Precigen, Inc. (NASDAQ:PGEN) Q2 2021 Results Earnings Conference Call August 9, 2021 4:05 PM ET Company Participants Steven Harasym - Vice President, IR Helen Sabzevari - President & CEO Conference Call Participants Nick Abbott - Wells Fargo Jason Butler - JMP Securities Ben Burnett - Stifel Swayampakula Ramakanth - H.C. Wainwright Justin Walsh - B. Riley Eric Joseph - JPMorgan Operator Good day. And welcome to the Precigen Second Quarter and First Half 2021 Financial Results Conference Call. [Operator Inst ...

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents Precigen, Inc.'s unaudited condensed consolidated financial information, including statements and detailed notes [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents Precigen, Inc.'s unaudited condensed consolidated financial statements and detailed notes for the specified periods [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The Condensed Consolidated Balance Sheets show the company's financial position as of June 30, 2021, and December 31, 2020 | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Total Assets | $402,573 | $314,587 | $87,986 | 27.97% | | Total Liabilities | $243,377 | $247,413 | $(4,036) | -1.63% | | Total Shareholders' Equity | $159,196 | $67,174 | $92,022 | 137.00% | | Cash and cash equivalents | $36,412 | $51,792 | $(15,380)| -29.70% | | Short-term investments | $78,694 | $48,325 | $30,369 | 62.84% | | Long-term investments | $85,269 | $0 | $85,269 | N/A | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The Condensed Consolidated Statements of Operations reflect the company's financial performance for the three and six months ended June 30, 2021 and 2020 3 Months Ended June 30, 2021 vs 2020 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total Revenues | $33,580 | $30,424 | $3,156 | 10.4% | | Total Operating Expenses | $49,254 | $42,254 | $7,000 | 16.6% | | Operating Loss | $(15,674) | $(11,830) | $(3,844) | 32.5% | | Net Loss | $(20,050) | $(43,354) | $23,304 | -53.8% | | Net Loss per Share (basic & diluted) | $(0.10) | $(0.26) | $0.16 | -61.5% | 6 Months Ended June 30, 2021 vs 2020 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Total Revenues | $58,091 | $60,262 | $(2,171) | -3.6% | | Total Operating Expenses | $91,453 | $88,692 | $2,761 | 3.1% | | Operating Loss | $(33,362) | $(28,430) | $(4,932) | 17.3% | | Net Loss | $(37,368) | $(99,352) | $61,984 | -62.4% | | Net Loss per Share (basic & diluted) | $(0.19) | $(0.61) | $0.42 | -68.9% | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The Condensed Consolidated Statements of Comprehensive Loss detail the net loss and other comprehensive income (loss) components 3 Months Ended June 30, 2021 vs 2020 | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(20,050) | $(43,354) | $23,304 | -53.8% | | Other comprehensive income (loss) | $795 | $704 | $91 | 12.9% | | Comprehensive loss | $(19,255) | $(42,650) | $23,395 | -54.8% | 6 Months Ended June 30, 2021 vs 2020 | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(37,368) | $(99,352) | $61,984 | -62.4% | | Other comprehensive income (loss) | $(1,456) | $26,546 | $(28,002)| -105.5% | | Comprehensive loss | $(38,824) | $(72,534) | $33,710 | -46.5% | [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) The Condensed Consolidated Statements of Shareholders' Equity detail changes in equity components, including common stock and additional paid-in capital Shareholders' Equity Summary | Metric (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Additional Paid-in Capital | $2,017,413 | $1,886,567 | $130,846 | 6.94% | | Accumulated Deficit | $(1,860,758) | $(1,823,390) | $(37,368)| 2.05% | | Total Shareholders' Equity | $159,196 | $67,174 | $92,022 | 137.00% | | Shares Issued and Outstanding (June 30, 2021) | 206,580,928 | 187,663,207 | 18,917,721 | 10.08% | - In January 2021, the company completed a public offering of **17,250,000 shares** of common stock, generating net proceeds of **$121,045 thousand**[30](index=30&type=chunk)[118](index=118&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows illustrate the company's cash generation and usage across operating, investing, and financing activities Cash Flow Summary | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :-------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Net cash used in operating activities | $(24,160) | $(41,548) | $17,388 | -41.8% | | Net cash used in investing activities | $(112,482) | $(12,586) | $(99,896)| 793.7% | | Net cash provided by financing activities | $121,063 | $32,891 | $88,172 | 268.1% | | Net decrease in cash, cash equivalents, and restricted cash | $(15,395) | $(21,302) | $5,907 | -27.7% | - Cash outflows from operations decreased by **$17.4 million**, driven by increased cash inflows from Trans Ova and Exemplar, reduced cash needs for MBP Titan, and streamlined corporate operations[240](index=240&type=chunk) - Investing activities included **$116.2 million** in net purchases of investments in 2021, compared to **$76.3 million** in 2020, primarily funded by proceeds from public offerings[241](index=241&type=chunk) - Financing activities in 2021 were significantly boosted by **$121.0 million** in net proceeds from a public offering of common stock[242](index=242&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements [1. Organization](index=13&type=section&id=1.%20Organization) Precigen, Inc. is a synthetic biology company focusing on gene and cellular therapies for immuno-oncology, autoimmune disorders, and infectious diseases - Precigen is a synthetic biology company focused on discovery and clinical stage gene and cellular therapies for immuno-oncology, autoimmune disorders, and infectious diseases[37](index=37&type=chunk) - Key subsidiaries include PGEN Therapeutics (gene/cell therapies), Precigen ActoBio (microbe-based biopharmaceuticals), Exemplar Genetics (MiniSwine research models), and Trans Ova Genetics (bovine reproductive technologies)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - The company completed a strategic shift by suspending MBP Titan's methane bioconversion operations and selling most non-healthcare assets in early 2020 to focus on healthcare[42](index=42&type=chunk)[43](index=43&type=chunk) [2. Summary of Significant Accounting Policies](index=13&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies, including the basis of presentation for unaudited interim financial statements and going concern considerations - The interim condensed consolidated financial statements are unaudited and prepared in accordance with U.S. GAAP, with certain disclosures condensed or omitted[44](index=44&type=chunk) - Management believes existing liquid assets will fund operations for at least one year, but expects continued operating losses and negative cash flows, requiring additional capital[46](index=46&type=chunk) - COVID-19 has caused delays in clinical trials (AG019, PRGN-3005) and introduces uncertainty regarding future impacts on business, operations, and financial performance[48](index=48&type=chunk)[49](index=49&type=chunk) - Starting Q1 2021, reportable segments are Biopharmaceuticals, Exemplar, and Trans Ova, with corporate expenses managed at a consolidated level[53](index=53&type=chunk) [3. Discontinued Operations](index=16&type=section&id=3.%20Discontinued%20Operations) This note details the financial impact of discontinued operations, primarily the wind-down of MBP Titan and the sale of non-healthcare assets - MBP Titan's operations were suspended in Q2 2020 and substantially wound down by December 31, 2020, due to market uncertainty from COVID-19 and the energy sector[58](index=58&type=chunk) - In January 2021, MBP Titan's property and equipment sale resulted in a **$464 thousand** gain, and a lease termination generated a **$4,602 thousand** gain, both included in income from discontinued operations[59](index=59&type=chunk) Income (Loss) from Discontinued Operations | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | | :-------------------- | :--------------------------- | :--------------------------- | | Income (loss) from discontinued operations (MBP Titan) | $4,539 | $(36,741) | | Income (loss) from discontinued operations (Transactions) | $0 | $(26,056) | | Total Income (loss) from discontinued operations | $4,539 | $(62,797) | - The Transactions in January 2020 involved selling a majority of non-healthcare assets for **$53 million** and contingent rights, and the sale of EnviroFlight equity for **$12.2 million**[64](index=64&type=chunk)[66](index=66&type=chunk) - The TS Biotechnology Sale in January 2020 resulted in a **$26,957 thousand** loss from the release of cumulative foreign currency translation losses[68](index=68&type=chunk) [4. Investments in Joint Ventures](index=19&type=section&id=4.%20Investments%20in%20Joint%20Ventures) This note details the company's investments in joint ventures, specifically Intrexon Energy Partners and Intrexon Energy Partners II - Precigen holds a **50% membership interest** in Intrexon Energy Partners, a JV formed to optimize MBP technology for fuels and lubricants, with a remaining capital commitment of **$4,225 thousand** as of June 30, 2021[75](index=75&type=chunk) - Precigen also holds a **50% membership interest** in Intrexon Energy Partners II, a JV for 1,4-butanediol production using MBP technology, with a remaining capital commitment of **$10,000 thousand** as of June 30, 2021[79](index=79&type=chunk) - Both JVs are classified as Variable Interest Entities (VIEs), but the company is not the primary beneficiary, having no risk of loss related to them as of June 30, 2021[52](index=52&type=chunk) [5. Collaboration and Licensing Revenue](index=20&type=section&id=5.%20Collaboration%20and%20Licensing%20Revenue) This note explains the company's collaboration and licensing revenue recognition policies, which typically involve upfront fees, R&D reimbursements, and milestone payments - Collaboration and licensing revenues are derived from agreements for technology development and commercialization, including licenses, R&D services, and potential milestone/royalty payments[82](index=82&type=chunk) Collaboration and Licensing Revenues (3 Months Ended) | Counterparty (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Castle Creek Biosciences, Inc. | $294 | $4,210 | $(3,916)| -93.0% | | Total Collaboration and Licensing Revenues | $301 | $4,315 | $(4,014)| -93.0% | Collaboration and Licensing Revenues (6 Months Ended) | Counterparty (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :-------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Castle Creek Biosciences, Inc. | $353 | $14,573 | $(14,220)| -97.6% | | Total Collaboration and Licensing Revenues | $367 | $15,036 | $(14,669)| -97.6% | Deferred Revenue | Deferred Revenue (in thousands) | June 30, 2021 | December 31, 2020 | | :------------------------------ | :------------ | :---------------- | | Collaboration and licensing agreements | $23,062 | $23,420 | | Prepaid product and service revenues | $3,097 | $2,126 | | Total | $26,299 | $25,823 | [6. Short-term and Long-term Investments](index=22&type=section&id=6.%20Short-term%20and%20Long-term%20Investments) The company's investments are classified as available-for-sale and primarily consist of U.S. government debt securities and certificates of deposit Investment Fair Value | Investment Type (in thousands) | June 30, 2021 Fair Value | December 31, 2020 Fair Value | Change | % Change | | :----------------------------- | :----------------------- | :--------------------------- | :----- | :------- | | U.S. government debt securities | $163,698 | $48,061 | $115,637 | 240.6% | | Certificates of deposit | $265 | $264 | $1 | 0.4% | | Total | $163,963 | $48,325 | $115,638 | 239.3% | Contractual Maturity of Investments | Contractual Maturity (in thousands) | June 30, 2021 Fair Value | | :---------------------------------- | :----------------------- | | Due within one year | $78,694 | | After one year through three years | $85,269 | | Total | $163,963 | [7. Fair Value Measurements](index=22&type=section&id=7.%2E%20Fair%20Value%20Measurements) This note describes how the company measures the fair value of its financial assets and liabilities, categorizing them into a three-level hierarchy - The fair value of cash, receivables, accounts payable, and accrued liabilities approximates their carrying amount due to short maturities[91](index=91&type=chunk) Financial Assets Fair Value Hierarchy | Financial Asset (in thousands) | Level 1 | Level 2 | Level 3 | June 30, 2021 Total | | :----------------------------- | :------ | :--------- | :------ | :------------------ | | U.S. government debt securities | $0 | $163,698 | $0 | $163,698 | | Other | $0 | $265 | $0 | $265 | | Total | $0 | $163,963 | $0 | $163,963 | - The fair value of the Convertible Notes was approximately **$173,000 thousand** as of June 30, 2021, and **$165,000 thousand** as of December 31, 2020, classified as Level 2 based on third-party trades[95](index=95&type=chunk) [8. Inventory](index=23&type=section&id=8.%20Inventory) Inventory consists of supplies, embryos, other production materials, work in process, livestock, and feed Inventory Components | Inventory Component (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :--------------------------------- | :------------ | :---------------- | :----- | :------- | | Supplies, embryos and other production materials | $2,098 | $2,060 | $38 | 1.8% | | Work in process | $2,624 | $2,348 | $276 | 11.8% | | Livestock | $5,640 | $5,047 | $593 | 11.8% | | Feed | $1,051 | $1,904 | $(853) | -44.8% | | Total inventory | $11,413 | $11,359 | $54 | 0.5% | [9. Property, Plant and Equipment, Net](index=24&type=section&id=9.%20Property%2C%20Plant%20and%20Equipment%2C%20Net) This note details the company's property, plant, and equipment, net, showing a decrease primarily due to accumulated depreciation Property, Plant and Equipment Summary | Asset Category (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Total Gross Carrying Amount | $70,612 | $69,876 | $736 | 1.1% | | Less: Accumulated depreciation and amortization | $(37,867) | $(34,952) | $(2,915)| 8.3% | | Property, plant and equipment, net | $32,745 | $34,924 | $(2,179)| -6.2% | - Depreciation expense for the six months ended June 30, 2021, was **$3,186 thousand**, a decrease from **$3,816 thousand** in the prior year[98](index=98&type=chunk) [10. Goodwill and Intangible Assets, Net](index=24&type=section&id=10.%20Goodwill%20and%20Intangible%20Assets%2C%20Net) This note details the company's goodwill and intangible assets, net, showing a decrease in intangibles due to ongoing amortization Goodwill and Intangible Assets Summary | Asset Category (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :---------------------------- | :------------ | :---------------- | :----- | :------- | | Goodwill | $54,273 | $54,363 | $(90) | -0.2% | | Intangible assets, net | $59,942 | $65,396 | $(5,454)| -8.3% | - Amortization expense for intangible assets was **$3,857 thousand** for the six months ended June 30, 2021, compared to **$3,762 thousand** in the prior year[101](index=101&type=chunk) [11. Lines of Credit and Long-Term Debt](index=25&type=section&id=11.