# Precigen, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Precigen, Inc.](/companies/pgen.md) (CIK 1356090)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 16:25 ET
- Period: 2024-06-30
- Accession: 0001356090-24-000017
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1356090/000135609024000017/pgen-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1356090/000135609024000017/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | −$1.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | −$1.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$58.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$82.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.33 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.33 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 252,366,533 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 250,803,790 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$37.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $6.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $9.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $23.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $73.2m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $23.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $30.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-06-30 | $43.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 48,373 characters.

*The following "Management's Discussion and Analysis of Financial Condition and Results of Operations" should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q, or Quarterly Report, and our Annual Report on Form 10-K for the year ended December 31, 2023, or Annual Report.*

*The following discussion contains forward-looking statements that reflect our plans, estimates, expectations, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements and you are cautioned not to place undue reliance on forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report, particularly in "Special Note Regarding Forward-Looking Statements" and "Risk Factors." The forward-looking statements included in this Quarterly Report are made only as of the date hereof.*

### Overview

We are a dedicated discovery and clinical-stage biopharmaceutical company advancing the next generation of gene and cell therapies with the overall goal of improving outcomes for patients with significant unmet medical needs. We are leveraging our proprietary technology platforms to develop product candidates designed to target urgent and intractable diseases in our core therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases.

We believe that our array of technology platforms uniquely positions us among other biotechnology companies to advance precision medicine. Precision medicine is the practice of therapeutic product development that takes into account specific genetic variations within populations impacted by a disease to design targeted therapies to improve outcomes for a disease or patient population. Our proprietary and complementary technology platforms provide a strong foundation to realize the core promise of precision medicine by supporting our efforts to construct powerful gene programs to drive efficacy, deliver these programs through viral, non-viral, and microbe-based approaches to drive lower costs, and control gene expression to drive safety. Our therapeutic platforms, including UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, are designed to allow us to precisely control the level and physiological location of gene expression and modify biological molecules to control the function and output of living cells to treat underlying disease conditions.

Our clinical pipeline includes PRGN-2012 and PRGN-2009, which are based on our AdenoVerse immunotherapy platform; and PRGN-3005, PRGN-3006 and PRGN-3007, which are built on our UltraCAR-T platform. We have completed enrollment in the Phase 1b clinical trial of PRGN-3006. In addition, we have completed a Phase 1b/2a study of AG019, which is built on our ActoBiotics platform, which we have begun to wind-down as discussed below under our Biopharmaceuticals segment (Precigen ActoBio, Inc.).

In August 2024, we announced strategic prioritization of our pipeline to focus on development of our lead program, PRGN-2012. As part of this restructuring, we plan to pause PRGN-3005 and PRGN-3007 UltraCAR-T clinical trials. We plan to minimize UltraCAR-T spend and focus on strategic partnerships to further advance UltraCAR-T programs. In addition, we plan to continue PRGN-2009 Phase 2 clinical trials under a cooperative research and development agreement ("CRADA") with the National Cancer Institute ("NCI") in recurrent/metastatic cervical cancer and in newly diagnosed HPV-associated oropharyngeal cancer. We plan to pause enrollment in PRGN-2009 cervical cancer trial at non-NCI clinical sites. We also plan to pause all preclinical programs. We have initiated shutdown of our ActoBio subsidiary operations, including planned elimination of all ActoBio personnel. In conjunction with this shutdown, ActoBio's portfolio of intellectual property will be made available for prospective transactions.

These strategic changes will enable us to focus on pre-commercialization efforts on PRGN-2012, including supporting submission of a rolling BLA under an accelerated approval pathway, conducting the confirmatory clinical trial, and manufacturing of commercial product. Additionally, we will continue acceleration of commercial readiness efforts for a potential launch.

We have developed a proprietary electroporation device, UltraPorator, designed to further streamline and ensure the rapid and cost-effective manufacturing of UltraCAR-T therapies. UltraPorator has received U.S. Food and Drug Administration, or FDA, clearance for manufacturing UltraCAR-T cells in clinical trials, and we have dosed patients manufactured UltraCAR-T cells using UltraPorator in our clinical trials.

