Intrexon Bets on Lantibiotics with Oragenics
In earlier articles we discussed synthetic biology and the recent IPO of Intrexon. Intrexon (NYSE:XON) has a unique “intel inside” business model in which they license their technology to various companies through “exclusive channel collaborations” (ECCs) that often involve Intrexon acquiring a stake in the counter party company. Yesterday, Intrexon filed an 8-K defining an ECC agreement they entered into on September 30, 2013 with Oragenics.
Founded in 1996, Tampa Florida based Oragenics (NYSEMKT:OGEN) is focused on developing novel antibiotics and oral health products. On April 10 2013, OGEN began trading on the NYSE MKT and currently has a market cap of around $85 million. To date, OGEN has not generated significant revenues from operations and has an accumulated deficit of around $57 million. Working capital as of June 30, 2013 is said by OGEN to be sufficient to meet their business objectives through March 2014.
Lantibiotics are rare antibiotic compounds which are able to overcome antibiotic-resistant infections. There are over 50 known compounds and only 1 commercially successful product based on these compounds. The reason for such a low level of commercialization is due to issues primarily involving synthesis, purification, and industrial-scale manufacturing. Oragenics is pursuing the first-ever synthetic route to commercial-scale production of a lantibiotic using the below process:
Oragenics has 6 issued and 2 pending patents relating to lantibiotics. The Company’s lead compound MU-1140, has been shown to be effective against Methicillin-resistant Staphylococcus aureus (MRSA) and drug resistant tuberculosis. In February 2013, Oragenics announced that along with Intrexon they discovered a promising new purification process for MU-1140 which demonstrated significant progress towards commercial production of MU-1140.
Several days ago Intrexon solidified and an agreement with Oragenics to develop genetically modified probiotics for the treatment of diseases of the oral cavity, throat, sinus and esophagus in return for 10% of net sales from products developed under the ECC. As part of the agreement, Oragenics issued to Intrexon 1,348,000 shares of Oragenics common stock worth $4.9 million at today’s price and sold to Intrexon 1,300,000 shares of Oragenics common stock at a price per share of $3.00. Oragenics also issued a Convertible Promissory Note to Intrexon in the principal amount of a $1,956,000 note convertible to cash or shares on December 31, 2013. The monetary value of this transaction to Intrexon is nearly $10 million with an additional tiered milestone payment structure of $17 million leading up to and including the first commercial sale of an ECC product by Oragenics anywhere in the world.
Oragenics appears to be in the very early stages of commercialization and will need to raise more cash for future development, milestone payments to Intrexon, and business as usual activities leading to product commercialization. Even with the potential dilution effects of cash raising, this recently inked agreement shows a strong vote of confidence by Intrexon on the future potential of Oragenics.
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