%20Lines%20of%20Credit%20and%20Long-Term%20Debt) This note details the company's lines of credit and long-term debt, primarily consisting of convertible senior notes - Trans Ova has a **$5,000 thousand** revolving line of credit (matures April 2022, interest at U.S. Prime Rate or 3.00%, **3.25%** as of June 30, 2021) with no outstanding balance[102](index=102&type=chunk) - Exemplar has a **$700 thousand** revolving line of credit (matures October 2021, interest at **4.00%**) with no outstanding balance[103](index=103&type=chunk) Long-Term Debt Summary | Debt Type (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :----------------------- | :------------ | :---------------- | :----- | :------- | | Convertible debt | $173,777 | $168,147 | $5,630 | 3.3% | | Notes payable | $3,438 | $3,655 | $(217) | -5.9% | | Total Long-term debt, less current portion | $176,922 | $171,522 | $5,400 | 3.1% | - The Convertible Notes have an outstanding principal balance of **$200,000 thousand**, mature on July 1, 2023, and bear interest at **3.50%** per year, with an effective interest rate of **11.02%** including amortization[106](index=106&type=chunk)[109](index=109&type=chunk) Interest Expense (Convertible Notes) | Interest Expense Component (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :---------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Cash interest expense | $3,500 | $3,500 | $0 | 0.0% | | Non-cash interest expense | $5,630 | $5,101 | $529 | 10.4% | | Total interest expense (Convertible Notes) | $9,130 | $8,601 | $529 | 6.2% | [12. Income Taxes](index=27&type=section&id=12.%20Income%20Taxes) The company calculates interim tax provisions based on actual taxable income or loss, as it cannot reliably estimate its annual effective income tax rate - The company reported U.S. taxable losses of approximately **$57,500 thousand** for the six months ended June 30, 2021, and **$107,000 thousand** for the same period in 2020[115](index=115&type=chunk) Income Tax Components | Income Tax Component (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Current foreign income tax expense | $7 | $56 | $(49) | -87.5% | | Deferred income tax benefit | $(119) | $(136) | $17 | -12.5% | | Total income tax benefit | $(112) | $(80) | $(32) | 40.0% | - As of June 30, 2021, the company had approximately **$813,700 thousand** in U.S. federal NOL carryforwards, **$211,500 thousand** in U.S. capital loss carryforwards, and **$10,500 thousand** in federal and state R&D tax credits, mostly offset by a valuation allowance[117](index=117&type=chunk) [13. Shareholders' Equity](index=28&type=section&id=13.%20Shareholders%27%20Equity) This note details changes in shareholders' equity, primarily driven by issuances of common stock, including a public offering in January 2021 - In January 2021, a public offering of **17,250,000 shares** of common stock generated net proceeds of **$121,045 thousand**[118](index=118&type=chunk) - In January 2020, TS Biotechnology purchased **5,972,696 shares** of common stock for **$35,000 thousand** in a private placement[119](index=119&type=chunk) - The company entered into a Share Lending Agreement for **7,479,431 shares** of common stock, which is equity-classified and not included in loss per share calculations unless the borrower defaults[121](index=121&type=chunk)[122](index=122&type=chunk) Accumulated Other Comprehensive Income | Component (in thousands) | June 30, 2021 | December 31, 2020 | Change | % Change | | :----------------------- | :------------ | :---------------- | :----- | :------- | | Unrealized gain (loss) on investments | $(72) | $13 | $(85) | -653.8% | | Income on foreign currency translation adjustments | $2,613 | $3,984 | $(1,371)| -34.4% | | Total accumulated other comprehensive income | $2,541 | $3,997 | $(1,456)| -36.4% | [14. Share-Based Payments](index=29&type=section&id=14.%20Share-Based%20Payments) This note details the company's share-based payment plans, including stock options and restricted stock units (RSUs), and the associated compensation expense Total Stock-Based Compensation Expense (3 Months Ended) | Expense Category (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Change | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total Stock-based compensation expense | $3,557 | $4,897 | $(1,340)| -27.4% | Total Stock-Based Compensation Expense (6 Months Ended) | Expense Category (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :------------------------------ | :--------------------------- | :--------------------------- | :----- | :------- | | Total Stock-based compensation expense | $8,972 | $9,269 | $(297) | -3.2% | Share-Based Awards Outstanding | Share-Based Award | Outstanding at June 30, 2021 | | :---------------- | :--------------------------- | | Stock Options | 12,660,387 | | RSUs | 554,146 | - The Executive Chairman's compensation arrangement, effective 2021, includes an annual retainer, fully vested stock options, and RSUs, contributing to selling, general, and administrative expenses[130](index=130&type=chunk) [15. Operating Leases](index=30&type=section&id=15.%20Operating%20Leases) The company leases facilities and equipment under operating leases, with terms ranging from one to nine years Total Lease Costs | Lease Cost Component (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :---------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Operating lease costs | $1,668 | $1,798 | $(130) | -7.2% | | Short-term lease costs | $947 | $852 | $95 | 11.2% | | Variable lease costs | $464 | $449 | $15 | 3.3% | | Total Lease costs | $3,079 | $3,099 | $(20) | -0.6% | Lease Liabilities | Lease Liability (in thousands) | June 30, 2021 | | :----------------------------- | :------------ | | Total Lease Liabilities | $19,790 | | Present value adjustment | $(6,032) | | Total | $13,758 | | Current portion | $1,937 | | Long-term portion | $11,821 | - The weighted average remaining lease term was **6.50 years** as of June 30, 2021, with a weighted average discount rate of **10.96%**[132](index=132&type=chunk) [16. Commitments and Contingencies](index=31&type=section&id=16.%20Commitments%20and%20Contingencies) This note outlines the company's commitments and contingencies, including ongoing legal proceedings and past settlements - Trans Ova is involved in a second patent infringement lawsuit by XY, LLC, with five patents at issue, and a trial expected in January 2022[134](index=134&type=chunk) - In September 2020, the company settled an SEC investigation regarding MBP program disclosures, consenting to a cease and desist order and paying a **$2,500 thousand** civil money penalty[136](index=136&type=chunk) - Shareholder class action lawsuits and a derivative shareholder action were filed in late 2020, asserting claims similar to the SEC allegations, which the company intends to vigorously defend[137](index=137&type=chunk) - In December 2020, the company settled disputes with Harvest by issuing **2,117,264 shares** of common stock (valued at **$18,103 thousand**) in exchange for terminating ECC agreements and returning ownership interests in certain start-up entities[138](index=138&type=chunk) [17. Related Party Transactions](index=33&type=section&id=17.%20Related%20Party%20Transactions) This note details transactions with related parties, primarily Third Security and its affiliates, due to the Executive Chairman's role - The company reimburses Third Security for tax-related services and out-of-pocket expenses, totaling **$46 thousand** for the six months ended June 30, 2021[142](index=142&type=chunk) - Sublease income from Third Security for administrative offices was **$41 thousand** for the six months ended June 30, 2021[143](index=143&type=chunk) - Past transactions included holding convertible preferred stock, a convertible note, common shares, and warrants of Castle Creek, which ceased to be a related party after its acquisition in December 2019[145](index=145&type=chunk) [18. Net Loss per Share](index=33&type=section&id=18.%20Net%20Loss%20per%20Share) This note provides the computation of basic and diluted net loss per share, showing significant improvement due to reduced net loss and increased shares outstanding Net Loss per Share Summary | Metric | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :----- | :--------------------------- | :--------------------------- | :----- | :------- | | Net loss | $(37,368) | $(99,352) | $61,984 | -62.4% | | Weighted average shares outstanding | 196,275,820 | 162,201,915 | 34,073,905 | 21.0% | | Net loss per share, basic and diluted | $(0.19) | $(0.61) | $0.42 | -68.9% | Potentially Dilutive Securities | Potentially Dilutive Securities | June 30, 2021 | June 30, 2020 | | :------------------------------ | :------------ | :------------ | | Convertible debt | 11,732,440 | 24,750,914 | | Options | 12,660,387 | 11,383,039 | | Restricted stock units | 554,146 | 1,897,181 | | Warrants | 121,888 | 133,264 | | Total | 25,068,861 | 38,164,398 | - All potentially dilutive securities were excluded from diluted EPS computations for both periods as their inclusion would have been anti-dilutive[147](index=147&type=chunk) [19. Segments](index=34&type=section&id=19.%20Segments) This note provides financial information by reportable segment: Biopharmaceuticals, Exemplar, and Trans Ova, with performance assessed using Segment Adjusted EBITDA - The company's reportable segments are Biopharmaceuticals, Exemplar, and Trans Ova, with performance measured by Segment Adjusted EBITDA[150](index=150&type=chunk) Segment Adjusted EBITDA (6 Months Ended) | Segment Adjusted EBITDA (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Biopharmaceuticals | $(21,394) | $(17,345) | $(4,049)| 23.3% | | Exemplar | $3,695 | $857 | $2,838 | >200% | | Trans Ova | $18,433 | $7,668 | $10,765 | 140.4% | | Total Segment Adjusted EBITDA | $734 | $(8,820) | $9,554 | -108.3% | Revenues from External Customers (6 Months Ended) | Revenues from External Customers (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Change | % Change | | :---------------------------------------------- | :--------------------------- | :--------------------------- | :----- | :------- | | Biopharmaceuticals | $594 | $15,322 | $(14,728)| -96.1% | | Exemplar | $6,656 | $4,256 | $2,400 | 56.4% | | Trans Ova | $50,841 | $40,630 | $10,211 | 25.1% | | Total Consolidated Revenues | $58,091 | $60,262 | $(2,171)| -3.6% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting its strategic shift to a healthcare-focused biopharmaceutical company [Overview](index=37&type=section&id=Overview) Precigen is a discovery and clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases - Precigen is a biopharmaceutical company advancing gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases[156](index=156&type=chunk) - Key technology platforms include UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, designed for precision medicine with controlled gene expression and delivery[157](index=157&type=chunk) - Lead clinical programs include PRGN-3005, PRGN-3006 (UltraCAR-T), PRGN-2009, PRGN-2012 (AdenoVerse), and AG019 (ActoBiotics)[158](index=158&type=chunk) - The UltraPorator device received FDA clearance in October 2020 for manufacturing UltraCAR-T cells in clinical trials, streamlining rapid and cost-effective production[159](index=159&type=chunk) [Our Healthcare Business](index=37&type=section&id=Our%20Healthcare%20Business) Precigen's healthcare business focuses on human therapeutics and research models, including Biopharmaceuticals and Exemplar Genetics - The healthcare business comprises Biopharmaceuticals (PGEN Therapeutics, ActoBio, Triple-Gene) and Exemplar Genetics[161](index=161&type=chunk) - PGEN Therapeutics advances gene and cell therapies using UltraCAR-T (e.g., PRGN-3005 for ovarian cancer, PRGN-3006 for AML) and AdenoVerse immunotherapy (e.g., PRGN-2009 for HPV+ cancers, PRGN-2012 for RRP)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - ActoBio pioneers microbe-based biopharmaceuticals (ActoBiotics), with AG019 (for type 1 diabetes) in Phase 1b/2a clinical trials, showing encouraging safety and C-peptide level trends[169](index=169&type=chunk)[170](index=170&type=chunk) - Precigen Triple-Gene's INXN-4001 (non-viral triple-effector plasmid for heart failure) completed a Phase 1 trial, demonstrating safety and feasibility[171](index=171&type=chunk) - Exemplar Genetics develops genetically engineered MiniSwine Yucatan miniature pig research models for studying life-threatening human diseases[174](index=174&type=chunk) [Our Non-Healthcare Business](index=41&type=section&id=Our%20Non-Healthcare%20Business) As of June 30, 2021, Precigen's sole non-healthcare business is Trans Ova Genetics, L.C., a bovine genetics company - Trans Ova Genetics, L.C. is Precigen's only non-healthcare business as of June 30, 2021[175](index=175&type=chunk) - Trans Ova offers advanced bovine reproductive technologies such as embryo transfer, IVF, sexed-semen, genetic preservation, and cloning[176](index=176&type=chunk) [COVID-19 Impact](index=41&type=section&id=COVID-19%20Impact) The COVID-19 pandemic has significantly impacted global health and economic environments, causing delays in Precigen's clinical trials - COVID-19 caused temporary suspensions in AG019 Phase 1b/2a and PRGN-3005 Phase 1 clinical trials in early 2020, which have since resumed[178](index=178&type=chunk) - The full impact of the COVID-19 pandemic on the company's ongoing business, results of operations, and financial performance remains uncertain and cannot be reliably estimated[180](index=180&type=chunk) [Discontinued Operations](index=42&type=section&id=Discontinued%20Operations) Precigen has strategically shifted its focus to healthcare, divesting non-healthcare assets and suspending MBP Titan's methane bioconversion operations - The company divested non-healthcare assets in January 2020 and suspended MBP Titan's operations in 2020 as part of a strategic shift to focus on healthcare[181](index=181&type=chunk)[182](index=182&type=chunk) - Remaining assets and contractual obligations from MBP Titan, including equity interests and collaboration agreements with Intrexon Energy Partners and Intrexon Energy Partners II, are managed at the corporate level[182](index=182&type=chunk) [Segments](index=42&type=section&id=Segments) As of June 30, 2021, Precigen's reportable segments are Biopharmaceuticals, Exemplar, and Trans Ova, with corporate expenses managed at a consolidated level - Reportable segments as of June 30, 2021, are Biopharmaceuticals, Exemplar, and Trans Ova[184](index=184&type=chunk) - Corporate expenses, including finance, accounting, legal, HR, IT, and investor relations, are unallocated and managed at a consolidated level[185](index=185&type=chunk) [Financial overview](index=42&type=section&id=Financial%20overview) Precigen has incurred significant losses since inception and expects this trend to continue, necessitating additional capital - The company has incurred significant losses since inception, with an accumulated deficit of **$1.9 billion** as of June 30, 2021, and expects continued losses[186](index=186&type=chunk)[234](index=234&type=chunk) - Future revenues will depend on advancing proprietary healthcare programs, regulatory approvals, commercial scale-up, and maintaining/improving Trans Ova's and Exemplar's offerings[192](index=192&type=chunk) - Research and development expenses are expected to increase with the progression of proprietary preclinical and clinical programs[197](index=197&type=chunk) - Interest expense is projected to increase due to noncash amortization of the long-term debt discount and debt issuance costs related to convertible senior notes[201](index=201&type=chunk) [Results of operations](index=47&type=section&id=Results%20of%20operations) Precigen's results of operations show mixed performance, with increased revenues in some segments but also higher operating losses, offset