Thursday 24 October 2013

Biotech Buzz Post No. 23 - XON

Intrexon (Nasdaq: XON) is taking the new field of synthetic biology into the commercial stage. Wow, it’s already a US$2bn company!          

Intrexon (Nasdaq: XON) – Betting on the future of synthetic biology

What I cannot build, I cannot understand Richard Feynman, American physicist and Nobel laureate (1918-1988).



When we look back in time we may regard Thursday 20 May 2010 as a major landmark in the evolution of the global economy. That was the day when the J. Craig Venter Institute (JCVI), of San Diego and Rockville, Md, announced that it had created the world’s first self-replicating synthetic bacterial cell. The same Craig Venter who had won the race to sequence the human genome in 2000, and subsequently sailed his yacht around the world discovering thousands of new species of ocean-dwelling microbes, was now publishing his greatest-ever biological feat. Venter’s team at the JCVI, which included the Nobel laureate Ham Smith, had used powerful computers to design a bacterial cell, assembled the components of that cell in a petrie dish, and got the cell to replicate as though it was E. Coli (click here for the Science paper).  If you’re reading this in the year 2050, ask yourself from the perspective of forty years ago how amazing this development was. Up until 2010 the only thing us biotech folks had really been able to do was take an existing bacterium and tinker with it using the tools of genetic engineering to make a few therapeutically useful proteins.  The JCVI team had now made the big leap forward and built an entire bacterium from scratch, having shown two years previous to this that you could create an entire synthetic bacterial genome (click here). Self-replicating synthetic bacterial cells are a big deal because when you can design entire organisms, you can theoretically design them to make all sorts of things we need in daily life, like fuel, food and clean water. In short, the arrival of synthetic biology wasn’t just a medical breakthrough, it was an economic breakthrough.

As with any scientific field that has this kind of potential, Venter and friends haven’t been the only ones doing synthetic biology. Another serious player has been Intrexon (Nasdaq: XON), a biotech company from Germantown, Md which did its IPO this year, raising US$184m. Clearly between 2010 and 2013 the word had gotten around regarding Venter’s giant leap because when Intrexon, which went out at US$16 per share, started listed life on 8 August the stock finished the day at US$24.73. At the current US$21.51 Intrexon is capitalised at just over US$2bn. That may be considered a little high for a company that can’t really say what its first product is going to be, but it does point to rising awareness of the ‘bioindustrial revolution’ coming over the horizon. It also reflects the halo effect of previous biomedical success. Intrexon’s major shareholder and CEO is Randal Kirk, the world’s 613th richest person according to this year’s Forbes billionaire’s list. His previous companies have been New River Pharmaceutical (developer of the ADHD drug Vyvanse, sold to Shire for $2.6 billion in 2007) and Clinical Data (developer the antidepressant Viibryd, sold to Forest Laboratories for $1.2 billion in 2011). Kirk was worth US$2.4bn when Forbes published its latest list. Intrexon made him, on paper, another US$1.5bn richer two months ago.

What Randal Kirk has put together in Intrexon is a suite of technologies to do synthetic biology at commercial scale. With Intrexon’s UltraVector platform, you can use sophisticated bioinformatics-based tools to design multiple synthetic genomes and put them inside cells. You can then pick out the cells you particularly like for further development using Intrexon’s LEAP (Laser-Enabled Analysis and Processing) technology. Probably the most interesting piece of Intrexon know-how is a transcriptional regulation system called the RheoSwitch, so called because, like a rheostat, the elements of this system allow the genome designer to not only induce protein expression, but also to control the level and timing of expression. It’s this sort of control that can make the difference between success or failure in terms of the useful products a cell can be engineered to produce.

