for the Company's equity method investments are as follows:
 
September 30,
2015
 
December 31, 2014
Current assets
$
12,225

 
$
63,627

Non-current assets
462

 
1,259

Total assets
12,687

 
64,886

Current liabilities
10,121

 
15,346

Non-current liabilities
—

 
570

Total liabilities
10,121

 
15,916

Net assets
$
2,566

 
$
48,970


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Revenues
$
330

 
$
834

 
$
1,389

 
$
1,753

Operating expenses
7,020

 
17,052

 
114,023

 
46,266

Loss from operations
(6,690
)
 
(16,218
)
 
(112,634
)
 
(44,513
)
Other
(34
)
 
5,854

 
(33
)
 
11,543

Net loss
$
(6,724
)
 
$
(10,364
)
 
$
(112,667
)
 
$
(32,970
)
Variable Interest Entities
The Company identifies entities that (i) do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support or (ii) in which the equity investors lack an essential characteristic of a controlling financial interest as variable interest entities ("VIE" or "VIEs"). The Company performs an initial and on-going evaluation of the entities with which the Company has variable interests to determine if any of these entities are VIEs. If an entity is identified as a VIE, the Company performs an assessment to determine whether the Company has both (i) the power to direct activities that most significantly impact the VIE's economic performance and (ii) have the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE. If both of these criteria are satisfied, the Company is identified as the primary beneficiary of the VIE.
As of September 30, 2015 and December 31, 2014, the Company determined that certain of its collaborators and joint ventures were VIEs. As of September 30, 2015, the Company also determined that Harvest Intrexon Enterprise Fund I, LP ("Harvest") (Note 17) was a VIE. The Company was not the primary beneficiary for these entities since it did not have the power to direct the activities that most significantly impact the economic performance of the VIEs. The Company's aggregate investment balances of these VIEs as of September 30, 2015 was $1,909, which represents the Company's maximum risk of loss related to the identified VIEs. As of December 31, 2014, the Company did not hold any investment balances in the identified VIEs and therefore had no risk of loss as of that date.
Trade Receivables
Trade receivables consist of credit extended to the Company's customers and collaborators in the normal course of business and are reported net of an allowance for doubtful accounts. The Company reviews its customer accounts on a periodic basis and records bad debt expense for specific amounts the Company evaluates as uncollectible. Past due status is determined based upon contractual terms. Amounts are written off at the point when collection attempts have been exhausted. Management estimates uncollectible amounts considering such factors as current economic conditions and historic and anticipated customer performance. This estimate can fluctuate due to changes in economic, industry or specific customer conditions which may require adjustment to the allowance recorded by the Company. Management has included amounts believed to be uncollectible in the allowance for doubtful accounts.

16

The following table shows the activity in the allowance for doubtful accounts for the nine months ended September 30, 2015:
Balance at December 31, 2014
$
565

Charged to operating expenses
1,562

Write offs of accounts receivable
(112
)
Balance at September 30, 2015
$
2,015

Inventory
The Company's inventory primarily includes adult female cows which are used in certain production processes and are recorded at acquisition cost using the first-in, first-out method or at market, whichever is lower. Work-in-process inventory includes allocations of production costs and facility costs for products currently in production and is recorded at the lower of cost or market. Significant declines in the price of cows could result in unfavorable adjustments to inventory balances.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. Major additions or betterments are capitalized and repairs and maintenance are generally expensed as incurred. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of these assets are as follows:
 
  
Years
Land improvements
 
4–20
Buildings and building improvements
  
3–23
Furniture and fixtures
  
1–7
Equipment
  
1–10
Computer hardware and software
  
1–7
Leasehold improvements are amortized over the shorter of the useful life of the asset or the applicable lease term, generally one to fourteen years.
Goodwill
Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized (Note 3). Goodwill is reviewed for impairment at least annually. The Company performs a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting unit is greater than the carrying amount, the two-step goodwill impairment test is not required.
If the two-step goodwill impairment test is required, first, the fair value of the reporting unit is compared with its carrying amount (including goodwill). If the fair value of the reporting unit is less than its carrying amount, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit's goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying amount, step two does not need to be performed.
The Company performs its annual impairment review of goodwill in the fourth quarter, or sooner if a triggering event occurs prior to the annual impairment review.
Intangible Assets
Intangible assets subject to amortization consist of patents, related technologies and know-how; customer relationships; trademarks; and a covenant not to compete acquired as a result of mergers and acquisitions (Note 3). These intangible assets are

17

subject to amortization, were recorded at fair value at the date of acquisition and are stated net of accumulated amortization. Indefinite-lived intangible assets consist of in-process research and development acquired in mergers and acquisitions (Note 3) and were recorded at fair value at the dates of the respective acquisitions.
The Company amortizes long-lived intangible assets to reflect the pattern in which the economic benefits of the intangible assets are expected to be realized. The intangible assets are amortized over their remaining estimated useful lives, ranging from two to eighteen years for the patents, related technologies and know-how; customer relationships; trademarks; and the covenant not to compete.
Impairment of Long-Lived Assets
Long-lived assets to be held and used, including property, plant and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable.
Indefinite-lived intangible assets, including in-process research and development, are tested for impairment annually, or more frequently if events or circumstances between annual tests indicate that the asset may be impaired. Impairment losses on indefinite-lived intangible assets are recognized based solely on a comparison of their fair value to carrying value, without consideration of any recoverability test. The Company monitors the progression of its in-process research and development, as the likelihood of success is contingent upon commercial development or regulatory approval.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries, where the local currency is the functional currency, are translated from their respective functional currencies into United States dollars at the exchange rates in effect at the balance sheet date, with resulting foreign currency translation adjustments recorded in the consolidated statement of comprehensive loss. Revenue and expense amounts are translated at average rates during the period.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to both differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of the change. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
The Company identifies any uncertain income tax positions and recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest, if any, related to unrecognized tax benefits as a component of interest expense. Penalties, if any, are recorded in selling, general and administrative expenses.
Net Loss per Share
Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, using the treasury-stock method. For purposes of the diluted net loss per share calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and, therefore, basic and diluted net loss per share were the same for all periods presented.
Segment Information
The Company has determined that it operates in one segment. The Company applies its technologies to create products and services which may be either sold directly to customers or developed through collaboration with third parties. As of

18

September 30, 2015 and December 31, 2014, the Company had $3,623 and $2,200, respectively, of long-lived assets in foreign countries. The Company recognized revenues derived in foreign countries totaling $1,183 and $809 for the three months ended September 30, 2015 and 2014, respectively, and $3,446 and $1,178 for the nine months ended September 30, 2015 and 2014, respectively.
Recently Issued Accounting Pronouncements
In September 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments ("ASU 2015-16"). ASU 2015-16 eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Rather, the acquirer must recognize adjustments during the period in which the amounts are determined, including the effect on earnings of any amounts that would have been recorded in previous periods. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company elected to early adopt this guidance and there was no significant impact on the Company's consolidated financial statements.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory ("ASU 2015-11"). The provisions of ASU 2015-11 provide guidance for simplifying the calculation for subsequent measurement of inventory measured using the first-in-first-out or average cost methods. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2016, and is effective for the Company for the year ending December 31, 2017. The Company is currently evaluating the impact that the implementation of this standard will have on the Company's consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis ("ASU 2015-02"). The provisions of ASU 2015-02 provide guidance which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015, with early adoption permitted. The Company elected to early adopt this guidance and there was no significant impact on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers ("ASU 2014-9"). The FASB issued ASU 2014-9 to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance. This guidance was originally effective for annual periods and interim periods within those annual periods beginning after December 15, 2016 and early adoption was not permitted. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606) - Deferral of the Effective Date ("ASU 2015-14"), which deferred the effective date of the guidance in ASU 2014-9 by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016, and is effective for the Company for the year ending December 31, 2018. The Company is currently evaluating the impact that the implementation of this standard will have on the Company's consolidated financial statements.
Reclassifications
Certain insignificant reclassifications have been made to the prior interim period consolidated financial statements to conform to the current interim period presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

19

3. Mergers and Acquisitions
Oxitec Acquisition
In September 2015, pursuant to a Stock Purchase Agreement (the “Oxitec Purchase Agreement”), the Company acquired 100% of the issued outstanding share capital of Oxitec, a pioneering company in biological insect control solutions, thereby expanding the Company’s capabilities to address a broad range of global environment, health and agricultural challenges. The aggregated consideration paid consisted of (i) 1,359,343 shares of the Company’s common stock (the “Stock Consideration”) and (ii) $90,199 in cash (the “Cash Consideration”), inclusive of net cash and working capital adjustments, as defined in the Oxitec Purchase Agreement, totaling $9,449 which are to be paid within eighty-five days of the September closing date. Stock Consideration totaling 480,422 shares and Cash Consideration totaling $1,991 were withheld as escrow at closing and are issuable and payable, respectively, eighteen months after closing, subject to reduction for satisfaction of any claims for indemnification made by the Company under the Oxitec Purchase Agreement. Cash Consideration related to the net cash and working capital adjustments, as well as the withheld cash, are included in deferred consideration as of September 30, 2015. The results of Oxitec’s operations subsequent to the acquisition date have been included in the consolidated financial statements.
The fair value of the total consideration transferred was $146,394. The acquisition date fair value of the Stock Consideration and Cash Consideration is presented below:
Cash
$
90,199

Common shares
56,195

 
$
146,394

The fair value of the shares of the Company common stock issued was based on the quoted closing price of the Company’s common stock as of the date of the acquisition. The preliminary estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below:
Cash
$
3,780

Trade receivables
125

Other receivables
7,395

Prepaid expenses and other
121

Property, plant, and equipment
1,198

Intangible assets
96,854

Total assets acquired
109,473

Accounts payable
1,187

Accrued compensation and benefits
246

Other accrued liabilities
210

Deferred revenue
120

Deferred tax liabilities
12,584

Total liabilities assumed
14,347

Net assets acquired
95,126

Goodwill
51,268

Total consideration
$
146,394

The fair value of assets acquired and liabilities assumed at the acquisition date are considered preliminary and are subject to revision when the valuation of intangible assets is finalized. The acquired intangibles assets primarily include in-process research and development and the fair values of the acquired assets were determined using the multi-period excess earning method, which is a variation of the income approach that converts future cash flows to single discounted present value amounts. The in-process research and development are currently indefinite-lived intangible assets and, accordingly, are not being amortized. Goodwill, which is not expected to be deductible for tax purposes, represents the assembled workforce and the potential for future Oxitec products and technologies.

20

As of September 30, 2015, the Company had incurred $1,644 of acquisition related costs, all of which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2015.
Okanagan Acquisition
In April 2015, pursuant to a Stock Purchase Agreement (the “Okanagan Purchase Agreement”), the Company acquired 100% of the outstanding shares of Okanagan, the pioneering agricultural company behind the world's first non-browning apple. In addition to supporting Okanagan's further commercialization and exploitation of its apple products, the Company expects to utilize its proprietary technologies to assist Okanagan in the development of further novel beneficial plant traits. Pursuant to the Okanagan Purchase Agreement, the former shareholders of Okanagan received an aggregate of 707,853 shares of the Company’s common stock, and $10,000 cash in exchange for all shares in Okanagan. The results of Okanagan's operations subsequent to the acquisition date have been included in the consolidated financial statements.
The fair value of the total consideration transferred was $40,933. The acquisition date fair value of each class of consideration transferred is presented below:
Cash
$
10,000

Common shares
30,933

 
$
40,933

The fair value of the shares of the Company's common stock issued was based on the quoted closing price of the Company's common stock as of the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below along with subsequent adjustments during the measurement period to the fair value of assets acquired and liabilities assumed. The adjustments resulted from revisions to the valuation of intangible assets.
 
Initial Estimated Fair Value
 
Adjustments
 
Adjusted Fair Value
Cash
$
58

 
$
—

 
$
58

Trade receivables
16

 
—

 
16

Other receivables
49

 
—

 
49

Property, plant, and equipment
32

 
—

 
32

Intangible assets
33,800

 
2,700

 
36,500

Total assets acquired
33,955

 
2,700

 
36,655

Accounts payable
181

 
—

 
181

Deferred revenue
181

 
—

 
181

Deferred tax liabilities
8,145

 
702

 
8,847

Total liabilities assumed
8,507

 
702

 
9,209

Net assets acquired
25,448

 
1,998

 
27,446

Goodwill
15,485

 
(1,998
)
 
13,487

Total consideration
$
40,933

 
$
—

 
$
40,933

The acquired intangible assets primarily include developed technology, patents and know-how and the fair values of the acquired assets were determined using the with and without method, which is a variation of the income approach that utilizes estimated cash flows with all assets in place at the valuation date and estimated cash flows with all assets in place except the intangible assets at the valuation date. The intangible assets are being amortized over a useful life of fourteen years. Goodwill, which is not expected to be deductible for tax purposes, represents potential future applications of Okanagan's technology to other fruits, including additional apple varietals, and anticipated buyer-specific synergies arising from the combination of the Company's and Okanagan's technologies.
The Company incurred $341 of acquisition-related costs, of which $267 is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2015.

21

ActoGeniX Acquisition
In February 2015, the Company acquired 100% of the membership interests of ActoGeniX NV ("ActoGeniX"), a European clinical stage biopharmaceutical company, pursuant to a Stock Purchase Agreement (the "ActoGeniX Purchase Agreement"). ActoGeniX's platform technology complements our broad collection of technologies available for current and future collaborators. Pursuant to the ActoGeniX Purchase Agreement, the former members of ActoGeniX received an aggregate of 965,377 shares of the Company's common stock and $32,739 in cash in exchange for all membership interests of ActoGeniX. The results of ActoGeniX's operations subsequent to the acquisition date have been included in the consolidated financial statements.
The fair value of the total consideration transferred was $72,474. The acquisition date fair value of each class of consideration transferred is presented below:
Cash
$
32,739

Common shares
39,735

 
$
72,474

The fair value of the shares of the Company's common stock issued was based on the quoted closing price of the Company's common stock as of the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below along with subsequent adjustments during the measurement period to the fair value of assets acquired and liabilities assumed. The adjustments resulted from the difference between estimated and actual accrued expenses.
 
Initial Estimated Fair Value
 
Adjustments
 
Adjusted Fair Value
Cash
$
3,180

 
$
—

 
$
3,180

Other receivables
305

 
—

 
305

Prepaid expenses and other
31

 
—

 
31

Property, plant and equipment
209

 
—

 
209

Intangible assets
68,100

 
—

 
68,100

Other assets
23

 
—

 
23

Total assets acquired
71,848

 
—

 
71,848

Accounts payable
230

 
—

 
230

Accrued compensation and benefits
624

 
(428
)
 
196

Other accrued liabilities
307

 
(54
)
 
253

Deferred revenue
732

 
—

 
732

Deferred tax liabilities
612

 
—

 
612

Total liabilities assumed
2,505

 
(482
)
 
2,023

Net assets acquired
69,343

 
482

 
69,825

Goodwill
3,131

 
(482
)
 
2,649

Total consideration
$
72,474

 
$
—

 
$
72,474

The acquired intangible assets primarily include in-process research and development, and the fair values of the acquired assets were determined using the multi-period excess earnings and with-and-without methods, which are both variations of the income approach that convert future cash flows to single discounted present value amounts. During the three months ended September 30, 2015, the Company re-evaluated the acquired in-process research and development and determined that it was no longer an indefinite-lived intangible asset. The Company assigned it a useful life of eighteen years and began amortization in August 2015. Goodwill, which is not expected to be deductible for tax purposes, represents the assembled workforce and anticipated buyer-specific synergies arising from the combination of the Company's and ActoGeniX's technologies.
The Company incurred $418 of acquisition-related costs, of which $381 is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2015.