by discontinued operations income [Comparison of the three months ended June 30, 2021 and the three months ended June 30, 2020](index=47&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030%2C%202021%20and%20the%20three%20months%20ended%20June%2030%2C%202020) This section compares the company's financial performance for the three months ended June 30, 2021 and 2020, highlighting revenue and expense trends | Metric (in thousands) | 3 Months Ended June 30, 2021 | 3 Months Ended June 30, 2020 | Dollar Change | Percent Change | | :-------------------- | :--------------------------- | :--------------------------- | :------------ | :------------- | | Total Revenues | $33,580 | $30,424 | $3,156 | 10.4% | | Collaboration and licensing revenues | $301 | $4,315 | $(4,014) | (93.0)% | | Product revenues | $8,335 | $8,540 | $(205) | (2.4)% | | Service revenues | $24,803 | $17,381 | $7,422 | 42.7% | | Total Operating Expenses | $49,254 | $42,254 | $7,000 | 16.6% | | Research and development | $13,681 | $9,474 | $4,207 | 44.4% | | Selling, general and administrative | $19,997 | $17,869 | $2,128 | 11.9% | | Operating Loss | $(15,674) | $(11,830) | $(3,844) | 32.5% | | Net Loss | $(20,050) | $(43,354) | $23,304 | (53.8)% | - Biopharmaceuticals' Segment Adjusted EBITDA declined by **71.2%** due to decreased collaboration revenues and increased costs for clinical and preclinical programs[212](index=212&type=chunk)[215](index=215&type=chunk) - Exemplar's Segment Adjusted EBITDA improved by **over 200%** due to increased service demand, price adjustments, and operational efficiencies[212](index=212&type=chunk)[216](index=216&type=chunk) - Trans Ova's Segment Adjusted EBITDA increased by **47.8%** due to higher customer demand, increased procedures, and improved pricing structure[212](index=212&type=chunk)[217](index=217&type=chunk) [Comparison of the six months ended June 30, 2021 and the six months ended June 30, 2020](index=50&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202021%20and%20the%20six%20months%20ended%20June%2030%2C%202020) This section compares the company's financial performance for the six months ended June 30, 2021 and 2020, focusing on revenue, expenses, and net loss | Metric (in thousands) | 6 Months Ended June 30, 2021 | 6 Months Ended June 30, 2020 | Dollar Change | Percent Change | | :-------------------- | :--------------------------- | :--------------------------- | :------------ | :------------- | | Total Revenues | $58,091 | $60,262 | $(2,171) | (3.6)% | | Collaboration and licensing revenues | $367 | $15,036 | $(14,669) | (97.6)% | | Product revenues | $14,716 | $13,501 | $1,215 | 9.0% | | Service revenues | $42,734 | $31,327 | $11,407 | 36.4% | | Total Operating Expenses | $91,453 | $88,692 | $2,761 | 3.1% | | Research and development | $24,202 | $20,801 | $3,401 | 16.4% | | Selling, general and administrative | $38,699 | $39,355 | $(656) | (1.7)% | | Operating Loss | $(33,362) | $(28,430) | $(4,932) | 17.3% | | Net Loss | $(37,368) | $(99,352) | $61,984 | (62.4)% | - Biopharmaceuticals' Segment Adjusted EBITDA declined by **23.3%** due to accelerated recognition of deferred revenue in the prior period and increased costs for clinical and preclinical programs[227](index=227&type=chunk)[230](index=230&type=chunk) - Exemplar's Segment Adjusted EBITDA improved by **over 200%** due to increased service demand, price adjustments, and operational efficiencies[227](index=227&type=chunk)[231](index=231&type=chunk) - Trans Ova's Segment Adjusted EBITDA increased by **140.4%** due to higher customer demand, increased procedures, and improved pricing structure[227](index=227&type=chunk)[232](index=232&type=chunk) [Liquidity and capital resources](index=52&type=section&id=Liquidity%20and%20capital%20resources) This section discusses the company's liquidity and capital resources, including its accumulated deficit, cash position, and future funding requirements - As of June 30, 2021, the company had **$36.4 million** in cash and cash equivalents and **$164.0 million** in short-term and long-term investments[234](index=234&type=chunk) - Net cash used in operating activities decreased by **$17.4 million** for the six months ended June 30, 2021, primarily due to increased cash inflows from Trans Ova and Exemplar, and reduced cash requirements for MBP Titan[236](index=236&type=chunk)[240](index=240&type=chunk) - Net cash provided by financing activities increased significantly by **$88.2 million**, driven by **$121.0 million** in net proceeds from a public offering of common stock in 2021[236](index=236&type=chunk)[242](index=242&type=chunk) - Future capital requirements depend on R&D progress, clinical trial outcomes, regulatory approvals, strategic transactions, and the impact of the COVID-19 pandemic[243](index=243&type=chunk) Contractual Obligations | Contractual Obligation (in thousands) | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :------------------------------------ | :-------- | :--------------- | :---------- | :---------- | :---------------- | | Operating leases | $19,790 | $3,344 | $6,192 | $4,945 | $5,309 | | Convertible debt | $200,000 | $0 | $200,000 | $0 | $0 | | Cash interest payable on convertible debt | $17,500 | $7,000 | $10,500 | $0 | $0 | | Long-term debt, excluding convertible debt | $3,501 | $356 | $772 | $783 | $1,590 | | Total | $240,791 | $10,700 | $217,464 | $5,728 | $6,899 | - Remaining capital contribution commitments to JVs were **$14.2 million** as of June 30, 2021, not included in the table due to timing uncertainty[250](index=250&type=chunk) - The company has net operating loss carryforwards of approximately **$813.7 million** for U.S. federal income tax purposes, largely offset by a valuation allowance[252](index=252&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate risk, for its cash, cash equivalents, and investments - As of June 30, 2021, the company held **$200.4 million** in cash, cash equivalents, and short-term and long-term investments[259](index=259&type=chunk) - Investments primarily consist of money market funds, U.S. government debt securities, and certificates of deposit[259](index=259&type=chunk) - A hypothetical **100 basis point** increase in interest rates is not expected to materially affect the fair value of interest-sensitive financial instruments[259](index=259&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2021, concluding they are effective - The CEO and Executive Director, Finance, concluded that disclosure controls and procedures were effective as of June 30, 2021[260](index=260&type=chunk) - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2021[261](index=261&type=chunk) [PART II - OTHER INFORMATION](index=57&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information beyond the financial statements, covering legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, but management does not believe these will have a material adverse effect on its business or financial condition - The company is involved in litigation and governmental investigations, but management does not believe these will have a material adverse effect on the business as of June 30, 2021[264](index=264&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No additional material updates or changes to risk factors have occurred since the filing of the Annual Report on Form 10-K for the year ended December 31, 2020[266](index=266&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period [Item 3. Defaults on Senior Securities](index=57&type=section&id=Item%203.%20Defaults%20on%20Senior%20Securities) This section indicates that there were no defaults on senior securities to report for the period [Item 4. Mine Safety Disclosures](index=57&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Item 5. Other Information](index=57&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report for the period [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and Executive Director, Finance - Exhibits include certifications from the CEO and Executive Director, Finance, as per Sarbanes-Oxley Act sections 302 and 906[273](index=273&type=chunk) - An Interactive Data File (XBRL) of the Condensed Consolidated Financial Statements is attached as Exhibit 101.0[273](index=273&type=chunk) [SIGNATURES](index=59&type=section&id=SIGNATURES) The report is duly signed on behalf of Precigen, Inc. by James V. Lambert, Executive Director, Finance, on August 9, 2021 - The report was signed by James V. Lambert, Executive Director, Finance (Interim Principal Financial and Accounting Officer) on August 9, 2021[275](index=275&type=chunk)

[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20%28unaudited%29%3A) This section presents Precigen, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $407.0 million, liabilities decreased to $232.2 million, and shareholders' equity grew to $174.8 million as of March 31, 2021 Condensed Consolidated Balance Sheet Data (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $27,355 | $51,792 | | Total current assets | $144,118 | $148,948 | | Total assets | $406,984 | $314,587 | | **Liabilities & Equity** | | | | Total current liabilities | $25,243 | $42,127 | | Total liabilities | $232,189 | $247,413 | | Total shareholders' equity | $174,795 | $67,174 | | Total liabilities and shareholders' equity | $406,984 | $314,587 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Total revenues decreased to $24.5 million, while net loss improved significantly to $17.3 million for the three months ended March 31, 2021 Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total revenues | $24,511 | $29,838 | | Operating loss | $(17,688) | $(16,600) | | Loss from continuing operations | $(21,844) | $(20,846) | | Income (loss) from discontinued operations | $4,526 | $(35,152) | | Net loss | $(17,318) | $(55,998) | | Net loss per share, basic and diluted | $(0.09) | $(0.35) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $16.4 million, while financing activities provided $121.0 million, resulting in a $24.5 million net decrease in cash Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(16,384) | $(27,743) | | Net cash used in investing activities | $(129,102) | $(36,553) | | Net cash provided by financing activities | $121,040 | $34,151) | | Net decrease in cash, cash equivalents, and restricted cash | $(24,457) | $(30,184) | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, business organization, discontinued operations, revenue recognition, debt structure, and confirm sufficient liquidity for the next year - The company is a synthetic biology firm focusing on gene and cellular therapies for immuno-oncology, autoimmune disorders, and infectious diseases. It operates through subsidiaries including PGEN Therapeutics, ActoBio, and Exemplar[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - The company completed the wind-down of its methane bioconversion subsidiary, MBP Titan, in January 2021, resulting in a gain of **$4.6 million** from lease termination and a gain of **$0.46 million** on asset sales, included in income from discontinued operations for Q1 2021[55](index=55&type=chunk)[56](index=56&type=chunk) - In January 2021, the company closed a public offering of **17,250,000 shares** of common stock, resulting in net proceeds of **$121.0 million**[117](index=117&type=chunk) - As of March 31, 2021, the company had **$200 million** in principal outstanding on its **3.50% convertible senior notes** due 2023, with a carrying value of **$170.9 million**[108](index=108&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's transition to a clinical-stage biopharmaceutical focus, reviewing segment performance, financial results, and confirming sufficient liquidity for the next 12 months - Precigen is a clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases, utilizing platforms like UltraCAR-T, AdenoVerse, and ActoBiotics[157](index=157&type=chunk)[158](index=158&type=chunk) - Key clinical programs include PRGN-3005 (ovarian cancer), PRGN-3006 (AML), PRGN-2009 (HPV+ tumors), PRGN-2012 (RRP), and AG019 (type 1 diabetes), with ongoing preclinical programs and the UltraPorator device for rapid UltraCAR-T manufacturing[159](index=159&type=chunk)[160](index=160&type=chunk) Results of Operations Comparison (in thousands) | Line Item | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $24,511 | $29,838 | $(5,327) | (17.9)% | | Operating loss | $(17,688) | $(16,600) | $(1,088) | 6.6% | | Loss from continuing operations | $(21,844) | $(20,846) | $(998) | 4.8% | | Net loss | $(17,318) | $(55,998) | $38,680 | (69.1)% | Segment Adjusted EBITDA (in thousands) | Segment | Q1 2021 | Q1 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Biopharmaceuticals | $(8,854) | $(10,022) | $1,168 | 11.7% | | Exemplar | $1,806 | $250 | $1,556 | >200% | | Trans Ova | $6,421 | $(457) | $6,878 | >200% | - The company believes its existing liquid assets of **$27.4 million** in cash and **$181.9 million** in investments will be sufficient to fund operations and capital requirements for at least the next **12 months**[221](index=221&type=chunk)[230](index=230&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$209.3 million** cash and investments, with no material impact expected from a 100 basis point rate increase - The company is exposed to interest rate risk on its **$209.3 million** in cash, cash equivalents, and investments, with the portfolio structured to preserve principal and maintain liquidity[246](index=246&type=chunk) - Management believes a hypothetical **100 basis point** increase in interest rates would not have a material effect on the fair value of its financial instruments, and losses would only be realized upon sale before maturity[246](index=246&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The CEO and interim Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[247](index=247&type=chunk) - No material changes were made to the company's internal control over financial reporting during the first quarter of 2021[248](index=248&type=chunk) [PART II - OTHER INFORMATION](index=53&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, none of which are expected to have a material adverse effect on its financial condition or operations - The company does not believe that any ongoing legal matters will have a material adverse effect on its business, financial condition, or cash flows as of March 31, 2021[251](index=251&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) No material updates or changes to the company's previously disclosed risk factors have occurred - No material updates or changes to the company's risk factors have occurred since the filing of the Annual Report[253](index=253&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[255](index=255&type=chunk) [Item 6. Exhibits](index=54&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Interactive Data Files - The report includes certifications from the CEO and interim Principal Financial Officer as required by the Sarbanes-Oxley Act, as well as Interactive Data Files (XBRL)[260](index=260&type=chunk)

Precigen, Inc. (NASDAQ:PGEN) Q4 2020 Earnings Conference Call March 1, 2020 4:30 PM ET Company Participants Steven Harasym - Head, IR Helen Sabzevari - President & CEO Tom Samuelson - Head, Financial Strategy Conference Call Participants Jason Butler - JMP Securities Chuck Whitesell - Wells Fargo Securities Hannah Adeoye - JPMorgan Arthur He - HC Wainwright Justin Walsh - B. Riley Securities Operator Good day and welcome to Precigen Fourth Quarter and Yearend 2020 Financial Results Conference call. [Operato ...

