Mergers and Acquisitions

Oxitec Acquisition

In September 2015, pursuant to a Stock Purchase Agreement (the “Oxitec Purchase Agreement”), the Company acquired 100% of the issued outstanding share capital of Oxitec, a pioneering company in biological insect control solutions, thereby expanding the Company’s capabilities to address a broad range of global environment, health and agricultural challenges. The aggregated consideration paid consisted of (i) 1,359,343 shares of the Company’s common stock (the “Stock Consideration”) and (ii) $90,199 in cash (the “Cash Consideration”), inclusive of net cash and working capital adjustments, as defined in the Oxitec Purchase Agreement, totaling $9,449 which are to be paid within eighty-five days of the September closing date. Stock Consideration totaling 480,422 shares and Cash Consideration totaling $1,991 were withheld as escrow at closing and are issuable and payable, respectively, eighteen months after closing, subject to reduction for satisfaction of any claims for indemnification made by the Company under the Oxitec Purchase Agreement. Cash Consideration related to the net cash and working capital adjustments, as well as the withheld cash, are included in deferred consideration as of September 30, 2015. The results of Oxitec’s operations subsequent to the acquisition date have been included in the consolidated financial statements.

The fair value of the total consideration transferred was $146,394. The acquisition date fair value of the Stock Consideration and Cash Consideration is presented below:



Cash	$	90,199
Common shares	56,195
	$	146,394

The fair value of the shares of the Company common stock issued was based on the quoted closing price of the Company’s common stock as of the date of the acquisition. The preliminary estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below:



Cash	$	3,780
Trade receivables	125
Other receivables	7,395
Prepaid expenses and other	121
Property, plant, and equipment	1,198
Intangible assets	96,854
Total assets acquired	109,473
Accounts payable	1,187
Accrued compensation and benefits	246
Other accrued liabilities	210
Deferred revenue	120
Deferred tax liabilities	12,584
Total liabilities assumed	14,347
Net assets acquired	95,126
Goodwill	51,268
Total consideration	$	146,394

The fair value of assets acquired and liabilities assumed at the acquisition date are considered preliminary and are subject to revision when the valuation of intangible assets is finalized. The acquired intangibles assets primarily include in-process research and development and the fair values of the acquired assets were determined using the multi-period excess earning method, which is a variation of the income approach that converts future cash flows to single discounted present value amounts. The in-process research and development are currently indefinite-lived intangible assets and, accordingly, are not being amortized. Goodwill, which is not expected to be deductible for tax purposes, represents the assembled workforce and the potential for future Oxitec products and technologies.

As of September 30, 2015, the Company had incurred $1,644 of acquisition related costs, all of which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2015.

Okanagan Acquisition

In April 2015, pursuant to a Stock Purchase Agreement (the “Okanagan Purchase Agreement”), the Company acquired 100% of the outstanding shares of Okanagan, the pioneering agricultural company behind the world's first non-browning apple. In addition to supporting Okanagan's further commercialization and exploitation of its apple products, the Company expects to utilize its proprietary technologies to assist Okanagan in the development of further novel beneficial plant traits. Pursuant to the Okanagan Purchase Agreement, the former shareholders of Okanagan received an aggregate of 707,853 shares of the Company’s common stock, and $10,000 cash in exchange for all shares in Okanagan. The results of Okanagan's operations subsequent to the acquisition date have been included in the consolidated financial statements.

The fair value of the total consideration transferred was $40,933. The acquisition date fair value of each class of consideration transferred is presented below:



Cash	$	10,000
Common shares	30,933
	$	40,933

The fair value of the shares of the Company's common stock issued was based on the quoted closing price of the Company's common stock as of the date of the acquisition. The estimated fair value of assets acquired and liabilities assumed at the acquisition date is shown below along with subsequent adjustments during the measurement period to the fair value of assets acquired and liabilities assumed. The adjustments resulted from revisions to the valuation of intangible assets.



	Initial Estimated Fair Value		Adjustments			Adjusted Fair Value
Cash	$	58	$	—		$	58
Trade receivables	16		—			16
Other receivables	49		—			49
Property, plant, and equipment	32		—			32
Intangible assets	33,800		2,700			36,500
Total assets acquired	33,955		2,700			36,655
Accounts payable	181		—			181
Deferred revenue	181		—			181
Deferred tax liabilities	8,145		702			8,847
Total liabilities assumed	8,507		702			9,209
Net assets acquired	25,448		1,998			27,446
Goodwill	15,485		(1,998		)	13,487
Total consideration	$	40,933	$	—		$	40,933

The acquired intangible assets primarily include developed technology, patents and know-how and the fair values of the acquired assets were determined using the with and without method, which is a variation of the income approach that utilizes estimated cash flows with all assets in place at the valuation date and estimated cash flows with all assets in place except the intangible assets at the valuation date. The intangible assets are being amortized over a useful life of fourteen years. Goodwill, which is not expected to be deductible for tax purposes, represents potential future applications of Okanagan's technology to other fruits, including additional apple varietals, and anticipated buyer-specific synergies arising from the combination of the Company's and Okanagan's technologies.

