Precigen, Inc. Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2019. The filing was submitted March 2, 2020. Although the request references 2019 Q4, this is an annual Form 10-K; fourth-quarter information is included in the unaudited quarterly data.
Business context
Precigen, formerly Intrexon Corporation, is a discovery and clinical-stage biotechnology company focused primarily on gene and cell therapies in immuno-oncology, autoimmune disorders, and infectious diseases. Its principal platforms include UltraCAR-T, AdenoVerse Immunotherapy, ActoBiotics, and UltraVector. At year-end, the company also operated non-healthcare businesses, including MBP Titan and Trans Ova, but announced a strategic shift toward healthcare.
Lead clinical programs included PRGN-3005 for ovarian cancer, PRGN-3006 for acute myeloid leukemia and higher-risk MDS, AG019 for recent-onset type 1 diabetes, and INXN-4001 for heart failure. No products had been commercialized by Precigen or through its collaborations.
Financial performance and liquidity
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Total revenue | $90.7 million | $151.2 million | Down 40.0% |
| Collaboration and licensing revenue | $14.1 million | $69.5 million | Down 79.8% |
| Product revenue | $23.8 million | $28.5 million | Down 16.5% |
| Service revenue | $51.8 million | $52.4 million | Down 1.2% |
| Operating loss | $204.2 million | $403.5 million | Improved by $199.3 million |
| Loss from continuing operations attributable to Precigen | $206.2 million | $408.9 million | Improved by $202.8 million |
| Net loss attributable to Precigen | $322.3 million | $509.3 million | Improved by $187.0 million |
| Basic and diluted net loss per share | $2.09 | $3.93 | Improved by $1.84 |
| Research and development expense | $101.9 million | $366.2 million | Down 72.2% |
| Cash used in operating activities | $135.9 million | $124.2 million | Use increased by $11.7 million |
Cost of products and services was $61.4 million, implying approximately $29.3 million of revenue after these direct costs and an indicative 32.3% margin before considering the economics of collaboration revenue and other operating costs. Operating margin was approximately negative 225%. These calculated margins are not presented as company-defined measures.
At December 31, 2019, cash and cash equivalents were $65.8 million and short-term investments were $9.3 million. Total assets were $455.8 million, total liabilities were $384.1 million, and total equity was $71.7 million. Accumulated deficit was $1.65 billion.
Debt included $200.0 million principal amount of 3.50% convertible senior notes due July 2023, with a $157.6 million carrying value at year-end, plus other convertible and term debt. Reported long-term debt, including current portions, was $218.0 million. Contractual obligations totaled $326.4 million, including debt, interest, leases, and contingent consideration.
Material changes versus the prior comparable period
- Revenue declined primarily because collaboration and licensing revenue fell after the company reacquired rights from or terminated arrangements with several collaborators, reducing reimbursed research activity and deferred-revenue recognition.
- Research and development expense fell sharply because 2018 included $236.7 million of immediately expensed in-process research and development related to reacquired rights. Core clinical and preclinical spending increased as the company pursued internally controlled programs.
- Operating and net losses improved substantially from 2018, but operating cash consumption worsened to $135.9 million.
- The company recorded $30.8 million of continuing-operations impairment charges, primarily a $29.6 million goodwill impairment for Trans Ova.
- Loss from discontinued operations increased to $116.2 million, including $89.7 million of impairment charges related to assets subsequently sold.
- AquaBounty was deconsolidated in April 2019 after a public offering reduced Precigen's control; Precigen sold its remaining AquaBounty shares to a related-party affiliate in October 2019 for $21.6 million.
- Precigen adopted the new lease standard in 2019, recording right-of-use assets and lease liabilities. Reportable segments were also reorganized into PGEN Therapeutics, ActoBio, MBP Titan, Trans Ova, and All Other.
Outlook, management commentary, risks, and unusual items
Management expects operating losses and negative operating cash flow to continue for the foreseeable future and does not expect significant product revenue for several years, if at all. The company stated that its existing liquid assets, together with funds obtained after year-end, were expected to fund operations and capital requirements for at least the next 12 months.
In January 2020, Precigen completed sales of most bioengineering assets to TS Biotechnology, a related party, for $53.0 million plus contingent payment rights, and sold its EnviroFlight interest to Darling Ingredients for $12.2 million. It also received $35.0 million from a private placement of 5,972,696 common shares to TS Biotechnology. The company changed its name to Precigen and reduced its workforce as part of the healthcare-focused restructuring.
Management expected initial data from PRGN-3005 and PRGN-3006 in the second half of 2020, interim AG019 data in the third quarter of 2020, INXN-4001 complete Phase 1 data in 2020, and progress toward a Phase 1 trial for PRGN-2009. These are forward-looking expectations, not guarantees.
Key risks include the absence of approved commercial products, clinical and regulatory failure, adverse events associated with gene and cell therapies, complex manufacturing, dependence on collaborators, intense competition, intellectual-property challenges, substantial future capital needs, potential dilution, convertible-debt repayment or conversion obligations, related-party transactions, and continued losses.
The filing discloses an SEC fact-finding investigation concerning disclosures about the methane bioconversion platform. The company stated that investigative work was largely complete as of November 2019, but discussions continued and the outcome remained uncertain. Trans Ova also remained involved in patent and royalty disputes with XY, including a pending motion concerning royalty obligations.
Most important facts for an investor to verify
- Current cash runway after the January 2020 asset sales and $35.0 million private placement, compared with the continuing quarterly operating cash burn.
- Status, safety, enrollment, and efficacy data for PRGN-3005, PRGN-3006, AG019, INXN-4001, and planned PRGN-2009 development.
- Terms, conversion mechanics, maturity obligations, and potential cash requirements associated with the convertible notes and other related-party debt.
- Whether collaboration and licensing revenue will continue to decline as prior arrangements wind down, and whether royalties or milestones can replace that revenue.
- Financial impact of the healthcare restructuring, discontinued operations, remaining MBP Titan and Trans Ova assets, and any additional divestitures or impairment charges.
- Outcome of the SEC investigation and the remaining XY litigation and royalty disputes.
- Potential dilution from equity financing, convertible debt, options, restricted stock units, and the company's concentrated insider ownership.
- Management's statement that available liquidity funds at least 12 months of operations, including the assumptions underlying that conclusion.