PART I [Business](index=7&type=section&id=Item%201.%20Business) Precigen is a clinical-stage biopharmaceutical company developing gene and cell therapies for various diseases using proprietary platforms - Precigen is a clinical-stage biopharmaceutical company focused on developing gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases[25](index=25&type=chunk) - The company's core therapeutic platforms include **UltraCAR-T**, **AdenoVerse immunotherapy**, and **ActoBiotics**, designed for precise control of gene expression[26](index=26&type=chunk) - In January 2020, the company increased its focus on healthcare opportunities, divested numerous non-healthcare assets, and changed its name to **Precigen, Inc**[181](index=181&type=chunk) Key Clinical Pipeline Programs | Product | Platform | Indication | Phase | | :--- | :--- | :--- | :--- | | PRGN-3005 | UltraCAR-T | Ovarian Cancer | Phase 1 | | PRGN-3006 | UltraCAR-T | AML, MDS | Phase 1 | | PRGN-2009 | AdenoVerse Immunotherapy | HPV+ Solid Tumors | Phase 1 | | AG019 | ActoBiotics | Type 1 Diabetes | Phase 1/2 | | PRGN-2012 | AdenoVerse Immunotherapy | Recurrent Respiratory Papillomatosis | Phase 1 | | INXN-4001 | Non-viral UltraVector | Heart Failure | Phase 1 (Completed) | [Our Strategy](index=8&type=section&id=Our%20Strategy) The company's strategy centers on advancing lead clinical programs and leveraging its technology platforms to create precision medicines - Precigen's strategy focuses on advancing its lead clinical programs, strategically pursuing preclinical programs with a data-driven **"go/no-go" approach**, and leveraging its technology platforms across various indications to create precision medicines[33](index=33&type=chunk) [Our Healthcare Subsidiaries and Platforms](index=9&type=section&id=Our%20Healthcare%20Subsidiaries%20and%20Platforms) The healthcare business operates through subsidiaries utilizing the UltraCAR-T, AdenoVerse, and ActoBiotics platforms - The healthcare business is operated through wholly-owned subsidiaries PGEN Therapeutics, Precigen ActoBio, and Precigen Exemplar, along with a majority interest in Precigen Triple-Gene[36](index=36&type=chunk) - The **UltraCAR-T platform** aims to improve upon traditional CAR-T therapies by shortening manufacturing time to overnight, reducing costs, and enhancing persistence[44](index=44&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) - The **AdenoVerse immunotherapy platform** utilizes proprietary gorilla adenovectors, which offer a large genetic payload capacity and suitability for repeat administration[71](index=71&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - The **ActoBiotics platform** uses the food-grade bacterium L. lactis for local delivery of therapeutics, with its lead candidate AG019 targeting Type 1 Diabetes[98](index=98&type=chunk)[103](index=103&type=chunk) [Competition: Healthcare Business](index=24&type=section&id=Competition%3A%20Healthcare%20Business) The company faces significant competition from large pharmaceutical and biotechnology companies with greater resources and established products - The company faces significant competition from large pharmaceutical and biotechnology companies with greater resources[116](index=116&type=chunk)[118](index=118&type=chunk) - In immuno-oncology, competitors for its UltraCAR-T and AdenoVerse programs include **Bristol-Myers Squibb**, **Celyad**, **Mustang Bio**, and **AstraZeneca**[119](index=119&type=chunk)[124](index=124&type=chunk) - In autoimmune disorders, primary competitors for its T1D candidate AG019 include **Provention Bio**, **Midatech Pharma**, and **MerciaPharma**[129](index=129&type=chunk) [Intellectual Property](index=26&type=section&id=Intellectual%20Property) A multi-layered IP strategy using patents, trademarks, and trade secrets protects the company's technologies and product pipeline - Precigen employs a multi-layered IP strategy using patents, trademarks, and trade secrets to protect its technologies and product pipeline[130](index=130&type=chunk)[133](index=133&type=chunk) - As of December 31, 2020, the company owned or in-licensed at least **55 issued U.S. patents** and **40 pending U.S. patent applications**, with key patents extending to 2042[134](index=134&type=chunk)[135](index=135&type=chunk) [Regulatory Environment](index=27&type=section&id=Regulatory%20Environment) The company's products are subject to extensive regulation by the FDA and other governmental authorities covering the entire product lifecycle - The company's products are subject to extensive regulation by governmental authorities in the U.S. (FDA) and other countries[140](index=140&type=chunk)[143](index=143&type=chunk) - The U.S. pharmaceutical development process involves preclinical testing, submitting an **Investigational New Drug (IND) application**, and conducting three phases of human clinical trials[146](index=146&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) - The company may seek expedited review programs such as **Orphan Drug Designation** and **Regenerative Medicine Advanced Therapy (RMAT) Designation** to accelerate development[157](index=157&type=chunk)[161](index=161&type=chunk)[163](index=163&type=chunk) [Transition to Our Core Healthcare Business Model](index=33&type=section&id=Transition%20to%20Our%20Core%20Healthcare%20Business%20Model) In 2020, the company divested non-healthcare assets and suspended its methane bioconversion business to focus on healthcare opportunities - In January 2020, the company divested a number of its non-healthcare assets to increase focus on its healthcare opportunities[181](index=181&type=chunk)[183](index=183&type=chunk) - During 2020, the company suspended operations of its methane bioconversion business, **MBP Titan, LLC**, due to market uncertainty[184](index=184&type=chunk) [Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, developmental, commercial, and operational risks that could adversely affect its business - The company has a history of net losses, with a **net loss attributable to Precigen of $170.5 million in 2020** and an **accumulated deficit of $1.8 billion** as of December 31, 2020[205](index=205&type=chunk)[208](index=208&type=chunk) - The business is highly dependent on advancing product candidates through lengthy and expensive clinical trials with **uncertain outcomes**[214](index=214&type=chunk)[216](index=216&type=chunk)[224](index=224&type=chunk) - Commercial success depends on market acceptance and third-party payer reimbursement, facing **significant competition** from larger, better-funded companies[240](index=240&type=chunk)[249](index=249&type=chunk)[286](index=286&type=chunk) - As of December 31, 2020, the Executive Chairman, Randal J. Kirk, controlled approximately **44% of the company's common stock**, allowing significant influence over corporate actions[361](index=361&type=chunk) [Unresolved Staff Comments](index=66&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - Not applicable[370](index=370&type=chunk) [Properties](index=66&type=section&id=Item%202.%20Properties) The company's primary lab and production facilities are located in Maryland, Belgium, and Iowa - The Trans Ova segment's primary domestic production facilities are in Sioux Center, Iowa, including approximately **275,000 square feet** of facilities and **360 acres** of land[371](index=371&type=chunk) Primary Lab Operations Facilities | Location | Segment | Square Footage | | :--- | :--- | :--- | | Germantown, Maryland | PGEN Therapeutics | 61,048 | | Ghent, Belgium | ActoBio | 14,198 | [Legal Proceedings](index=66&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course litigation that is not expected to have a material adverse effect on the business - The company is involved in litigation and legal matters but does not believe any will have a material adverse effect on its business, financial condition, or cash flows[373](index=373&type=chunk) [Mine Safety Disclosures](index=66&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports that this item is not applicable - Not applicable[375](index=375&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=67&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under the symbol "PGEN" and it does not anticipate paying cash dividends - The company's common stock trades on the Nasdaq Global Select Market under the symbol **"PGEN"**[376](index=376&type=chunk) - The company has never declared or paid cash dividends and does not expect to in the foreseeable future, intending to retain any earnings for business growth[378](index=378&type=chunk) [Selected Financial Data](index=69&type=section&id=Item%206.%20Selected%20Financial%20Data) This section provides selected consolidated financial data for the fiscal years 2016 through 2020 Selected Consolidated Financial Data (In thousands, except per share data) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | **Statements of Operations Data:** | | | | | Total revenues | $103,178 | $90,722 | $151,178 | | Operating loss | $(86,603) | $(166,789) | $(369,667) | | Loss from continuing operations | $(103,773) | $(170,334) | $(380,487) | | Net loss from continuing operations attributable to Precigen | $(103,773) | $(168,742) | $(375,117) | | Net loss from continuing operations per share, basic and diluted | $(0.62) | $(1.09) | $(2.90) | | **Balance Sheet Data (at year-end):** | | | | | Cash and cash equivalents | $51,792 | $65,793 | $96,876 | | Total assets | $314,587 | $455,763 | $716,177 | | Long-term debt | $171,882 | $217,991 | $211,695 | | Total Precigen shareholders' equity | $67,174 | $71,711 | $362,855 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, transition to a healthcare focus, and liquidity position - The company has transitioned its business model to focus on healthcare, divesting non-healthcare assets and discontinuing its methane bioconversion (MBP Titan) operations in 2020[395](index=395&type=chunk)[396](index=396&type=chunk) - Collaboration and licensing revenues **increased by 51%** in 2020 due to accelerated recognition of deferred revenue from terminated collaborations[421](index=421&type=chunk) - Research and development expenses **decreased by 38%** in 2020, primarily due to the deprioritization of certain programs and the closure of two operating divisions in 2019[424](index=424&type=chunk) - As of December 31, 2020, the company had cash and cash equivalents of **$51.8 million** and short-term investments of **$48.3 million**[461](index=461&type=chunk) Results of Operations Comparison (2020 vs. 2019, in thousands) | | 2020 | 2019 | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $103,178 | $90,722 | $12,456 | 13.7% | | Total operating expenses | $189,781 | $257,511 | $(67,730) | (26.3)% | | Operating loss | $(86,603) | $(166,789) | $80,186 | (48.1)% | | Loss from continuing operations | $(103,773) | $(170,334) | $66,561 | (39.1)% | [Quantitative and Qualitative Disclosures About Market Risk](index=88&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk on its cash and investments and foreign currency exchange risk - The company's primary market risks are interest rate risk on its **$100.1 million portfolio** of cash and investments, and foreign currency exchange risk from its operations in Belgium and Germany[508](index=508&type=chunk)[509](index=509&type=chunk) [Financial Statements and Supplementary Data](index=88&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates by reference the company's consolidated financial statements and supplementary data - This item refers to the full consolidated financial statements and related notes, which are included later in the report[510](index=510&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=88&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants - None[511](index=511&type=chunk) [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2020[512](index=512&type=chunk) - Management assessed internal control over financial reporting as **effective** as of December 31, 2020, and the independent auditor issued an unqualified opinion on its effectiveness[516](index=516&type=chunk)[517](index=517&type=chunk) [Other Information](index=89&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[519](index=519&type=chunk) PART III This part incorporates information by reference from the company's 2021 Definitive Proxy Statement for its Annual Meeting of Shareholders [Directors, Executive Officers and Corporate Governance](index=90&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's 2021 Definitive Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders[521](index=521&type=chunk) [Executive Compensation](index=90&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's 2021 Definitive Proxy Statement - Information regarding executive compensation is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders[523](index=523&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=90&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's 2021 Definitive Proxy Statement - Information regarding security ownership is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders[524](index=524&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=90&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's 2021 Definitive Proxy Statement - Information regarding related party transactions and director independence is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders[525](index=525&type=chunk) [Principal Accountant Fees and Services](index=90&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's 2021 Definitive Proxy Statement - Information regarding principal accountant fees and services is incorporated by reference from the company's Definitive Proxy Statement for its 2021 Annual Meeting of Shareholders[526](index=526&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=91&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the consolidated financial statements, schedules, and exhibits filed with the Annual Report - This item lists the financial statements and exhibits filed as part of the Form 10-K[528](index=528&type=chunk)[529](index=529&type=chunk) [Form 10-K Summary](index=94&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports that this item is not applicable - None[539](index=539&type=chunk) Financial Statements [Consolidated Balance Sheets](index=130&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets present the company's financial position, showing a decrease in total assets to $314.6 million in 2020 Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $51,792 | $65,793 | | Total current assets | $148,948 | $234,643 | | Total assets | $314,587 | $455,763 | | Total current liabilities | $42,127 | $122,912 | | Long-term debt, net | $171,522 | $186,321 | | Total liabilities | $247,413 | $384,052 | | Total shareholders' equity | $67,174 | $71,711 | [Consolidated Statements of Operations](index=132&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported total revenues of $103.2 million and a net loss attributable to Precigen of $170.5 million for 2020 Consolidated Statement of Operations Data (in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenues | $103,178 | $90,722 | $151,178 | | Operating loss | $(86,603) | $(166,789) | $(369,667) | | Loss from continuing operations | $(103,773) | $(170,334) | $(380,487) | | Loss from discontinued operations | $(66,748) | $(153,582) | $(134,219) | | Net loss attributable to Precigen | $(170,521) | $(322,324) | $(509,336) | | Net loss per share, basic and diluted | $(1.02) | $(2.09) | $(3.93) | [Consolidated Statements of Cash Flows](index=137&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $77.0 million in 2020, and the company's cash balance decreased by $16.2 million Consolidated Cash Flow Data (in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(77,021) | $(135,927) | $(124,240) | | Net cash provided by (used in) investing activities | $27,779 | $86,851 | $(151,213) | | Net cash provided by financing activities | $32,705 | $8,138 | $309,795 | | Net (decrease) increase in cash | $(16,184) | $(41,748) | $34,637 | [Notes to the Consolidated Financial Statements](index=140&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, discontinued operations, revenue, debt, and contingencies - **Note 3 (Discontinued Operations)**: Details the wind-down of the MBP Titan business and the sale of other non-healthcare assets, representing a major strategic shift to focus on healthcare[685](index=685&type=chunk)[692](index=692&type=chunk)[694](index=694&type=chunk) - **Note 6 (Collaboration and Licensing Revenue)**: Summarizes revenue from collaborations, including the termination of agreements with Castle Creek and Oragenics, which led to the accelerated recognition of **$20.2 million** in revenue[723](index=723&type=chunk)[739](index=739&type=chunk)[747](index=747&type=chunk) - **Note 12 (Long-Term Debt)**: Details the **$200 million** principal amount of 3.50% convertible senior notes due 2023, with a carrying value of **$168.1 million** as of Dec 31, 2020[773](index=773&type=chunk)[778](index=778&type=chunk) - **Note 17 (Commitments and Contingencies)**: Discloses ongoing patent infringement litigation and shareholder class action lawsuits filed in October 2020 following an SEC settlement[818](index=818&type=chunk)[821](index=821&type=chunk)

| --- | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | | | | | | Forward‐looking Statements Some of the statements made in this presentation are forward‐looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward‐ looking statements are based upon Precigen's current expectations and projections about future events and generally relate to plans, object ...