22

Trans Ova Acquisition
In August 2014, the Company acquired 100% of the membership interests of Trans Ova, a provider of bovine reproductive technologies, pursuant to an Amended and Restated Membership Interest Purchase Agreement (the "Trans Ova Purchase Agreement"). The Company and Trans Ova intend to build upon Trans Ova's current platform with new capabilities with a goal of achieving higher levels of delivered value to dairy and beef cattle producers. Pursuant to the Trans Ova Purchase Agreement, the former members of Trans Ova received an aggregate of 1,444,388 shares of the Company's common stock and $63,625 in cash, and will receive deferred cash consideration valued at $20,115 in exchange for all membership interests of Trans Ova. The deferred cash consideration is payable in three equal installments upon the first, second, and third anniversaries of the transaction date. The Trans Ova Purchase Agreement also provides for payment to the former members of Trans Ova a portion of certain cash proceeds in the event there is an award under certain litigation matters pending as of the transaction date to which Trans Ova is a party. The results of Trans Ova's operations subsequent to the acquisition date have been included in the consolidated financial statements, including revenues of $18,283 and $64,743 and net income (loss) of $(3,655) and $530 for the three and nine months ended September 30, 2015, respectively, and revenues of $8,502 and net loss of $481 for the three and nine months ended September 30, 2014.
The fair value of the total consideration transferred, including the noncontrolling interest in a majority-owned subsidiary of Trans Ova, was $127,875. The acquisition date fair value of each class of consideration transferred and noncontrolling interest is presented below:
Cash
$
63,625

Common shares
32,802

Deferred cash consideration
20,115

Total consideration transferred
116,542

Fair value of noncontrolling interest
11,333

Total
$
127,875

The fair value of the shares of the Company's common stock issued was based on the quoted closing price of the Company's common stock as of the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown in the table below.
Cash
$
960

Trade receivables
18,693

Related party receivables
1,219

Inventory
18,476

Prepaid expenses and other
590

Property, plant and equipment
21,164

Intangible assets
23,700

Other assets
147

Total assets acquired
84,949

Accounts payable
3,317

Accrued compensation and benefits
913

Other accrued liabilities
271

Deferred revenue
4,458

Lines of credit
4,091

Related party payables
1,246

Long term debt
9,090

Total liabilities assumed
23,386

Net assets acquired
61,563

Goodwill
66,312

Total consideration and fair value of noncontrolling interest
$
127,875


23

The fair value of acquired inventory was determined using the cost approach, which establishes value based on the cost of reproducing or replacing the asset. The fair value of acquired property, plant and equipment was determined using the cost approach and the market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The acquired intangible assets include various developed technologies and know-how, customer relationships, and trademarks, and the fair values of these assets were determined using the relief-from-royalty, multi-period excess earnings, and with-and-without methods, which are all variations of the income approach. The acquired intangible assets are being amortized over useful lives ranging from three to nine years. Goodwill, which will be deductible for tax purposes, represents the assembled workforce, potential future expansion of Trans Ova business lines and anticipated buyer-specific synergies arising from the combination of the Company's and Trans Ova's technologies.
In conjunction with a prior transaction associated with Trans Ova's subsidiary, ViaGen, in September 2012, the Company may be obligated to make certain future contingent payments to the former equity holders of ViaGen, up to a total of $6,000 if certain revenue targets, as defined in the share purchase agreement, are met.  The Company does not expect these revenue targets to be met and accordingly has assigned no value to this liability.
The Company incurred $713 of costs primarily for legal and due diligence services related to this acquisition, of which $372 and $684 is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.
In February 2015, the Company acquired, through an exchange offer, the remaining outstanding membership interests of Trans Ova's majority-owned subsidiary, Exemplar, for $1,566 in cash and 307,074 shares of Company common stock.
Medistem Acquisition
In March 2014, the Company acquired 100% of the outstanding common stock and securities convertible into common stock of Medistem, Inc. ("Medistem"), an entity engaged in the development of Endometrial Regenerative Cells ("ERCs"), for a combination of cash and Company common stock. The acquisition allows the Company to employ its synthetic biology platforms to engineer a diverse array of cell-based therapeutic candidates using Medistem's multipotent ERCs. Pursuant to the terms of the merger agreement, Medistem equity holders received 714,144 shares of the Company's common stock and $4,920 in cash in exchange for the outstanding Medistem common stock and securities convertible into common stock. Additionally, Medistem had issued the Company two promissory notes in the amount of $707, including accrued interest, both of which were settled upon closing of the merger. Certain members of Medistem's management surrendered a total of 17,695 shares of their merger consideration to reimburse the Company for required payroll tax withholdings. The results of Medistem's operations subsequent to the acquisition date have been included in the consolidated financial statements.
The fair value of the total consideration transferred was $24,995. The acquisition date fair value of each class of consideration transferred is presented below:
 
Cash
$
4,920

Common shares
19,368

Settlement of promissory notes
707

 
$
24,995


24

The fair value of the shares of the Company's common stock issued was based on the quoted closing price of the Company's common stock as of the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown in the table below.
Cash
$
8

Intangible assets
4,824

Total assets acquired
4,832

Accounts payable
644

Accrued compensation and benefits
67

Other accrued expenses
50

Total liabilities assumed
761

Net assets acquired
4,071

Goodwill
20,924

Total consideration
$
24,995

The fair value of acquired intangible assets was determined using the cost approach. The acquired intangible assets consist of in-process research and development, which is an indefinite-lived intangible asset. The goodwill consists of buyer-specific synergies between the Company's and Medistem's technologies present. The goodwill is not expected to be deductible for tax purposes.
The Company incurred $680 of acquisition-related costs, of which $310 is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2014.
Unaudited Condensed Pro Forma Financial Information
The results of operations of the 2015 acquisitions discussed above are included in the consolidated statements of operations beginning on the day after the acquisition date. The following unaudited condensed pro forma financial information for the three and nine months ended September 30, 2015 and 2014 is presented as if the acquisitions had been consummated on January 1, 2014:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
Pro forma
Revenues
$
53,754

 
$
21,524

 
$
133,060

 
$
41,742

Loss before income taxes
(43,979
)
 
(58,972
)
 
(66,686
)
 
(117,811
)
Net loss
(43,057
)
 
(58,586
)
 
(66,319
)
 
(116,100
)
Net loss attributable to the noncontrolling interests
816

 
1,137

 
2,940

 
2,895

Net loss attributable to Intrexon
(42,241
)
 
(57,449
)
 
(63,379
)
 
(113,205
)

25

The results of operations of the 2014 acquisitions discussed above are included in the consolidated statements of operations beginning on the day after their respective acquisition dates. The following unaudited condensed pro forma financial information for the three and nine months ended September 30, 2014 is presented as if the acquisitions had been consummated on January 1, 2013:
 
Three Months Ended 
 September 30, 2014
 
Nine Months Ended 
 September 30, 2014
 
Pro forma
Revenues
$
31,507

 
$
88,629

Loss before income taxes
(51,864
)
 
(98,816
)
Net loss
(51,864
)
 
(98,839
)
Net loss attributable to the noncontrolling interests
1,200

 
3,260

Net loss attributable to Intrexon
(50,664
)
 
(95,580
)
4. Investments in Joint Ventures
Intrexon Energy Partners
In March 2014, the Company and certain investors (the "Investors"), including an affiliate of Third Security, LLC ("Third Security"), entered into a Limited Liability Company Agreement which governs the affairs and conduct of business of Intrexon Energy Partners, LLC ("Intrexon Energy Partners"), a joint venture formed to optimize and scale-up the Company's gas-to-liquid bioconversion platform for the production of certain fuels and lubricants. The Company also entered into an ECC with Intrexon Energy Partners providing exclusive rights to our technology for the use in bioconversion, as a result of which the Company received a technology access fee of $25,000 while retaining a 50% membership interest in Intrexon Energy Partners. The Investors made initial capital contributions, totaling $25,000 in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners totaling 50%. In addition, Intrexon has committed to make additional capital contributions of up to $25,000, and the Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners, have committed to make additional capital contributions of up to $25,000, at the request of Intrexon Energy Partners' Board of Managers (the "Intrexon Energy Partners Board") and subject to certain limitations. As of September 30, 2015, the Company's remaining commitment was $20,426. The Company and the Investors have the right, but not the obligation, to make additional capital contributions above these limits when and if solicited by the Intrexon Energy Partners Board. Intrexon Energy Partners is governed by a board of managers which has five members. Two members of the Intrexon Energy Partners Board are designated by the Company and three members of the Intrexon Energy Partners Board are designated by a majority of the Investors.
See further discussion of the ECC at Note 5. See discussion of a concurrent private placement securities purchase made by the Investors at Note 13.
The Company's investment in Intrexon Energy Partners was $(1,591) and $(740) as of September 30, 2015 and December 31, 2014, respectively, and is included in other accrued liabilities in the accompanying consolidated balance sheets.
OvaXon
In December 2013, the Company and OvaScience, Inc. ("OvaScience"), a life sciences company focused on the discovery, development and commercialization of new treatments for infertility, entered into a Limited Liability Company Agreement ("OvaXon LLC Agreement") to form OvaXon, LLC ("OvaXon"), a joint venture to create new applications for improving human and animal health. Both the Company and OvaScience made an initial capital contribution of $1,500 in January 2014 for a 50% membership interest in OvaXon. OvaXon is governed by the OvaXon board of managers ("OvaXon Board") which has four members, two each from the Company and OvaScience. In cases in which the OvaXon Board determines that additional capital contributions are necessary in order for OvaXon to conduct business and comply with its obligations, each of the Company and OvaScience have the right, but not the obligation, to make additional capital contributions to OvaXon subject to the OvaXon LLC Agreement.
Contemporaneously with the formation of the joint venture, the Company entered into an ECC with OvaXon (see Note 5).

26

The Company's investment in OvaXon was $242 and $(83) as of September 30, 2015 and December 31, 2014, respectively, and is included in investments in affiliates and other accrued liabilities, respectively, in the accompanying consolidated balance sheets.
S & I Ophthalmic
In September 2013, the Company entered into a Limited Liability Company Agreement ("Sun LLC Agreement") with Caraco Pharmaceutical Laboratories, Ltd. ("Sun Pharmaceutical Subsidiary"), an indirect subsidiary of Sun Pharmaceutical Industries Ltd. ("Sun Pharmaceutical"), an international specialty pharmaceutical company focused on chronic diseases, to form S & I Ophthalmic, LLC ("S & I Ophthalmic"). The Sun LLC Agreement governs the affairs and the conduct of business of S & I Ophthalmic. S & I Ophthalmic leverages experience and technology from both the Company and Sun Pharmaceutical. Both the Company and Sun Pharmaceutical Subsidiary made an initial capital contribution of $5,000 in October 2013 for a 50% membership interest in S & I Ophthalmic. S & I Ophthalmic is governed by a board of managers ("S & I Ophthalmic Board") which has four members, two each from the Company and Sun Pharmaceutical Subsidiary. In cases in which the S & I Ophthalmic Board determines that additional capital contributions are necessary in order for S & I Ophthalmic to conduct business and comply with its obligations, each of the Company and Sun Pharmaceutical Subsidiary have committed to making additional capital contributions to S & I Ophthalmic subject to certain limits defined in the agreement. Each has the right, but not the obligation, to make additional capital contributions above the defined limits when and if solicited by the S & I Ophthalmic Board.
Beginning on the seventh anniversary of the effective date of the Sun LLC Agreement, and upon the second anniversary thereafter, the Company, as well as Sun Pharmaceutical Subsidiary, may make a cash offer to purchase all of the other party's interest in S & I Ophthalmic. Upon receipt of such an offer, the other party must either agree to tender its interests at the offered price or submit a counteroffer at a price higher than the original offer. Such offer and counteroffer may continue until one party agrees to the other's price.
Contemporaneously with the formation of the joint venture, the Company entered into an ECC with S & I Ophthalmic (see Note 5).
The Company's investment in S & I Ophthalmic was $1,881 and $3,220 as of September 30, 2015 and December 31, 2014, respectively, and is included in investments in affiliates in the accompanying consolidated balance sheets.
5. Collaboration and Licensing Revenue
The Company's collaborations and licensing agreements provide for multiple deliverables to be delivered by the Company and typically include a license to the Company's technology platforms, participation in collaboration committees, performance of certain research and development services and may include obligations for certain manufacturing services. The Company typically groups these deliverables into two units of accounting based on the nature of the deliverables and the separation criteria. The first deliverable ("Unit of Accounting 1") includes the license to the Company's technology platform, the Company's participation on the collaboration committees and any research and development services associated with its technology platforms. The deliverables for Unit of Accounting 1 are combined because they cannot be individually separated. If applicable, the second deliverable ("Unit of Accounting 2") includes manufacturing services to be provided for any Company materials in an approved product. These services have standalone value and are contingent due to uncertainties on whether an approved product will ever be developed thereby requiring manufacture by the Company at that time. All upfront consideration is allocated to Unit of Accounting 1. Unit of Accounting 2 is determined to be a contingent deliverable at the inception of the collaboration due to the uncertainties surrounding whether an approved product will ever be developed and require manufacturing by the Company. The upfront consideration allocated to Unit of Accounting 1 is recognized over the expected life of the Company's technology platform using a straight-line approach.
The Company recognizes the reimbursement payments received for research and development services in the period when the services are performed and collection is reasonably assured. At the inception of each collaboration and licensing agreement, the Company determines whether any milestone payments are substantive and can be recognized when earned. The milestone payments are typically not considered substantive. Royalties related to product sales will be recognized when earned since payments relate directly to products that have been fully developed and for which the Company has satisfied all of its obligations.
The Company determines whether collaborations and licensing agreements are individually significant for disclosure based on a number of factors, including total revenue recorded by the Company pursuant to collaboration or licensing agreements, collaborators or licensees either consolidated or accounted for using the equity method, or other qualitative factors.

27

Collaboration and licensing revenues generated from consolidated subsidiaries are eliminated in consolidation. The following table summarizes the amounts recorded in the consolidated statements of operations for each significant collaboration and licensing agreement for the three and nine months ended September 30, 2015 and 2014.
 