The Company incurred $341 of acquisition-related costs, of which $267 is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2015.

ActoGeniX Acquisition

In February 2015, the Company acquired 100% of the membership interests of ActoGeniX NV ("ActoGeniX"), a European clinical stage biopharmaceutical company, pursuant to a Stock Purchase Agreement (the "ActoGeniX Purchase Agreement"). ActoGeniX's platform technology complements our broad collection of technologies available for current and future collaborators. Pursuant to the ActoGeniX Purchase Agreement, the former members of ActoGeniX received an aggregate of 965,377 shares of the Company's common stock and $32,739 in cash in exchange for all membership interests of ActoGeniX. The results of ActoGeniX's operations subsequent to the acquisition date have been included in the consolidated financial statements.

The fair value of the total consideration transferred was $72,474. The acquisition date fair value of each class of consideration transferred is presented below:



Cash	$	32,739
Common shares	39,735
	$	72,474



	Initial Estimated Fair Value		Adjustments			Adjusted Fair Value
Cash	$	3,180	$	—		$	3,180
Other receivables	305		—			305
Prepaid expenses and other	31		—			31
Property, plant and equipment	209		—			209
Intangible assets	68,100		—			68,100
Other assets	23		—			23
Total assets acquired	71,848		—			71,848
Accounts payable	230		—			230
Accrued compensation and benefits	624		(428		)	196
Other accrued liabilities	307		(54		)	253
Deferred revenue	732		—			732
Deferred tax liabilities	612		—			612
Total liabilities assumed	2,505		(482		)	2,023
Net assets acquired	69,343		482			69,825
Goodwill	3,131		(482		)	2,649
Total consideration	$	72,474	$	—		$	72,474

The acquired intangible assets primarily include in-process research and development, and the fair values of the acquired assets were determined using the multi-period excess earnings and with-and-without methods, which are both variations of the income approach that convert future cash flows to single discounted present value amounts. During the three months ended September 30, 2015, the Company re-evaluated the acquired in-process research and development and determined that it was no longer an indefinite-lived intangible asset. The Company assigned it a useful life of eighteen years and began amortization in August 2015. Goodwill, which is not expected to be deductible for tax purposes, represents the assembled workforce and anticipated buyer-specific synergies arising from the combination of the Company's and ActoGeniX's technologies.

The Company incurred $418 of acquisition-related costs, of which $381 is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the nine months ended September 30, 2015.

Trans Ova Acquisition

In August 2014, the Company acquired 100% of the membership interests of Trans Ova, a provider of bovine reproductive technologies, pursuant to an Amended and Restated Membership Interest Purchase Agreement (the "Trans Ova Purchase Agreement"). The Company and Trans Ova intend to build upon Trans Ova's current platform with new capabilities with a goal of achieving higher levels of delivered value to dairy and beef cattle producers. Pursuant to the Trans Ova Purchase Agreement, the former members of Trans Ova received an aggregate of 1,444,388 shares of the Company's common stock and $63,625 in cash, and will receive deferred cash consideration valued at $20,115 in exchange for all membership interests of Trans Ova. The deferred cash consideration is payable in three equal installments upon the first, second, and third anniversaries of the transaction date. The Trans Ova Purchase Agreement also provides for payment to the former members of Trans Ova a portion of certain cash proceeds in the event there is an award under certain litigation matters pending as of the transaction date to which Trans Ova is a party. The results of Trans Ova's operations subsequent to the acquisition date have been included in the consolidated financial statements, including revenues of $18,283 and $64,743 and net income (loss) of $(3,655) and $530 for the three and nine months ended September 30, 2015, respectively, and revenues of $8,502 and net loss of $481 for the three and nine months ended September 30, 2014.

The fair value of the total consideration transferred, including the noncontrolling interest in a majority-owned subsidiary of Trans Ova, was $127,875. The acquisition date fair value of each class of consideration transferred and noncontrolling interest is presented below:



Cash	$	63,625
Common shares	32,802
Deferred cash consideration	20,115
Total consideration transferred	116,542
Fair value of noncontrolling interest	11,333
Total	$	127,875



Cash	$	960
Trade receivables	18,693
Related party receivables	1,219
Inventory	18,476
Prepaid expenses and other	590
Property, plant and equipment	21,164
Intangible assets	23,700
Other assets	147
Total assets acquired	84,949
Accounts payable	3,317
Accrued compensation and benefits	913
Other accrued liabilities	271
Deferred revenue	4,458
Lines of credit	4,091
Related party payables	1,246
Long term debt	9,090
Total liabilities assumed	23,386
Net assets acquired	61,563
Goodwill	66,312
Total consideration and fair value of noncontrolling interest	$	127,875