[SEC Filing Information](index=1&type=section&id=Table%20of%20Contents%20(SEC%20Filing%20Info)) This section provides standard SEC filing details for the Form 10-Q, including registrant information and filing status [Form 10-Q Details](index=1&type=section&id=Form%2010-Q%20Details) This section provides the standard SEC filing information for the Form 10-Q, including the registrant's name, address, commission file number, and details about its common stock listing on the Nasdaq Global Select Market. It also confirms the registrant's filing status as a large accelerated filer and its compliance with SEC reporting requirements - Registrant: **PRECIGEN, INC. (PGEN)**[3](index=3&type=chunk)[4](index=4&type=chunk) - Filing Type: Quarterly Report (Form 10-Q) for the period ended September 30, 2020[2](index=2&type=chunk) **Filing Status:** | Indicator | Status | | :--- | :--- | | Large accelerated filer | ☒ | | Filed all required reports (preceding 12 months) | Yes ☒ | | Submitted Interactive Data File (preceding 12 months) | Yes ☒ | [Report Table of Contents](index=3&type=section&id=Table%20of%20Contents%20(Report%20Specific)) This section outlines the detailed structure of the Form 10-Q, categorizing financial and other information with corresponding page numbers [Report Structure](index=3&type=section&id=Report%20Structure) This section presents the detailed table of contents for the Form 10-Q, outlining the structure of the financial information (Part I) and other information (Part II), along with corresponding page numbers for each item - The report is divided into two main parts: Part I - Financial Information (starting on page 5) and Part II - Other Information (starting on page 65)[7](index=7&type=chunk) [Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) This section provides a cautionary statement about forward-looking statements in the report, emphasizing potential material differences in actual results due to risks [Forward-Looking Statements Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20Disclaimer) This section provides a cautionary statement regarding forward-looking statements contained within the report, highlighting that actual results may differ materially due to substantial risks and uncertainties. It lists various aspects of the company's strategy, future events, financial position, and market conditions that are considered forward-looking - The report contains forward-looking statements subject to substantial risks and uncertainties, and actual results may differ materially from disclosed plans[10](index=10&type=chunk)[13](index=13&type=chunk) - Forward-looking statements cover strategy, future events, operations, financial position, revenue, costs, prospects, plans, management objectives, and expected market growth[10](index=10&type=chunk) - Key risk factors are detailed in Part II, Item 1A. "Risk Factors," and the company does not assume any obligation to update these statements[13](index=13&type=chunk)[14](index=14&type=chunk) [PART I - FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This part contains the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period [Item 1. Condensed Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This item presents the unaudited condensed consolidated financial statements of Precigen, Inc. and its subsidiaries for the periods ended September 30, 2020, and December 31, 2019, including balance sheets, statements of operations, comprehensive loss, shareholders' equity, and cash flows, along with accompanying notes - The financial statements are unaudited and prepared in accordance with U.S. GAAP, reflecting all normal recurring adjustments for fair statement[58](index=58&type=chunk) - Interim financial results are not necessarily indicative of full-year results[58](index=58&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show the company's financial position as of September 30, 2020, compared to December 31, 2019, indicating a decrease in total assets and total liabilities, and a reduction in shareholders' equity **Condensed Consolidated Balance Sheets (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $336,186 | $455,763 | $(119,577) | | Total Liabilities | $277,634 | $384,052 | $(106,418) | | Total Shareholders' Equity | $58,552 | $71,711 | $(13,159) | - Current assets held for sale decreased from **$110,821 thousand** in Dec 2019 to **$0** in Sep 2020, reflecting the sale of bioengineering assets[18](index=18&type=chunk) - Cash and cash equivalents decreased from **$65,793 thousand** to **$27,740 thousand**, while short-term investments significantly increased from **$9,260 thousand** to **$85,358 thousand**[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations show a significant reduction in net loss for both the three and nine months ended September 30, 2020, compared to the prior year, driven by increased revenues and substantial decreases in operating expenses, particularly research and development **Condensed Consolidated Statements of Operations (Amounts in thousands):** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $23,583 | $18,299 | $83,845 | $73,720 | | Total Operating Expenses | $48,561 | $62,936 | $173,994 | $199,946 | | Operating Loss | $(24,978) | $(44,637) | $(90,149) | $(126,226) | | Net Loss | $(29,508) | $(53,634) | $(128,860) | $(154,701) | | Net Loss per Share (Basic & Diluted) | $(0.18) | $(0.35) | $(0.79) | $(1.00) | - Research and development expenses decreased by **52.6%** for the three months and **44.0%** for the nine months ended September 30, 2020, compared to the prior year[24](index=24&type=chunk) - Loss from discontinued operations significantly impacted the nine-month net loss in 2020 (**$26,056 thousand**) compared to 2019 (**$20,442 thousand**)[24](index=24&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The condensed consolidated statements of comprehensive loss show a decrease in comprehensive loss for both the three and nine months ended September 30, 2020, compared to the prior year, primarily due to a reduction in net loss and a significant gain on foreign currency translation adjustments for the nine-month period **Condensed Consolidated Statements of Comprehensive Loss (Amounts in thousands):** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(29,508) | $(53,634) | $(128,860) | $(154,701) | | Other Comprehensive Income (Loss): | | | | | | Unrealized gain (loss) on investments | $(186) | $(25) | $86 | $81 | | Gain (loss) on foreign currency translation adjustments | $2,198 | $(4,871) | $1,787 | $(4,560) | | Release of cumulative foreign currency translation adjustments to loss from discontinued operations | $0 | $0 | $26,957 | $0 | | Comprehensive Loss | $(27,496) | $(58,530) | $(100,030) | $(159,180) | - A significant non-cash item for the nine months ended September 30, 2020, was the release of **$26,957 thousand** in cumulative foreign currency translation adjustments to loss from discontinued operations[29](index=29&type=chunk) [Condensed Consolidated Statements of Shareholders' and Total Equity](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20and%20Total%20Equity) The condensed consolidated statements of shareholders' and total equity show a decrease in total shareholders' equity from $71,711 thousand at December 31, 2019, to $58,552 thousand at September 30, 2020, primarily due to net loss, partially offset by increases in additional paid-in capital from stock-based compensation, private placements, and debt conversions **Changes in Shareholders' Equity (Amounts in thousands):** | Item | Dec 31, 2019 Balance | 9 Months Ended Sep 30, 2020 Changes | Sep 30, 2020 Balance | | :--- | :--- | :--- | :--- | | Additional Paid-in Capital | $1,752,048 | +$86,871 | $1,838,919 | | Accumulated Deficit | $(1,652,869) | $(128,860) | $(1,781,729) | | Accumulated Other Comprehensive Income (Loss) | $(27,468) | +$28,830 | $1,362 | | Total Shareholders' Equity | $71,711 | $(13,159) | $58,552 | - Shares issued in a private placement contributed **$35,000 thousand** to additional paid-in capital during the nine months ended September 30, 2020[35](index=35&type=chunk) - Conversion of long-term debt resulted in the issuance of **6,293,402 shares** and added **$31,827 thousand** to additional paid-in capital[35](index=35&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=14&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows indicate a net decrease in cash, cash equivalents, and restricted cash of $40,257 thousand for the nine months ended September 30, 2020, primarily driven by cash used in operating and investing activities, partially offset by cash provided by financing activities **Condensed Consolidated Statements of Cash Flows (Amounts in thousands):** | Cash Flow Activity | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Operating Activities | $(60,552) | $(103,785) | | Investing Activities | $(12,405) | $32,342 | | Financing Activities | $32,777 | $6,939 | | Effect of exchange rate changes | $(77) | $(843) | | Net Decrease in Cash, Cash Equivalents, and Restricted Cash | $(40,257) | $(65,347) | | End of Period Cash, Cash Equivalents, and Restricted Cash | $28,177 | $44,835 | - Cash used in operating activities decreased significantly by **$43,233 thousand**, primarily due to reduced funding for divested businesses and streamlined operations[41](index=41&type=chunk)[298](index=298&type=chunk) - Investing activities shifted from providing cash in 2019 to using cash in 2020, with significant purchases of investments (**$171,360 thousand**) and proceeds from the sale of discontinued operations (**$64,240 thousand**)[43](index=43&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=17&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the condensed consolidated financial statements, offering explanations and additional information on the company's organization, significant accounting policies, discontinued operations, investments, revenue recognition, and various financial statement line items - The notes are an integral part of the financial statements, providing context and detail for the unaudited interim periods[48](index=48&type=chunk) [1. Organization](index=17&type=section&id=1.%20Organization) Precigen, Inc. is a synthetic biology company increasingly focused on gene and cellular therapies for immuno-oncology, autoimmune disorders, and infectious diseases. It operates through wholly-owned subsidiaries like PGEN Therapeutics, ActoBio, Exemplar, Trans Ova, and Progentus, and has undergone significant divestitures, including bioengineering assets and AquaBounty, to sharpen its healthcare focus - Precigen is a synthetic biology company focusing on discovery and clinical stage gene and cellular therapies for immuno-oncology, autoimmune disorders, and infectious diseases[49](index=49&type=chunk) - Key wholly-owned subsidiaries include PGEN Therapeutics (gene/cell therapies), ActoBio (microbe-based biopharmaceuticals), Exemplar (MiniSwine research models), and Trans Ova/Progentus (reproductive technologies)[50](index=50&type=chunk)[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company completed the sale of most bioengineering assets in January 2020 and deconsolidated AquaBounty in April 2019, reclassifying these as discontinued operations to focus on healthcare[55](index=55&type=chunk)[56](index=56&type=chunk) [2. Summary of Significant Accounting Policies](index=18&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including the basis of presentation, liquidity management, risks and uncertainties (notably COVID-19 impacts), equity method investments, variable interest entities, accounts receivable, segment information, use of estimates, and recently adopted and issued accounting pronouncements - The financial statements are prepared under U.S. GAAP, with certain annual disclosures condensed or omitted[58](index=58&type=chunk) - Management expects operating losses and negative cash flows to continue, requiring additional capital to fund operations and achieve profitability[60](index=60&type=chunk) - COVID-19 has caused clinical trial delays (e.g., AG019, PRGN-3005) and led to the suspension of MBP Titan's operations, with the full impact on future financial performance currently unquantifiable[62](index=62&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) [3. Discontinued Operations](index=21&type=section&id=3.%20Discontinued%20Operations) Precigen completed the sale of a majority of its bioengineering assets (TS Biotechnology Sale) and its equity interest in EnviroFlight (EnviroFlight Sale) in January 2020. These transactions represent a strategic shift to focus on healthcare, and the related assets, liabilities, and operations are reclassified as discontinued operations for all periods presented - On January 31, 2020, Precigen sold most of its bioengineering assets to TS Biotechnology for **$53,000 thousand** and contingent payment rights[83](index=83&type=chunk) - On January 2, 2020, the company sold its equity interest in EnviroFlight to Darling Ingredients, Inc. for **$12,200 thousand**[84](index=84&type=chunk) - These sales represent a strategic shift towards becoming a primarily healthcare company[85](index=85&type=chunk) **Loss from Discontinued Operations (Amounts in thousands):** | Item | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Revenues | $1,294 | $8,644 | | Operating Income (Loss) | $398 | $(18,503) | | Gain on sale of discontinued operations | $672 | $0 | | Loss on release of cumulative foreign currency translation adjustment | $(26,957) | $0 | | Loss from discontinued operations | $(26,056) | $(20,442) | [4. Investments in Joint Ventures](index=25&type=section&id=4.%20Investments%20in%20Joint%20Ventures) Precigen holds equity method investments in joint ventures, Intrexon Energy Partners (IEP) and Intrexon Energy Partners II (IEPII), both focused on methane bioconversion technology. The company has remaining capital contribution commitments of $4,225 thousand for IEP and $10,000 thousand for IEPII as of September 30, 2020 - Precigen has a **50% membership interest** in Intrexon Energy Partners (IEP), focused on methane bioconversion for fuels and lubricants[102](index=102&type=chunk) - Precigen has a **50% membership interest** in Intrexon Energy Partners II (IEPII), focused on methane bioconversion for 1,4-butanediol[104](index=104&type=chunk) **Remaining Capital Contribution Commitments (Amounts in thousands):** | Joint Venture | Remaining Commitment (Sep 30, 2020) | | :--- | :--- | | Intrexon Energy Partners, LLC | $4,225 | | Intrexon Energy Partners II, LLC | $10,000 | [5. Collaboration and Licensing Revenue](index=27&type=section&id=5.