Precigen, Inc. Form 10-Q Summary
Business context and reporting period
Precigen is a clinical-stage biopharmaceutical company developing gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases. Its principal programs include UltraCAR-T candidates PRGN-3005, PRGN-3006, and PRGN-3007; AdenoVerse candidates PRGN-2009 and PRGN-2012; and ActoBio’s AG019. Precigen Exemplar provides genetically engineered miniature swine models and related services.
This unaudited Form 10-Q covers the three months ended March 31, 2023, with comparisons to the three months ended March 31, 2022. In August 2022, the company sold Trans Ova; its prior-year results are presented as discontinued operations.
Financial metrics
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Total revenue | $1.9 million | $5.5 million |
| Gross profit and margin | $0.3 million; 17.5% | $3.8 million; 69.3% |
| Research and development | $12.2 million | $11.8 million |
| SG&A | $11.6 million | $13.7 million |
| Operating loss | $23.5 million | $22.2 million |
| Loss from continuing operations | $22.7 million | $23.9 million |
| Net loss | $22.7 million | $19.3 million |
| Basic and diluted loss per share | $0.10 | $0.10 |
| Net cash used in operating activities | $18.4 million | $18.8 million |
At March 31, 2023, cash and cash equivalents were $9.7 million, short- and long-term investments were $101.8 million, and restricted cash was $13.8 million. Total cash, cash equivalents, and restricted cash were $23.9 million. Current assets were $137.7 million versus current liabilities of $46.7 million.
Convertible debt had a $13.8 million carrying value and $13.8 million principal balance at quarter-end, with a July 1, 2023 maturity. Operating lease liabilities totaled $7.9 million. The company reported an accumulated deficit of $1.9 billion and shareholders’ equity of $184.1 million.
Material changes versus the prior comparable period
- Revenue declined 66.4% to $1.9 million. Product revenue decreased 34.1%, service revenue decreased 69.0%, and other revenue was zero. The decline reflected lower Exemplar demand and $1.0 million of prior-year revenue recognition from previously deferred agreements that did not recur.
- Gross margin declined substantially because of lower revenue and higher Exemplar personnel costs.
- R&D increased 3.1% as the company continued prioritizing clinical candidates.
- SG&A decreased 15.0%, primarily because of $2.0 million lower professional fees and reduced litigation-related legal costs.
- Operating loss increased 6.0%, although the loss from continuing operations improved 4.9% because lower convertible-note interest and higher investment income more than offset the operating deterioration.
- Exemplar Segment Adjusted EBITDA fell to $0.1 million from $3.6 million. Biopharmaceuticals Segment Adjusted EBITDA was negative $20.8 million, broadly comparable with the prior year.
- In January 2023, Precigen issued 43.96 million common shares for net proceeds of $72.8 million. Shares outstanding increased to 255.5 million at March 31, 2023, from 208.2 million at December 31, 2022.
- The company retired $29.5 million principal amount of convertible notes during the quarter using restricted cash and recognized a gain on debt extinguishment. It had retired $156.7 million in 2022.
- Investing cash flow was negative $50.4 million, primarily reflecting net purchases of investments, compared with $16.6 million provided by investing activities in Q1 2022.
- Q1 2022 included $4.6 million of income from discontinued Trans Ova operations; no such income was recorded in Q1 2023.
Guidance, outlook, risks, contingencies, and unusual items
Management expects operating losses and negative cash flows to continue for the foreseeable future and states that additional capital will be required to fund operations and execute its business plan. Management believes existing liquid assets will fund operations for at least one year from the issuance date of the financial statements, but long-term success depends on additional financing, strategic transactions, regulatory approvals, commercialization, and recurring revenue generation.
Potential future funding sources include equity or debt offerings, asset sales, collaborations, licensing transactions, and strategic alliances. Additional equity financing could materially dilute existing shareholders. Debt financing may impose restrictive covenants, while licensing or collaboration transactions could require the company to relinquish valuable rights.
Key operating risks include clinical-trial execution, regulatory approval, manufacturing scale-up, intellectual-property protection, competition, dependence on key personnel, customer demand at Exemplar, uncertain commercialization timelines, and the ability to generate future royalties or milestone payments. The filing also references continuing potential effects from COVID-19.
In February 2023, the buyer of Trans Ova determined that the 2022 performance condition for a $5.0 million earn-out was not met. The company did not recognize the earn-out. A $13.0 million accrual remains for a proposed securities-class-action settlement, partially offset by a $12.5 million insurance receivable. Court approval and finalization of the settlement remain required.
On April 3, 2023, after the quarter ended, Precigen entered into an amended and restated license agreement with Alaunos Therapeutics. The agreement grants Alaunos broad exclusive rights to specified T-cell receptor and Sleeping Beauty technology applications in exchange for an annual license fee of $0.1 million, with no additional milestone or royalty obligations described in the filing.
Important facts for investors to verify
- Whether the remaining convertible notes were repaid, converted, or otherwise resolved by the July 1, 2023 maturity date.
- Precigen’s ability to maintain sufficient liquidity while operating cash burn remains approximately $18 million per quarter and recurring revenue remains limited.
- Clinical-trial enrollment, safety, efficacy, regulatory milestones, and funding requirements for PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, and PRGN-2012.
- Whether Exemplar revenue and profitability recover after the sharp Q1 demand decline and customer concentration remains manageable.
- The final court disposition and cash cost of the proposed $13.0 million securities-litigation settlement and any related indemnification claims.
- The potential dilution from the January equity offering, outstanding options and restricted stock units, and any further equity issuance.
- The company’s ability to convert its clinical pipeline and intellectual property into approved, commercially viable products and recurring revenue.