Wunderlich Hikes Intrexon To $70, Sees 'Software/Biotech Hybrid' As A Key Strength

In a report published Monday, Wunderlich analyst Rob Breza maintained a Buy rating on Intrexon Corp (NYSE: XON), while raising the price target from $55 to $70. The analyst believes that the company continues to increase its deal pipeline to capitalize on large, multi-vertical opportunities, which are likely to lead to royalty revenues that are high margin and back-end loaded.

"We believe that XON is an undervalued favorable investment compared to pure-play biotech companies as the company boasts a larger, multi-vertical addressable market, does not burn cash, and supports its investments with a stable revenue stream," Breza said.

In addition, the company's innovative software platform and its business model offer flexibility for Intrexon to expand its deal pipeline with only minimal upfront investment.

According to the Wunderlich report, "In comparison to pure-play biotech, XON generates a stable stream of product and services revenue, is not burning cash on its ECC investments, and addresses multi-billion dollar market opportunities in pharmaceuticals, food/agriculture, energy, and chemicals."

In fact, Intrexon generates revenues even during the development process, with the achievement of each milestone. This allows the company to penetrate a small part of the multiple verticals market with lesser upfront risk than its peers.

"While we believe that material royalty revenues are at least two years away, we expect that the stock will benefit from the achievement of milestones that will result in the collection of development fees," Breza added, with several of the company's ECCs expected to start clinical trials over the next 12 months.

Intrexon is also expected to begin pilot programs for its energy venture during the next six months.