Three Months Ended September 30, 2015
 
Revenue Recognized From
 
Total
 
Upfront and Milestone Payments
 
Research and Development Services
 
ZIOPHARM Oncology, Inc.
$
645

 
$
4,006

 
$
4,651

Oragenics, Inc.
4,868

 
332

 
5,200

Fibrocell Science, Inc.
4,823

 
1,317

 
6,140

Genopaver, LLC
68

 
993

 
1,061

S & I Ophthalmic, LLC
—

 
1,193

 
1,193

OvaXon, LLC
—

 
549

 
549

Intrexon Energy Partners, LLC
625

 
3,185

 
3,810

Persea Bio, LLC
125

 
297

 
422

Ares Trading S.A.
1,597

 
260

 
1,857

Other
7,841

 
2,002

 
9,843

Total
$
20,592

 
$
14,134

 
$
34,726

 
Three Months Ended September 30, 2014
 
Revenue Recognized From
 
Total
 
Upfront and Milestone Payments
 
Research and Development Services
 
ZIOPHARM Oncology, Inc.
$
644

 
$
3,370

 
$
4,014

Oragenics, Inc.
261

 
3

 
264

Fibrocell Science, Inc.
449

 
1,014

 
1,463

Genopaver, LLC
68

 
360

 
428

S & I Ophthalmic, LLC
—

 
667

 
667

OvaXon, LLC
—

 
813

 
813

Intrexon Energy Partners, LLC
625

 
1,535

 
2,160

Other
443

 
2,404

 
2,847

Total
$
2,490

 
$
10,166

 
$
12,656

 
Nine Months Ended September 30, 2015
 
Revenue Recognized From
 
Total
 
Upfront and Milestone Payments
 
Research and Development Services
 
ZIOPHARM Oncology, Inc.
$
1,933

 
$
11,769

 
$
13,702

Oragenics, Inc.
5,437

 
408

 
5,845

Fibrocell Science, Inc.
5,719

 
4,500

 
10,219

Genopaver, LLC
205

 
2,460

 
2,665

S & I Ophthalmic, LLC
—

 
2,838

 
2,838

OvaXon, LLC
—

 
1,855

 
1,855

Intrexon Energy Partners, LLC
1,875

 
8,101

 
9,976

Persea Bio, LLC
375

 
553

 
928

Ares Trading S.A.
2,336

 
260

 
2,596

Other
9,446

 
6,620

 
16,066

Total
$
27,326

 
$
39,364

 
$
66,690


28

 
Nine Months Ended September 30, 2014
 
Revenue Recognized From
 
Total
 
Upfront and Milestone Payments
 
Research and Development Services
 
ZIOPHARM Oncology, Inc.
$
1,932

 
$
9,103

 
$
11,035

Oragenics, Inc.
784

 
588

 
1,372

Fibrocell Science, Inc.
1,345

 
2,759

 
4,104

Genopaver, LLC
205

 
1,204

 
1,409

S & I Ophthalmic, LLC
—

 
2,153

 
2,153

OvaXon, LLC
—

 
1,561

 
1,561

Intrexon Energy Partners, LLC
1,250

 
2,745

 
3,995

Other
1,373

 
5,255

 
6,628

Total
$
6,889

 
$
25,368

 
$
32,257

The following is a summary of the terms of the Company's significant collaborations and licensing agreements.
Merck Licensing Agreement
In March 2015, the Company signed a worldwide License and Collaboration Agreement ("Merck Agreement") with Ares Trading S.A. ("Ares Trading"), a subsidiary of the biopharmaceutical business of Merck KGaA, and ZIOPHARM through which the parties established a collaboration for the research and development and commercialization of certain products for the prophylactic, therapeutic, palliative or diagnostic use for cancer in humans. Pursuant to the Merck Agreement, the Company received a technology access fee of $115,000 as upfront consideration, of which $57,500 was paid to ZIOPHARM in accordance with the terms of the agreement. Upon the selection of the first two targets by Ares Trading, the Company is entitled to receive $10,000 payable in equal quarterly installments over two years, of which $6,250 is included in trade receivables and $3,750 in other long term assets on the consolidated balance sheet as of September 30, 2015. The Company will be entitled to receive a further $5,000 for each additional target selected by Ares Trading. The Company is also entitled to up to $413,000 of potential payments for substantive and non-substantive development and commercial milestones for each product, and royalties ranging from the lower-single digits to the low-teens of the net sales derived from the sale of products developed under the Merck Agreement. The Company may also receive up to $50,000 of further cash fees upon certain technical milestones as provided for in the agreement. The term of the Merck Agreement commenced in May 2015 and may be terminated by either party in the event of a material breach as defined in the agreement and may be terminated voluntarily by Ares Trading upon 90 days written notice to the Company. The Company will pay to ZIOPHARM 50% of all payments received for upfront fees, milestones, and royalties under the Merck Agreement. The remaining balance of deferred revenue associated with the upfront payment was $55,164 at September 30, 2015.
ZIOPHARM Collaborations
In January 2011, the Company entered into an ECC with ZIOPHARM, a related party. Pursuant to the ECC, ZIOPHARM received a license to the Company's technology platform within the field of oncology as defined more specifically in the agreement. Upon execution of the ECC, the Company received 3,636,926 shares of ZIOPHARM's common stock valued at $17,457 as upfront consideration. In addition to the deliverables discussed above, the Company transferred two clinical product candidates to ZIOPHARM that resulted in a separate unit of accounting for which $1,115 of the upfront consideration was allocated and recognized as collaboration revenue in 2011. The remaining $16,342 of upfront consideration was allocated to Unit of Accounting 1 discussed above. The Company is entitled to additional shares of common stock representing the lesser of (i) the original shares received or (ii) the number of shares representing 7.495% of ZIOPHARM's outstanding shares at the date of the dosing of the first patient in a Phase II clinical trial of a product candidate created, produced or developed by ZIOPHARM using the Company's technology ("ZIOPHARM Milestone"). In October 2012, the ZIOPHARM Milestone was achieved and the Company received 3,636,926 shares of ZIOPHARM's common stock valued at $18,330 as milestone consideration. Since the ZIOPHARM Milestone was not substantive, the Company allocated the ZIOPHARM Milestone to the applicable units of accounting and is recognizing it in a manner similar to these units of accounting. The remaining balance of deferred revenue associated with upfront and milestone payments was $21,260 and $23,193 at September 30, 2015 and December 31, 2014, respectively. The Company receives reimbursement payments for research and development services provided and manufacturing services for Company materials provided to ZIOPHARM during the ECC. Subject to certain expense allocations, ZIOPHARM will pay the Company 50% of the quarterly net profits derived from the sale of products developed from the ECC, as defined in the agreement. ZIOPHARM is responsible for conducting preclinical and clinical development of product candidates, as well as for other aspects of commercialization or manufacturing of product candidates.

29

The term of the ECC commenced in January 2011 and continues until terminated pursuant to the ECC agreement. The ECC may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by ZIOPHARM upon 90 days written notice to the Company. In March 2015, in conjunction with the Merck Agreement, the Company and ZIOPHARM amended their existing ECC. The amendment modifies the scope of the ECC in connection with the Merck Agreement and provides that the Company will pay to ZIOPHARM 50% of all payments received for upfront fees, milestones and royalties under the Merck Agreement.
In September 2015, the Company entered into its second ECC with ZIOPHARM ("ZIOPHARM ECC 2"). Pursuant to the ECC, ZIOPHARM received a license to the Company's technology platform to develop and commercialize novel biotherapeutics for the treatment of patients with graft-versus-host disease, or GvHD. Upon execution of ZIOPHARM ECC 2, the Company received a technology access fee of $10,000, all of which is included in deferred revenue at September 30, 2015. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC and manufacturing services for Company materials provided to ZIOPHARM during the ECC. ZIOPHARM will pay the Company 50% of quarterly net profits derived from the sale of products developed from ZIOPHARM ECC 2, as defined in the agreement.
ZIOPHARM is responsible for funding the further development of ZIOPHARM ECC 2 products towards the goal of commercialization, conducting preclinical and clinical development of product candidates, as well as for other aspects of commercialization or manufacturing of the product candidates. The term of the ZIOPHARM ECC 2 commenced in September 2015 and may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by ZIOPHARM upon 90 days written notice to the Company.
See Notes 13 and 17 for further discussion related to ZIOPHARM.
Oragenics Collaborations
In June 2012, the Company entered into an ECC with Oragenics, a publicly traded company focused on becoming the world leader in novel antibiotics against infectious disease and probiotics for oral health for humans and pets and a related party. Pursuant to the ECC, at the transaction effective date, Oragenics received a license to the Company's technology platform within the field of lantibiotics for the treatment of infectious diseases in humans and companion animals as defined more specifically in the agreement. Upon execution of the ECC, the Company received a technology access fee of 4,392,425 shares of Oragenics' common stock valued at $6,588 as upfront consideration. The Company is entitled to receive additional shares of common stock, or at Oragenics' option, receive a cash payment based upon the fair market value of the shares, upon the separate achievement of certain regulatory milestones of the first product candidate developed from the ECC ("Oragenics ECC 1 Milestones"). The Oragenics ECC 1 Milestones include: (i) 1% of Oragenics' outstanding shares as defined in the ECC agreement at the date of the filing of the first Investigative New Drug Application with the U.S. FDA for a product candidate created, produced or developed using the Company's technology ("Oragenics ECC 1 Product"); (ii) 1.5% of Oragenics' outstanding shares as defined in the ECC agreement at the date of the dosing of the first patient in the first Phase II clinical trial of an Oragenics ECC 1 Product; (iii) 2% of Oragenics' outstanding shares as defined in the ECC agreement at the date of the dosing of the first patient in the first Phase III clinical trial of an Oragenics ECC 1 Product; (iv) 2.5% of Oragenics' outstanding shares as defined in the ECC agreement at the date of the first New Drug Application or Biologics License Application with the U.S. FDA for an Oragenics ECC 1 Product, or alternatively the first equivalent regulatory filing with a foreign agency; and (v) 3% of Oragenics' outstanding shares as defined in the ECC agreement at the date of the granting of the first regulatory approval of an Oragenics ECC 1 Product. The remaining balance of deferred revenue associated with the upfront payment was $4,758 and $5,171 at September 30, 2015 and December 31, 2014, respectively. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC and manufacturing services for Company materials provided to Oragenics during the ECC. Oragenics will pay the Company 25% of the quarterly profits derived from the sale of products developed from the ECC, as defined in the agreement.
Oragenics is responsible for funding the further development of lantibiotics toward the goal of commercialization, conducting preclinical and clinical development of product candidates, as well as for other aspects of commercialization or manufacturing of the product candidates. The term of the ECC commenced in June 2012 and continues until terminated pursuant to the ECC agreement. The ECC may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Oragenics upon 90 days written notice to the Company.
In September 2013, the Company entered into its second ECC with Oragenics ("Oragenics ECC 2"). Pursuant to Oragenics ECC 2, at the transaction effective date, Oragenics received a license to the Company's technology platform to develop and commercialize probiotics, specifically the direct administration to humans of genetically modified probiotics for the treatment of diseases of the oral cavity, throat, sinus and esophagus as defined more specifically in the agreement. Upon execution of Oragenics ECC 2, the Company received a technology access fee of 1,348,000 shares of Oragenics' common stock valued at

30

$3,503 and a $1,956 convertible promissory note maturing on or before December 31, 2013 as upfront consideration. Prior to the maturity date, Oragenics had the right to convert the promissory note into shares of Oragenics' common stock subject to its shareholders' approval. The conversion price was equal to the closing price of Oragenics' common stock on the last trading day immediately prior to the date of conversion. In December 2013, Oragenics converted the promissory note into 698,241 shares of Oragenics' common stock. In September 2015, Oragenics and the Company mutually agreed to terminate Oragenics ECC 2 and accordingly, the Company recognized the remaining balance of the deferred revenue associated with the upfront payment.
In June 2015, the Company entered into its third ECC with Oragenics ("Oragenics ECC 3"). Pursuant to Oragenics ECC 3, at the transaction effective date, Oragenics received a license to the Company's technology platform within the field of biotherapeutics for use in certain treatments of oral mucositis and other diseases and conditions of the oral cavity, throat, and esophagus. Upon execution of Oragenics ECC 3, the Company received a technology access fee of a $5,000 convertible promissory note, which approximates fair value, maturing on or before December 31, 2015 as upfront consideration. Prior to the maturity date, Oragenics has the right to convert the promissory note into shares of Oragenics' common stock, subject to its shareholders' approval. The Company is also entitled to up to $22,000 of potential payments for development and commercial milestones for each Oragenics product developed from Oragenics ECC 3 and up to $10,000 of potential one-time payments for certain regulatory milestones under Oragenics ECC 3. The remaining balance of deferred revenue associated with the upfront payment was $4,815 at September 30, 2015. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC and manufacturing services for Company materials provided to Oragenics during Oragenics ECC 3. Oragenics will pay the Company a royalty as a percentage in the low-teens of net sales derived from the sale of products developed from Oragenics ECC 3, as defined in the agreement.
Oragenics is responsible for funding the further development of Oragenics ECC 3 products towards the goal of commercialization, conducting preclinical and clinical development of product candidates, as well as for other aspects of commercialization or manufacturing of the product candidates. The term of Oragenics ECC 3 commenced in June 2015 and may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Oragenics upon 90 days written notice to the Company.
See Note 17 for a discussion of additional arrangements with Oragenics.
Fibrocell Science, Inc. Collaboration
In October 2012, the Company entered into an ECC with Fibrocell Science, Inc. ("Fibrocell"), a publicly traded, autologous cellular therapeutic company focused on the development of innovative products for aesthetic, medical and scientific applications and a related party. Pursuant to the ECC, at the transaction effective date, Fibrocell received a license to the Company's technology platform to develop and commercialize genetically modified and non-genetically modified autologous fibroblasts and autologous dermal cells in the United States of America. Upon execution of the ECC, the Company received a technology access fee of 1,317,520 shares of Fibrocell's common stock valued at $7,576 as upfront consideration. The number of shares received reflects a 1-for-25 reverse stock split of Fibrocell's common stock effective April 30, 2013. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC and manufacturing services for Company materials provided to Fibrocell during the ECC. On a quarterly basis, Fibrocell will pay the Company royalties of 7% of net sales up to $25,000 and 14% of net sales above $25,000 on each product developed from the ECC, as defined in the agreement. If Fibrocell uses the Company's technology platform to improve the production of a current or new Fibrocell product not developed from the ECC, Fibrocell will pay the Company a quarterly royalty equal to 33% of the cost of goods sold savings generated by the improvement, as defined in the agreement. Fibrocell is responsible for conducting preclinical and clinical development of product candidates, as well as for other aspects of commercialization and manufacturing of the product candidates. The term of the ECC commenced in October 2012 and continues until terminated pursuant to the ECC agreement. The ECC may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Fibrocell upon 90 days written notice to the Company.
In June 2013, the Company entered into an amendment to the ECC with Fibrocell. The amendment expands the field of use defined in the ECC agreement. Under the terms of the amendment to the ECC, the Company received 1,243,781 shares of Fibrocell's common stock valued at $7,612 as a supplemental technology access fee. The Company allocated this additional consideration to the appropriate unit of accounting and is recognizing it consistent with the unit of accounting.
In January 2014, the Company entered into a second amendment to the ECC with Fibrocell. The second amendment further expanded the field of use defined in the ECC agreement. Under the terms of the second amendment to the ECC, the Company received 1,024,590 shares of Fibrocell's common stock valued at $5,225 as a technology access fee. The Company allocated this additional consideration to the appropriate unit of accounting. In September 2015, Fibrocell and the Company mutually agreed to terminate the second amendment to the ECC and accordingly, the Company recognized the remaining balance of

31

deferred revenue associated with the related upfront payment. The remaining balance of deferred revenue associated with Fibrocell was $11,772 and $17,491 at September 30, 2015 and December 31, 2014, respectively.
See Note 17 for further discussion related to Fibrocell.
Genopaver Collaboration
In March 2013, the Company entered into an ECC with Genopaver, LLC ("Genopaver"), an affiliate of Third Security (Note 17) and a related party. Genopaver was formed for the purpose of entering into the ECC and developing and commercializing products in the field of the fermentative production of alkaloids through genetically modified cell-lines and substrate feeds for use as active pharmaceutical ingredients or as commercially sold intermediates in the manufacture of active pharmaceutical ingredients. Upon execution of the ECC, the Company received a technology access fee of $3,000 as upfront consideration. The remaining balance of deferred revenue associated with the upfront payment was $2,318 and $2,523 at September 30, 2015 and December 31, 2014, respectively. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC. Genopaver will pay the Company a royalty as a percentage in the lower-double digits on the quarterly gross profits of product sales from products developed under the ECC, as defined in the agreement. Genopaver is responsible for the development and commercialization of the product candidates. The term of the ECC commenced in March 2013 and continues until terminated pursuant to the ECC agreement. The ECC may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Genopaver upon 90 days written notice to the Company.
AquaBounty Collaboration
In February 2013, the Company entered into an ECC with AquaBounty, a majority-owned consolidated subsidiary. The Company will be reimbursed for research and development services as provided for in the ECC agreement. In the event of product sales from a product developed from the ECC, the Company will receive 16.66% of quarterly gross profits for each product, as defined in the agreement. All revenues and expenses related to this ECC are eliminated in consolidation.
S & I Ophthalmic Collaboration
In September 2013, the Company entered into an ECC with S & I Ophthalmic, a joint venture between the Company and Sun Pharmaceutical Subsidiary, an indirect subsidiary of Sun Pharmaceutical, an international specialty pharmaceutical company focused on chronic diseases (Note 4). The ECC grants S & I Ophthalmic an exclusive license to the Company's technology platform to develop and commercialize therapies in humans for the treatment of ocular diseases defined more specifically in the agreement. The Company will be reimbursed for research and development services pursuant to the agreement and manufacturing services for Company materials provided to S & I Ophthalmic during the ECC. Subject to certain expense allocations, S & I Ophthalmic will pay the Company royalties with percentages ranging from mid-single digits and above of the net sales derived from the sale of products developed under the ECC, as defined in the agreement. The term of the ECC commenced in September 2013 and continues until terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by S & I Ophthalmic upon 90 days written notice to the Company.
BioPop Collaboration
In October 2013, the Company entered into an ECC with BioPop, a majority-owned consolidated subsidiary. The ECC grants BioPop an exclusive license to the Company's technology platform to develop and commercialize artwork, children's toys and novelty goods that are derived from living organisms or are enabled by synthetic biology. The Company will be reimbursed for research and development services and manufacturing services as provided for in the ECC agreement. The Company is entitled to royalties in the mid-single digits as a percentage of the net product sales of a product developed under the ECC, as defined in the agreement. All revenues and expenses related to this ECC are eliminated in consolidation.
OvaXon Collaboration
In December 2013, the Company entered into an ECC with OvaXon, a joint venture between the Company and OvaScience, a life sciences company focused on infertility treatments (Note 4) and a related party. The ECC grants OvaXon an exclusive license to the Company's technology platform to create new applications for improving human and animal health. OvaScience also licensed certain technology to OvaXon pursuant to a separate license agreement. The Company will be reimbursed for research and development services and manufacturing services as provided for in the ECC agreement. The term of the ECC commenced in December 2013 and continues until terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by OvaXon upon 90 days written notice to the Company.

