Precigen, Inc. Form 10-Q Summary
Business context and reporting period
Precigen is a clinical-stage biopharmaceutical company developing gene and cell therapies in immuno-oncology, autoimmune disorders, and infectious diseases. Its principal programs use UltraCAR-T, AdenoVerse, and ActoBiotics platforms. The company also operates Precigen Exemplar, which develops genetically engineered MiniSwine research models and related services.
This unaudited Form 10-Q covers the three and nine months ended September 30, 2023, compared with the corresponding 2022 periods. Trans Ova was sold in August 2022 and is reported as discontinued operations for the 2022 comparative periods.
Financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Total revenue | $1.4 million, versus $16.7 million | $5.0 million, versus $25.1 million |
| Operating loss | $20.9 million, versus $7.6 million | $65.5 million, versus $53.9 million |
| Loss from continuing operations | $19.8 million, versus $7.6 million | $62.8 million, versus $57.6 million |
| Net income (loss) | $(19.8) million, versus $87.4 million | $(62.8) million, versus $50.5 million |
| Basic and diluted EPS | $(0.08), versus $0.44 | $(0.26), versus $0.25 |
| Net cash used in operating activities | Not separately provided | $51.2 million, versus $49.6 million |
Revenue consisted primarily of Exemplar product and service revenue. Collaboration and licensing revenue was zero in 2023, compared with $14.6 million in the first nine months of 2022, when the company recognized deferred revenue related to the Intrexon Energy Partners entities. Nine-month product and service revenue declined to $5.0 million from $10.4 million, primarily because of lower Exemplar service activity.
Nine-month operating expenses were $70.5 million, including $35.6 million of research and development and $30.2 million of selling, general and administrative expenses. Research and development declined 2.1%, while SG&A declined 17.4%. No goodwill or other noncurrent-asset impairment was recorded in 2023, compared with $1.1 million of such charges in the 2022 period.
At September 30, 2023, cash and cash equivalents were $10.1 million, and short-term and long-term investments were $69.0 million. Cash, cash equivalents, and restricted cash totaled $10.3 million. Total assets were $190.7 million, total liabilities were $43.0 million, and shareholders’ equity was $147.7 million.
All Convertible Notes were retired by June 30, 2023. No convertible debt remained at September 30, 2023. The company had no balance outstanding under Exemplar’s $2.5 million revolving credit line at quarter-end; a new $5.0 million line was entered into on October 20, 2023, bearing interest at 8.5% and maturing November 1, 2024.
Material changes versus the prior comparable period
- Revenue fell 91.8% in the quarter and 80.1% for the nine-month period, primarily because 2022 included $14.6 million of one-time collaboration and licensing revenue.
- Exemplar revenue declined 34.3% in the quarter and 51.8% for the nine-month period, reflecting lower demand and fewer services performed.
- Operating losses increased despite lower operating expenses because the substantial 2022 collaboration revenue did not recur.
- Interest expense declined materially after the Convertible Notes were retired; nine-month interest expense was $0.5 million versus $6.1 million.
- Interest income increased to $2.3 million for the nine-month period from $0.1 million, reflecting higher interest rates and invested cash balances.
- In January 2023, Precigen issued 43.96 million common shares for net proceeds of $72.8 million. Shares outstanding increased to 256.4 million at September 30, 2023, from 208.2 million at December 31, 2022.
- Operating cash use was $51.2 million. Investing cash flow was a use of $16.4 million, primarily reflecting net purchases of investments, while financing cash flow provided $29.6 million from the equity offering, partly offset by debt retirement.
Guidance, outlook, risks, contingencies, and unusual items
Management expects operating losses and negative cash flows to continue for the foreseeable future. It believes existing liquid assets will fund operations and capital requirements for at least one year from the financial statement issuance date, but states that additional capital will be required to execute its business plan.
Future funding may come from equity or debt offerings, asset sales, partnerships, collaborations, licensing transactions, or other strategic transactions. These alternatives may be unavailable or unfavorable and could dilute shareholders, impose restrictive debt covenants, or require the company to relinquish rights to technologies or product candidates.
Management expects collaboration revenue to continue declining in the near term unless new strategic transactions are completed. Research and development spending may increase as clinical and preclinical programs advance. The principal clinical programs include PRGN-2012, PRGN-2009, PRGN-3005, PRGN-3006, PRGN-3007, and AG019. Regulatory approval, clinical outcomes, manufacturing scale-up, commercialization, and market acceptance remain uncertain.
The company had $16.8 million of unincurred research and development commitments at September 30, 2023, generally cancellable with notice. Operating lease obligations totaled $10.2 million, plus $0.7 million for leases not yet commenced. A $13.0 million accrual remained for a shareholder class-action settlement at quarter-end; the settlement received final court approval on November 6, 2023. The company also recorded $5.1 million of remaining indemnification accruals related to the Trans Ova sale.
The company reported no additional material risk-factor changes from its 2022 Form 10-K and stated that existing legal matters were not expected to have a material adverse effect, although litigation outcomes cannot be predicted with assurance.
Important facts for investors to verify
- Whether cash and investments can sustain clinical development and corporate operations at the current operating cash burn.
- The timing and terms of any required equity, debt, licensing, partnering, or asset-sale transactions and the resulting dilution or loss of strategic rights.
- Clinical, regulatory, and manufacturing progress for the lead product candidates, particularly PRGN-2012 and the UltraCAR-T programs.
- Whether Exemplar demand and revenue stabilize or continue to decline.
- The extent to which future revenue may depend on uncertain collaborations, licensing payments, royalties, or eventual product approvals.
- Resolution and cash impact of remaining litigation, indemnification obligations, and the shareholder settlement.
- Potential impairment of goodwill and intangible assets if operating performance, market conditions, or management assumptions deteriorate.