%20Collaboration%20and%20Licensing%20Revenue) Collaboration and licensing revenues increased by $2.9 million (128%) for the three months and $5.5 million (38%) for the nine months ended September 30, 2020, primarily due to accelerated recognition of deferred revenue from the mutual termination of collaborations with Oragenics and the termination/modification of agreements with Castle Creek **Collaboration and Licensing Revenues (Amounts in thousands):** | Counterparty | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Oragenics, Inc. | $2,823 | $231 | $3,053 | $613 | | Castle Creek Biosciences, Inc. | $2,394 | $402 | $16,967 | $3,247 | | Total | $5,223 | $2,296 | $20,259 | $14,717 | - In July 2020, the ECC with Oragenics was terminated, leading to the recognition of **$2,823 thousand** in deferred revenue[113](index=113&type=chunk) - In March 2020, the 2012 Castle Creek ECC was terminated/modified, and in February 2020, the 2015 Castle Creek ECC was terminated, resulting in significant deferred revenue recognition[114](index=114&type=chunk)[115](index=115&type=chunk) **Deferred Revenue (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Collaboration and licensing agreements | $30,964 | $50,593 | | Total Deferred Revenue | $34,159 | $53,833 | [6. Short-term Investments](index=29&type=section&id=6.%20Short-term%20Investments) The company's short-term investments, classified as available-for-sale, significantly increased from $9,260 thousand at December 31, 2019, to $85,358 thousand at September 30, 2020, primarily in U.S. government debt securities. All investments were due within one year and none were in an unrealized loss position as of September 30, 2020 **Available-for-Sale Investments (Amounts in thousands):** | Investment Type | Sep 30, 2020 Fair Value | Dec 31, 2019 Fair Value | | :--- | :--- | :--- | | U.S. government debt securities | $85,094 | $8,996 | | Certificates of deposit | $264 | $264 | | Total | $85,358 | $9,260 | - All available-for-sale investments were due within one year based on contractual maturities as of September 30, 2020[120](index=120&type=chunk) [7. Fair Value Measurements](index=30&type=section&id=7.%20Fair%20Value%20Measurements) The company measures certain financial assets and liabilities at fair value, primarily short-term debt investments (Level 2) and convertible notes (Level 2). The fair value of convertible notes was $106,000 thousand as of September 30, 2020, significantly lower than their amortized cost of $165,367 thousand. A contingent consideration liability of $585 thousand was reduced to $0 during the nine months ended September 30, 2020, as the payment period expired **Fair Value of Financial Instruments (Amounts in thousands):** | Item | Sep 30, 2020 Fair Value | Dec 31, 2019 Fair Value | Fair Value Hierarchy | | :--- | :--- | :--- | :--- | | U.S. government debt securities | $85,094 | $8,996 | Level 2 | | Convertible Notes | ~$106,000 | ~$126,000 | Level 2 | - The contingent consideration liability, which was **$585 thousand** at December 31, 2019, was reduced to **$0** by September 30, 2020, as the potential payment period expired[125](index=125&type=chunk) [8. Inventory](index=31&type=section&id=8.%20Inventory) Inventory decreased from $16,097 thousand at December 31, 2019, to $10,348 thousand at September 30, 2020, primarily driven by reductions in livestock and feed **Inventory Composition (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Supplies, embryos and other production materials | $2,339 | $2,282 | | Work in process | $2,647 | $3,702 | | Livestock | $3,310 | $7,553 | | Feed | $2,052 | $2,560 | | Total inventory | $10,348 | $16,097 | [9. Property, Plant and Equipment, Net](index=32&type=section&id=9.%20Property,%20Plant%20and%20Equipment,%20Net) Net property, plant, and equipment decreased from $60,969 thousand at December 31, 2019, to $44,685 thousand at September 30, 2020. This reduction was primarily due to impairment losses of $9,914 thousand related to MBP Titan's operations suspension and $920 thousand for right-of-use assets at leased locations during the nine months ended September 30, 2020 **Property, Plant and Equipment, Net (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total Property, Plant and Equipment, Net | $44,685 | $60,969 | - Impairment losses of **$9,914 thousand** were recorded for property, plant, and equipment related to the suspension of MBP Titan's operations[128](index=128&type=chunk) - An additional **$920 thousand** in impairment losses was recorded for right-of-use assets at leased locations[129](index=129&type=chunk) [10. Goodwill and Intangible Assets, Net](index=32&type=section&id=10.%20Goodwill%20and%20Intangible%20Assets,%20Net) Goodwill decreased from $63,754 thousand at December 31, 2019, to $54,237 thousand at September 30, 2020, primarily due to a $9,635 thousand impairment charge related to the suspension of MBP Titan's operations. Intangible assets, net, also saw a slight decrease **Goodwill and Intangible Assets, Net (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Goodwill | $54,237 | $63,754 | | Intangible assets, net | $65,018 | $68,346 | - A goodwill impairment of **$9,635 thousand** was recorded due to the suspension of MBP Titan's operations[132](index=132&type=chunk) - Cumulative impairment losses for goodwill reached **$53,278 thousand** as of September 30, 2020[131](index=131&type=chunk) [11. Lines of Credit and Long-Term Debt](index=33&type=section&id=11.%20Lines%20of%20Credit%20and%20Long-Term%20Debt) Long-term debt, net of current portion, increased from $186,321 thousand at December 31, 2019, to $193,801 thousand at September 30, 2020. This includes $200,000 thousand in principal for Convertible Notes due 2023 with an effective interest rate of 11.02%, and a $25,000 thousand convertible note (Merck Note) due June 2021 **Long-Term Debt (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Convertible debt | $190,367 | $213,771 | | Notes payable | $3,762 | $4,089 | | Other | $93 | $131 | | Total Long-term debt | $194,222 | $217,991 | | Less current portion | $(421) | $(31,670) | | Long-term debt, less current portion | $193,801 | $186,321 | - The Convertible Notes have an outstanding principal of **$200,000 thousand** and an effective interest rate of **11.02%**[138](index=138&type=chunk)[142](index=142&type=chunk) - The Merck Note, a **$25,000 thousand** convertible note, automatically converts to Precigen common stock in December 2020[145](index=145&type=chunk) [12. Income Taxes](index=36&type=section&id=12.%20Income%20Taxes) The company reported U.S. taxable losses of $26,900 thousand and $133,900 thousand for the three and nine months ended September 30, 2020, respectively. It has significant operating loss carryforwards ($702,700 thousand) and capital loss carryforwards ($199,700 thousand), but these are largely offset by a valuation allowance due to a history of net losses **Income Tax Benefit from Continuing Operations (Amounts in thousands):** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Current foreign income tax expense | $18 | $10 | $74 | $34 | | Deferred income tax benefit | $(68) | $(13) | $(204) | $(59) | | Total income tax benefit | $(50) | $(3) | $(130) | $(25) | - The company has U.S. federal operating loss carryforwards of approximately **$702,700 thousand** and capital loss carryforwards of approximately **$199,700 thousand**[152](index=152&type=chunk) - Net deferred tax assets are largely offset by a valuation allowance due to the company's history of net losses[151](index=151&type=chunk) [13. Shareholders' Equity](index=36&type=section&id=13.%20Shareholders'%20Equity) During the nine months ended September 30, 2020, Precigen issued 5,972,696 shares of common stock in a private placement for $35,000 thousand and 6,293,402 shares upon conversion of long-term debt for $31,827 thousand. Accumulated other comprehensive income (loss) shifted from a loss of $27,468 thousand to a gain of $1,362 thousand, primarily due to the release of cumulative foreign currency translation losses - **5,972,696 shares** of common stock were issued in a private placement for **$35,000 thousand** on January 31, 2020[153](index=153&type=chunk) - **6,293,402 shares** were issued upon conversion of long-term debt, valued at **$31,827 thousand**[35](index=35&type=chunk) **Accumulated Other Comprehensive Income (Loss) (Amounts in thousands):** | Item | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Unrealized gain on investments | $93 | $7 | | Income (loss) on foreign currency translation adjustments | $1,269 | $(27,475) | | Total | $1,362 | $(27,468) | [14. Share-Based Payments](index=38&type=section&id=14.%20Share-Based%20Payments) Total stock-based compensation expense for continuing operations was $4,600 thousand for the three months and $13,869 thousand for the nine months ended September 30, 2020. The company has multiple equity incentive plans, with 11,379,605 stock options and 1,813,043 RSUs outstanding as of September 30, 2020 **Stock-Based Compensation Expense (Amounts in thousands):** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Stock-Based Compensation Expense | $4,600 | $5,423 | $13,869 | $14,538 | **Outstanding Equity Awards (Sep 30, 2020):** | Award Type | Number Outstanding | Weighted Average Exercise Price / Grant Date Fair Value | Weighted Average Remaining Contractual Term (Years) | | :--- | :--- | :--- | :--- | | Stock Options | 11,379,605 | $15.77 | 7.36 | | Restricted Stock Units | 1,813,043 | $5.96 | 0.65 | - A new compensation arrangement for the Executive Chairman was approved in September 2020, including an annual retainer, stock options, and RSUs[165](index=165&type=chunk) [15. Operating Leases](index=39&type=section&id=15.%20Operating%20Leases) The company leases facilities and equipment under operating leases, with total lease costs of $2,757 thousand for the three months and $8,162 thousand for the nine months ended September 30, 2020. The weighted average remaining lease term is 4.61 years, and the weighted average discount rate is 10.96% **Operating Lease Costs (Amounts in thousands):** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Operating lease costs | $1,803 | $1,821 | $5,319 | $5,439 | | Short-term lease costs | $480 | $530 | $1,332 | $1,544 | | Variable lease costs | $474 | $619 | $1,511 | $1,641 | | Total Lease Costs | $2,757 | $2,970 | $8,162 | $8,624 | **Operating Lease Metrics (Sep 30, 2020):** | Metric | Value | | :--- | :--- | | Weighted average remaining lease term | 4.61 years | | Weighted average discount rate | 10.96% | [16. Commitments and Contingencies](index=40&type=section&id=16.%20Commitments%20and%20Contingencies) Precigen is involved in ongoing legal proceedings, including a patent infringement suit with XY, LLC related to Trans Ova's semen-sorting products, which has seen recent court orders reducing Trans Ova's royalty obligations. The company also settled an SEC investigation regarding its methane bioconversion platform for $2,500 thousand and faces shareholder class action lawsuits and an arbitration notice from Harvest - Trans Ova is involved in a patent infringement suit with XY, LLC, where a May 2020 court order substantially reduced Trans Ova's royalty obligation on standard sorted semen products, terminating it as of December 4, 2019[169](index=169&type=chunk)[173](index=173&type=chunk) - The company reached a final settlement with the SEC in September 2020 regarding its methane bioconversion platform disclosures, agreeing to a cease and desist order and a **$2,500 thousand** civil money penalty[177](index=177&type=chunk) - Three shareholder class action lawsuits were filed in October 2020, tracking the SEC allegations, which the company intends to vigorously defend[178](index=178&type=chunk) [17. Related Party Transactions](index=42&type=section&id=17.%20Related%20Party%20Transactions) Precigen has various related party transactions, primarily with Third Security and its affiliates, including compensation arrangements for the Executive Chairman, sublease income, and the TS Biotechnology Sale. Collaborations with entities like Oragenics and Castle Creek were also considered related parties until their termination or acquisition - The Executive Chairman is also the Senior Managing Director and CEO of Third Security, which previously provided services to Precigen for a fee paid in common stock[182](index=182&type=chunk) - The TS Biotechnology Sale in January 2020 involved an affiliate of Third Security[185](index=185&type=chunk) - Collaborations with Oragenics and Castle Creek were with related parties until their respective terminations or acquisitions in 2020 and 2019[186](index=186&type=chunk) [18. Net Loss per Share](index=44&type=section&id=18.%20Net%20Loss%20per%20Share) The basic and diluted net loss per share attributable to Precigen decreased to $(0.18) for the three months and $(0.79) for the nine months ended September 30, 2020, compared to $(0.35) and $(1.00) for the respective prior-year periods. Potentially dilutive securities, including convertible debt, options, RSUs, and warrants, were anti-dilutive and excluded from the calculation **Net Loss per Share Attributable to Precigen:** | Item | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net loss per share, basic and diluted | $(0.18) | $(0.35) | $(0.79) | $(1.00) | **Potentially Dilutive Securities (Anti-Dilutive):** | Security Type | Sep 30, 2020 | Sep 30, 2019 | | :--- | :--- | :--- | | Convertible debt | 17,843,715 | 21,055,805 | | Options | 11,379,605 | 9,530,483 | | Restricted stock units | 1,813,043 | 2,108,509 | | Warrants | 133,264 | 133,264 | | Total | 31,169,627 | 32,828,061 | [19. Segments](index=45&type=section&id=19.