Precigen, Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
Precigen is a clinical-stage biopharmaceutical company developing gene and cell therapies focused on immuno-oncology, autoimmune disorders, and infectious diseases. Its principal programs use the UltraCAR-T, AdenoVerse, and ActoBiotics platforms. The company also operates Precigen Exemplar, which develops genetically engineered miniature swine models and related research services. This unaudited filing covers the three months ended March 31, 2024, compared with the same period in 2023.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1.065 million | $1.851 million | Down 42.5% |
| Product revenue | $0.138 million | $0.324 million | Down 57.4% |
| Service revenue | $0.919 million | $1.527 million | Down 39.8% |
| Research and development expense | $14.249 million | $12.163 million | Up 17.2% |
| SG&A expense | $10.151 million | $11.639 million | Down 12.8% |
| Operating loss | $24.410 million | $23.478 million | Loss increased 4.0% |
| Net loss | $23.738 million | $22.734 million | Loss increased 4.4% |
| Basic and diluted loss per share | $0.10 | $0.10 | No change |
| Net cash used in operations | $14.090 million | $18.388 million | Use decreased $4.298 million |
Revenue consisted almost entirely of Exemplar product and service revenue; no collaboration and licensing revenue was recognized in either period. The filing does not provide a clear consolidated gross-margin percentage. Gross margin on products and services declined primarily because of lower Exemplar revenue.
At March 31, 2024, cash and cash equivalents were $17.478 million, short-term investments were $27.280 million, and total cash, cash equivalents, and short-term investments were $44.758 million. Cash, cash equivalents, and restricted cash increased by $9.895 million during the quarter, primarily because investment sales and maturities exceeded purchases by $28.393 million, partially offset by operating cash use and $4.351 million of capital expenditures.
Total assets were $134.847 million and total liabilities were $37.828 million. Shareholders’ equity was $97.019 million, down from $118.498 million at December 31, 2023, primarily reflecting the quarterly net loss and accumulated other comprehensive loss.
Precigen had no outstanding balance on Exemplar’s $5.0 million revolving credit facility and no outstanding convertible notes. The convertible notes were fully repurchased in June 2023. Lease liabilities totaled $6.705 million, and operating lease commitments totaled $9.133 million.
Material changes versus the prior comparable period
- Total revenue declined $0.786 million, primarily because Exemplar performed fewer services and experienced lower demand from existing customers.
- Research and development expense increased $2.086 million, primarily because of higher personnel costs, consultant fees, and contract research organization costs supporting clinical development.
- SG&A expense decreased $1.488 million, primarily because of lower stock-based compensation and insurance expense.
- Biopharmaceuticals Segment Adjusted EBITDA loss increased to $23.820 million from $21.343 million, reflecting higher research and development spending.
- Exemplar shifted from Segment Adjusted EBITDA of $0.121 million in Q1 2023 to a loss of $0.200 million in Q1 2024, primarily because of lower revenue.
- Operating cash use improved from $18.388 million to $14.090 million, while investing cash flow changed from a $50.408 million use to a $24.045 million source due largely to investment maturities and sales.
- No financing cash flows occurred in Q1 2024, compared with $44.174 million of financing cash inflows in Q1 2023, which included equity proceeds and debt retirement activity.
Guidance, outlook, risks, contingencies, and unusual items
Management expects operating losses and negative operating cash flows to continue for the foreseeable future. The filing states that existing cash and investments are not sufficient to fund planned operations through one year after issuance of the interim financial statements and therefore there is substantial doubt about the company’s ability to continue as a going concern.
Management plans to raise additional capital through possible equity or debt financings, collaborations, strategic alliances, asset monetizations, licensing or other transactions. There is no committed source of additional funding, and the filing cautions that financing may be unavailable or available only on unfavorable terms, potentially causing substantial dilution or requiring the company to relinquish valuable rights.
PRGN-2012 Phase 2 pivotal data were anticipated in the second quarter of 2024. Management planned to submit a biologics license application under an accelerated approval pathway in the second half of 2024 and was preparing for potential commercial launch in 2025, subject to regulatory approval. The filing does not provide financial guidance for revenue, earnings, or cash burn.
Clinical-stage programs remain subject to regulatory, clinical, manufacturing, financing, intellectual-property, and commercialization risks. Failure to obtain additional capital could require the company to delay, reduce, or eliminate research and development activities or clinical trials.
Research and development commitments with third parties totaled $19.210 million at March 31, 2024, generally cancellable with advance notice. The company also had $9.133 million of operating lease commitments. In April 2024, the buyer of Trans Ova disputed certain 2023 earn-out calculations, and the company disputed items in the buyer’s notification. The company also received a $1.862 million indemnification claim related to post-sale expenses; $5.075 million remained accrued for indemnification obligations at March 31, 2024.
Several shareholder-related legal matters remain outstanding, including a derivative action and a books-and-records inspection action. Management does not believe currently known matters will have a material adverse effect, individually or in the aggregate, although outcomes are uncertain.
Most important facts for investors to verify
- Whether Precigen secures near-term financing or another liquidity source sufficient to address the disclosed going-concern uncertainty.
- The pace of quarterly cash burn and whether the $44.758 million of cash and short-term investments supports the company’s stated development and commercial-readiness plans.
- PRGN-2012 Phase 2 data, the timing and contents of any accelerated-approval BLA, and the probability and timing of a potential 2025 launch.
- Clinical progress, safety, efficacy, enrollment, and regulatory milestones for PRGN-2009, PRGN-3005, PRGN-3006, PRGN-3007, and AG019.
- Whether Exemplar revenue and demand stabilize after the 42.5% year-over-year revenue decline.
- The terms and dilution implications of any future equity, convertible debt, licensing, collaboration, or asset-sale transactions.
- The resolution and potential cash impact of the Trans Ova earn-out dispute and indemnification claim.
- Future impairment risk for goodwill and intangible assets, particularly if the company continues to realign operations or monetize assets.