Precigen(PGEN) - 2021 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents Precigen, Inc.'s unaudited condensed consolidated financial information, including statements and detailed notes Item 1. Condensed Consolidated Financial Statements (unaudited) This section presents Precigen, Inc.'s unaudited condensed consolidated financial statements and detailed notes for the specified periods Condensed Consolidated Balance Sheets 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 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 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 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][118] Condensed Consolidated Statements of Cash Flows 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] - 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] - Financing activities in 2021 were significantly boosted by $121.0 million in net proceeds from a public offering of common stock[242] Notes to the Condensed Consolidated Financial Statements These notes provide detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements 1. Organization 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] - 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][39][40][41] - 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][43] 2. Summary of Significant Accounting Policies 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] - 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] - COVID-19 has caused delays in clinical trials (AG019, PRGN-3005) and introduces uncertainty regarding future impacts on business, operations, and financial performance[48][49] - Starting Q1 2021, reportable segments are Biopharmaceuticals, Exemplar, and Trans Ova, with corporate expenses managed at a consolidated level[53] 3. Discontinued Operations 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] - 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] 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][66] - The TS Biotechnology Sale in January 2020 resulted in a $26,957 thousand loss from the release of cumulative foreign currency translation losses[68] 4. Investments in Joint Ventures 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] - 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] - 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] 5. Collaboration and Licensing Revenue 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] 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 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 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] 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] 8. Inventory 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 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] 10. Goodwill and Intangible Assets, Net 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] 11. Lines of Credit and Long-Term Debt 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] - Exemplar has a $700 thousand revolving line of credit (matures October 2021, interest at 4.00%) with no outstanding balance[103] 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][109] 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 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] 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] 13. Shareholders' Equity 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] - In January 2020, TS Biotechnology purchased 5,972,696 shares of common stock for $35,000 thousand in a private placement[119] - 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][122] 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 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] 15. Operating Leases 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] 16. Commitments and Contingencies 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] - 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] - 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] - 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] 17. Related Party Transactions 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] - Sublease income from Third Security for administrative offices was $41 thousand for the six months ended June 30, 2021[143] - 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] 18. Net Loss per Share 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] 19. Segments 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] 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 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 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] - Key technology platforms include UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, designed for precision medicine with controlled gene expression and delivery[157] - Lead clinical programs include PRGN-3005, PRGN-3006 (UltraCAR-T), PRGN-2009, PRGN-2012 (AdenoVerse), and AG019 (ActoBiotics)[158] - The UltraPorator device received FDA clearance in October 2020 for manufacturing UltraCAR-T cells in clinical trials, streamlining rapid and cost-effective production[159] Our Healthcare Business 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] - 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][163][164][165][166][167] - 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][170] - Precigen Triple-Gene's INXN-4001 (non-viral triple-effector plasmid for heart failure) completed a Phase 1 trial, demonstrating safety and feasibility[171] - Exemplar Genetics develops genetically engineered MiniSwine Yucatan miniature pig research models for studying life-threatening human diseases[174] Our Non-Healthcare Business 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] - Trans Ova offers advanced bovine reproductive technologies such as embryo transfer, IVF, sexed-semen, genetic preservation, and cloning[176] COVID-19 Impact 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] - 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] Discontinued Operations 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][182] - 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] 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] - Corporate expenses, including finance, accounting, legal, HR, IT, and investor relations, are unallocated and managed at a consolidated level[185] Financial overview 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][234] - 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] - Research and development expenses are expected to increase with the progression of proprietary preclinical and clinical programs[197] - 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] Results of operations 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 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][215] - Exemplar's Segment Adjusted EBITDA improved by over 200% due to increased service demand, price adjustments, and operational efficiencies[212][216] - Trans Ova's Segment Adjusted EBITDA increased by 47.8% due to higher customer demand, increased procedures, and improved pricing structure[212][217] Comparison of the six months ended June 30, 2021 and the six months ended June 30, 2020 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][230] - Exemplar's Segment Adjusted EBITDA improved by over 200% due to increased service demand, price adjustments, and operational efficiencies[227][231] - Trans Ova's Segment Adjusted EBITDA increased by 140.4% due to higher customer demand, increased procedures, and improved pricing structure[227][232] Liquidity and capital resources 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] - 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][240] - 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][242] - Future capital requirements depend on R&D progress, clinical trial outcomes, regulatory approvals, strategic transactions, and the impact of the COVID-19 pandemic[243] 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] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] - Investments primarily consist of money market funds, U.S. government debt securities, and certificates of deposit[259] - A hypothetical 100 basis point increase in interest rates is not expected to materially affect the fair value of interest-sensitive financial instruments[259] Item 4. Controls and Procedures 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] - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2021[261] PART II - OTHER INFORMATION This section provides additional information beyond the financial statements, covering legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 This section indicates that there were no defaults on senior securities to report for the period Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information This section states that there is no other information to report for the period Item 6. Exhibits 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] - An Interactive Data File (XBRL) of the Condensed Consolidated Financial Statements is attached as Exhibit 101.0[273] 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]