%20Segments) Precigen's reportable segments for the nine months ended September 30, 2020, include PGEN Therapeutics, ActoBio, MBP Titan, Trans Ova, and the Human Biotherapeutics division. Segment performance is assessed using Segment Adjusted EBITDA, which excludes non-cash items and certain other expenses - Reportable segments include PGEN Therapeutics, ActoBio, MBP Titan, Trans Ova, and the Human Biotherapeutics division[191](index=191&type=chunk) - Segment Adjusted EBITDA is the primary measure of segment performance, excluding noncash revenues/expenses, interest, taxes, depreciation, amortization, stock-based compensation, impairment losses, equity in net loss of affiliates, and deferred revenue recognition[189](index=189&type=chunk) **Segment Adjusted EBITDA (Amounts in thousands):** | Segment | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | PGEN Therapeutics | $(6,739) | $(5,953) | $(19,356) | $(20,789) | | ActoBio | $(1,602) | $(4,634) | $(4,727) | $(11,196) | | MBP Titan | $(1,765) | $(9,024) | $(15,728) | $(26,238) | | Trans Ova | $(1,606) | $(5,560) | $3,723 | $(2,854) | | Human Biotherapeutics | $(420) | $(142) | $(2,253) | $(719) | | All Other | $1,654 | $(1,345) | $2,783 | $(5,062) | | Unallocated corporate costs | $10,412 | $13,028 | $27,938 | $42,476 | [20. Subsequent Events](index=47&type=section&id=20.%20Subsequent%20Events) In October 2020, Ares Trading voluntarily converted the entire $25,000 thousand outstanding principal of the Merck Note into 6,758,400 shares of Precigen common stock - In October 2020, the **$25,000 thousand** Merck Note was converted into **6,758,400 shares** of Precigen common stock[196](index=196&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, emphasizing its strategic shift towards gene and cell therapies, the impact of COVID-19, and the financial performance of its healthcare and non-healthcare segments - The company is a discovery and clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases[199](index=199&type=chunk) - The discussion should be read in conjunction with the unaudited financial information and notes in this Quarterly Report and the Annual Report on Form 10-K for 2019[197](index=197&type=chunk) [Overview](index=48&type=section&id=Overview) Precigen is a dedicated discovery and clinical-stage biopharmaceutical company leveraging proprietary technology platforms (UltraCAR-T, ActoBiotics, AdenoVerse Immunotherapy, UltraVector) to develop precision gene and cell therapies for urgent and intractable diseases in immuno-oncology, autoimmune disorders, and infectious diseases. The company is actively advancing lead clinical programs and has a robust preclinical pipeline - Precigen is a biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases[199](index=199&type=chunk) - The company utilizes proprietary technology platforms including UltraCAR-T, ActoBiotics, and AdenoVerse Immunotherapy to develop precision medicine[200](index=200&type=chunk) - Lead clinical programs include PRGN-3005, PRGN-3006 (UltraCAR-T), PRGN-2009 (AdenoVerse Immunotherapy), and INXN-4001 (UltraVector)[201](index=201&type=chunk) [Our Healthcare Subsidiaries](index=48&type=section&id=Our%20Healthcare%20Subsidiaries) Precigen's healthcare business is operated by PGEN Therapeutics (gene/cell therapies), ActoBio (microbe-based biopharmaceuticals), Exemplar (MiniSwine research models), and Triple-Gene (cardiovascular gene therapies). These subsidiaries are advancing various clinical and preclinical programs, including UltraCAR-T, AdenoVerse Immunotherapy, and ActoBiotics platforms - Healthcare business is operated by PGEN Therapeutics, ActoBio, Exemplar, and Triple-Gene[202](index=202&type=chunk) - PGEN Therapeutics is developing therapies based on UltraCAR-T and AdenoVerse Immunotherapy platforms, with lead programs PRGN-3005, PRGN-3006, and PRGN-2009 in clinical trials[203](index=203&type=chunk)[204](index=204&type=chunk)[207](index=207&type=chunk) - ActoBio is pioneering microbe-based biopharmaceuticals (ActoBiotics), with AG019 in a Phase 1b/2a clinical trial for type 1 diabetes[209](index=209&type=chunk)[210](index=210&type=chunk) - Triple-Gene's INXN-4001, a non-viral triple-effector plasmid DNA, is in a Phase 1 clinical trial for heart failure[211](index=211&type=chunk)[212](index=212&type=chunk) - Exemplar develops MiniSwine Yucatan miniature pig research models for studying human diseases and regenerative medicine[213](index=213&type=chunk) - Partnered programs include D-Fi and FCX-013 with Castle Creek Biosciences for skin and connective tissue diseases, and previously AG013 with Oragenics for oral mucositis (now terminated)[214](index=214&type=chunk)[215](index=215&type=chunk) [Our Non-Healthcare Businesses](index=51&type=section&id=Our%20Non-Healthcare%20Businesses) Precigen also operates non-healthcare businesses, including Trans Ova Genetics, L.C., a provider of bovine reproductive technologies, and MBP Titan LLC, which housed the Methane Bioconversion Platform. MBP Titan's operations were suspended in Q2 2020 due to market uncertainty and the energy sector's state, leading to impairment charges - Trans Ova Genetics, L.C. is an internationally recognized provider of bovine reproductive technologies, including embryo transfer, IVF, sexed-semen, genetic preservation, and cloning[216](index=216&type=chunk) - MBP Titan LLC, comprising the Methane Bioconversion Platform, suspended operations in Q2 2020 due to market uncertainty from COVID-19 and the energy sector[217](index=217&type=chunk)[218](index=218&type=chunk) - Noncash impairment charges of **$22.0 million** were recorded for MBP Titan related to goodwill, property, and equipment, and right-of-use assets[218](index=218&type=chunk) [COVID-19 Impact](index=52&type=section&id=COVID-19%20Impact) The COVID-19 pandemic has extensively impacted global health and economic environments, causing delays in Precigen's clinical trials (AG019, PRGN-3005) and leading to the suspension of MBP Titan's operations. While Trans Ova and Exemplar have not seen significant impacts yet, future disruptions are uncertain and could materially affect the company's business, results of operations, and financial position - COVID-19 caused temporary suspensions in clinical trials for AG019 (ActoBio) and PRGN-3005 (PGEN Therapeutics), which have since resumed[220](index=220&type=chunk) - MBP Titan's operations were suspended due to market uncertainty driven by the COVID-19 pandemic and the energy sector[221](index=221&type=chunk) - The full impact of COVID-19 on ongoing business, results of operations, and financial performance for 2020 and beyond cannot be reliably estimated and could be materially adverse[222](index=222&type=chunk) [TS Biotechnology Sale](index=52&type=section&id=TS%20Biotechnology%20Sale) In January 2020, Precigen sold a majority of its bioengineering assets (TS Biotechnology Sale) and its interest in EnviroFlight to focus on the healthcare industry. These transactions are presented as discontinued operations, and the company may incur future impairment charges as it continues to streamline its business - In January 2020, Precigen sold bioengineering assets (TS Biotechnology Sale) and its interest in EnviroFlight to enhance its focus on the healthcare industry[223](index=223&type=chunk)[224](index=224&type=chunk) - The divested assets and operations are reclassified and presented as discontinued operations for all periods[225](index=225&type=chunk) - Future impairment indicators or charges could arise from ongoing efforts to focus the business and generate additional capital[226](index=226&type=chunk) [Segments](index=53&type=section&id=Segments) Precigen's reportable segments include PGEN Therapeutics, ActoBio, MBP Titan, Trans Ova, and the Human Biotherapeutics division. Corporate expenses are unallocated and managed at a consolidated level, and Segment Adjusted EBITDA is used as the primary measure of segment performance - Reportable segments are PGEN Therapeutics, ActoBio, MBP Titan, Trans Ova, and the Human Biotherapeutics division[227](index=227&type=chunk) - Corporate expenses are not allocated to segments and include general and administrative functions[228](index=228&type=chunk) - Segment Adjusted EBITDA is the primary metric for assessing segment operating performance and allocating resources[228](index=228&type=chunk) [Financial overview](index=53&type=section&id=Financial%20overview) Precigen has incurred significant losses since its inception and expects to continue doing so, with long-term profitability dependent on raising additional capital, regulatory approvals, successful commercialization, and revenue generation from its healthcare focus. The COVID-19 pandemic introduces further uncertainty to its financial outlook - The company has incurred significant losses since inception and expects continued losses, with an accumulated deficit of **$1.8 billion** as of September 30, 2020[229](index=229&type=chunk)[292](index=292&type=chunk) - Long-term success depends on raising additional capital, obtaining regulatory approval, successful commercialization, and generating revenue from product candidates[60](index=60&type=chunk) - The COVID-19 pandemic's full impact on business, operations, and financial results cannot be reliably estimated and could be significantly adverse[229](index=229&type=chunk) [Sources of revenue](index=53&type=section&id=Sources%20of%20revenue) Historically, revenue was derived from collaboration and licensing agreements, product sales (Trans Ova, Exemplar), and service revenues. With a shift to healthcare, future revenues will depend on advancing proprietary programs, market commercialization, and maintaining/improving existing product/service offerings, while collaboration revenues are expected to decrease in the near term - Collaboration and licensing revenues historically came from technology access fees, R&D reimbursements, milestone payments, and royalties[230](index=230&type=chunk) - Product and service revenues are primarily generated by Trans Ova (bovine reproductive technologies) and Exemplar (MiniSwine models)[234](index=234&type=chunk) - Future revenues will depend on advancing proprietary healthcare programs and commercialization, with collaboration revenues expected to decrease as existing ECCs are fulfilled or terminated[235](index=235&type=chunk) [Cost of products and services](index=54&type=section&id=Cost%20of%20products%20and%20services) Cost of products and services primarily includes labor, drugs, supplies, livestock, feed, and facility charges. Fluctuations in livestock and feed prices have not significantly impacted operating margins, and no derivative financial instruments are used for price risk mitigation - Costs include labor, drugs, supplies, livestock, feed, and facility charges[236](index=236&type=chunk) - Fluctuations in livestock and feed prices have not significantly impacted operating margins[236](index=236&type=chunk) [Research and development expenses](index=54&type=section&id=Research%20and%20development%20expenses) Research and development expenses decreased by $13.5 million (53%) for the three months and $35.6 million (44%) for the nine months ended September 30, 2020, primarily due to the suspension of MBP Titan's operations and deprioritization of certain ActoBio programs. These expenses are expected to increase in the future as proprietary healthcare programs advance into preclinical and clinical stages **Research and Development Expenses (Amounts in thousands):** | Period | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $12,154 | $25,667 | $(13,513) | | 9 Months Ended Sep 30 | $45,253 | $80,844 | $(35,591) | - Decrease driven by suspension of MBP Titan's operations and deprioritization of certain ActoBio programs[252](index=252&type=chunk)[273](index=273&type=chunk) - Expected to increase as proprietary programs advance into preclinical and clinical stages, requiring additional personnel and resources[238](index=238&type=chunk) [Selling, general and administrative expenses](index=55&type=section&id=Selling,%20general%20and%20administrative%20expenses) Selling, general and administrative (SG&A) expenses were comparable for the three months ended September 30, 2020, but decreased by $8.4 million (12%) for the nine-month period. This was due to reduced headcount and professional fees from a streamlined organization, partially offset by increased legal fees related to litigation and SEC settlement **Selling, General and Administrative Expenses (Amounts in thousands):** | Period | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $22,300 | $22,187 | $113 | | 9 Months Ended Sep 30 | $64,057 | $72,486 | $(8,429) | - Nine-month decrease driven by reduced corporate headcount and professional fees from a streamlined organization[274](index=274&type=chunk) - Partially offset by increased legal fees associated with litigation matters, including the SEC settlement[253](index=253&type=chunk)[276](index=276&type=chunk) [Other income (expense), net](index=55&type=section&id=Other%20income%20(expense),%20net) Total other expense, net, increased by $5.5 million (91%) for the nine months ended September 30, 2020, primarily due to the absence of unrealized appreciation on equity securities (which were liquidated by early 2020) and lower interest income from short-term investments. Interest expense is expected to increase due to convertible debt amortization **Total Other Expense, Net (Amounts in thousands):** | Period | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $(4,057) | $(3,941) | $(116) | | 9 Months Ended Sep 30 | $(11,660) | $(6,115) | $(5,545) | - Increase in other expense for the nine-month period due to the absence of **$3.1 million** unrealized appreciation on equity securities in 2019 (liquidated in 2020) and lower interest income[278](index=278&type=chunk) - Interest expense is expected to increase in future periods due to the noncash amortization of the long-term debt discount and debt issuance costs related to convertible notes[243](index=243&type=chunk) [Equity in net income (loss) of affiliates](index=55&type=section&id=Equity%20in%20net%20income%20(loss)%20of%20affiliates) Equity in net loss of affiliates decreased by $818 thousand (42.1%) for the nine months ended September 30, 2020, compared to the prior year. This represents Precigen's pro-rata share of operating results from its equity method investments in joint ventures and start-up entities **Equity in Net