Precigen, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Precigen is a discovery- and clinical-stage biopharmaceutical company focused on gene and cell therapies for immuno-oncology, autoimmune disorders, and infectious diseases. Its other continuing businesses are Precigen Exemplar, which provides genetically engineered swine models and related services, and Trans Ova, which provides bovine reproductive technologies. The report covers the three months ended March 31, 2021, compared with the same period in 2020.
The company continued its strategic shift toward healthcare. MBP Titan’s methane bioconversion operations were substantially wound down, and the former non-healthcare businesses sold in January 2020 remain classified as discontinued operations.
Key Financial Metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $24.5 million | $29.8 million | Down 17.9% |
| Collaboration and licensing revenue | $0.1 million | $10.7 million | Down 99.4% |
| Product revenue | $6.4 million | $5.0 million | Up 28.6% |
| Service revenue | $17.9 million | $13.9 million | Up 28.6% |
| Operating loss | $17.7 million | $16.6 million | Higher by $1.1 million |
| Loss from continuing operations | $21.8 million | $20.8 million | Higher by $1.0 million |
| Net loss | $17.3 million | $56.0 million | Improved by $38.7 million |
| Net loss per share | $0.09 | $0.35 | Improved |
| Cash used in operating activities | $16.4 million | $27.7 million | Improved by $11.4 million |
Q1 2021 net loss included $4.5 million of income from discontinued operations, primarily from a $4.6 million gain on termination of the MBP Titan facility lease and a $0.5 million gain on disposal of property and equipment. Q1 2020 included a $35.2 million loss from discontinued operations, including a $27.0 million noncash foreign-currency translation loss related to the 2020 asset sales.
Product and service gross profit improved with stronger demand, pricing changes, workforce reductions, improved inventory management, and operational efficiencies at Trans Ova and Exemplar. Research and development expense declined 7.1% to $10.5 million, and selling, general and administrative expense declined 13.0% to $18.7 million. Stock-based compensation was $5.4 million.
Liquidity, Debt, and Capital Resources
- Cash and cash equivalents were $27.4 million at March 31, 2021, compared with $51.8 million at December 31, 2020.
- Short-term and long-term investments totaled $181.9 million, compared with $48.3 million of short-term investments at year-end 2020.
- Cash, cash equivalents, and investments totaled approximately $209.3 million at March 31, 2021.
- Net cash used in investing activities was $129.1 million, primarily reflecting purchases of investments.
- Net cash provided by financing activities was $121.0 million, primarily from a January 2021 public offering of 17.25 million shares that generated $121.0 million of net proceeds.
- Total long-term debt was $174.5 million, including $200.0 million principal amount of 3.50% convertible senior notes due July 2023. The carrying value of the convertible notes was $170.9 million.
- The company had no outstanding borrowings under Trans Ova’s $5.0 million revolving line or Exemplar’s $0.7 million revolving line at March 31, 2021.
- Management stated that existing liquid assets should fund operations for at least one year from the issuance date of the financial statements, but additional capital will be required as operating losses and negative cash flows are expected to continue.
Material Changes Versus the Prior Comparable Period
- Revenue mix shifted materially away from collaboration and licensing revenue after the prior-period recognition of deferred revenue related to the Castle Creek collaboration termination.
- Trans Ova external revenue increased 25.6% and Segment Adjusted EBITDA improved to $6.4 million from a $0.5 million loss, supported by stronger beef and dairy markets, higher demand, pricing changes, and cost efficiencies.
- Exemplar revenue increased 51.4% to $3.3 million, while Segment Adjusted EBITDA increased to $1.8 million.
- Biopharmaceuticals revenue declined 98.4% to $0.2 million, although Segment Adjusted EBITDA improved to a loss of $8.9 million from a loss of $10.0 million.
- Unallocated corporate costs decreased 24.4% to $8.2 million, primarily because of lower headcount and reduced legal and professional fees.
- Shares outstanding increased to 206.4 million at March 31, 2021 from 187.7 million at December 31, 2020, principally because of the public offering and equity-based issuances.
- The company revised its reportable segments to Biopharmaceuticals, Exemplar, and Trans Ova and restated historical segment information accordingly.
Guidance, Outlook, Risks, and Unusual Items
The filing does not provide formal revenue or earnings guidance. Management expects significant operating losses and negative cash flows for the foreseeable future and anticipates that research and development expenses may increase as clinical and preclinical programs advance.
- Lead programs include PRGN-3005, PRGN-3006, PRGN-2009, PRGN-2012, AG019, and INXN-4001. The first patient was dosed in the PRGN-2012 Phase 1 trial in March 2021.
- COVID-19 previously caused temporary suspensions or enrollment delays in the AG019 and PRGN-3005 trials. Further delays, site closures, reduced personnel availability, or regulatory delays remain possible.
- The company depends on additional financing, strategic transactions, collaborations, asset sales, and eventual regulatory approvals and commercialization. Additional equity financing could dilute shareholders.
- The $200.0 million convertible notes mature in 2023, creating a significant refinancing, repayment, or conversion consideration.
- Remaining contractual commitments include approximately $14.2 million of potential capital contributions to joint ventures and $15.2 million of outstanding third-party research and development commitments.
- Trans Ova remains involved in patent litigation with XY, LLC. The company also faces consolidated shareholder class-action litigation and a derivative action related to prior disclosures concerning the methane bioconversion platform. The ultimate outcomes are uncertain.
- The SEC matter regarding methane bioconversion disclosures was settled in September 2020, including a $2.5 million civil penalty.
- The company has substantial tax attributes, including approximately $796.6 million of U.S. federal net operating loss carryforwards, but their utilization may be limited by Section 382 and other restrictions.
Important Facts for Investors to Verify
- Whether cash, investments, operating cash flow, and future financing access are sufficient to fund the business through the 2023 convertible-note maturity.
- Clinical enrollment, safety, efficacy, regulatory milestones, and potential commercialization timing for the lead pipeline programs.
- The sustainability of Trans Ova’s and Exemplar’s improved revenue and profitability, including demand, pricing, and operating efficiencies.
- The extent to which collaboration revenue remains minimal and whether new strategic transactions or milestone payments materialize.
- Potential dilution from future equity offerings, convertible debt conversion, stock compensation, and other equity issuances.
- Developments and potential financial exposure related to the XY patent litigation and shareholder lawsuits.
- The continuing operational and financial effects of COVID-19 on clinical trials, supply chains, customers, and access to capital.