Our Biopharmaceuticals reportable segment is primarily comprised of the Company's legal entities of Precigen and ActoBio. Our Exemplar reportable segment is comprised of Exemplar Genetics LLC, doing business as Precigen Exemplar, or Exemplar, our wholly owned subsidiary focused on developing research models and services for healthcare research applications.

#### Biopharmaceuticals

#### Precigen

We are developing therapies built on our "off-the-shelf" AdenoVerse immunotherapy platform and our UltraCAR-T therapeutics platform. Our AdenoVerse immunotherapy platform utilizes a library of proprietary adenovectors for the efficient gene delivery of therapeutic effectors, immunomodulators, and vaccine antigens. We have established proprietary manufacturing cell lines and production methodologies from our AdenoVerse immunotherapy platform, which we believe are scalable for commercial supply. We believe that our proprietary gorilla adenovectors, part of the AdenoVerse technology, have superior performance characteristics as compared to current competition, including standard human adenovirus serotype 5, rare human adenovirus types and other non-human primate adenovirus types.

Through our UltraCAR-T therapeutics platform, we are able to precision-engineer UltraCAR-T cells to produce a homogeneous cell product that simultaneously expresses antigen-specific chimeric antigen receptor, or CAR, kill switch, and our proprietary membrane-bound interleukin-15, or mbIL15, genes in any genetically modified UltraCAR-T cell. Our decentralized and rapid proprietary manufacturing process allows us to manufacture UltraCAR-T cells overnight at a medical center's current good manufacturing practices facility, or cGMP, and reinfuse the patient the following day after gene transfer. This process improves upon current approaches to CAR-T manufacturing, which require extensive *ex vivo* expansion following viral vector transduction to achieve clinically relevant cell numbers that we believe can result in the exhaustion of CAR-T cells prior to their administration, limiting their potential for persistence in patients. We have developed a proprietary electroporation device, UltraPorator, designed to further streamline and ensure the rapid and cost-effective manufacturing of UltraCAR-T therapies. The UltraPorator system includes proprietary hardware and software solutions and potentially represents major advancements over current electroporation devices by significantly reducing the processing time and contamination risk. UltraPorator is intended to be a viable scale-up and commercialization solution for decentralized UltraCAR-T manufacturing.

PRGN-2012 is a first-in-class, investigational "off-the-shelf" AdenoVerse immunotherapy for the treatment of recurrent respiratory papillomatosis, or RRP. PRGN-2012 is an innovative therapeutic vaccine with optimized antigen design that uses our gorilla adenovector technology, part of our proprietary AdenoVerse platform, to elicit immune responses directed against cells infected with HPV6 and HPV11. We have completed the primary endpoint evaluation of the Phase 1/2 clinical trial. PRGN-2012 Phase 1/2 pivotal trial data were presented at the 2024 American Society of Clinical Oncology (ASCO) Annual Meeting in June 2024. We have announced that the FDA has agreed that the Phase 1/2 clinical trial of PRGN-2012 will serve as pivotal for the purpose of filing an accelerated approval request for licensure. PRGN-2012 has been granted Breakthrough Therapy Designation and Orphan Drug designation for the treatment of RRP by the FDA. PRGN-2012 has received Orphan Drug Designation for the Treatment of RRP from the European Commission as well. We plan to submit a BLA under an accelerated approval pathway in the second half of 2024. We are preparing for commercial readiness for a potential launch, if approved, of PRGN-2012 in 2025.

