Please ensure Javascript is enabled for purposes of website accessibility

Intrexon Corporation Shares Were Stung in April -- Here's Why

By Sean Williams - May 4, 2016 at 2:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Intrexon became the buzz of Wall Street for all the wrong reasons in April.

Aedys Aegypti mosqutio. Image source: Centers for Disease Control and Prevention.

What: Shares of Intrexon (PGEN 3.73%), a biotechnology company focused on creating therapies to control gene regulation, were stung in April, tumbling 21%, according to data from S&P Global Market Intelligence.

So what: There appear to be two primary causes for Intrexon's valuation implosion in April.

First, a report issued by Spotlight Research on April 21 questioned whether or not Intrexon was deserving of a valuation approaching $5 billion considering its subsidiary, Oxitec, which it acquired in 2015 and is working on a solution to the Zika virus, may not have an economically viable solution. Oxitec's solution of modifying the genetic makeup of male Aedys aegypti mosquitoes to pass along a gene that shortens the next generation's lifespan, halting the breeding process, has been around for a while, but it hasn't really caught on.

Image source: Centers for Disease Control and Prevention.

The other issue relates to residents in Florida who are petitioning the Food and Drug Administration not to use their state to run a clinical test. The idea would be to release Intrexon's modified male mosquitoes in Florida in an effort to control the Aedys aegypti population. However, nearly 11,000 signatures suggest that there are concerns regarding the safety of these modified mosquitoes, even though the FDA has cleared them as safe for the environment.

Now what: Intrexon is certainly set up to be a battleground stock in 2016, but I believe it's for all the wrong reasons. Even if Intrexon has the only commercial viable Zika solution that's demonstrated success in Brazil, Panama, and the Cayman Islands, its solution at its peak is only expected to generate $200 million to $400 million in annual sales, according to various analyst estimates. However, if global health agencies work to control the Zika virus, which seems increasingly likely, Intrexon's moat of opportunity to control Zika could be limited at best (assuming it gets the green light from the FDA).

It's long been a contention of mine that Intrexon's real value is tied up in its collaboration with Ziopharm Oncology to develop CAR-T immunotherapies. With CAR-T, researchers harvest patients' T-cells, genetically modify them to produce chimeric antigen receptors (CARs) that can help locate and bind to cancer cells, and finally inject those cells back into the body. Intrexon's role is to provide its RheoSwitch technology that can effectively turn genes on or off, ensuring that a patient's immune system remains supercharged only for a relatively short period of time. The potential of CAR-T is where the bulk of Intrexon's valuation derives from, and it's what I strongly suggest investors pay close attention to instead of hoping that Intrexon's Zika virus solution becomes a winner.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Precigen, Inc. Stock Quote
Precigen, Inc.
$1.39 (3.73%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.