Loss of Affiliates (Amounts in thousands):** | Period | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30 | $(523) | $(479) | $(44) | | 9 Months Ended Sep 30 | $(1,125) | $(1,943) | $818 | - The company accounts for investments in joint ventures and start-up entities using the equity method[244](index=244&type=chunk) [Segment performance](index=55&type=section&id=Segment%20performance) Segment Adjusted EBITDA improved for most segments for the nine months ended September 30, 2020, compared to 2019, particularly for ActoBio, MBP Titan, and Trans Ova, reflecting cost reductions, operational efficiencies, and revenue increases. PGEN Therapeutics and Human Biotherapeutics saw declines due to increased clinical trial costs and one-time severance **Segment Adjusted EBITDA (Amounts in thousands):** | Segment | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2019 | Change | | :--- | :--- | :--- | :--- | | PGEN Therapeutics | $(19,356) | $(20,789) | $1,433 | | ActoBio | $(4,727) | $(11,196) | $6,469 | | MBP Titan | $(15,728) | $(26,238) | $10,510 | | Trans Ova | $3,723 | $(2,854) | $6,577 | | Human Biotherapeutics | $(2,253) | $(719) | $(1,534) | | All Other | $2,783 | $(5,062) | $7,845 | | Unallocated corporate costs | $27,938 | $42,476 | $(14,538) | - ActoBio's Segment Adjusted EBITDA improved due to fewer costs with contract research organizations and delayed AG019 trial costs[285](index=285&type=chunk) - MBP Titan's Segment Adjusted EBITDA improved due to the suspension of its operations[286](index=286&type=chunk) - Trans Ova's Segment Adjusted EBITDA improved due to operational efficiencies, reduced costs, and increased procedures[287](index=287&type=chunk) [Results of operations](index=56&type=section&id=Results%20of%20operations) This section provides a detailed comparison of the company's results of operations for the three and nine months ended September 30, 2020, versus the corresponding periods in 2019, highlighting changes in revenues, operating expenses, and segment performance [Comparison of the three months ended September 30, 2020 and the three months ended September 30, 2019](index=56&type=section&id=Comparison%20of%20the%20three%20months%20ended%20September%2030,%202020%20and%20the%20three%20months%20ended%20September%2030,%202019) For the three months ended September 30, 2020, total revenues increased by 28.9% to $23.6 million, while total operating expenses decreased by 22.8% to $48.6 million, leading to a significant reduction in operating loss and net loss compared to the prior year **Key Financial Highlights (3 Months Ended Sep 30, Amounts in thousands):** | Item | 2020 | 2019 | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $23,583 | $18,299 | $5,284 | 28.9% | | Total Operating Expenses | $48,561 | $62,936 | $(14,375) | (22.8)% | | Operating Loss | $(24,978) | $(44,637) | $19,659 | (44.0)% | | Net Loss attributable to Precigen | $(29,508) | $(53,634) | $24,126 | (45.0)% | - Collaboration and licensing revenues increased by **128%** due to accelerated recognition of deferred revenue from terminated collaborations with Oragenics and Castle Creek[249](index=249&type=chunk) - Research and development expenses decreased by **52.6% ($13.5 million)** due to the suspension of MBP Titan's operations and deprioritization of ActoBio programs[252](index=252&type=chunk) [Comparison of the nine months ended September 30, 2020 and the nine months ended September 30, 2019](index=61&type=section&id=Comparison%20of%20the%20nine%20months%20ended%20September%2030,%202020%20and%20the%20nine%20months%20ended%20September%2030,%202019) For the nine months ended September 30, 2020, total revenues increased by 13.7% to $83.8 million, while total operating expenses decreased by 13.0% to $174.0 million. This resulted in a reduced operating loss and net loss, despite significant impairment charges related to MBP Titan and increased other expenses **Key Financial Highlights (9 Months Ended Sep 30, Amounts in thousands):** | Item | 2020 | 2019 | Dollar Change | Percent Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $83,845 | $73,720 | $10,125 | 13.7% | | Total Operating Expenses | $173,994 | $199,946 | $(25,952) | (13.0)% | | Operating Loss | $(90,149) | $(126,226) | $36,077 | (28.6)% | | Net Loss attributable to Precigen | $(128,860) | $(153,109) | $24,249 | (15.8)% | - Collaboration and licensing revenues increased by **37.7%** due to accelerated recognition of deferred revenue from terminated collaborations with Castle Creek and Oragenics[270](index=270&type=chunk) - Research and development expenses decreased by **44.0% ($35.6 million)** due to the suspension of MBP Titan's operations and deprioritization of ActoBio programs[273](index=273&type=chunk) - Impairment of goodwill and other noncurrent assets increased by **$22.3 million**, primarily due to **$22.0 million** in charges related to MBP Titan's operations suspension[277](index=277&type=chunk) [Liquidity and capital resources](index=66&type=section&id=Liquidity%20and%20capital%20resources) Precigen had $27.7 million in cash and cash equivalents and $85.4 million in short-term investments as of September 30, 2020. The company expects to fund future operations through equity offerings, debt financings, strategic alliances, asset sales, and licensing, as it anticipates continued operating losses and negative cash flows. The COVID-19 pandemic may impact future access to capital **Liquid Assets (Amounts in thousands):** | Item | Sep 30, 2020 | | :--- | :--- | | Cash and cash equivalents | $27,740 | | Short-term investments | $85,358 | | Total | $113,098 | - Net cash used in operating activities decreased by **$43.2 million** for the nine months ended September 30, 2020, compared to 2019, due to reduced funding for divested businesses and streamlined operations[294](index=294&type=chunk)[298](index=298&type=chunk) - Future capital requirements depend on R&D progress, clinical trial timing, regulatory approvals, strategic transactions, and the impact of the COVID-19 pandemic[302](index=302&type=chunk)[303](index=303&type=chunk) **Contractual Obligations and Commitments (Amounts in thousands, as of Sep 30, 2020):** | Obligation | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating leases | $32,144 | $7,116 | $13,386 | $10,540 | $1,102 | | Convertible debt | $225,000 | $25,000 | $200,000 | $0 | $0 | | Cash interest payable on convertible debt | $21,000 | $7,000 | $14,000 | $0 | $0 | | Long-term debt, excluding convertible debt | $3,855 | $421 | $696 | $753 | $1,985 | | Total | $281,999 | $39,537 | $228,082 | $11,293 | $3,087 | [Critical accounting policies and estimates](index=70&type=section&id=Critical%20accounting%20policies%20and%20estimates) The company's financial statements rely on estimates and assumptions that affect reported asset/liability amounts and disclosures. Management evaluates these estimates continually, and there have been no material changes to critical accounting policies from those described in the 2019 Annual Report - Financial statements require management to make estimates and assumptions affecting reported amounts of assets, liabilities, revenues, and expenses[312](index=312&type=chunk) - No material changes to critical accounting policies from the 2019 Annual Report[313](index=313&type=chunk) [Recent accounting pronouncements](index=70&type=section&id=Recent%20accounting%20pronouncements) This section refers to Note 2 of the Condensed Consolidated Financial Statements for information on recently adopted and issued accounting pronouncements and their impact on the financial statements - Refer to Note 2 for details on recently adopted and issued accounting pronouncements[314](index=314&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=70&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item discusses the company's exposure to market risks, specifically interest rate risk and foreign currency exchange risk. The company holds $113.1 million in cash, cash equivalents, and short-term investments, primarily in U.S. government debt securities, and does not hedge foreign currency risk - The company is exposed to interest rate risk and foreign currency exchange risk[315](index=315&type=chunk) **Cash, Cash Equivalents, and Short-term Investments (Amounts in millions):** | Date | Amount | | :--- | :--- | | Sep 30, 2020 | $113.1 | | Dec 31, 2019 | $75.1 | - A hypothetical **100 basis point increase** in interest rates would not materially affect the fair value of interest-sensitive financial instruments[317](index=317&type=chunk) - The company does not hedge its foreign currency exchange rate risk, and a hypothetical **10% change** in rates would not materially impact financial statements[318](index=318&type=chunk) [Item 4. Controls and Procedures](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2020, the CEO and CFO concluded that the company's disclosure controls and procedures were effective. There have been no material changes to internal control over financial reporting during the quarter, despite certain employees working remotely due to the COVID-19 pandemic - CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2020[319](index=319&type=chunk) - No material changes to internal control over financial reporting during the three months ended September 30, 2020, despite remote work due to COVID-19[320](index=320&type=chunk) [PART II - OTHER INFORMATION](index=72&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part contains other required information for the Form 10-Q, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=72&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, including governmental investigations and litigation, which are subject to uncertainties. As of September 30, 2020, management does not believe these matters will have a material adverse effect on the company's business, financial condition, results of operations, or cash flows - The company is involved in litigation and governmental investigations[323](index=323&type=chunk) - Management does not believe current legal matters will have a material adverse effect on the company's business or financial condition[323](index=323&type=chunk) - Further details on ongoing legal matters are provided in Note 16 of the financial statements[324](index=324&type=chunk) [Item 1A. Risk Factors](index=72&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the Annual Report, primarily focusing on the adverse impacts of the ongoing COVID-19 pandemic. Key risks include disruptions to product candidate development, clinical trial delays, operational challenges, potential loss of key personnel, and adverse effects on access to capital. The future of the MBP platform also remains uncertain - The ongoing COVID-19 pandemic could disrupt product candidate development and adversely impact the healthcare business, including clinical trial delays (e.g., AG019, PRGN-3005)[325](index=325&type=chunk) - COVID-19 effects may disrupt business operations, including supply chain, customer demand, and employee efficiency, potentially leading to impairments and credit losses[326](index=326&type=chunk)[329](index=329&type=chunk)[331](index=331&type=chunk) - The future of the MBP platform is uncertain, with operations suspended and **$22.0 million** in impairment charges incurred, and COVID-19 creates additional challenges for strategic alternatives[332](index=332&type=chunk) - The pandemic has created significant volatility, uncertainty, and economic disruption, which could adversely affect the company's access to capital on favorable terms[333](index=333&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=73&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[335](index=335&type=chunk) [Item 3. Defaults on Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20on%20Senior%20Securities) This item states that there were no defaults on senior securities to report for the period - No defaults on senior securities to report[336](index=336&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that mine safety disclosures are not applicable to the company - Mine Safety Disclosures are not applicable[337](index=337&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) This item states that there is no other information to report for the period - No other information to report[338](index=338&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This item lists the exhibits filed as part of the Form 10-Q, including compensation arrangements, certifications from the CEO and CFO, and the Interactive Data File (XBRL) - Includes Executive Chairman Compensation Arrangement, CEO and CFO certifications (Sarbanes-Oxley Act), and Interactive Data File (XBRL)[339](index=339&type=chunk) [Signatures](index=75&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by Precigen, Inc. and signed by the Chief Financial Officer - The report is signed by Rick L. Sterling, Chief Financial Officer (Principal Financial and Accounting Officer) of Precigen, Inc[343](index=343&type=chunk)

| --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | Precigen Advancing Medicine with Precision H.C. Wainwright & Co. Annual Global Investment Conference | | | | | | September 14, 2020 | | | | | | | | | | | | PRECIGEN | | | | | Forward-looking Statements Some of the statements made in this presentation are forward-looking statements made pursuant to the safe harbor p ...

| --- | --- | --- | --- | --- | |--------------------------------------------------------|-------|-------|-------|-------| | | | | | | | | | | | | | | | | | | | Precigen, Inc. 2Q-2020 Business Update 10 August 2020 | | | | | | | | | | | | | | | | 1 | Forward-looking Statements Some of the statements made in this presentation are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon Preci ...

Precigen, Inc. (NASDAQ:PGEN) Q2 2020 Earnings Conference Call August 10, 2020 4:30 PM ET Company Participants Steven Harasym - Head, IR Helen Sabzevari - President, CEO & Director Tom Samuelson - Head, Financial Strategy Conference Call Participants Douglas Buchanan - JMP Securities Operator Good afternoon. Welcome to the Precigen Second Quarter and First Half 2020 Financial Results and Business Update Conference call. [Operator Instructions]. I would now like to turn the conference over to Steven Harasym. ...