PRGN-2009 is a first-in-class, "off-the-shelf" investigational immunotherapy designed to activate the immune system to recognize and target human papillomavirus-positive, or HPV+, solid tumors. PRGN-2009 leverages our UltraVector and AdenoVerse platforms to optimize HPV type 16 and HPV type 18, antigen designed for delivery via a proprietary gorilla adenovector with a large genetic payload capacity and the ability for repeat administrations. We have completed a Phase 1 clinical trial of PRGN-2009 as a monotherapy or in combination with bintrafusp alfa, or M7824, an investigational bifunctional fusion protein, for patients with HPV-associated cancers in collaboration with the National Cancer Institute, or NCI, pursuant to a cooperative research and development arrangement, or CRADA. A Phase 2 clinical trial of PRGN-2009 in combination with pembrolizumab in newly diagnosed oropharyngeal squamous cell carcinoma patients is ongoing in collaboration with the NCI pursuant to a CRADA. In addition, a Phase 2 randomized-controlled clinical trial of PRGN-2009 in combination with pembrolizumab to treat patients with recurrent or metastatic cervical cancer is ongoing pursuant to a CRADA. As part of the strategic prioritization of our pipeline announced in August 2024, we plan to pause enrollment in PRGN-2009 cervical cancer clinical trial at non-NCI clinical sites.

PRGN-3006 is a first-in-class, investigational autologous CAR-T therapy that utilizes our UltraCAR-T platform to express a CAR to target CD33 (Siglec-3), mbIL15 and a kill switch gene. PRGN-3006 is in a Phase 1/1b clinical trial for the treatment of relapsed or refractory, or r/r, acute myeloid leukemia, or AML, and high-risk myelodysplastic syndromes, or MDS. PRGN-3006 has been granted Fast Track designation in patients with r/r AML by the FDA. Previously PRGN-3006 was granted Orphan Drug Designation in patients with AML by the FDA. We have completed the Phase 1 dose escalation trial. We have completed enrollment of the Phase 1b trial for PRGN-3006 in AML and are planning for an end of Phase 1b meeting with the FDA.

PRGN-3005 is a first-in-class, investigational autologous CAR-T therapy that utilizes our UltraCAR-T platform to simultaneously express a CAR targeting the unshed portion of the Mucin 16 antigen, mbIL15, and kill switch genes. PRGN-3005 is in a Phase 1/1b clinical trial for the treatment of advanced, recurrent platinum-resistant ovarian, fallopian tube, or primary peritoneal cancer. We have completed enrollment in the Phase 1 dose escalation cohorts of the intraperitoneal (IP) and intravenous (IV) arms without lymphodepletion as well as in the lymphodepletion cohort in the IV arm. As part of the strategic prioritization of our pipeline announced in August 2024, we will pause enrollment in the ongoing Phase 1b clinical trial of PRGN-3005.

PRGN-3007 is a first-in-class, investigational autologous CAR-T therapy that utilizes the next generation UltraCAR-T platform to express a CAR which targets ROR1, mbIL15, a kill switch, and a novel mechanism for the intrinsic blockade of the programmed death 1, or PD-1, gene expression. PRGN-3007 is in a Phase 1/1b clinical trial for patients with advanced receptor tyrosine kinase-like orphan receptor 1-positive, or ROR1+, hematological (Arm 1) and solid tumors (Arm 2). The target patient population for Arm 1 includes relapsed or refractory CLL, relapsed or refractory MCL, relapsed or refractory B-ALL, and relapsed or refractory DLBCL. The target patient population for Arm 2 includes locally advanced unresectable or metastatic histologically confirmed TNBC Arm 1 and Arm 2 will enroll in parallel. The study is designed to enroll in two parts: an initial 3+3 dose escalation in each arm followed by a dose expansion at the maximum tolerated dose. As part of the strategic prioritization of our pipeline announced in August 2024, we will pause enrollment in the ongoing Phase 1 clinical trial of PRGN-3007.

#### Precigen ActoBio, Inc.

ActoBio utilizes a proprietary class of microbe-based biopharmaceuticals, referred to as ActoBiotics, that enable expression and local delivery of disease-modifying therapeutics. Our ActoBiotics platform is a unique delivery platform precisely tailored for specific disease modification with the potential for superior efficacy and safety.