Intrexon is commercialising its various technologies through ‘exclusive channel collaborations’, or ECCs, with companies looking to use synthetic biology in new product development. There are a lot of these collaborations in place and more are being added all the time. Elanco, the animal health division of Eli Lilly, is a collaborator, as is Rentokil, the pest control business owned by the major British business services company Rentokil Initial.  However most of Intrexon’s collaborations are with companies considerably lower in profile. The Boston-based Ziopharm Oncology (Nasdaq: ZIOP), which is using Intrexon technology in cancer drug candidates, may be capped at US$302m. However Fibrocell Science (NYSE MKT: FCSC) of Exton, Pa., which wants to use Intrexon’s technology to treat a rare blistering disorder called ‘recessive dystrophic epidermolysis bullosa’, is only worth US$106m. Oragenics (NYSE MKT: OGEN), working on new antibiotics in Tampa, Fl, sits at US$72m. And AquaBounty Technologies (AIM: ABTX), creator of a new strain of salmon that grows twice as fast as conventional salmon, can only manage £32m (ie US$52m – the company is from Maynard, Ma. but the stock only trades in London).  Moreover none of the products being worked on is anywhere near the market.

Don’t get me wrong. Intrexon’s technology still has the potential for positive outcomes. Ziopharm is using it to deliver interleukin-12 (IL-12) directly to tumours. We’ve known for years that this cytokine is deadly to cancer, but is too toxic to be delivered systemically at therapeutic doses (click here). Ziopharm sidesteps this problem by putting the gene for IL-12 inside an adenovirus and placing the gene under the control of an Intrexon-sourced Rheoswitch. After the adenoviral vector has been delivered, the patient takes a pill which turns the Rheoswitch on, causing a whole bunch of IL-12 to suddenly express inside cancer cells. Pre-clinical data and Phase I clinical data on this cancer immunotherapy have been encouraging and the product, called Ad-RTS-IL-12, is now in Phase II in melanoma and breast cancer. Interestingly, Australia’s Mesoblast (ASX: MSB) is now working with Ziopharm on a similar approach under a collaboration announced yesterday. The thinking is that Mesoblast’s mesenchymal cells could also be used to dump Rheoswitch-controlled payloads at the site of tumours. Apparently the pre-clinical work here has gone well - in which case, chalk up yet another capability for Mesoblast’s increasingly versatile suite of mesenchymal-lineage cells.

But to return to Intrexon. Favourable early data for collaborators is one thing. A US$2bn market capitalisation for a concept play is another. I would argue that investors are currently pricing Intrexon’s technologies at ~US$2bn in part because of the perception that they are helping to solve pressing major global problems like peak oil rather than just inventing a new drug or two. Here’s how Intrexon puts it in its S-1 filing with the SEC from earlier this year:  ‘At present rates of global industrialization and population growth, food and energy supplies and environmental and healthcare resources are becoming more scarce and/or costly. We believe it is not a viable option for mankind to continue on this path — new solutions will be necessary to preserve and globally expand a high quality of life. We believe that synthetic biology is a solution.’ In my opinion, when you talk big like that and are valued accordingly you need to be in a truly high profile collaborations such as the one between Exxon and the Venter-funded Synthetic Genomics. For a couple of years after 2009 those two companies worked together on using synthetic biology to make algae fuel at commercial scale. It didn’t work out, but it sure sounded exciting at the time given what oil prices had done up until 2008. I expect that if Intrexon came up with a similar collaboration in the energy area the market reaction would be highly favourable.

That’s the trouble with breakthroughs like those Craig Venter achieved in 2010.  It’s a reasonable bet that synthetic biology can transform our lives and work, and that Intrexon can play a part in this bioindustrial revolution over time. However like all great breakthroughs, the transformation will probably take decades rather than months or years. Will investors buying the first notable synthetic biology play on Nasdaq be able to wait that long?






Stuart Roberts, Australian biotechnology analyst, with global focus
+61 (0)447 247 909
Twitter @Biotech_buzz

About Stuart Roberts. I started as an equities analyst at the Sydney-based Southern Cross Equities in April 2001, focused on the Life Sciences sector from February 2002. Southern Cross Equities was acquired by Bell Financial Group (ASX: BFG) in 2008 and I continued at Bell Potter Securities until June 2013. I joined Baillieu Holst in October 2013. Over the last twelve years I have built a reputation as one of Australia's leading biotech analysts. Before joining Southern Cross Equities I wrote for The Intelligent Investor, probably the most readable investment publication in Australia. I have a Masters Degree in Finance from Finsia. My hobbies are jazz, cinema, US politics and reading patent applications filed by biotechnology and medical device companies.