32

Intrexon Energy Partners Collaboration
In March 2014, the Company entered into an ECC with Intrexon Energy Partners, a joint venture between the Company and certain investors, including an affiliate of Third Security (Note 4), and a related party. The ECC grants Intrexon Energy Partners an exclusive license to the Company's technology platform to optimize and scale-up the Company's gas-to-liquid bioconversion platform for the production of certain fuels and lubricants. Upon execution of the ECC, the Company received a technology access fee of $25,000 as upfront consideration. The remaining balance of deferred revenue associated with the upfront payment was $21,250 and $23,125 at September 30, 2015 and December 31, 2014, respectively. The Company will be reimbursed for research and development services as provided for in the ECC agreement. The term of the ECC commenced in March 2014 and continues until March 2034 unless terminated prior to that date by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Intrexon Energy Partners upon 90 days written notice to the Company.
Persea Bio Collaboration
In December 2014, the Company entered into an ECC with Persea Bio, LLC ("Persea Bio"), an affiliate of Third Security (Note 17) and a related party. Persea Bio was formed for the purpose of entering into the ECC and developing and commercializing a food program, as defined in the agreement. Upon execution of the ECC, the Company received a technology access fee of $5,000 as upfront consideration. The remaining balance of deferred revenue associated with the upfront payment was $4,625 and $5,000 at September 30, 2015 and December 31, 2014, respectively. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC. Persea Bio will pay the Company royalties as a percentage in the lower-double digits on the quarterly gross profits of product sales from products derived from the ECC, as defined in the agreement. Persea Bio is responsible for the development and commercialization of the product candidates. The term of the ECC commenced in December 2014 and continues until terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Persea Bio upon 90 days written notice to the Company.
Thrive Agrobiotics Collaboration
In September 2015, the Company entered into an ECC with Thrive Agrobiotics, an affiliate of Harvest (Note 17) and a related party. Thrive Agrobiotics was formed for the purpose of entering into the ECC and developing and commercializing products to improve the overall growth and feed efficiency in piglets. Upon execution of the ECC, the Company received a technology access fee in the form of equity in Thrive Agrobiotics valued at $1,667 as upfront consideration, all of which is included in deferred revenue as of September 30, 2015. The Company is also entitled to up to $5,500 of potential payments for development and commercial milestones for each product developed under the ECC. The Company receives reimbursement payments for research and development services provided pursuant to the agreement during the ECC. Thrive Agrobiotics will pay the Company a royalty as a percentage in the lower-double digits on the quarterly gross profits of product sales from products developed under the ECC, as defined in the agreement. Thrive Agrobiotics is responsible for the development and commercialization of the product candidates. The term of the ECC commenced in September 2015 and continues until terminated pursuant to the ECC agreement. The ECC may be terminated by either party in the event of certain material breaches defined in the agreement and may be terminated voluntarily by Thrive Agrobiotics upon 90 days written notice to the Company.

33

Deferred Revenue
Deferred revenue primarily consists of consideration received for upfront and milestone payments in connection with the Company's collaborations and licensing agreements, prepayments for research and development services performed for collaborators and licensees and prepayments for product and service revenues. Deferred revenue consists of the following:
 
September 30,
2015
 
December 31,
2014
Upfront and milestone payments
$
159,069

 
$
107,228

Prepaid research and development services
11,099

 
1,045

Prepaid product and service revenues
5,292

 
4,365

Other
794

 
571

Total
$
176,254

 
$
113,209

Current portion of deferred revenue
$
32,006

 
$
16,522

Long-term portion of deferred revenue
144,248

 
96,687

Total
$
176,254

 
$
113,209

6. Short-term and Long-term Investments
The Company's investments are classified as available-for-sale. The following table summarizes the amortized cost, gross unrealized gains and losses and fair value of available-for-sale investments as of September 30, 2015:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Aggregate
Fair Value
U.S. government debt securities
$
226,567

 
$
291

 
$
—

 
$
226,858

Certificates of deposit
272

 
—

 
—

 
272

Total
$
226,839

 
$
291

 
$
—

 
$
227,130

The following table summarizes the amortized cost, gross unrealized gains and losses and fair value of available-for-sale investments as of December 31, 2014:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Aggregate
Fair Value
U.S. government debt securities
$
115,293

 
$
54

 
$
(12
)
 
$
115,335

Certificates of deposit
273

 
—

 
—

 
273

Total
$
115,566

 
$
54

 
$
(12
)
 
$
115,608

For more information on the Company's method for determining the fair value of its assets, see Note 2 – "Fair Value of Financial Instruments".
The estimated fair value of available-for-sale investments classified by their contractual maturities as of September 30, 2015 was as follows:
Due within one year
$
90,864

After one year through three years
136,266

Total
$
227,130

Changes in market interest rates and bond yields cause certain investments to fall below their cost basis, resulting in unrealized losses on investments. The unrealized losses of the Company's investments were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these investments and have been in a loss position for less than 12 months.
As of September 30, 2015 and December 31, 2014, the Company did not consider any of its investments to be other-than-temporarily impaired. When evaluating its investments for other-than-temporary impairment, the Company reviews factors

34

such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer, the Company's ability and intent to hold the security and whether it is more likely than not that it will be required to sell the investment before recovery of its cost basis.
7. Fair Value Measurements
The carrying amount of cash and cash equivalents, receivables, prepaid expenses and other current assets, accounts payable, accrued compensation and benefits, other accrued liabilities, and related party payables approximate fair value due to the short maturity of these instruments.
The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis, including the items for which the fair value option has been elected, at September 30, 2015:
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
September 30,
2015
Assets
 
 
 
 
 
 
 
U.S. government debt securities (Note 6)
$
—

 
$
226,858

 
$
—

 
$
226,858

Equity securities (Note 5)
61,747

 
14,876

 
—

 
76,623

Other
—

 
417

 
—

 
417

Total
$
61,747

 
$
242,151

 
$
—

 
$
303,898

The following table presents the placement in the fair value hierarchy of financial assets that are measured at fair value on a recurring basis, including the items for which the fair value option has been elected, at December 31, 2014:
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
December 31,
2014
Assets
 
 
 
 
 
 
 
U.S. government debt securities (Note 6)
$
—

 
$
115,335

 
$
—

 
$
115,335

Equity securities (Note 5)
143,927

 
20,962

 
—

 
164,889

Other
—

 
273

 
—

 
273

Total
$
143,927

 
$
136,570

 
$
—

 
$
280,497

The carrying values of the Company's long term debt approximates fair value due to the length of time to maturity and/or the existence of interest rates that approximate prevailing market rates. Financial liabilities measured on a recurring basis were not significant at September 30, 2015 and December 31, 2014.
The method used to estimate the fair value of the Level 1 assets in the tables above is based on observable market data as these equity securities are publicly-traded. The method used to estimate the fair value of the Level 2 short-term and long-term investments in the tables above is based on professional pricing sources for identical or comparable instruments, rather than direct observations of quoted prices in active markets. The method used to estimate the fair value of the Level 2 equity securities in the tables above is based on the quoted market price of the publicly-traded security, adjusted for a discount for lack of marketability.
During the nine months ended September 30, 2015, $8,307 of certain equity securities have been transferred from Level 2 to Level 1 as a result of no longer needing to apply a discount for lack of marketability to these transferred equity securities.

35


8. Inventory
Inventory consists of the following:
 
September 30,
2015
 
December 31,
2014
Supplies, semen and embryos
$
1,368

 
$
1,184

Work in process
6,135

 
5,637

Livestock
12,753

 
16,996

Feed
2,082

 
1,972

Total inventory
$
22,338

 
$
25,789

9. Property, Plant and Equipment, net
Property, plant and equipment consist of the following:
 
September 30,
2015
 
December 31,
2014
Land and land improvements
$
9,085

 
$
7,565

Buildings and building improvements
7,311

 
7,265

Furniture and fixtures
1,608

 
1,236

Equipment
36,018

 
31,983

Leasehold improvements
6,998

 
6,382

Computer hardware and software
5,722

 
5,060

Construction and other assets in progress
1,927

 
1,002

 
68,669

 
60,493

Less: Accumulated depreciation and amortization
(26,468
)
 
(22,493
)
Property, plant and equipment, net
$
42,201

 
$
38,000

Depreciation expense was $1,987 and $1,807 for the three months ended September 30, 2015 and 2014, respectively, and $5,768 and $4,206 for the nine months ended September 30, 2015 and 2014, respectively.
10. Goodwill and Intangible Assets, net
The changes in the carrying amount of goodwill for the nine months ended September 30, 2015 are as follows:
Balance at December 31, 2014
$
101,059

Acquisitions
67,404

Foreign currency translation adjustment
(1,597
)
Balance at September 30, 2015
$
166,866

No goodwill or accumulated impairment losses existed as of September 30, 2015 and December 31, 2014.

36

Intangible assets consist of the following at September 30, 2015:
 
Weighted Average Useful Life (Years)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
Patents, related technologies and know-how
15.2
 
$
142,066

 
$
(15,141
)
 
$
126,925

Customer relationships
6.5
 
10,700

 
(2,255
)
 
8,445

Trademarks
8.4
 
5,900

 
(834
)
 
5,066

Covenant not to compete
2.0
 
395

 
(115
)
 
280

In-process research and development
 
 
115,568

 
—

 
115,568

Total
 
 
$
274,629

 
$
(18,345
)
 
$
256,284

Intangible assets consist of the following at December 31, 2014:
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net
Patents, related technologies and know-how
$
41,872

 
$
(10,849
)
 
$
31,023

Customer relationships
10,700

 
(806
)
 
9,894

Trademarks
5,900

 
(298
)
 
5,602

In-process research and development
19,428

 
—

 
19,428

Total
$
77,900

 
$
(11,953
)
 
$
65,947

Amortization expense was $2,857 and $1,290 for the three months ended September 30, 2015 and 2014, respectively and $6,434 and $2,664 for the nine months ended September 30, 2015 and 2014, respectively.
11. Lines of Credit and Long Term Debt
Lines of Credit
Trans Ova has a $6,000 revolving line of credit with First National Bank of Omaha which matures on May 1, 2016. The line of credit bears interest at the greater of 2.95% above the London Interbank Offered Rate or 3.00% and was 3.15% at September 30, 2015. As of September 30, 2015, there were no amounts outstanding. The amount available under the line of credit is based on eligible accounts receivable and inventory or the maximum line of credit amount.
Trans Ova's revolving line of credit is collateralized by certain of its assets and contain certain restricted covenants that include maintaining minimum tangible net worth, maximum allowable annual capital expenditures and working capital. Trans Ova was in compliance with these covenants as of September 30, 2015.
Exemplar has a $700 revolving line of credit with American State Bank which matures on November 1, 2016. The line of credit bears interest at 4.50% per annum. As of September 30, 2015, there was an outstanding balance of $475.
Long Term Debt
Long term debt consists of the following:
 
September 30,
2015
 
December 31,
2014
Notes payable
$
6,773

 
$
7,653

Royalty-based financing
1,857

 
1,926

Other
480

 
790

Long term debt
9,110

 
10,369

Less current portion
1,314

 
1,675

Long term debt, less current portion
$
7,796

 
$
8,694


37


Trans Ova has a note payable to American State Bank which matures in April 2033 and has an outstanding principal balance of $5,694 as of September 30, 2015. Trans Ova pays monthly installments of $39, which includes interest at 3.95%. The note payable is collateralized by all of Trans Ova's assets.
Trans Ova has a note payable to the Iowa Economic Development Authority which matures in July 2016 and has an outstanding principal balance of $550 as of September 30, 2015. Trans Ova pays quarterly installments of $183. The note payable in collateralized by certain parcels of Trans Ova's real estate.
Exemplar has notes payable with outstanding principal balances totaling $529 as of September 30, 2015. Exemplar pays monthly installments ranging from $1 to $4 with interest rates ranging from 0% to 3.00%. These notes mature from September 2018 to May 2020 and are collateralized by certain of Exemplar's real estate or letters of credit of certain of its members.
AquaBounty has a royalty-based financing grant from the Atlantic Canada Opportunities Agency ("ACOA"), a Canadian government agency, to provide funding of a research and development project. The total amount available under the award was $2,142, which AquaBounty claimed over a five year period. All amounts claimed by AquaBounty must be repaid in the form of a 10% royalty on any products commercialized out of this research and development project until fully paid. Because the timing of commercialization is subject to regulatory approval, the timing of repayment is uncertain. As of the acquisition date, AquaBounty had claimed $1,952 of the available funds and this amount was recorded at its acquisition date fair value of $1,107. The Company accretes the difference of $845 between the face value of amounts drawn and the acquisition date fair value over the expected period of repayment. Since the acquisition date, AquaBounty has claimed the remaining balance available under the grant, resulting in total long term debt of $1,857 as of September 30, 2015.
Future maturities of long term debt are as follows:
2015
$
506

2016
929

2017
382

2018
525

2019
340

2020
309

Thereafter
4,262

Total
$
7,253

The AquaBounty royalty-based financing grant is not included in the table above due to the uncertainty of the timing of repayment.
12. Income Taxes
Tax provisions for interim periods are calculated using an estimate of actual taxable income or loss for the respective period, rather than estimating the Company's annual effective income tax rate, as the Company is currently unable to reliably estimate its income for the full year. For the three months ended September 30, 2015, the Company had U.S. taxable loss of approximately $15,865, which resulted in an income tax benefit of $318 that was recognized to offset income tax expense recognized during the six months ended June 30, 2015. For the nine months ended September 30, 2015, the Company had U.S. taxable income of approximately $22,935, which, after offset of available loss carryforwards, resulted in $459 of current income tax expense due to the corporate alternative minimum tax. For the three and nine months ended September 30, 2015, the Company recognized $27 of current foreign income tax benefit. For the three months ended September 30, 2014, the Company had U.S. taxable loss of approximately $600, and no income tax benefit was recognized. For the nine months ended September 30, 2014, the Company had U.S. taxable income of approximately $600, which, after offset by available loss carryforwards, resulted in $23 of current income tax expense due to the corporate alternative minimum tax. For the three months ended September 30, 2015, the Company recorded deferred tax benefit of $578. For the nine months ended September 30, 2015, the Company recorded deferred tax expense of $374. There was no deferred tax expense for the three and nine months ended September 30, 2014. The Company's net deferred tax assets, excluding certain deferred tax liabilities totaling $21,550, are offset by a valuation allowance due to the Company's history of net losses combined with an inability to confirm recovery of the tax benefits of the Company's losses and other net deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the

38


periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
At September 30, 2015, the Company has loss carryforwards for U.S. federal income tax purposes of approximately $227,100 available to offset future taxable income and federal and state research and development tax credits of approximately $6,800, prior to consideration of annual limitations that may be imposed under Section 382. These carryforwards will begin to expire in 2022. Of these loss carryforwards, approximately $29,300 relates to benefits from stock compensation deductions that will be recorded as a component of paid-in capital when realized. The Company's direct foreign subsidiaries have foreign loss carryforwards of approximately $116,700, most of which do not expire.
13. Shareholders' Equity
Issuances of Common Stock
In August 2015, the Company closed a public offering of 5,609,756 shares of its common stock, inclusive of 731,707 shares of common stock sold by the Company pursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering, at a public offering price of $41.00 per share. The aggregate proceeds of the offering were $218,193, net of underwriting discounts of $11,500 and offering expenses paid by the Company of approximately $306, all of which were capitalized.
In January 2015, the Company closed a public offering of 4,312,500 shares of its common stock, inclusive of 562,500 shares of common stock sold by the Company pursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering and 555,556 shares of common stock purchased by affiliates of Third Security (Note 17), at a public offering price of $27.00 per share. The aggregate proceeds of the offering were $110,041, net of underwriting discounts and commissions of $6,086 and offering expenses paid by the Company of approximately $311, all of which were capitalized.
In March 2014 and concurrent with the formation of Intrexon Energy Partners, the Company entered into securities purchase agreements with each of the Investors in Intrexon Energy Partners for the private placement of 972,004 shares of the Company's common stock at a price per share of $25.72 for gross proceeds of $25,000. Each Investor purchased an amount proportionate to its investment in Intrexon Energy Partners, including 243,001 shares, or $6,250, purchased by an affiliate of Third Security (Note 17).
Dividend to Shareholders
In June 2015, the Company distributed to its shareholders 17,830,305 shares of ZIOPHARM common stock, representing all of the equity interests of ZIOPHARM held by the Company and resulting in a realized gain of $81,401. The distribution constituted a dividend to shareholders of record as of June 4, 2015. In connection with the distribution, pursuant to the terms of the Company's equity incentive plans, the conversion terms of all outstanding options for shares of the Company's stock as of June 4, 2015 were adjusted to reflect the value of the distribution with respect to shares of the Company's common stock.
Components of Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss were as follows:
 
September 30,
2015
 
December 31,
2014
Unrealized gain on investments
$
291

 
$
42

Foreign currency translation adjustments
(5,486
)
 
(46
)
Total accumulated other comprehensive loss
$
(5,195
)
 
$
(4
)

39


14. Stock Option Plans
The Company records the fair value of stock options issued to employees and non-employees as of the grant date as stock-based compensation expense. Stock-based compensation expense for employees and non-employees is recognized over the requisite service period, which is typically the vesting period. Stock-based compensation costs included in the consolidated statements of operations are presented below:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Cost of products
$
21

 
$
5

 
$
76

 
$
5

Cost of services
98

 
50

 
301

 
50

Research and development
2,234

 
1,514

 
6,141

 
3,226

Selling, general and administrative
6,032

 
2,681

 
20,006

 
11,591

Total
$
8,385

 
$
4,250

 
$
26,524

 
$
14,872

Intrexon Stock Option Plans
In April 2008, Intrexon adopted the 2008 Equity Incentive Plan (the "2008 Plan") for employees and nonemployees pursuant to which Intrexon's board of directors may grant share based awards, including stock options, to officers, key employees and nonemployees. Upon the effectiveness of the 2013 Omnibus Incentive Plan (the "2013 Plan"), no new awards may be granted under the 2008 Plan. As of September 30, 2015, there are 1,439,637 stock options outstanding under the 2008 Plan.
In July 2013, the Company adopted the 2013 Plan for employees and nonemployees pursuant to which Intrexon's board of directors may grant share based awards, including stock options and shares of common stock, to employees, officers, consultants, advisors and nonemployee directors. The 2013 Plan became effective upon the closing of the Company's initial public offering in August 2013, and as of September 30, 2015, there were 13,000,000 shares authorized for issuance under the 2013 Plan, of which 9,220,403 stock options were outstanding and 3,219,354 shares were available for grant.
Stock option activity under Intrexon's award plans was as follows:
 
Number of Shares
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (Years)
Balances at December 31, 2014
8,323,544

 
$
22.59

 
8.64
Granted
4,282,000

 
47.89

 
 
Adjustment due to dividend (Note 13)
312,795

 
25.40

 
 
Exercised
(790,265
)
 
(16.89
)
 
 
Forfeited
(1,467,488
)
 
(25.77
)
 
 
Expired
(546
)
 
(17.72
)
 
 
Balances at September 30, 2015
10,660,040

 
32.07

 
8.53
Exercisable at September 30, 2015
2,502,418

 
18.18

 
6.73
Vested and Expected to Vest at September 30, 2015(1)
8,803,769

 
30.69

 
8.37
(1)
The number of stock options expected to vest takes into account an estimate of expected forfeitures.
Total unrecognized compensation costs related to nonvested awards at September 30, 2015 and December 31, 2014 were $112,205 and $62,281, respectively, and are expected to be recognized over a weighted-average period of approximately three years.
Intrexon currently uses authorized and unissued shares to satisfy share award exercises.

