Precigen(US:PGEN)2021-03-01 21:15PART I Business 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 diseases25 - The company's core therapeutic platforms include UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, designed for precise control of gene expression26 - In January 2020, the company increased its focus on healthcare opportunities, divested numerous non-healthcare assets, and changed its name to Precigen, Inc181 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 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 medicines33 Our Healthcare Subsidiaries and Platforms 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-Gene36 - The UltraCAR-T platform aims to improve upon traditional CAR-T therapies by shortening manufacturing time to overnight, reducing costs, and enhancing persistence44474849 - The AdenoVerse immunotherapy platform utilizes proprietary gorilla adenovectors, which offer a large genetic payload capacity and suitability for repeat administration71737475 - The ActoBiotics platform uses the food-grade bacterium L. lactis for local delivery of therapeutics, with its lead candidate AG019 targeting Type 1 Diabetes98103 Competition: Healthcare Business 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 resources116118 - In immuno-oncology, competitors for its UltraCAR-T and AdenoVerse programs include Bristol-Myers Squibb, Celyad, Mustang Bio, and AstraZeneca119124 - In autoimmune disorders, primary competitors for its T1D candidate AG019 include Provention Bio, Midatech Pharma, and MerciaPharma129 Intellectual Property 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 pipeline130133 - 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 2042134135 Regulatory Environment 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 countries140143 - The U.S. pharmaceutical development process involves preclinical testing, submitting an Investigational New Drug (IND) application, and conducting three phases of human clinical trials146149151 - The company may seek expedited review programs such as Orphan Drug Designation and Regenerative Medicine Advanced Therapy (RMAT) Designation to accelerate development157161163 Transition to Our Core Healthcare Business Model 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 opportunities181183 - During 2020, the company suspended operations of its methane bioconversion business, MBP Titan, LLC, due to market uncertainty184 Risk Factors 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, 2020205208 - The business is highly dependent on advancing product candidates through lengthy and expensive clinical trials with uncertain outcomes214216224 - Commercial success depends on market acceptance and third-party payer reimbursement, facing significant competition from larger, better-funded companies240249286 - 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 actions361 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the SEC - Not applicable370 Properties 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 land371 Primary Lab Operations Facilities | Location | Segment | Square Footage | | :--- | :--- | :--- | | Germantown, Maryland | PGEN Therapeutics | 61,048 | | Ghent, Belgium | ActoBio | 14,198 | Legal Proceedings 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 flows373 Mine Safety Disclosures The company reports that this item is not applicable - Not applicable375 PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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 - 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 growth378 Selected Financial Data 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 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 2020395396 - Collaboration and licensing revenues increased by 51% in 2020 due to accelerated recognition of deferred revenue from terminated collaborations421 - 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 2019424 - As of December 31, 2020, the company had cash and cash equivalents of $51.8 million and short-term investments of $48.3 million461 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 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 Germany508509 Financial Statements and Supplementary Data 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 report510 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None511 Controls and Procedures 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, 2020512 - Management assessed internal control over financial reporting as effective as of December 31, 2020, and the independent auditor issued an unqualified opinion on its effectiveness516517 Other Information The company reports no other information for this item - None519 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 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 Shareholders521 Executive Compensation 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 Shareholders523 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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 Shareholders524 Certain Relationships and Related Transactions, and Director Independence 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 Shareholders525 Principal Accountant Fees and Services 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 Shareholders526 PART IV Exhibits, Financial Statement Schedules 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-K528529 Form 10-K Summary The company reports that this item is not applicable - None539 Financial Statements Consolidated Balance Sheets 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 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 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 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 healthcare685692694 - 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 revenue723739747 - 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, 2020773778 - Note 17 (Commitments and Contingencies): Discloses ongoing patent infringement litigation and shareholder class action lawsuits filed in October 2020 following an SEC settlement818821