AG019, is a disease modifying antigen-specific, investigational immunotherapy for the prevention, delay, or reversal of type 1 diabetes mellitus, or T1D. We have completed a Phase 1b/2a clinical trial of AG019 for the treatment of early-onset T1D. The Phase 1b portion of the study evaluated the safety and tolerability of AG019 monotherapy administered both as a single dose and as repeated daily doses in adult and adolescent patients. The Phase 2a double-blind portion of the study investigated the safety and tolerability of AG019 in combination with teplizumab, or PRV-031. The primary endpoint of assessing safety and tolerability in both the Phase 1b AG019 monotherapy and the Phase 2a AG019 combination therapy were met.

Into the second quarter of 2024, we operated ActoBio as a standalone subsidiary comprising our ActoBio reporting unit, which included our associated technologies, personnel, and facilities. We previously announced our continued effort to strategically prioritize our application of resources to particular development efforts. During the second quarter of 2024, we suspended ActoBio's operations and began the process to wind down ActoBio's activities. This included the commencement of terminating leases and employees, and the disposition of certain of its assets and obligations with a focus on the preservation of ActoBio's intellectual property, which will be made available for prospective transactions. We recorded non-cash impairment charges of $34.5 million during the second quarter of 2024 related to the write-down of goodwill, property and equipment, and right-of-use assets to their net realizable values. In addition, we recorded a tax benefit of $1.7 million related to these impairment charges. The Company also recorded a charge related to employee severance and termination benefits of $2.1 million, which we believe will be paid in the third quarter of 2024. We continue to assess potential next steps with respect to the future of the ActoBio programs and intellectual property. See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 1, 6 and 7" appearing elsewhere in the Quarterly Report for further discussion, including discussion related to impairment and employee severance and termination charges of ActoBio.

#### Precigen Exemplar

Exemplar is committed to enabling the study of life-threatening human diseases through the development of Yucatan MiniSwine miniature preclinical research models and services. Historically, researchers have lacked animal models that faithfully represent human diseases. As a result, a sizeable barrier has blocked progress in the discovery of human disease mechanisms; novel diagnostics, procedures, devices, prevention strategies and therapeutics; as well as the ability to predict in humans the efficacy of next-generation procedures, devices, and therapeutics. Exemplar's MiniSwine models are genetically engineered to exhibit a wide variety of human disease states, which provides a more accurate platform to test the efficacy of new medications and devices.

### Segments

As of June 30, 2024, our reportable segments were (i) Biopharmaceuticals and (ii) Exemplar. These identified reportable segments met the quantitative thresholds to be reported separately for the six months ended June 30, 2024.

### Financial overview

We have incurred significant losses since our inception. We anticipate that we may continue to incur significant losses in the foreseeable future, and we may never achieve or maintain profitability. Our historical collaboration and licensing revenues were generated under a business model from which we have gradually transitioned, and we do not expect to expend significant resources servicing our historical collaborations in the future. We may enter into strategic transactions for individual platforms or programs in the future from which we may generate new collaboration and licensing revenues. We continue to generate product and service revenues through our Exemplar subsidiary. Products currently in our clinical pipeline will require regulatory approval and/or commercial scale-up before they may commence significant product sales and operating profits.

As we continue our efforts to focus our business and generate additional capital, we may be willing to enter into transactions involving one or more of our operating segments and reporting units for which we have goodwill and intangible assets. These efforts could result in us identifying impairment indicators or recording impairment charges in future periods. In addition, market changes and changes in judgements, assumptions, and estimates that we have made in assessing the fair value of goodwill could cause us to consider some portion or all of certain assets to become impaired.

See further discussion regarding our ability to continue as a going concern below under the future capital requirements section on Item 2.

### Sources of revenue

Our primary current revenues arise from Exemplar, which generates product and service revenues through the development and sale of genetically engineered miniature swine models. We recognize revenue when control of the promised product or service is transferred to the customer.