40


Other Plans
As of September 30, 2015, there were 5,382,000 options outstanding under the AquaBounty 2006 Equity Incentive Plan ("AquaBounty Plan") at a weighted average exercise price of $0.26 per share of which 4,320,333 were exercisable. As of December 31, 2014 , there were 7,347,000 options outstanding under the AquaBounty Plan at a weighted average exercise price of $0.31 per share of which 6,171,520 were exercisable.
15. License Agreement
In January 2015, the Company and ZIOPHARM jointly entered into a license agreement with the University of Texas System Board of Regents on behalf of the University of Texas MD Anderson Cancer Center ("MD Anderson") whereby the Company received an exclusive license to certain research and development technologies owned and licensed by MD Anderson, including technologies relating to novel chimeric antigen receptor (CAR) T-cell therapies, as well as co-licenses and non-exclusive licenses to certain other related technologies. ZIOPHARM shall receive access to these technologies pursuant to the terms of the Company's ECC with ZIOPHARM. The Company issued 2,100,085 shares of its common stock valued at $59,579 to MD Anderson as consideration, which is included in research and development expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2015. Subject to certain exceptions, the license agreement expires on the last to occur of (i) the expiration of all patents licensed thereunder, or (ii) the twentieth anniversary of the date of the license agreement.
In connection with the license agreement, the Company, ZIOPHARM, and MD Anderson entered into a research and development agreement which governs certain operational activities between the parties and pursuant to which ZIOPHARM will provide funding for certain research and development activities of MD Anderson for a period of three years, in an amount between $15,000 and $20,000 per year. The Company and ZIOPHARM are obligated to reimburse MD Anderson for out of pocket expenses for maintaining patents covering the licensed technologies.
16. Commitments and Contingencies
Operating Leases
The Company leases facilities and certain equipment under noncancelable operating leases. The equipment leases are renewable at the option of the Company. At September 30, 2015, future minimum lease payments under operating leases having initial or remaining noncancelable lease terms in excess of one year are as follows:
2015
$
739

2016
4,161

2017
3,381

2018
2,067

2019
1,889

2020
1,941

Thereafter
1,587

Total
$
15,765

Rent expense, including other facility expenses, was $2,167 and $2,518 for the three months ended September 30, 2015 and 2014, respectively, and $6,548 and $5,249 for the nine months ended September 30, 2015 and 2014, respectively.
The Company maintains subleases for certain of its facilities. Rental income under sublease agreements was $334 and $270 for the three months ended September 30, 2015 and 2014, respectively, and $1,153 and $532 for the nine months ended September 30, 2015 and 2014, respectively. Future rental income approximates $182 for 2015, $741 for 2016, and $96 for 2017.
Contingencies
In March 2012, Trans Ova was named as a defendant in a licensing and patent infringement suit brought by XY, Inc. alleging that certain of Trans Ova's activities breach a licensing agreement and infringe on patents that XY, Inc. allegedly owns. Trans Ova is reviewing, defending and filing counter claims in the case. The matter is scheduled to go to trial in the first half of 2016. Based on advice from legal counsel, Trans Ova believes that XY, Inc.'s complaints are without merit; however, no assurances can be given that this matter will be resolved in Trans Ova's favor.

41

The Company may become subject to claims and assessments from time to time in the ordinary course of business. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. The Company accrues liabilities for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated. As of September 30, 2015 and December 31, 2014, the Company does not believe that any such matters, individually or in the aggregate, will have a material adverse effect on the Company's business, financial condition, results of operations, or cash flows.
17. Related Party Transactions
Third Security and Affiliates
The Company reimburses Third Security for certain administrative services and out-of-pocket expenses incurred on the Company's behalf. The total amount of expenses incurred by the Company for the three months ended September 30, 2015 and 2014 was $142 and $85, respectively and $294 and $173 for the nine months ended September 30, 2015 and 2014, respectively.
The Manager of Third Security is also the Chief Executive Officer ("CEO") and Chairman of the Board of Directors of the Company. Prior to 2015, the CEO did not receive compensation for his services as CEO, and as a result, the Company recorded $508 and $1,485 in compensation expense for the three and nine months ended September 30, 2014, respectively, based on the estimated salary and benefits appropriate for the role. The Company anticipates that the CEO will participate in the Company's executive annual incentive compensation plan beginning in 2015.
See additional discussion related to Third Security and the Company's CEO at Note 19.
Transactions with ECC Parties
In addition to entities controlled by Third Security, any entity in which the Company holds equity securities, including securities received as upfront or milestone consideration, and which also are party to a collaboration with the Company are considered to be related parties.
In July 2015, the Company purchased 375,868 shares of common stock of Fibrocell at $5.80 per share.
In March 2015, the Company purchased 278,788 shares of common stock of AmpliPhi Biosciences Corporation ("AmpliPhi"), a collaborator, and 69,696 warrants for $2,300. Of the total purchase price, $1,979 was allocated to the value of the shares of common stock and $321 was allocated to the value of the warrants. The number of shares and warrants received reflects a 1-for-50 reverse stock split of AmpliPhi's common stock effective August 7, 2015. The AmpliPhi warrants have been included in other assets on the consolidated balance sheet with a value of $145 as of September 30, 2015.
Between February 2011 and February 2015, the Company purchased $43,582 of ZIOPHARM securities. See Note 13 for additional discussion related to the Company's investment in ZIOPHARM.
The Company entered into an ECC with Histogenics Corporation ("Histogenics") in September 2014 and received a $10,000 convertible promissory note as upfront consideration. The note originally matured in September 2015 and accrued interest at 6.0% per annum. Upon the closing of Histogenics' IPO in December 2014, the note, with accrued interest, was converted to Histogenics common stock. Additionally, the Company purchased 1,772,364 shares of Histogenics common stock at $11.00 per share in the IPO.
In conjunction with the ECC with Oragenics (Note 5), the Company is entitled to, at its election, purchase up to 30% of securities offerings that may be conducted by Oragenics in the future, subject to certain conditions and limitations. In November 2013, the Company purchased 1,100,000 shares of Oragenics common stock at $2.50 per share. In September 2013, the Company purchased 1,300,000 shares of Oragenics common stock at $3.00 per share in a private transaction. In connection with Oragenics ECC 3 (Note 5), the Company agreed to purchase additional common stock in a qualified financing, as defined in the agreement, during the sixteen months following the effective date of the Oragenics ECC 3 in an amount up to the lesser of (i) the amount that is the proportion of such financing equal to the Company's pro rata equity holdings in Oragenics as of the effective date and (ii) $10,000, subject to certain conditions.
The Company recognized $31,740 and $11,295 of collaboration revenues from related parties in the three months ended September 30, 2015 and 2014, respectively, and $59,775 and $29,613 for the nine months ended September 30, 2015 and 2014, respectively.

42

Other Related Parties
In June 2015, the Company entered into an agreement with Harvest, an investment fund sponsored by Harvest Capital Strategies, LLC, and a related party based on ownership in the fund by affiliates of Third Security. Harvest was established to invest in life science research and development opportunities that Intrexon offers to Harvest. These will be investment proposals that are suitable for pursuit by a startup venture, characterized by the agreement as "start-up opportunities." For such start-up opportunities, the Company will provide Harvest with exclusive rights of first-look and first negotiation. For any opportunities it decides to pursue, Harvest would establish new collaboration entities which would enter into an ECC with the Company in a designated field. The terms of such ECCs would be negotiated between the Company and Harvest. In addition, the agreement provides the Company the right to present to Harvest the opportunity to invest in other ventures, including investment opportunities with respect to the Company's existing collaborations. Any such opportunities would be presented at the Company's discretion on a non-exclusive basis. The agreement with Harvest does not limit the Company's ability to execute other collaborations and joint ventures with third parties. As consideration for providing exclusive rights of first look and first negotiation for start-up opportunities, the Company receives a portion of the management fee collected by Harvest. These fees are included in other income in the accompanying consolidated statements of operations and totaled $697 for the three and nine months ended September 30, 2015.
18. Net Loss per Share
The following table presents the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2015 and 2014:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
Historical net loss per share:
 
 
 
 
 
 
 
Numerator:
 
 
 
 
 
 
 
Net loss attributable to Intrexon
$
(38,213
)
 
$
(52,725
)
 
$
(51,779
)
 
$
(100,653
)
Denominator:
 
 
 
 
 
 
 
Weighted average shares outstanding, basic and diluted
112,244,129

 
99,888,203

 
109,244,641

 
98,711,564

Net loss attributable to Intrexon per share, basic and diluted
$
(0.34
)
 
$
(0.53
)
 
$
(0.47
)
 
$
(1.02
)
The following potentially dilutive securities have been excluded from the above computations of diluted weighted average shares outstanding for the three and nine months ended September 30, 2015 and 2014, as they would have been anti-dilutive:
 
September 30,
 
2015
 
2014
Options
10,660,040

 
8,194,650

Warrants
194,719

 
373,102

Total
10,854,759

 
8,567,752

19. Subsequent Events
In November 2015, the Company entered into a Services Agreement ("Services Agreement") with Third Security pursuant to which Third Security will provide the Company with certain professional, administrative, and other support services in exchange for a fee of $800 per month to be paid in the form of fully-vested shares of the Company's common stock. The payments made by the Company under the Services Agreement constitute, in the aggregate, an award under the 2013 Plan and will be subject to the terms of the 2013 Plan.
In November 2015, the Company entered into a compensation arrangement with the Company's CEO. Previously, the CEO did not receive compensation for his services as CEO of the Company. Under the new compensation arrangement, the CEO will

43

receive compensation of $200 per month in the form of fully-vested shares of the Company's common stock. The shares of common stock will be issued pursuant to the terms of a Restricted Stock Unit Agreement under the 2013 Plan.

44

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.
The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements and you are cautioned not to place undue reliance on forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in "Special Note Regarding Forward-Looking Statements" and "Risk Factors." The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof.
Overview
We believe we are a leader in the field of synthetic biology, an emerging and rapidly evolving discipline that applies engineering principles to biological systems. Using our suite of proprietary and complementary technologies, we design, build and regulate gene programs, which are DNA sequences that consist of key genetic components. A single gene program or a complex, multi-genic program are fabricated and stored within a DNA vector. Vectors are segments of DNA used as a vehicle to transmit genetic information. DNA vectors can, in turn, be introduced into cells in order to generate a simple or complex cellular system, which are the basic and complex cellular activities that take place within a cell and the interaction of those systems in the greater cellular environment. It is these genetically modified cell systems that can be used to produce proteins, produce small molecules, or serve as cell-based products, which enable the development of new and improved products and manufacturing processes across a variety of end markets, including health, food, energy, environment, and consumer. Our synthetic biology capabilities include the ability to precisely control the amount, location and modification of biological molecules to control the function and output of living cells and optimize for desired results at an industrial scale.
We have devised our business model to bring many different commercial products to market through the formation of agreements, including exclusive channel collaborations, or ECCs, with collaborators that have expertise within specific industry sectors. Through our collaborations, we provide expertise in the engineering, creation and modification of gene programs and cellular systems, and our collaborators are responsible for providing market and product development expertise, as well as regulatory, sales and marketing capabilities. Generally, our collaborators compensate us through payment of technology access fees, royalties, milestones and reimbursement of certain costs. This business model allows us to leverage our capabilities and capital across a broader landscape of product opportunities and end markets than we would be capable of addressing on our own. Alternatively, where a collaborator wishes to work with us to develop an early-stage program, we may execute a research collaboration pursuant to which we receive reimbursement for our development costs but the exclusive license rights, and related access fee, are deferred until completion of an initial research program.
In certain strategic circumstances, we may enter into a joint venture with an ECC collaborator. In that event, we will enter into an ECC with a joint venture entity and may contribute access to our technology, cash or both into the joint venture which we will jointly control with our ECC collaborator. Pursuant to a joint venture agreement, we may be required to contribute additional capital to the joint venture, and we may be able to receive a higher financial return than we would normally receive from an ECC to the extent that we and our ECC collaborator are successful in developing one or more products. We currently are party to several such joint venture agreements including: S & I Ophthalmic, LLC, or S & I Ophthalmic, which is a joint venture with Caraco Pharmaceutical Laboratories, Ltd., or Sun Pharmaceutical Subsidiary, an indirect subsidiary of Sun Pharmaceutical Industries Ltd., or Sun Pharmaceutical, an international specialty pharmaceutical company focused on chronic diseases; OvaXon, LLC, or OvaXon, which is a joint venture with OvaScience, Inc., or OvaScience, a life sciences company focused on the discovery, development and commercialization of new treatments for infertility; and Intrexon Energy Partners, LLC, or Intrexon Energy Partners, a joint venture with a select group of external investors, to optimize and scale-up our gas-to-liquid bioconversion platform for the production of certain fuels and lubricants.
In 2011, we entered into our first collaboration and have added new collaborations since then, either by entering into new agreements or expanding or adding fields to existing ECCs. To date, we have entered into 36 such agreements and expansions with 28 different counterparties, of which 29 remain active. We have 26 active ECCs, including two expansions, and three research collaborations that we anticipate could, if successful, become commercial agreements. Under the ECCs, we are developing products in the fields of healthcare, food, energy, environment and consumer goods.
In June 2015, we entered into an agreement with Harvest Intrexon Enterprise Fund I, LP, or Harvest, an investment fund sponsored by Harvest Capital Strategies, LLC, and a related party based on ownership in the fund by affiliates of Third