The fair value of acquired inventory was determined using the cost approach, which establishes value based on the cost of reproducing or replacing the asset. The fair value of acquired property, plant and equipment was determined using the cost approach and the market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets. The acquired intangible assets include various developed technologies and know-how, customer relationships, and trademarks, and the fair values of these assets were determined using the relief-from-royalty, multi-period excess earnings, and with-and-without methods, which are all variations of the income approach. The acquired intangible assets are being amortized over useful lives ranging from three to nine years. Goodwill, which will be deductible for tax purposes, represents the assembled workforce, potential future expansion of Trans Ova business lines and anticipated buyer-specific synergies arising from the combination of the Company's and Trans Ova's technologies.

In conjunction with a prior transaction associated with Trans Ova's subsidiary, ViaGen, in September 2012, the Company may be obligated to make certain future contingent payments to the former equity holders of ViaGen, up to a total of $6,000 if certain revenue targets, as defined in the share purchase agreement, are met. The Company does not expect these revenue targets to be met and accordingly has assigned no value to this liability.

The Company incurred $713 of costs primarily for legal and due diligence services related to this acquisition, of which $372 and $684 is included in selling, general and administrative expenses in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.

In February 2015, the Company acquired, through an exchange offer, the remaining outstanding membership interests of Trans Ova's majority-owned subsidiary, Exemplar, for $1,566 in cash and 307,074 shares of Company common stock.

Medistem Acquisition

In March 2014, the Company acquired 100% of the outstanding common stock and securities convertible into common stock of Medistem, Inc. ("Medistem"), an entity engaged in the development of Endometrial Regenerative Cells ("ERCs"), for a combination of cash and Company common stock. The acquisition allows the Company to employ its synthetic biology platforms to engineer a diverse array of cell-based therapeutic candidates using Medistem's multipotent ERCs. Pursuant to the terms of the merger agreement, Medistem equity holders received 714,144 shares of the Company's common stock and $4,920 in cash in exchange for the outstanding Medistem common stock and securities convertible into common stock. Additionally, Medistem had issued the Company two promissory notes in the amount of $707, including accrued interest, both of which were settled upon closing of the merger. Certain members of Medistem's management surrendered a total of 17,695 shares of their merger consideration to reimburse the Company for required payroll tax withholdings. The results of Medistem's operations subsequent to the acquisition date have been included in the consolidated financial statements.

The fair value of the total consideration transferred was $24,995. The acquisition date fair value of each class of consideration transferred is presented below:



Cash	$	4,920
Common shares	19,368
Settlement of promissory notes	707
	$	24,995



Cash	$	8
Intangible assets	4,824
Total assets acquired	4,832
Accounts payable	644
Accrued compensation and benefits	67
Other accrued expenses	50
Total liabilities assumed	761
Net assets acquired	4,071
Goodwill	20,924
Total consideration	$	24,995

The fair value of acquired intangible assets was determined using the cost approach. The acquired intangible assets consist of in-process research and development, which is an indefinite-lived intangible asset. The goodwill consists of buyer-specific synergies between the Company's and Medistem's technologies present. The goodwill is not expected to be deductible for tax purposes.

The Company incurred $680 of acquisition-related costs, of which $310 is included in selling, general and administrative expenses in the accompanying consolidated statement of operations for the nine months ended September 30, 2014.

Unaudited Condensed Pro Forma Financial Information

The results of operations of the 2015 acquisitions discussed above are included in the consolidated statements of operations beginning on the day after the acquisition date. The following unaudited condensed pro forma financial information for the three and nine months ended September 30, 2015 and 2014 is presented as if the acquisitions had been consummated on January 1, 2014:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
	Pro forma
Revenues	$	53,754		$	21,524		$	133,060		$	41,742
Loss before income taxes	(43,979		)	(58,972		)	(66,686		)	(117,811		)
Net loss	(43,057		)	(58,586		)	(66,319		)	(116,100		)
Net loss attributable to the noncontrolling interests	816			1,137			2,940			2,895
Net loss attributable to Intrexon	(42,241		)	(57,449		)	(63,379		)	(113,205		)

The results of operations of the 2014 acquisitions discussed above are included in the consolidated statements of operations beginning on the day after their respective acquisition dates. The following unaudited condensed pro forma financial information for the three and nine months ended September 30, 2014 is presented as if the acquisitions had been consummated on January 1, 2013:



	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
	Pro forma
Revenues	$	31,507		$	88,629
Loss before income taxes	(51,864		)	(98,816		)
Net loss	(51,864		)	(98,839		)
Net loss attributable to the noncontrolling interests	1,200			3,260
Net loss attributable to Intrexon	(50,664		)	(95,580		)