Precigen, Inc. — FY2020 Form 10-K 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 principal platforms include UltraCAR-T, AdenoVerse immunotherapy and ActoBiotics. Reportable segments were PGEN Therapeutics, ActoBio, Trans Ova and Human Biotherapeutics. The filing covers the fiscal year ended December 31, 2020; quarterly data identify fourth-quarter 2020 separately.
During 2020, the company continued its strategic transition toward healthcare by selling most non-healthcare assets, selling its interest in EnviroFlight and winding down MBP Titan. The divested and wound-down activities are presented as discontinued operations.
Financial performance and key metrics
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Total revenue | $103.2 million | $90.7 million | 13.7% increase |
| Collaboration and licensing revenue | $21.2 million | $14.1 million | 50.8% increase |
| Product revenue | $24.3 million | $23.8 million | 2.4% increase |
| Service revenue | $56.9 million | $51.8 million | 9.8% increase |
| Operating loss | $(86.6) million | $(166.8) million | Improved by $80.2 million |
| Loss from continuing operations | $(103.8) million | $(170.3) million | Improved by $66.6 million |
| Net loss attributable to Precigen | $(170.5) million | $(322.3) million | Improved by $151.8 million |
| Net loss per share | $(1.02) | $(2.09) | Improved |
| Research and development expense | $41.6 million | $66.7 million | 37.5% decrease |
| Cash used in operating activities | $(77.0) million | $(135.9) million | Outflow reduced by $58.9 million |
Based on reported figures, the operating margin was approximately (83.9%) and the net margin was approximately (165.3%). These margins are not directly indicative of product economics because 2020 collaboration revenue included accelerated recognition of previously deferred revenue.
Trans Ova generated $71.2 million of external revenue and positive Segment Adjusted EBITDA of $2.6 million. PGEN Therapeutics generated $0.8 million of external revenue and Segment Adjusted EBITDA of $(25.6) million. ActoBio generated $3.1 million of external revenue and Segment Adjusted EBITDA of $(7.9) million. Human Biotherapeutics generated $17.8 million of external revenue and Segment Adjusted EBITDA of $(2.1) million.
Liquidity, capital resources and debt
- Cash and cash equivalents were $51.8 million at December 31, 2020, compared with $65.8 million at December 31, 2019.
- Short-term investments were $48.3 million, bringing cash and short-term investments to approximately $100.1 million.
- Total debt was $171.9 million, including $168.1 million of convertible debt. The convertible notes have $200.0 million principal outstanding, bear interest at 3.5% and mature July 1, 2023.
- Contractual obligations included $200.0 million of convertible debt principal, $21.0 million of related cash interest, $12.9 million of operating lease payments and $14.2 million of remaining joint-venture capital contribution commitments.
- In January 2021, the company raised approximately $121.2 million of net proceeds through an offering of 17.25 million common shares. Management stated that existing liquid assets, including those proceeds, were expected to fund operations and capital requirements for at least the next 12 months.
- Management expects continuing operating losses and negative operating cash flow and expects to require additional capital through equity or debt financings, strategic transactions, asset sales, collaborations or licensing arrangements.
Material changes versus the prior comparable period
- Revenue increased primarily because the company recognized previously deferred revenue after terminating or modifying collaborations, particularly with Castle Creek and Oragenics. Castle Creek-related revenue was $17.8 million in 2020.
- Research and development expense declined due to deprioritized ActoBio programs, reduced clinical and preclinical activity in certain areas and the closure of operating divisions in 2019. Management expects clinical development costs to rise as programs advance.
- Operating losses narrowed partly because of lower operating expenses and the absence of the $29.8 million goodwill impairment recorded in 2019.
- Net loss remained substantial because 2020 included $66.7 million of discontinued-operations losses, $18.4 million of interest expense, a $26.6 million noncash foreign-currency translation loss associated with the asset sale, and an $11.4 million loss on the Harvest settlement.
