Precigen(PGEN) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The company's unaudited statements show a Q2 2023 net loss of $20.3 million and increased shareholders' equity Condensed Consolidated Balance Sheets Total assets decreased to $207.5 million while shareholders' equity rose to $166.2 million due to debt retirement Condensed Consolidated Balance Sheet Data (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $16,546 | $4,858 | | Short-term investments | $71,888 | $51,092 | | Total current assets | $105,632 | $118,159 | | Total assets | $207,527 | $215,977 | | Liabilities & Shareholders' Equity | | | | Total current liabilities | $30,773 | $78,645 | | Total liabilities | $41,317 | $89,718 | | Total shareholders' equity | $166,210 | $126,259 | | Total liabilities and shareholders' equity | $207,527 | $215,977 | Condensed Consolidated Statements of Operations The company reported a Q2 2023 net loss of $20.3 million on revenues of $1.8 million Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,767 | $2,911 | $3,618 | $8,424 | | Research and development | $11,874 | $11,954 | $24,037 | $23,755 | | Selling, general and administrative | $9,316 | $12,670 | $20,954 | $26,359 | | Operating loss | ($21,120) | ($24,162) | ($44,597) | ($46,315) | | Net loss | ($20,319) | ($17,635) | ($43,053) | ($36,886) | | Net loss per share, basic and diluted | ($0.08) | ($0.09) | ($0.18) | ($0.18) | Condensed Consolidated Statements of Cash Flows Net cash used in operations was $34.2 million, while financing activities provided $29.6 million from a stock offering Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($34,156) | ($25,836) | | Net cash (used in) provided by investing activities | ($26,905) | $33,141 | | Net cash provided by (used in) financing activities | $29,589 | ($276) | | Net decrease in cash, cash equivalents, and restricted cash | ($31,644) | $6,558 | - In January 2023, the company received net proceeds of $72.8 million from a public offering of common stock[38][100] - The company retired $43.1 million of its Convertible Notes during the first six months of 2023[38][95] Notes to the Condensed Consolidated Financial Statements Notes detail key events including a subsidiary sale, debt retirement, a $72.8 million stock offering, and a lawsuit settlement - Management believes existing liquid assets will allow the company to continue operations for at least one year from the financial statement issuance date, despite expecting continued operating losses[45] - In August 2022, the company completed the sale of its subsidiary, Trans Ova, for $170 million plus potential earn-outs, with results reported as discontinued operations[62][147] - On June 30, 2023, the company repurchased all remaining outstanding Convertible Notes, retiring a total of $43.34 million in principal during H1 2023[92][95] - In January 2023, the company closed a public offering of 43.96 million shares, resulting in net proceeds of $72.8 million[100] - The company reached an agreement to settle a shareholder class action lawsuit for $13.0 million, for which an accrual has been recorded[116][117] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses decreased revenue, lower operating expenses, and sufficient liquidity following a recent equity offering Overview Precigen is a clinical-stage biopharmaceutical company developing gene and cell therapies across two operating segments - The company is advancing lead clinical programs including PRGN-3005, PRGN-3006, and PRGN-3007 (UltraCAR-T platform), and PRGN-2009 and PRGN-2012 (AdenoVerse platform)[132] - PRGN-2012 for recurrent respiratory papillomatosis (RRP) has received Breakthrough Therapy Designation from the FDA[138] - The company's reportable segments are Biopharmaceuticals (Precigen and ActoBio) and Exemplar (research models and services)[135][148] Results of Operations Q2 2023 revenues fell 39% year-over-year, while a 27% drop in SG&A expenses helped narrow the operating loss Q2 2023 vs Q2 2022 Performance (in thousands) | Metric | Q2 2023 | Q2 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,767 | $2,911 | ($1,144) | (39.3)% | | Research and development | $11,874 | $11,954 | ($80) | (0.7)% | | Selling, general and administrative | $9,316 | $12,670 | ($3,354) | (26.5)% | | Operating loss | ($21,120) | ($24,162) | $3,042 | (12.6)% | H1 2023 vs H1 2022 Performance (in thousands) | Metric | H1 2023 | H1 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $3,618 | $8,424 | ($4,806) | (57.1)% | | Research and development | $24,037 | $23,755 | $282 | 1.2% | | Selling, general and administrative | $20,954 | $26,359 | ($5,405) | (20.5)% | | Operating loss | ($44,597) | ($46,315) | $1,718 | (3.7)% | - The decrease in SG&A expenses was primarily driven by a reduction in professional fees of $2.2 million for Q2 and $4.2 million for H1, mainly due to lower legal fees[168][181] Liquidity and Capital Resources The company holds $16.5 million in cash and believes its liquid assets are sufficient for the next 12 months - As of June 30, 2023, the company had cash and cash equivalents of $16.5 million and investments of $79.0 million[189] - The company raised $72.8 million in net proceeds from a public stock offering in January 2023[190] - Management believes existing liquid assets will fund operating expenses and capital requirements for at least the next 12 months[199] - Future funding may be sought through equity offerings, debt financing, or strategic alliances, which could lead to dilution or relinquishing valuable rights[201] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate fluctuation on its $95.6 million investment portfolio - The company's investment portfolio, valued at $95.6 million as of June 30, 2023, is exposed to interest rate risk[211] - The company believes a 100 basis point increase in interest rates would not have a material effect on the fair value of its interest-sensitive financial instruments[211] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of the end of the reporting period[213] - No material changes to internal control over financial reporting occurred during the three months ended June 30, 2023[214] PART II - OTHER INFORMATION Item 1. Legal Proceedings Management believes ongoing legal matters will not have a material adverse effect on the company's business - The company does not believe that any ongoing legal matters will have a material adverse effect on its business, financial condition, or cash flows[217] - For further details on legal matters, the report refers to Note 14 of the Condensed Consolidated Financial Statements[218] Item 1A. Risk Factors No material changes to risk factors have occurred since the company's last Annual Report on Form 10-K - No material updates or changes to risk factors have occurred since the filing of the company's Annual Report[219] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - None[221] Item 6. Exhibits This section lists filed exhibits, including an amended license agreement and required CEO/CFO certifications - An Amended and Restated Exclusive License Agreement with Alaunos Therapeutics, dated April 3, 2023, was filed as an exhibit[226]