45

Security, LLC. Harvest was established to invest in life science research and development opportunities that we offer to Harvest. These will be investment proposals that are suitable for pursuit by a startup venture, characterized by the agreement as "start-up opportunities." For such start-up opportunities, we will provide Harvest with exclusive rights of first-look and first negotiation. For any opportunities it decides to pursue, Harvest would establish new collaboration entities which would enter into an ECC with us in a designated field. The terms of such ECCs would be negotiated between us and Harvest.  In addition, the agreement provides us the right to present to Harvest the opportunity to invest in other ventures, including investment opportunities with respect to our existing collaborations. Any such opportunities would be presented at our discretion on a non-exclusive basis. The agreement with Harvest does not limit our ability to execute other collaborations and joint ventures with third parties. As consideration for providing exclusive rights of first look and first negotiation for start-up opportunities, we receive a portion of the management fee collected by Harvest.
As part of our ECC business model, we sometimes receive equity in lieu of cash for technology access fees and milestones and also may participate in capital raises to allow earlier-stage collaborators to focus their resources on product development. However, when such a collaborator develops greater operational or financial resources, its shares become a financial asset within Intrexon that is independent of our operational or collaborative purposes. In June 2015, we provided our shareholders the opportunity to participate directly in the value generated by our ECC with ZIOPHARM by distributing all of our shares in ZIOPHARM to our shareholders as a special stock dividend.
Mergers, acquisitions, and technology in-licensing
We may augment our suite of proprietary technologies through mergers or acquisitions of technologies which then become available to new or existing collaborators. Among other things, we seek to ensure that these acquired technologies are complementary to our existing technologies and that these mergers and acquisitions meet our desired return on investment and other economic criteria. In certain cases, such technologies may already be applied in the production of innovative products or services and in these cases, we seek to ensure that the target will achieve the creation of a new market or enable a disruptive position within an existing market for their existing products or services and that there is an opportunity for expansion of that unique position when complemented by our technology.
In September 2015, we acquired 100 percent of Oxitec Limited, or Oxitec, thereby expanding our capabilities to address a broad range of global environment, health and agricultural challenges. The aggregated consideration paid consisted of (i) 1,359,343 shares of our common stock, or the Stock Consideration, and (ii) $90.2 million in cash, or the Cash Consideration, inclusive of net cash and working capital adjustments, as defined in the agreement, totaling $9.4 million which are to be paid within eighty-five days of the September closing date. Stock Consideration totaling 480,422 shares and Cash Consideration totaling $2.0 million were withheld as escrow at closing and are issuable and payable, respectively, eighteen months after closing, subject to reduction for satisfaction of any claims for indemnification made by us under the agreement. We began consolidating Oxitec’s results of operations and financial position beginning in September 2015.
In April 2015, we acquired 100 percent of Okanagan Specialty Fruits Inc., or Okanagan, a company which developed and received regulatory approval for the world's first non-browning apple without the use of any flavor-altering chemical or antioxidant additives, for $10.0 million in cash and 707,853 shares of our common stock. In addition to supporting Okanagan's further commercialization and exploitation of its apple products, we expect to utilize our proprietary technologies to assist Okanagan in the development of further novel beneficial plant traits. We began consolidating Okanagan's results of operations and financial position beginning in April 2015.
In February 2015, we acquired 100 percent of ActoGeniX NV, or ActoGeniX, a European clinical stage biopharmaceutical company, for $32.7 million in cash and 965,377 shares of our common stock. ActoGeniX's platform technology complements our broad collection of technologies available for current and future collaborations. We began consolidating ActoGeniX's results of operations and financial position beginning in February 2015.
In January 2015, we and ZIOPHARM jointly entered into a license agreement with the University of Texas System Board of Regents on behalf of the University of Texas MD Anderson Cancer Center ("MD Anderson") whereby we received an exclusive license to certain research and development technologies owned and licensed by MD Anderson, including technologies relating to novel chimeric antigen receptor (CAR) T-cell therapies, as well as co-licenses and non-exclusive licenses to certain other related technologies. ZIOPHARM also received access to these technologies pursuant to the terms of our ECC with ZIOPHARM. We issued 2,100,085 shares of our common stock valued at $59.6 million to MD Anderson as consideration. Subject to certain exceptions, the license agreement expires on the last to occur of (i) the expiration of all patents licensed thereunder, or (ii) the twentieth anniversary of the date of the license agreement.

46

In August 2014, we acquired 100 percent of the membership interests of Trans Ova Genetics, L.C., or Trans Ova, a provider of bovine reproductive technologies. Intrexon and Trans Ova intend to build upon Trans Ova's current platform with new capabilities with a goal of achieving higher levels of delivered value to dairy and beef cattle producers. The consideration paid for all the membership interests in Trans Ova consisted of $63.6 million in cash and the issuance of an aggregate of 1,444,388 shares of the Company's common stock. In addition, deferred cash valued at $20.1 million is payable to the former members of Trans Ova in three equal installments upon the first, second, and third anniversaries of the closing date. The agreement also provides for the payment to the former members of Trans Ova of a portion of certain cash proceeds in the event there is an award under certain litigation matters pending as of closing to which Trans Ova is a party. We began consolidating Trans Ova's results of operations and financial position beginning in August 2014.
Financial overview
We have incurred significant losses since our inception. We anticipate that we may continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability. We have never generated any royalty revenues from sales of products by our collaborators and may never be profitable.
We expect our future capital requirements will be substantial, particularly as we continue to develop our business and expand our synthetic biology technology platform. We believe that our existing cash and cash equivalents, short-term and long-term investments, and cash expected to be received through our current collaborators and for sales of products and services provided by our consolidated subsidiaries will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
Sources of revenue
We derive our revenues through the execution of ECCs and license and collaboration agreements for the development and commercialization of products enabled by our technologies. Generally, the terms of our collaborations provide that we receive some or all of the following: (i) technology access fees upon signing; (ii) reimbursements of costs incurred by us for our research and development and/or manufacturing efforts related to the specific application provided for in the collaboration; (iii) milestone payments upon the achievement of specified development, regulatory and commercial activities; and (iv) royalties on sales of products arising from the collaboration.
Our technology access fees and milestone payments may be in the form of cash or securities of the collaborator. Our collaborations contain multiple arrangements and we typically defer revenues from the technology access fees and milestone payments received and recognize such revenues in the future over the anticipated performance period. We are also entitled to sublicensing revenues in those situations where our collaborators choose to license our technologies to other parties.
We also generate products and services revenue through sales of advanced reproductive technologies, including bovine embryos derived from our embryo transfer and in vitro fertilization processes and from genetic preservation and sexed semen processes and applications of such processes to other livestock, as well as sales of livestock used in production.  Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) services have been rendered or delivery has occurred such that risk of loss has passed to the customer, (iii) the price is fixed or determinable, and (iv) collection from the customer is reasonably assured.
In future periods, our revenues will depend on the number of collaborations to which we are party, the advancement and creation of programs within our collaborations and the extent to which our collaborators bring products enabled by our technologies to market. Our revenues will also depend upon our ability to maintain or improve the volume and pricing of our current product and service offerings and to develop new offerings, including those arising from the Okanagan and Oxitec acquisitions and those which may incorporate our technologies. Our revenues will also depend upon the ability of AquaBounty to receive regulatory approval and establish successful commercialization of its AquAdvantage® Salmon products. Our future revenues may also include additional revenue streams we may acquire through mergers and acquisitions. In light of our limited operating history and experience in consummating new collaborations and also the limited experience with our consolidated subsidiaries, there can be no assurance as to the timing, magnitude and predictability of revenues to which we might be entitled.
Cost of products and services revenues
Cost of products and services revenues includes primarily labor and related costs, drugs and supplies used primarily in the embryo transfer and in vitro fertilization processes, livestock and feed used in production, and facility charges, including rent and depreciation.  Fluctuations in the price of livestock and feed have not had a significant impact on our operating margins and no derivative financial instruments are used to mitigate the price risk.

47

Research and development expenses
We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:
•
salaries and benefits, including stock-based compensation expense, for personnel in research and development functions;
•
fees paid to consultants and contract research organizations who perform research on our behalf and under our direction;
•
costs related to laboratory supplies used in our research and development efforts;
•
costs related to certain in-licensed technology rights;
•
depreciation of leasehold improvements and laboratory equipment;
•
amortization of patents and related technologies acquired in mergers and acquisitions; and
•
rent and utility costs for our research and development facilities.
We have no individually significant research and development projects and our research and development expenses primarily relate to either the costs incurred to expand or otherwise improve our multiple platform technologies or the costs incurred to develop a specific application of our technologies in support of current or prospective collaborators. Research and development expenses typically do not include significant development, including preclinical or clinical development, activities since they are the responsibility of our collaborators. Research and development expenses incurred for programs we support pursuant to an ECC agreement are typically reimbursed by the collaborator at cost and all other research and development programs may be terminated or otherwise deferred at our discretion. The amount of our research and development expenses may be impacted by, among other things, the number of collaborations and the number and size of programs we may support on behalf of a collaboration.
The table below summarizes our research and development expenses incurred to expand or otherwise improve our multiple platform technologies or the costs incurred to develop a specific application of our technologies in support of current or prospective collaborators and licensees for the three and nine months ended September 30, 2015 and 2014. Other research and development expenses for these periods include indirect salaries and overhead expenses that are not allocated to either expanding or improving our multiple platform technologies or specific applications of our technologies in support of current or prospective collaborators and licensees.
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(In thousands)
Expansion or improvement of our platform technologies
$
3,641

 
$
3,134

 
$
72,168

 
$
10,185

Specific applications of our technologies in support of current and prospective collaborators and licensees
10,608

 
7,015

 
28,686

 
19,198

Other
7,349

 
4,702

 
20,432

 
11,960

Total research and development expenses
$
21,598

 
$
14,851

 
$
121,286

 
$
41,343

We expect that our research and development expenses will increase as we continue to enter into collaborations and as we expand our offerings across additional market sectors. We believe these increases will likely include increased costs related to the hiring of additional personnel in research and development functions, increased costs paid to consultants and contract research organizations and increased costs related to laboratory supplies. Research and development expenses may also increase as a result of ongoing research and development operations which we might assume through mergers and acquisitions.

48

Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and related costs, including stock-based compensation expense, for employees in executive, operational, finance, sales and marketing, information technology and legal functions. Other significant selling, general and administrative expenses include rent and utilities, advertising, insurance, legal services and expenses associated with obtaining and maintaining our intellectual property.
We expect that our selling, general and administrative expenses will increase as we continue to operate as a public company and expand our operations. We believe that these increases will likely include costs related to the hiring of additional personnel and increased fees for outside consultants, lawyers and accountants, including costs to comply with corporate governance, internal controls and similar requirements applicable to public companies. Selling, general and administrative expenses may also increase as a result of ongoing operations which we might assume through mergers and acquisitions.
Other income (expense), net
We hold equity securities received and/or purchased from certain collaborators. Other than investments accounted for using the equity method discussed below, we elected the fair value option to account for our equity securities held in these collaborators. These equity securities are recorded at fair value at each reporting date. Unrealized appreciation (depreciation) resulting from fair value adjustments are reported as other income (expense) in the consolidated statements of operations. As such, we bear the risk that fluctuations in the securities' share prices may significantly impact our results of operations. In June 2015, we recorded a realized gain related to the distribution of all of our shares of ZIOPHARM to our shareholders as a special stock dividend.
Interest income consists of interest earned on our cash and cash equivalents and short-term and long-term investments.
Interest expense pertains to deferred consideration payable to the former members of Trans Ova and long term debt.
As consideration for providing exclusive rights of first-look and first negotiation, we receive a portion of the management fee collected by Harvest for our obligation to provide Harvest with investment proposals that are suitable for pursuit by a startup. These fees are included in other income.
Equity in net loss of affiliates
Equity in net income or loss of affiliates is our pro-rata share of our equity method investments' operating results, adjusted for accretion of basis difference. We account for investments in our joint ventures and startup entities backed by Harvest using the equity method of accounting since we have the ability to exercise significant influence, but not control, over the operating activities of these joint ventures.

49

Results of operations
Comparison of the three months ended September 30, 2015 and the three months ended September 30, 2014
The following table summarizes our results of operations for the three months ended September 30, 2015 and 2014, together with the changes in those items in dollars and as a percentage:
 
Three Months Ended 
 September 30,
 
Dollar
Change
 
Percent
Change
 
2015
 
2014
 
 
(In thousands)
 
 
Revenues
 
 
 
 
 
 
 
Collaboration and licensing revenues
$
34,726

 
$
12,656

 
$
22,070

 
174.4
 %
Product revenues
9,446

 
4,115

 
5,331

 
129.6
 %
Service revenues
8,945

 
4,261

 
4,684

 
109.9
 %
Other revenues
250

 
165

 
85

 
51.5
 %
Total revenues
53,367

 
21,197

 
32,170

 
151.8
 %
Operating expenses
 
 
 
 
 
 


Cost of products
11,215

 
4,224

 
6,991

 
165.5
 %
Cost of services
5,451

 
2,316

 
3,135

 
135.4
 %
Research and development
21,598

 
14,851

 
6,747

 
45.4
 %
Selling, general and administrative
23,019

 
14,853

 
8,166

 
55.0
 %
Total operating expenses
61,283

 
36,244

 
25,039

 
69.1
 %
Operating loss
(7,916
)
 
(15,047
)
 
7,131

 
(47.4
)%
Total other expense, net
(29,607
)
 
(37,196
)
 
7,589

 
(20.4
)%
Equity in loss of affiliates
(2,429
)
 
(1,619
)
 
(810
)
 
50.0
 %
Loss before income taxes
(39,952
)
 
(53,862
)
 
13,910

 
(25.8
)%
Income tax benefit
923

 
—

 
923

 
N/A

Net loss
(39,029
)
 
(53,862
)
 
14,833

 
(27.5
)%
Net loss attributable to noncontrolling interests
816

 
1,137

 
(321
)
 
(28.2
)%
Net loss attributable to Intrexon
$
(38,213
)
 
$
(52,725
)
 
$
14,512

 
(27.5
)%
Collaboration and licensing revenues
The following table shows the collaboration and licensing revenue recognized for upfront and milestone payments received from our collaborators and reimbursements received for research and development services provided to our collaborators for the three months ended September 30, 2015 and 2014, together with the changes in those items:

50

 
Upfront and Milestone Payments
 
Research and Development Services
 
Total
 
Three Months Ended 
 September 30,
 
Dollar
Change
 
Three Months Ended 
 September 30,
 
Dollar
Change
 
Three Months Ended 
 September 30,
 
Dollar
Change
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
 
(In thousands)
ZIOPHARM Oncology, Inc.
$
645

 
$
644

 
$
1

 
$
4,006

 
$
3,370

 
$
636

 
$
4,651

 
$
4,014

 
$
637

Oragenics, Inc.
4,868

 
261

 
4,607

 
332

 
3

 
329

 
5,200

 
264

 
4,936

Fibrocell Science, Inc.
4,823

 
449

 
4,374

 
1,317

 
1,014

 
303

 
6,140

 
1,463

 
4,677

Genopaver, LLC
68

 
68

 
—

 
993

 
360

 
633

 
1,061

 
428

 
633

S & I Ophthalmic, LLC
—

 
—

 
—

 
1,193

 
667

 
526

 
1,193

 
667

 
526

OvaXon, LLC
—

 
—

 
—

 
549

 
813

 
(264
)
 
549

 
813

 
(264
)
Intrexon Energy Partners, LLC
625

 
625

 
—

 
3,185

 
1,535

 
1,650

 
3,810

 
2,160

 
1,650

Persea Bio, LLC
125

 
—

 
125

 
297

 
—

 
297

 
422

 
—

 
422

Ares Trading S.A.
1,597

 
—

 
1,597

 
260

 
—

 
260

 
1,857

 
—

 
1,857

Other
7,841

 
443

 
7,398

 
2,002

 
2,404

 
(402
)
 
9,843

 
2,847

 
6,996

Total
$
20,592

 
$
2,490

 
$
18,102

 
$
14,134

 
$
10,166

 
$
3,968

 
$
34,726

 
$
12,656

 
$
22,070

Collaboration and licensing revenues increased $22.1 million over the three months ended September 30, 2014 due to (i) the recognition of deferred revenue for upfront payments received from our license and collaboration agreement with Ares Trading S.A, or Ares Trading, which became effective in May 2015, and from other collaborations signed by us between October 1, 2014 and September 30, 2015; (ii) increased research and development services for both new collaborations and for the expansion or addition of new programs with previously existing collaborators, including ZIOPHARM, Genopaver, LLC, or Genopaver, and our joint venture with Intrexon Energy Partners; and (iii) the recognition of previously deferred revenue related to collaboration agreements for which we satisfied all of our obligations or which were terminated during the three months ended September 30, 2015.
Product and service revenues and cost of products and services
For the three months ended September 30, 2015, product revenue includes $8.3 million from the sale of pregnant cows, live calves and livestock used in production and service revenue includes $7.3 million from the provision of in vitro fertilization and embryo transfer services. For the three months ended September 30, 2014, these amounts were $3.8 million and $3.1 million, respectively. For the three months ended September 30, 2015, costs of products and services include $16.5 million related to the production of such products and services which primarily consist of employee compensation costs, livestock, feed, drug supplies, recipient costs and facility charges; this amount was $6.4 million for the three months ended September 30, 2014. These increases relate primarily to the inclusion of a full three months of results for Trans Ova in 2015 versus approximately one and a half months of results for 2014 since the acquisition occurred in August 2014.
Research and development expenses
Research and development expenses were $21.6 million for the three months ended September 30, 2015 compared to $14.9 million for the three months ended September 30, 2014, an increase of $6.7 million, or 45 percent. Salaries, benefits and other personnel costs increased $3.1 million due to (i) increases in research and development headcount to support new and expanded collaborations and from our 2015 acquisitions and (ii) additional compensation expenses related to performance and retention incentives for research and development employees. Lab supplies and consultants expenses increased $1.5 million as a result of the increased level of research and development services provided to our collaborators. Depreciation and amortization increased $1.3 million primarily as a result of acquiring property and equipment and intangible assets in connection with our acquisitions of ActoGeniX and Okanagan in 2015.
Selling, general and administrative expenses
Selling, general and administrative expenses were $23.0 million for the three months ended September 30, 2015 compared to $14.9 million for the three months ended September 30, 2014, an increase of $8.1 million, or 55 percent. Salaries, benefits and other personnel costs increased $4.1 million due to (i) the inclusion of selling, general and administrative employees of Trans