As we have shifted our focus to our healthcare business, we have and may continue to mutually terminate historical collaboration agreements or repurchase rights to the exclusive fields from collaborators, relieving us of any further performance obligations under the agreement. Upon such circumstances or when we determine no further performance obligations are required of us under an agreement, we may recognize any remaining deferred revenue as either collaboration revenue or as a reduction of operating expense, depending on the circumstances. See "Notes to the Consolidated Financial Statements (Unaudited) - Note 3" appearing elsewhere in this Quarterly Report for a discussion of changes to our significant collaborations.

In future periods, in connection with our focus on healthcare, our revenues will primarily depend on our ability to advance and create our own programs and the extent to which we bring products enabled by our technologies to market. Other than for collaboration revenues recognized upon cancellation or modification of an existing collaboration or for revenues generated pursuant to future strategic transactions for any of our existing platforms or programs, we expect our collaboration revenues will continue to decrease in the near term, although if any new collaboration agreements or strategic transactions are entered into, revenue could be positively impacted. Our revenues will also depend upon our ability to maintain or improve the volume and pricing of Exemplar's current product and service offerings and to develop and scale up production of new offerings from the various technologies of Exemplar. As we focus on our healthcare business, we anticipate that our expenses will increase substantially if, and as, we continue to advance the preclinical and clinical development of our existing product candidates and our research programs. We expect a significant period of time could pass before commercialization of our various product candidates or before the achievement of contractual milestones and the realization of royalties on product candidates commercialized under our collaborations. Accordingly, there can be no assurance as to the timing, magnitude, and predictability of revenues, if any, to which we might be entitled.

### Cost of products and services

Cost of products and services, all which are related to our Exemplar reporting segment, includes primarily labor and related costs, drugs and supplies, feed used in production, and facility charges, including rent and depreciation. Fluctuations in the price of livestock and feed have not had a significant impact on our operating margins and no derivative financial instruments are used to mitigate the price risk.

### Research and development expenses

We recognize research and development expenses as they are incurred. Our research and development expenses consist primarily of:

- salaries and benefits, including stock-based compensation expense and severance benefits, for personnel in research and development functions;
- fees paid to consultants and contract research organizations who perform research on our behalf and under our direction;
- costs related to laboratory supplies used in our research and development efforts and acquiring, developing, and manufacturing preclinical study and clinical trial materials;
- costs related to certain in-licensed technology rights or in-process research and development;
- amortization of patents and related technologies acquired in mergers and acquisitions; and
- facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and other operating costs.

Our research and development expenses are generally incurred by our reportable segments and primarily relate to either costs incurred to expand or otherwise improve our technologies or the costs incurred to develop our own products and services. Prior to August 2024, our Biopharmaceuticals segment was progressing preclinical and clinical programs that targeted urgent and intractable diseases in our core therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases, including PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, AG019 and PRGN-2012. As discussed above in the Overview – Biopharmaceuticals reporting segment (Precigen), in August 2024, we announced a strategic prioritization of our clinical portfolio and streamlining of resources, to focus on potential commercialization of the PRGN-2012 AdenoVerse® gene therapy for the treatment of RRP. Our Exemplar segment's research and development activities relate to new and improved pig research models. The following table summarizes our research and development expenses incurred by reportable segment and reconciles those expenses to research and development expenses on the condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023.

|  | Three Months Ended June 30, 2024 | 2023 | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Biopharmaceuticals | $15,667 | $11,797 | $29,893 | $23,894 |
| Exemplar | 26 | 77 | 49 | 143 |
| Total consolidated research and development expenses | $15,693 | $11,874 | $29,942 | $24,037 |

In addition to the strategic prioritization, the amount of research and development expenses may be impacted by, among other things, the number and nature of our own proprietary programs, and the number and size of programs we may support on behalf of collaboration agreements.

### Selling, general and administrative expenses

Selling, general and administrative, or SG&A, expenses consist primarily of salaries and related costs, including stock-based compensation expense and severance benefits, for employees in executive, operational (including commercialization), finance, information technology, legal, and corporate communications functions. Other significant SG&A expenses include rent and utilities, insurance, accounting, and legal services (including the cost of settling any claims and lawsuits), and expenses associated with obtaining and maintaining our intellectual property.

