Zika Seen as $200M - $400M Annual Opportunity for Intrexon (XON); Stifel Affirms at 'Buy'
Stifel reaffirms its Buy rating and $69 price target on Intrexon (NYSE: XON) amid the recent Zika epidemic.
Thomas Shrader, PhD, CFA, sees the Zika virus as a $200 to $400 million annual opportunity for Intrexon, even with a cautious adoption ramp. The analyst commented: The release of GMO insects to fight disease causing insects is certainly a trailblazing endeavor – but some current financial metrics are worth noting. Overall, we would expect the ramp to peak sales in any approved country to be slow - a decade seems a reasonable estimate. A slow ramp is expected as there are obvious political obstacles to using GMO organisms in most places and also because the optimal ways to treat mosquito outbreaks are still being worked out. This estimate should probably be viewed as an estimate of the conventional self-paying market. The potential for large grants from sources such as the Gates Foundation or the WHO to service areas unable to self-pay might be as large or larger.
Shrader noted: Early Commercial use in Piracicaba – 82% reduction and counting. Despite being only partially approved, a Brazilian municipality is already testing OX513A in a crisis area containing about 5,000 people that is adjacent to other crisis areas that are not being treated. Intrexon has indicated that after about half a season of treatment the AE population has been decreased by about 82% in the infected area. Based on this positive result, the treated area will be expanded to an area in the center of Piracicaba containing 30k-60k residents. This project is being paid for by the Piracicaba local government (funded by local taxes) but the value of the contract has not been released. Oxitec commented several years ago that treatment could cost municipalities less than $10 per resident in the treated area – but the reliability of this estimate is no longer clear. Intrexon has only commented that the process of treating a mosquito-infested area takes several years and that initial COGS are highest during the initial treatment period designed to get the AE population under control. However, following the initial blitz-by-dilution phase, fewer OX513A insects need to be released to keep the AE population in check.
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