51

Ova for the full three months in 2015 compared to approximately one and a half months in 2014 and (ii) additional compensation expenses related to performance and retention incentives for selling, general and administrative employees. Legal and professional expenses increased $1.4 million primarily due to costs associated with the Oxitec acquisition in 2015.
Total other expense, net
Total other expense, net, was $29.6 million for the three months ended September 30, 2015 compared to $37.2 million for the three months ended September 30, 2014, a decrease of $7.6 million or 20 percent. Unrealized depreciation in fair value of equity securities decreased from $37.1 million for the three months ended September 30, 2014 to $30.5 million for the three months ended September 30, 2015 due to market changes in our equity securities portfolio.
Equity in net loss of affiliates
Equity in net loss of affiliates for the three months ended September 30, 2015 and 2014 includes our pro-rata share of the net losses of our investments we account for using the equity method of accounting. The $0.8 million increase in net loss of affiliates is primarily due to higher net losses incurred by Intrexon Energy Partners in 2015.
Comparison of the nine months ended September 30, 2015 and the nine months ended September 30, 2014
The following table summarizes our results of operations for the nine months ended September 30, 2015 and 2014, together with the changes in those items in dollars and as a percentage:
 
Nine Months Ended 
 September 30,
 
Dollar
Change
 
Percent
Change
 
2015
 
2014
 
 
(In thousands)
 
 
Revenues
 
 
 
 
 
 
 
Collaboration and licensing revenues
$
66,690

 
$
32,257

 
$
34,433

 
106.7
 %
Product revenues
32,645

 
4,124

 
28,521

 
>200%

Service revenues
32,157

 
4,261

 
27,896

 
>200%

Other revenues
615

 
196

 
419

 
>200%

Total revenues
132,107

 
40,838

 
91,269

 
>200%

Operating expenses
 
 
 
 
 
 


Cost of products
31,654

 
4,310

 
27,344

 
>200%

Cost of services
17,316

 
2,316

 
15,000

 
>200%

Research and development
121,286

 
41,343

 
79,943

 
193.4
 %
Selling, general and administrative
74,320

 
43,870

 
30,450

 
69.4
 %
Total operating expenses
244,576

 
91,839

 
152,737

 
166.3
 %
Operating loss
(112,469
)
 
(51,001
)
 
(61,468
)
 
120.5
 %
Total other income (expense), net
65,121

 
(49,014
)
 
114,135


>200%

Equity in loss of affiliates
(6,565
)
 
(3,510
)
 
(3,055
)
 
87.0
 %
Loss before income taxes
(53,913
)
 
(103,525
)
 
49,612

 
(47.9
)%
Income tax expense
(806
)
 
(23
)
 
(783
)
 
>200%

Net loss
(54,719
)
 
(103,548
)
 
48,829

 
(47.2
)%
Net loss attributable to noncontrolling interests
2,940

 
2,895

 
45

 
1.6
 %
Net loss attributable to Intrexon
$
(51,779
)
 
$
(100,653
)
 
$
48,874

 
(48.6
)%
Collaboration and licensing revenues
The following table shows the collaboration and licensing revenue recognized for upfront and milestone payments received from our collaborators and reimbursements received for research and development services provided to our collaborators for the nine months ended September 30, 2015 and 2014, together with the changes in those items:

52

 
Upfront and Milestone Payments
 
Research and Development Services
 
Total
 
Nine Months Ended 
 September 30,
 
Dollar
Change
 
Nine Months Ended 
 September 30,
 
Dollar
Change
 
Nine Months Ended 
 September 30,
 
Dollar
Change
 
2015
 
2014
 
2015
 
2014
 
2015
 
2014
 
 
(In thousands)
ZIOPHARM Oncology, Inc.
$
1,933

 
$
1,932

 
$
1

 
$
11,769

 
$
9,103

 
$
2,666

 
$
13,702

 
$
11,035

 
$
2,667

Oragenics, Inc.
5,437

 
784

 
4,653

 
408

 
588

 
(180
)
 
5,845

 
1,372

 
4,473

Fibrocell Science, Inc.
5,719

 
1,345

 
4,374

 
4,500

 
2,759

 
1,741

 
10,219

 
4,104

 
6,115

Genopaver, LLC
205

 
205

 
—

 
2,460

 
1,204

 
1,256

 
2,665

 
1,409

 
1,256

S & I Ophthalmic, LLC
—

 
—

 
—

 
2,838

 
2,153

 
685

 
2,838

 
2,153

 
685

OvaXon, LLC
—

 
—

 
—

 
1,855

 
1,561

 
294

 
1,855

 
1,561

 
294

Intrexon Energy Partners, LLC
1,875

 
1,250

 
625

 
8,101

 
2,745

 
5,356

 
9,976

 
3,995

 
5,981

Persea Bio, LLC
375

 
—

 
375

 
553

 
—

 
553

 
928

 
—

 
928

Ares Trading S.A.
2,336

 
—

 
2,336

 
260

 
—

 
260

 
2,596

 
—

 
2,596

Other
9,446

 
1,373

 
8,073

 
6,620

 
5,255

 
1,365

 
16,066

 
6,628

 
9,438

Total
$
27,326

 
$
6,889

 
$
20,437

 
$
39,364

 
$
25,368

 
$
13,996

 
$
66,690

 
$
32,257

 
$
34,433

Collaboration and licensing revenues increased $34.4 million over the nine months ended September 30, 2014 due to (i) the recognition of deferred revenue for upfront payments received from our license and collaboration agreement with Ares Trading, which became effective in May 2015, and from other collaborations signed by us between January 1, 2014 and September 30, 2015; (ii) increased research and development services for both new collaborations and for the expansion or addition of new programs with previously existing collaborators, including ZIOPHARM; Fibrocell Science, Inc., or Fibrocell; Genopaver and our joint venture with Intrexon Energy Partners; and (iii) the recognition of previously deferred revenue related to collaboration agreements for which we satisfied all of our obligations or which were terminated during the nine months ended September 30, 2015.
Product and service revenues and cost of products and services
For the nine months ended September 30, 2015, product revenue includes $28.4 million from the sale of pregnant cows, live calves and livestock used in production and service revenue includes $27.2 million from the provision of in vitro fertilization and embryo transfer services. For the nine months ended September 30, 2014, these amounts were $3.8 million and $3.1 million, respectively. For the nine months ended September 30, 2015, costs of products and services include $48.6 million related to the production of such products and services which primarily consist of employee compensation costs, livestock, feed, drug supplies, recipient costs and facility charges; this amount was $6.4 million for the nine months ended September 30, 2014. These increases relate primarily to the inclusion of nine months of results for Trans Ova in 2015 versus approximately one and one half months of results in 2014 since the acquisition occurred in August 2014.
Research and development expenses
Research and development expenses were $121.3 million for the nine months ended September 30, 2015 compared to $41.3 million for the nine months ended September 30, 2014, an increase of $80.0 million, or 193 percent. In January 2015, we issued 2,100,085 shares of our common stock valued at $59.6 million to the University of Texas MD Anderson Cancer Center, or MD Anderson, in exchange for an exclusive license to certain technologies owned by MD Anderson. Salaries, benefits and other personnel costs increased $9.0 million due to (i) increases in research and development headcount to support new and expanded collaborations and from our 2015 acquisitions and (ii) additional compensation expenses related to performance and retention incentives for research and development employees. Lab supplies and consultants expenses increased $5.6 million as a result of the increased level of research and development services provided to our collaborators. Depreciation and amortization expense increased $2.2 million primarily as a result of acquiring property and equipment and intangible assets in connection with our acquisitions of ActoGeniX and Okanagan in 2015.

53

Selling, general and administrative expenses
Selling, general and administrative expenses were $74.3 million for the nine months ended September 30, 2015 compared to $43.9 million for the nine months ended September 30, 2014, an increase of $30.4 million, or 69 percent. Salaries, benefits and other personnel costs increased $17.5 million due to (i) the inclusion of selling, general and administrative employees of Trans Ova for a full nine months in 2015 compared to approximately one and a half months in 2014 and (ii) additional compensation expenses related to performance and retention incentives for general and administrative employees. Legal and professional expenses increased $4.1 million primarily due to costs associated with the acquisitions of Oxitec, ActoGeniX, Okanagan and Exemplar, the license agreement with MD Anderson and other business development activity. Depreciation and amortization associated with Trans Ova increased $2.0 million due to the inclusion of such amounts for nine months in 2015 compared to one and one half months in 2014.
Total other income (expense), net
Total other income (expense), net, was $65.1 million for the nine months ended September 30, 2015 compared to $(49.0) million for the nine months ended September 30, 2014, an increase of $114.1 million or 233 percent. This increase was primarily related to the $81.4 million realized gain recognized upon the special stock dividend of all of our shares of ZIOPHARM to our shareholders in June 2015 and offset by unrealized depreciation in fair value of equity securities of $17.0 million for the nine months ended September 30, 2015 compared to $48.9 million for the nine months ended September 30, 2014 due to market changes in our equity securities portfolio.
Equity in net loss of affiliates
Equity in net loss of affiliates for the nine months ended September 30, 2015 and 2014 includes our pro-rata share of the net losses of our investments we account for using the equity method of accounting. The $3.1 million increase in net loss of affiliates is primarily due to higher net losses incurred by Intrexon Energy Partners in 2015.
Liquidity and capital resources
Sources of liquidity
We have incurred losses from operations since our inception and as of September 30, 2015, we had an accumulated deficit of $510.0 million. From our inception through September 30, 2015, we have funded our operations principally with the proceeds received from the sale of $509.5 million of our preferred stock, net proceeds from our IPO of $168.3 million and net proceeds from our subsequent public offerings of $328.2 million. As of September 30, 2015, we had cash and cash equivalents of $125.4 million and short-term and long-term investments of $227.1 million. Cash in excess of immediate requirements is invested primarily in money market funds, certificates of deposits and U.S. government debt securities in order to maintain liquidity and capital preservation.
Cash flows
The following table sets forth the significant sources and uses of cash for the periods set forth below: 
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
(In thousands)
Net cash provided by (used in):
 
 
 
Operating activities
$
23,337

 
$
(10,808
)
Investing activities
(257,318
)
 
(36,494
)
Financing activities
331,441

 
22,595

Effect of exchange rate changes on cash and cash equivalents
507

 
(98
)
Net increase (decrease) in cash and cash equivalents
$
97,967

 
$
(24,805
)
Cash flows from operating activities:
Net cash provided by operating activities was $23.3 million for the nine months ended September 30, 2015 compared to $10.8 million net cash used in operating activities for the nine months ended September 30, 2014. During the nine months ended

54

September 30, 2015, we received a $115.0 million technology access fee, of which $57.5 million was paid to ZIOPHARM, from our license and collaboration agreement with Ares Trading, offset by our net loss of $54.7 million which includes noncash items of (i) $64.4 million of unrealized appreciation and realized gains on our equity securities, (ii) $59.6 million of common stock issued to MD Anderson recorded as research and development expense, (iii) $26.5 million of stock-based compensation expense, and (iv) $12.2 million of depreciation and amortization expense. Net cash used in operating activities during the nine months ended September 30, 2014 was primarily composed of our $103.5 million net loss, which includes noncash items of (i) $48.9 million of unrealized depreciation on our equity securities, (ii) $14.9 million of stock compensation expense, and (iii) $6.9 million of depreciation and amortization expense, offset by the receipt of a $25.0 million technology access fee from our ECC with Intrexon Energy Partners.
Cash flows from investing activities:
Net cash used in investing activities was $257.3 million for the nine months ended September 30, 2015 compared to $36.5 million for the nine months ended September 30, 2014. During the nine months ended September 30, 2015, we used $114.5 million, net of cash received, for the acquisitions of ActoGeniX, Okanagan, and Oxitec; $181.6 million for the purchase of short-term and long-term investments; $17.1 million for the purchase of equity securities and warrants of three of our collaborators; and $9.8 million for purchases of property, plant and equipment. These cash outflows were offset by $70.0 million of proceeds from the maturity of short-term and long-term investments. During the nine months ended September 30, 2014, we received proceeds from the maturity of short-term and long-term investments of $98.3 million. These proceeds were offset by cash outflows of $67.1 million for the acquisitions of Trans Ova and Medistem, Inc., net of cash received; $60.5 million of purchases of short-term and long-term investments; and $5.2 million in purchases of property and equipment.
Cash flows from financing activities:
Net cash provided by financing activities was $331.4 million for the nine months ended September 30, 2015 compared to $22.6 million for the nine months ended September 30, 2014. During the nine months ended September 30, 2015, we received $328.2 million of net proceeds from our public offerings in January and August. During the nine months ended September 30, 2014, we received $25.0 million of proceeds from the private placement of our common stock which closed in March and $1.3 million from stock option exercises.
Future capital requirements
We established our current strategy and business model of commercializing our technologies through collaborators with development expertise in 2010 and we consummated our first collaboration in January 2011. We believe that we will continue to consummate collaborations with new companies across our various market sectors, which will result in additional upfront, milestone and cost recovery payments in the future.
We believe that our existing cash and cash equivalents, short-term and long-term investments, and cash expected to be received from our current collaborators and for sales of products and services provided by our consolidated subsidiaries will enable us to fund our operating expenses and capital expenditure requirements for at least the next 12 months.
We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
 
•
progress in our research and development programs, as well as the magnitude of these programs;
•
the timing, receipt and amount of upfront, milestone and other payments, if any, from present and future collaborators, if any;
•
the timing, receipt and amount of sales and royalties, if any, from our potential products;
•
our ability to maintain or improve the volume and pricing of our current product offerings and to develop new offerings, including those which may incorporate new technologies;
•
the timing, receipt and amount of funding under future government contracts, if any;
•
our ability to maintain and establish additional collaborative arrangements and/or new business initiatives;

55

•
the timing of regulatory approval of products of our operations and those of AquaBounty;
•
the resources, time and cost required for the preparation, filing, prosecution, maintenance and enforcement of patent claims;
•
investments we may make in current and future collaborators, including joint ventures;
•
strategic mergers and acquisitions, including both the upfront acquisition cost as well as the cost to integrate, maintain, and expand the strategic target; and
•
the costs associated with legal activities, including litigation, arising in the course of our business activities and our ability to prevail in any such legal disputes.
Until such time, if ever, as we can generate positive operating cash flows, we may finance our cash needs through a combination of equity offerings, debt financings, government or other third-party funding, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
Contractual obligations and commitments
The following table summarizes our significant contractual obligations and commercial commitments at September 30, 2015 and the effects such obligations are expected to have on our liquidity and cash flows in future periods:
 
Total
 
Less Than 1 Year
 
1 - 3 Years
 
3 - 5 Years
 
More Than 5 Years
 
(In thousands)
Operating leases
$
15,765

 
$
3,909

 
$
5,969

 
$
3,806

 
$
2,081

Deferred consideration
24,922

 
16,212

 
8,710

 
—

 
—

Long term debt
7,253

 
1,314

 
940

 
661

 
4,338

 
$
47,940

 
$
21,435

 
$
15,619

 
$
4,467

 
$
6,419

In addition to the obligations in the table above, as of September 30, 2015 we also have the significant contractual obligations described below.
We acquired 100 percent of the outstanding capital stock of Immunologix in October 2011. The transaction included a contingent consideration arrangement which may require us to pay the selling shareholders 50 percent, subject to a maximum of $2.0 million, of revenue generated from Immunologix's technology applied towards a specific target as defined in the agreement up to a maximum of $2.0 million. This amount is not included in the table above due to the uncertainty of whether, if ever, we will pay this contingent consideration.
We are also party to in-licensed research and development agreements with various academic and commercial institutions where we could be required to make future payments for annual maintenance fees as well as for milestones and royalties we might receive upon commercial sales of products which incorporate their technologies. These agreements are generally subject to termination by us and therefore no amounts are included in the tables above. At September 30, 2015, we had research and development commitments with third parties totaling $6.6 million that had not yet been incurred.
In January 2009, AquaBounty was awarded a grant to provide funding of a research and development project from the Atlantic Canada Opportunities Agency, a Canadian government agency. The total amount available under the award was USD$2.1 million, which AquaBounty claimed over a five year period. All amounts claimed by AquaBounty must be repaid in the form of a 10 percent royalty on any products commercialized out of this research and development project until fully paid. Because the