SG&A expenses may fluctuate in the future depending on the scaling of our corporate functions required to support our corporate initiatives, the strategic prioritization, the build-up of our commercialization efforts and the outcomes of legal claims and assessments against us.

### Other income (expense), net

Other income consists of gain on convertible debt retirement (for 2023) and interest earned on our cash and cash equivalents and short-term and long-term investments, which may fluctuate based on amounts invested and current interest rates.

Other expense consisted primarily of interest on our Convertible Notes, which decreased in 2023 due to the retirement of our Convertible Notes. See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 8" appearing elsewhere in this Quarterly Report for further discussion.

### Segment performance

We use Segment Adjusted EBITDA as our primary measure of segment performance. We define Segment Adjusted EBITDA as net income (loss) before (i) interest expense and interest income, (ii) income tax expense or benefit, (iii) depreciation and amortization, (iv) stock-based compensation expense, (v) loss on settlement agreements where noncash consideration is paid, (vi) adjustments for accrued bonuses paid in equity awards, (vii) gain or loss on disposals of assets, (viii) loss on impairment of goodwill and other noncurrent assets, (ix) equity in net income (loss) of affiliates, and (x) recognition of previously deferred revenue associated with upfront and milestone payments as well as cash outflows from capital expenditures and investments in affiliates, but includes proceeds from the sale of assets in the period sold. See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 14" appearing elsewhere in this Quarterly Report for further discussion of Segment Adjusted EBITDA.

### Results of operations

### Comparison of the three months ended June 30, 2024 and the three months ended June 30, 2023

The following table summarizes our results of operations for the three months ended June 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

*(In thousands)*

|  | Three Months Ended June 30, 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Product revenues | $31 | $324 | $(293) | (90.4)% |
| Service revenues | 673 | 1,438 | (765) | (53.2)% |
| Other revenues | 13 | 5 | 8 | 160.0% |
| Total revenues | 717 | 1,767 | (1,050) | (59.4)% |
| Operating expenses |  |  |  |  |
| Cost of product and services | 1,014 | 1,697 | (683) | (40.2)% |
| Research and development | 15,693 | 11,874 | 3,819 | 32.2% |
| Selling, general and administrative | 10,306 | 9,316 | 990 | 10.6% |
| Impairment of goodwill | 1,630 | — | 1,630 | N/A |
| Impairment of other noncurrent assets | 32,915 | — | 32,915 | N/A |
| Total operating expenses | 61,558 | 22,887 | 38,671 | 169.0% |
| Operating loss | (60,841) | (21,120) | (39,721) | 188.1% |
| Total other income, net | 360 | 736 | (376) | (51.1)% |
| Loss before income taxes | (60,481) | (20,384) | (40,097) | 196.7% |
| Income tax benefit | 1,689 | 65 | 1,624 | \>200% |
| Net loss | $(58,792) | $(20,319) | $(38,473) | 189.3% |

### Product and service revenues

Product and service revenues decreased $1.1 million, or 60%, compared to the three months ended June 30, 2023. This decrease was related to reductions in services performed at Exemplar.

### Cost of product and services

Cost of product and services decreased primarily as a result of decreased revenues at Exemplar.

### Research and development expenses

Research and development expenses increased $3.8 million, or 32%, compared to the three months ended June 30, 2023. Salaries, benefits, and other personnel costs increased $2.1 million primarily due to severance charges related to the shutdown of the ActoBio subsidiary. Additionally, fees paid to contract research organizations related to the start of the PRGN-2012 confirmatory clinical trial and close out of the PRGN-2012 pivotal clinical trial activities and professional fees incurred related to our manufacturing facility readiness for anticipated BLA submission increased $1.5 million compared to the prior year period.

### Selling, general and administrative expenses

SG&A expenses increased by $1.0 million, or 11%, compared to the three months ended June 30, 2023. This increase was primarily driven by severance costs incurred related to the suspension of ActoBio operations of $0.4 million, increased costs associated with PRGN-2012 commercial readiness as well as increased professional fees incurred related to general corporate matters compared to the prior year period.