- Shares outstanding increased to 187.7 million at year-end from 163.3 million, including shares issued in a private placement, debt conversions and a settlement agreement. The January 2021 equity offering caused additional dilution.
- Cash used in operations improved primarily because of the divestitures, MBP Titan’s wind-down and lower spending in ActoBio and corporate functions.
Clinical pipeline, outlook and management commentary
- PRGN-3005 and PRGN-3006 remained in Phase 1/1b trials for ovarian cancer and hematologic malignancies, respectively. Preliminary early-patient data were described as encouraging, but the studies were small, non-randomized and preliminary.
- PRGN-2009 was in a Phase 1/2 trial for HPV-associated cancers. PRGN-2012 received FDA IND clearance in January 2021 to begin a Phase 1 trial for recurrent respiratory papillomatosis.
- AG019 remained in a Phase 1b/2a trial for early-onset type 1 diabetes. The company reported preliminary trends in C-peptide stabilization, but these results require further clinical validation.
- The Phase 1 study of INXN-4001 for heart failure was completed; final analysis remained ongoing.
- The FDA cleared the UltraPorator system in October 2020 for clinical-trial manufacturing, and patients were dosed with UltraCAR-T cells manufactured using the system in November 2020.
- COVID-19 temporarily suspended or delayed portions of the AG019 and PRGN-3005 trials. Future enrollment, site operations, supply availability, regulatory interactions and development timelines may remain affected.
- No formal revenue, earnings or product-approval guidance is provided in the filing. The company expects losses and negative cash flow for the foreseeable future and does not expect meaningful product sales until regulatory approvals and commercial scale-up occur, if ever.
Risks, contingencies and unusual items
- The company has incurred losses since inception, had an accumulated deficit of $1.8 billion at year-end and depends on additional financing. Future financings may dilute shareholders or include restrictive terms.
- The $200.0 million convertible notes mature in 2023. A lack of cash or refinancing capacity could impair the company’s ability to repay, convert or repurchase the notes.
- All product candidates remain subject to clinical, manufacturing, regulatory, safety, reimbursement and commercialization risks. No lead product has received marketing approval.
- Cell and gene therapies are complex to manufacture, and the UltraPorator and decentralized manufacturing approach have not been commercially validated.
- In September 2020, the company settled an SEC investigation without admitting or denying the allegations and paid a $2.5 million civil penalty. Related securities class actions and a derivative shareholder action were pending at year-end.
- Trans Ova settled one patent dispute in December 2020, while another patent infringement lawsuit remained pending and could affect use of the disputed technology.
- The company issued 2.1 million shares valued at $18.1 million to settle matters with Harvest, resulting in an $11.4 million loss.
- An out-of-period adjustment of $26.6 million was recorded in 2020 for cumulative foreign-currency translation losses related to divested entities. Management concluded it was not material to 2020 or 2019 results and it did not affect cash or continuing operations.
- Randal J. Kirk controlled approximately 44% of the company’s common stock at December 31, 2020, creating significant shareholder concentration and related-party transaction risk.
- Management and Deloitte reported effective disclosure controls and internal control over financial reporting. The 2020 audit opinion was unqualified.
Most important facts for investors to verify
- Reconcile 2020 revenue to determine the portion that was recurring versus accelerated recognition of deferred collaboration revenue.
- Review the January 2021 financing, resulting share count, dilution and expected cash runway relative to projected operating cash burn.
- Confirm the terms, conversion conditions and 2023 maturity obligations of the convertible notes.
- Evaluate updated clinical-trial enrollment, safety, efficacy and manufacturing data for PRGN-3005, PRGN-3006, PRGN-2009, PRGN-2012, AG019 and INXN-4001.
- Monitor the SEC-related shareholder litigation, the remaining Trans Ova patent case and any related settlements or reserves.
- Assess whether Trans Ova’s positive Segment Adjusted EBITDA can offset continuing corporate and clinical-development cash requirements.
- Verify the effect of COVID-19 on trial timelines, regulatory milestones, supply chains and financing access.