56

timing of commercialization is subject to regulatory approval, the timing of repayment is uncertain. As of the acquisition date, AquaBounty had claimed $2.0 million of the available funds and this amount was recorded on our audited consolidated balance sheet at its acquisition date fair value of $1.1 million. The Company accretes the difference of $0.9 million between the face value of amounts drawn and the acquisition date fair value over the expected period of repayment. Since the acquisition date, AquaBounty claimed the remaining balance available under the grant, resulting in total long-term debt of $1.9 million as of September 30, 2015. This amount is not included in the table above due to the uncertainty of the timing of repayment.
In conjunction with the formation of a joint venture with an indirect subsidiary of Sun Pharmaceutical Industries, Ltd. in September 2013, we committed to making future capital contributions to the joint venture, subject to certain conditions and limitations, in order to comply with the obligations of the joint venture. In cases in which the board of managers of the joint venture determines that additional capital contributions are necessary, we have committed to making additional capital contributions subject to certain limitations. These future capital contributions are not included in the table above due to the uncertainty of the timing and amounts of such contributions.
In conjunction with the formation of a joint venture with OvaScience in December 2013, we may make future capital contributions to the joint venture. In cases in which the board of the joint venture determines that additional capital contributions are necessary, we have the option of making additional capital contributions subject to certain limitations. These future capital contributions are not included in the table above due to the uncertainty of the timing and amounts of such contributions.
In conjunction with the formation of a joint venture with Intrexon Energy Partners in March 2014, we committed to making future capital contributions to the joint venture in the amount of $25.0 million at the request of the board of managers of Intrexon Energy Partners and subject to certain conditions and limitations. As of September 30, 2015, our remaining commitment was $20.4 million. These future capital contributions are not included in the table above due to the uncertainty of the timing and amounts of such contributions.
In August 2014, we acquired all of the membership interests of Trans Ova and agreed to pay a portion of certain cash proceeds in the event there is an award under certain litigation matters pending as of closing to which Trans Ova is a party. These amounts are not included in the table above due to the uncertainty of whether any amounts may be due.
In conjunction with a prior transaction associated with Trans Ova's subsidiary, ViaGen, in September 2012, the Company may be obligated to make certain future contingent payments to the former equity holders of ViaGen, up to a total of $6.0 million if certain revenue targets, as defined in the share purchase agreement, are met. This amount is not included in the table above due to the uncertainty of when the Company will make any of these future payments, if ever.
In January 2015, we and ZIOPHARM jointly entered into a license agreement with MD Anderson whereby we received an exclusive license to certain technologies owned by MD Anderson. ZIOPHARM shall receive access to these technologies pursuant to the terms of our ECC. We and ZIOPHARM are obligated to reimburse MD Anderson for out of pocket expenses for maintaining patents covering the licensed technologies. These reimbursements are not included in the table above due to the uncertainty of the timing and amounts of such reimbursements.
In June 2015, we and Oragenics, Inc., or Oragenics, entered into an ECC. In conjunction with this ECC, we agreed to purchase additional common stock in a qualified financing, as defined in the agreement, during the sixteen months following the effective date of the ECC in an amount up to the lesser of (i) the amount that is the proportion of such financing equal to the Company's pro rata equity holdings in Oragenics as of the effective date and (ii) $10,000, subject to certain conditions. This amount is not included in the table above due to the uncertainty of the timing of this payment.
Net operating losses
As of September 30, 2015, we had net operating loss carryforwards of approximately $227.1 million for U.S. federal income tax purposes available to offset future taxable income and U.S. federal and state research and development tax credits of $6.8 million, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended, or Section 382. These carryforwards begin to expire in 2022. Our direct foreign subsidiaries have foreign loss carryforwards of approximately $116.7 million, most of which do not expire.
Our past issuances of stock and mergers and acquisitions have resulted in ownership changes within the meaning of Section 382. As a result, the utilization of portions of our net operating losses may be subject to annual limitations. As of September 30, 2015, approximately $16.4 million of our net operating losses generated prior to 2008 are limited by Section 382 to annual usage limits of approximately $1.5 million. As of September 30, 2015, approximately $19.1 million of domestic net

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operating losses were inherited via acquisition and are limited based on the value of the target at the time of the transaction. Future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation.
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, other than operating leases as mentioned above, as defined under Securities and Exchange Commission, or SEC, rules.
Critical accounting policies and estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
There have been no material changes to our critical accounting policies from those described in "Management's discussion and analysis of financial condition and results of operations" included in our Annual report on Form 10-K for the year ended December 31, 2014.
Recent accounting pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncement on our consolidated financial statements, see Note 2 – "Summary of Significant Accounting Policies" in the notes to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The following sections provide quantitative information on our exposure to interest rate risk, stock price risk, and foreign currency exchange risk. We make use of sensitivity analyses which are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.
Interest rate risk
We had cash, cash equivalents and short-term and long-term investments of $352.6 million and $143.1 million at September 30, 2015 and December 31, 2014, respectively. Our cash and cash equivalents and short-term and long-term investments consist of cash, money market funds, U.S. government debt securities and certificates of deposit. The primary objective of our investment activities is to preserve principal, maintain liquidity and maximize income without significantly increasing risk. Our investments consist of U.S. government debt securities and certificates of deposit which may be subject to market risk due to changes in prevailing interest rates that may cause the fair values of our investments to fluctuate. We believe that a hypothetical 100 basis point increase in interest rates would not materially affect the fair value of our interest-sensitive financial instruments and any such losses would only be realized if we sold the investments prior to maturity.
Investments in publicly traded companies
We have common stock investments in several publicly traded companies that are subject to market price volatility. We have adopted the fair value method of accounting for these investments, except for our investment in AquaBounty as further described below, and therefore, have recorded them at fair value at the end of each reporting period with the unrealized gain or loss recorded as a separate component of other income (expense), net for the period. As of September 30, 2015 and December 31, 2014 the original aggregate cost basis of these investments was $102.6 million and $173.9 million, respectively, and the market value was $76.6 million and $164.9 million, respectively. The fair value of these investments is subject to fluctuation in the future due to the volatility of the stock market, changes in general economic conditions and changes in the financial conditions of these companies. The fair value of these investments as of September 30, 2015 would be approximately $84.3 million and $61.3 million, respectively, based on a hypothetical 10 percent increase or 20 percent decrease in the value of

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the investments. The fair value of these investments as of December 31, 2014 would be approximately $181.4 million and $131.9 million, respectively, based on a hypothetical 10 percent increase or 20 percent decrease in the value of the investments.
In November 2012, we acquired 47.56 percent of the outstanding common stock of AquaBounty and we accounted for this investment under the equity method of accounting for the period from acquisition date through March 15, 2013. On March 15, 2013, we acquired 18,714,814 additional shares of AquaBounty common stock for $4.9 million, thereby increasing our aggregate ownership to 53.82 percent upon closing. Accordingly, effective upon closing of the acquisition of the additional shares, we consolidated the assets and operating results of AquaBounty in our consolidated financial statements. On March 20, 2014, we acquired 19,040,366 additional shares of AquaBounty common stock for $10.0 million, and on June 30, 2015, we acquired 12,728,044 additional shares for $3.0 million, thereby increasing our aggregate ownership to 62.96 percent upon closing. The common stock of AquaBounty is traded on the London Stock Exchange and the fair value of our investment in AquaBounty at September 30, 2015 and December 31, 2014 was $18.8 million and $22.8 million, respectively. The fair value of our investment in AquaBounty as of September 30, 2015 would be approximately $20.7 million and $15.0 million, respectively, based on a hypothetical 10 percent increase or 20 percent decrease in the share price of AquaBounty. The fair value of our investment in AquaBounty as of December 31, 2014 would be approximately $25.1 million and $18.2 million, respectively, based on a hypothetical 10 percent increase or 20 percent decrease in the share price of AquaBounty.
Foreign currency exchange risk
Because the common stock of AquaBounty is traded on the London Stock Exchange, the fair value of our holdings is subject to fluctuations in foreign currency rates. In addition, some of our subsidiaries' assets and current expenses are denominated in foreign currencies. We do not hedge our foreign currency exchange rate risk. The effect of a hypothetical 10 percent change in foreign currency exchange rates applicable to our business would not have a material impact on our consolidated financial statements.
Item 4. Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation, under supervision and with the participation of our management, including our Chief Executive Officer ("CEO"), who is our principal executive officer, and our Chief Financial Officer ("CFO"), who is our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, as of the end of the period covered by this report, our CEO and CFO concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
In August 2014, we completed the acquisition of Trans Ova Genetics, L.C. (Trans Ova). Accordingly, our assessment of internal controls over financial reporting for the year ended December 31, 2014 excluded Trans Ova from the scope of our report. Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. During the integration period management is developing additional controls to ensure the financial information provided by Trans Ova is complete and accurate in all material respects. We expect this effort to be completed during 2015.
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2015, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION 
Item 1. Legal Proceedings
We are involved in litigation or legal matters incidental to our business activities. While the outcome of these matters cannot be predicted with certainty, we are vigorously defending them and do not currently expect that any of them will have a material adverse effect on our business or financial position. However, should one or more of these matters be resolved in a manner adverse to our current expectation, the effect on our results of operations for a particular fiscal reporting period could be material.
Item 1A. Risk Factors
As disclosed in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2014, there are a number of risks and uncertainties that can have a material effect on the operating results of our business and our financial condition. There are no additional material updates or changes to our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2014, except as follows:
We may encounter difficulties in connection with our acquisition of Oxitec.
In September 2015, we acquired Oxitec Limited, or Oxitec. We cannot be certain that this acquisition will be successful or that we will realize the anticipated benefits of the acquisition. In particular, we may not be able to realize the strategic and operational benefits and objectives we anticipate. In addition, we may face increased competition in the markets for Oxitec’s products. Any of the following factors may have a material adverse effect on our business, operating results and financial condition. These factors may include:
•
the potential disruption of our ongoing business and diversion of management resources;
•
unanticipated expenses related to Oxitec's operations;
•
the impairment of relationships with Oxitec's customers;
•
the impairment of relationships with key suppliers and their ability to meet our demand;
•
potential unknown liabilities associated with the acquired business and technology;
•
potential liabilities related to litigation involving Oxitec;
•
potential periodic impairment of goodwill and intangible assets acquired; and
•
potential inability to retain, integrate and motivate key personnel.
AquaBounty will need additional capital.
In order for AquaBounty Technologies, Inc., or AquaBounty, to execute on its business plan as announced by its management, AquaBounty will have future capital requirements, and we may be asked to invest additional funds in AquaBounty. On June 30, 2015, we invested an additional $3.0 million into AquaBounty. If we fail to invest additional funds, we may not retain control over AquaBounty. We have been advised by the management of AquaBounty that as of September 30, 2015, AquaBounty held $3.1 million of cash and cash equivalents and had a working capital balance of $2.6 million and that the proceeds from Intrexon’s $3.0 million investment will provide AquaBounty with sufficient cash resources to continue operating to early 2016 at its current rate of spending. We have no contractual obligation to provide funds to AquaBounty and therefore we do not know whether, or to what extent, we will be required to invest additional funds in AquaBounty.
In evaluating our risks, readers should carefully consider these risk factors and the risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition or operating results, in addition to the other information set forth in this report and in our other filings with the Securities and Exchange Commission.


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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
From July 1, 2015 through September 30, 2015, we consummated the following transaction involving the issuance of unregistered securities:
•
the issuance of 878,921 unregistered shares of our common stock on September 4, 2015 in connection with our acquisition of all of the outstanding equity of Oxitec Limited as previously discussed in our Current Reports on Form 8-K filed on August 12, 2015 and September 8, 2015.
(b) Use of Proceeds
On August 7, 2013, our registration statement on Form S-1 (File No. 333-189853) was declared effective by the Securities and Exchange Commission for our initial public offering pursuant to which we sold an aggregate of 11,499,998 shares of our common stock (inclusive of 1,499,999 shares of common stock sold by us pursuant to the full exercise of an overallotment option granted to the underwriters in connection with the offering) at a price to the public of $16.00 per share for aggregate gross offering proceeds of approximately $184.0 million. J.P. Morgan Securities LLC and Barclays Capital Inc. acted as joint book-running managers. On August 13, 2013, we closed the sale of such shares, resulting in net proceeds to us of approximately $168.3 million after deducting underwriting discounts and commissions of approximately $12.9 million and other offering expenses of approximately $2.8 million. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. We invested the funds received in cash equivalents and other short-term and long-term investments in accordance with our investment policy. There has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus, dated August 7, 2013, and filed with the Securities and Exchange Commission on August 8, 2013 pursuant to Rule 424(b).
On January 27, 2015, we closed a public offering of 4,312,500 shares of our common stock (inclusive of 562,500 shares of common stock sold by us pursuant to the full exercise of an option granted to the underwriters in connection with the offering) at a public offering price of $27.00 per share for aggregate gross offering proceeds of approximately $116.4 million. J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporate acted as joint book-running managers. Net proceeds to us were approximately $110.0 million after deducting underwriting discounts and commissions of approximately $6.1 million and other offering expenses of approximately $0.3 million. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. We invested the funds received in cash equivalents and other short-term and long-term investments in accordance with our investment policy. There has been no material change in the planned use of proceeds from this offering as described in our final prospectus, dated January 21, 2015, and filed with the Securities and Exchange Commission on January 22, 2015 pursuant to Rule 424(b).
On August 26, 2015, we closed a public offering of 5,609,756 shares of our common stock (inclusive of 731,707 shares of common stock sold by us pursuant to the full exercise of an option granted to the underwriters in connection with the offering) at a public offering price of $41.00 per share for aggregate gross offering proceeds of approximately $230.0 million. JMP Securities LLC acted as sole book-running manager. Stifel, Nicolaus & Company, Incorporated acted as lead manager. Griffin Securities, Inc. and Wunderlich Securities, Inc. acted as co-managers. Net proceeds to us were approximately $218.2 million after deducting underwriting discounts and commissions of approximately $11.5 million and other offering expenses of approximately $0.3 million. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. We invested the funds received in cash equivalents and other short-term and long-term investments in accordance with our investment policy. There has been no material change in the planned use of proceeds from this offering as described in our final prospectus, dated August 21, 2015, and filed with the Securities and Exchange Commission on August 25, 2015 pursuant to Rule 424(b).
(c) Issuer Purchases of Equity Securities
Not applicable.

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Item 6. Exhibits
Exhibit
No.
 
Description
1.1*
 
Underwriting Agreement, dated August 21, 2015, by and among the Company and JMP Securities LLC, as representative of the several underwriters named therein (incorporated by reference to Exhibit 1.1 to Intrexon Corporation’s Current Report on Form 8-K, filed on August 21, 2015 with the Securities and Exchange Commission)
 
 
2.1*
 
Agreement for the Acquisition of the Entire Issued and To Be Issued Share Capital of Oxitec Limited, dated August 7, 2015, by and among Intrexon Corporation, the Sellers named therein, the Warrantors (as defined therein) and 3729th Single Member Shelf Trading Company Limited (incorporated by reference to Exhibit 2.1 to Intrexon Corporation’s Current Report on Form 8-K, filed on August 12, 2015 with the Securities and Exchange Commission)
 
 
31.1
 
Certification of Randal J. Kirk, Chairman and Chief Executive Officer (Principal Executive Officer) of Intrexon Corporation, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
31.2
 
Certification of Rick L. Sterling, Chief Financial Officer (Principal Financial Officer) of Intrexon Corporation, pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
32.1**
 
Certification of Randal J. Kirk, Chairman and Chief Executive Officer (Principal Executive Officer) of Intrexon Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
32.2**
 
Certification of Rick L. Sterling, Chief Financial Officer (Principal Financial Officer) of Intrexon Corporation, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101.0**
 
Interactive Data File (Quarterly Report on Form 10-Q, for the quarterly period ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language)).
 
Attached as Exhibit 101.0 to this Quarterly Report on Form 10-Q are the following documents formatted in XBRL: (i) the Consolidated Balance Sheets at September 30, 2015 and December 31, 2014, (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014, (iii) the Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2015 and 2014, (iv) the Consolidated Statements of Shareholders' and Total Equity for the nine months ended September 30, 2015, (v) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014, and (vi) the Notes to Consolidated Financial Statements.
*    Previously filed.
**
Furnished herewith.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
Intrexon Corporation
 
 
(Registrant)
 
 
 
Date: November 9, 2015
 
By:
 
/s/  Rick L. Sterling        
 
 
 
 
Rick L. Sterling
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial and Accounting Officer)


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