Intrexon inc. (NYSE:XON) has been one of my favorite stocks for 2015. The company is a leader in an exciting emerging area of biotech known as synthetic biology. It offers a diverse portfolio of synthetic biotechnologies that have a wide range of applications in industries including health, environmental, food and energy. The game changing potential for these technologies have given investors a very bullish long-term outlook on the stock with investing titans like Bill Miller of Legg Mason dubbing Intrexon as “the AAPL of the next decade”. Further optimism for the company hinges on its stellar management team led by billionaire biotech investor Randal J. Kirk.
Synthetic biology is essentially the manipulation of DNA which allows you to design and control cells for a specific function. Intrexon calls this technology a “paradigm shift” in the analysis of biology which will allow for numerous innovations across many different industries, from creating targeted cancer therapies to apples that do not brown.
Intrexon is different from most biotech companies that typically have one or two speculative drugs or therapies in the works. Companies like this depend on the FDA’s approval, thus presenting a significant risk if their product is not approved. Rather than developing a couple of drugs and treatments Intrexon designs, builds, and regulates gene programs, which are DNA sequences consisting of key genetic components. The company applies these technologies and monetizes them through strategic partnerships that they call “exclusive channel collaborations”. Many publicly traded biotech companies have entered into these collaborations with Intrexon. Here are just a few:
- Sanofi (NYSE:SNY)
- Johnson & Johnson (NYSE:JNJ)
- Fibrocell Science, Inc. (NASDAQ:FCSC)
- Synthetic Biologics Inc. (NYSEMKT:SYN
- ZIOPHARM Oncology Inc. (NASDAQ:ZIOP)
All of these companies use Intrexon technologies for the research and development of their own drugs and therapies. Due to its diverse portfolio of technologies and partnerships Intrexon is inherently less risky than many other companies in the biotech sector. Any significant successes or breakthroughs coming from the company’s partners could boost its own stock significantly.
Intrexon is currently trading around $51 which is about 26% off its recent all time high made just last week at $69. It sold off sharply after missing its Q2 earnings estimates. This recent correction is, in my opinion, a great long term buying opportunity. Earnings are important, however, earnings were hurt by capital expenditures which are necessary to fuel future growth. The company still exhibits undeniable growth with revenues increasing 300% year-over-year. As you can see in the chart below, earnings have fallen despite healthy revenue growth. Most likely this can be attributed to expensive investments in research and development which should pay off in the future.
The chart below shows the stock’s performance this year with the 50 day moving average overlaid, one of the most widely watched indicators. As you can see,the stock sold off sharply after becoming very overextended from the 50-DMA. Recently it has dipped under the moving average, and historically when this occurs it has been a great time to buy. The stock has some real potential and is worth keeping an eye on.