Aquaculture company AquaBounty Technologies has scrapped plans to use a broad equity offering to raise the money it needs to bring its genetically engineered salmon to consumers. Instead, it has inked a deal to raise funds by selling securities to synthetic biology company Intrexon, its largest shareholder.
The deal with Intrexon (NYSE: XON), announced Monday, will raise $25 million for Maynard, MA-based AquaBounty (OTC: AQBT), a company that has brought genetic techniques to fish farming. With the funds, AquaBounty says it will have enough money to keep operating for two years as it charts a course to bring its FDA-approved salmon to market.
The deal comes as AquaBounty scrambles for the cash it needs to keep going. In interim financial results reported in July, AquaBounty said that it had $1.9 million in cash through the end of the second quarter, along with $5 million remaining in a convertible debt agreement with Intrexon. Those funds, the company said, would carry the company through the first quarter of 2017.
AquaBounty could raise more money by selling stock to the public. But the company said Monday that it concluded the cash needed for the legal and regulatory work required of a public stock offering made that route “impractical and costly.” Rather than selling to a broad swath of investors, AquaBounty is raising the money it needs from just one.
According to the agreement with Intrexon, the Germantown, MD-based biotech company will buy convertible promissory notes—short-term debt that can later convert to equity in AquaBounty—for $10 million. AquaBounty will raise the rest of the money by selling additional stock to Intrexon, as long as the aquaculture company can meet certain conditions, such as maintaining listings on the Nasdaq and the AIM stock exchange in London. AquaBounty says the initial funding will help the startup meet exchange listing requirements.
AquaBounty’s technology adds a growth hormone gene from Chinook salmon to Atlantic salmon, which enables the Atlantic salmon to reach market weight faster. In approving AquaBounty’s salmon last year, the FDA said that the company’s genetically engineered salmon, called “AquAdvantage,” was as safe to eat as conventional salmon, CEO Ron Stotish explained last month at a marine biotechnology symposium in Research Triangle Park, NC. Regulators in Canada reached the same conclusion.
With FDA approval in hand and an infusion in new funding, AquaBounty says it is now looking to start generating revenue. The company already operates an enclosed, land-based fish farm in Panama, which can produce the company’s faster-growing fish. AquaBounty says it is also considering either purchasing an existing fish production facility or constructing a new one in North America.
Two of AquaBounty’s directors, Jack Bobo and Rick Sterling, who are also Intrexon employees, recused themselves from the vote to approve and authorize the deal with the biotech company. AquaBounty says independent directors and its executives negotiated the share purchase agreement with Intrexon. If the closing conditions of the agreement have not been met by March 31, 2017, its terms will no longer be in effect and either AquaBounty or Intrexon has the right to terminate the deal.
Photo of Atlantic salmon courtesy of Flickr user U.S. Fish and Wildlife Service via a Creative Commons license.