Intrexon Investors Are Neglecting This Technology Platform

Image source: Flickruser John Goode.

Investors and the media love the Zika virus-fighting mosquitoes, non-browning apples, and fast-growing salmon now owned by engineered biology conglomerate Intrexon (NYSE: XON). But the technology platforms that steal the headlines aren't always those with the greatest revenue potential in the near or long term. For instance, the company's recent acquisition of EnviroFlight, which makes high-protein fish and animal feed from insect larvae, may result in significant contributions to the top and bottom line sooner than other platforms; meanwhile, regulatory obstacles could prove insurmountable for the company's AquAdvantage salmon.

Given the disproportionate coverage of technology platforms being developed or commercialized by Intrexon, you may want to pay more attention to the ActoBiotics platform.

What are ActoBiotics?

Intrexon got its hands on the technology platform when it acquired ActoGeniX in February 2015. The idea is relatively simple: create a system that enables orally administered, targeted delivery of various biotherapeutics (cytokines, hormones, enzymes, and monoclonal antibodies). Such a product would boast improvements over the industry's status quo for biological drugs, which are delivered intravenously and can be difficult to target to specific parts of the body, namely the gastrointestinal tract, since many biological drugs don't survive the journey through the stomach. Solving the problem of targeted delivery could result in better, more effective treatments for various autoimmune disorders.

How do you make biological drugs survive the trip to the GI tract? While several companies have sought to stuff biotherapeutics into capsules and even plant cells with varying success, Intrexon and ActoGeniX are relying on a slightly different approach. The pair are engineering cells of Lactococcus lactis bacteria to produce various biotherapeutics (referred to by their trade name, ActoBiotics). The food-grade bacteria could be orally administered, make their way to the GI tract, and secrete biological drugs once inside. Think of it as taking a pill, but that pill is actually a tiny drug factory.

The platform is still in very early development, but ActoBiotics could have several potential advantages over current biological drugs. In addition to oral administration and targeted delivery, ActoBiotics from Intrexon and ActoGeniX could have lower toxicity, cost less, and deliver more than one biotherapeutic at a time.

ActoBiotics are currently being investigated by five different partners in preclinical and early stage trials. The most advanced program is AG013 for the treatment of oral mucositis, a side effect of cancer treatments, which showed positive results in a phase 1b trial and could move into phase 2 trials later this year. The trial was under way when ActoGeniX was acquired, and Intrexon will receive low-double-digit royalties on sales if the treatment is successfully commercialized. Additional trials are shown in the figure below:

Image source: Intrexon.

It's important to note that aside from Janssen, a Johnson & Johnson company, all partners working with Intrexon's ActoBiotics platform have market capitalizations well under $1 billion. That represents a risk for investors, considering, at the very least, Intrexon may have to pony up to cover many of the expenses associated with trials and potential commercialization.

It's also important to note that targeted delivery of biological molecules extends beyond the pharmaceutical industry.

ActoBiotics on the farm

Intrexon is also developing ActoBiotics for targeted delivery of nutrients to piglets to enhance growth and early life health. While it hasn't had much to say on this application just yet, the application with perhaps the biggest potential remains agriculture. Intrexon Crop Protection, the holding company for Intrexon's various agricultural technologies, is currently investigating the potential of ActoBiotics in the targeted delivery of biological pesticides, specifically RNAi molecules.

In theory, RNAi pesticides would target specific pests, ranging from insects to viruses to weeds, without any off-target effects on other organisms, although experts aren't entirely convinced we can be so sure about that. The potential promise of RNAi pesticides has resulted in extensive research and development programs elsewhere, including agricultural technology company Monsanto. The company's BioDirect pipeline is developing topical RNAi sprays aimed at specific pests, including a product targeting varroa mites for the sole purpose of protecting honeybee health. If Intrexon can improve upon the delivery of RNAi pesticides, then it may have an advantage over Monsanto's BioDirect platform, although the risks of the technology may greatly stall commercialization.

The potential is there nonetheless: Each year farmers spend over $30 billion on insecticides and fungicides, according to Intrexon. However, investors should know that, similar to pharmaceutical applications, agricultural ActoBiotics have just left proof-of-concept phase.

What does it mean for investors?

The ActoBiotics platform is in the earliest stages of development, bu itt has far-reaching potential across multiple industries. That alone should be enough to make investors interested in Intrexon want to learn more about its potential. Of course, when it comes to engineered biology, investors need to emphasize the word "potential." Biology-based products need to succeed in the face of myriad technical, regulatory, political, and social factors, any one of which could delay or extinguish a hyped-up product. Either way, this is one technology platform investors should be paying more attention to.

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Maxx Chatsko has no position in any stocks mentioned.Follow him on Twitterto keep up with developments in the engineered biology field.

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