Previous Australian Biotechnology Buzz posts:
Acorda Therapeutics (Nasdaq: ACOR), 10 October 2013.
Advanced Cell Technology (OTCBB: ACTC), 4 September 2013
Alcobra Pharma (Nasdaq: ADHD), 17 September 2013
Amicus Therapeutics (Nasdaq: FOLD), 22 September 2013
Aradigm (OTCBB: ARDM), 8 September 2013
BioSpecifics Technologies (Nasdaq: BSTC), 26 September 2013
Celldex Therapeutics (Nasdaq: CLDX), 9 November 2013
Cellular Dyamics (Nasdaq: ICEL), 3 September 2013
Exelixis (Nasdaq: EXEL), 17 October 2013
ImmunoCellular Therapeutics (NYSE MKT: IMUC), 27 August 2013
Immunomedics (Nasdaq: IMMU), 21 August 2013
Inovio Pharmaceuticals (NYSE MKT: INO), 24 August 2013
Intrexon (Nasdaq: XON), 24 August 2013
Merrimack Pharmcaceuticals (Nasdaq: MACK), 26 August 2013
Novavax (Nasdaq: NVAX), 3 October 2013
Oncolytics Biotech (Nasdaq: ONCY),  22 August 2013
Pharmacyclics (Nasdaq: PCYC), 2 September 2013
Regulus Therapeutics (Nasdaq: RGLS), 23 August 2013
SIGA Technologies (Nasdaq: SIGA) - 30 September 2013
Sunshine Heart (Nasdaq: SSH), 28 August 2013
Synta Pharmaceuticals (Nasdaq: SNTA), 1 September 2013
TrovaGene (Nasdaq: TROV), 15 September 2013
Verastem (Nasdaq: VSTM), 5 September 2013

Disclaimer. This is commentary, not investment research. If you buy the stock of any biotech company in Australia, the US or wherever you need to do your own homework, and I mean, do your own homework. I'm not responsible if you lose money.


1 comment:

  1. I was diagnosed of Herpes 2years ago and I have tried all possible means to get the cure but all to no avail, until i saw a post in a health forum about a Herbal Doctor(Dr imoloa who prepares herbal medicine to cure all kind of diseases including Herpes, at first i doubted, if it was real but decided to give him a trial, when i contacted Dr imoloa through his Email: drimolaherbalmademedicine@gmail.com he guided me and prepared a herbal medicine and sent it to me via courier Delivery service,when i received the package (herbal medicine) He gave me instructions on how to consume it, i started using it as instructed and i stop getting outbreaks and the sores started vanishing, could you believe i was cured of this deadly virus within two to three weeks and notices changes in my body. Days of using this REMEDY,couldn't believe the healing at first until i see it as my HERPES get cleared like magic Dr imoloa also use his herbal medicine to cure diseases like, HIV/aids, lupus disease, dry cough, fever, malaria, Lyme disease, acute myeloid leukaemia, alzheimer's disease, blood poisoning, measles, kidney cancer, kidney infections, diarrhoea, epilepsy, joint pain, mouth ulcer,bowel cancer, discoid eczema, eye cancer, food poisoning, fibroid, hairy cell leukaemia, mouth cancer, skin disease, lung cancer, liver disease, penile cancer, parkinson disease, arthritis, breast cancer, bone cancer hepatitis A.B.C, Diabetes, fatigue, muscle aches, anal cancer, asthma, Contact this great herbal Doctor today the father of herbalism. via Email: drimolaherbalmademedicine@gmail.com or whatssapp him +2347081986098. and get cured permanently He is real..

    ReplyDelete