### Impairment of Goodwill and other noncurrent assets

In conjunction with the suspension of ActoBio’s operations, we recorded $34.5 million of impairment charges related to goodwill and long-lived assets in the second quarter of 2024.

### Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended June 30, 2024 and 2023, for each of our reportable segments.

*(In thousands)*

| Segment Adjusted EBITDA: | Three Months Ended June 30, 2024 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Biopharmaceuticals | $(27,574) | $(17,254) | $(10,320) | (59.8)% |
| Exemplar | (483) | (83) | (400) | \<(200)% |

For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 14" appearing elsewhere in this Quarterly Report.

The following table summarizes revenues from external customers for the three months ended June 30, 2024 and 2023, for our one reportable segment for which revenue exists.

*(In thousands)*

|  | Three Months Ended June 30, 2024 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Exemplar | $717 | $1,767 | $(1,050) | (59.4)% |

#### Biopharmaceuticals

Segment Adjusted EBITDA loss increased primarily due to costs incurred related to the suspension of ActoBio operations in the second quarter of 2024 as well as higher fees paid to contract research organizations related to the start of the PRGN-2012 confirmatory clinical trial, close out of the PRGN-2012 pivotal clinical trial activities and non-capitalizable professional fees related to the build-out of our manufacturing facility compared to the prior period. Additionally, capital expenditures were higher in the current period related to the build-out of our manufacturing facility for PRGN-2012.

#### Exemplar

Revenues for Exemplar decreased due to a decrease in services performed resulting from a lower demand from existing customers. The decline in Segment Adjusted EBITDA was primarily due to the decreased revenues.

### Comparison of the six months ended June 30, 2024 and the six months ended June 30, 2023

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

*(In thousands)*

|  | Six Months Ended June 30, 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Product revenues | $169 | $648 | $(479) | (73.9)% |
| Service revenues | 1592 | 2,965 | (1,373) | (46.3)% |
| Other revenues | 21 | 5 | 16 | \>200% |
| Total revenues | 1,782 | 3,618 | (1,836) | (50.7)% |
| Operating expenses |  |  |  |  |
| Cost of product and services | 2,089 | 3,224 | (1,135) | (35.2)% |
| Research and development | 29,942 | 24,037 | 5,905 | 24.6% |
| Selling, general and administrative | 20,457 | 20,954 | (497) | (2.4)% |
| Impairment of goodwill | 1,630 | — | 1,630 | N/A |
| Impairment of other noncurrent assets | 32,915 | — | 32,915 | N/A |
| Total operating expenses | 87,033 | 48,215 | 38,818 | 80.5% |
| Operating loss | (85,251) | (44,597) | (40,654) | 91.2% |
| Total other income (expense), net | 1,003 | 1,424 | (421) | (29.6)% |
| Loss before income taxes | (84,248) | (43,173) | (41,075) | 95.1% |
| Income tax benefit | 1,718 | 120 | 1,598 | \>200% |
| Net loss | $(82,530) | $(43,053) | $(39,477) | 91.7% |

### Product and service revenues

Product and service revenues decreased $1.9 million, or 51%, compared to the six months ended June 30, 2023. This decrease was related to reductions in services performed at Exemplar.

### Cost of product and services

Cost of product and service decreased primarily as a result of decreased revenues at Exemplar and cost reduction initiatives implemented at Exemplar.

### Research and development expenses

Research and development expenses increased $5.9 million, or 25%, compared to the six months ended June 30, 2023. Salaries, benefits, and other personnel costs increased by $3.3 million primarily due to severance charges incurred related to shutdown of the ActoBio subsidiary and an increase in the hiring of employees related to the advancement of PRGN-2012 in 2023 at Precigen. Additionally, fees paid to contract research organizations related to the start of the PRGN-2012 confirmatory clinical trial and close out of the PRGN-2012 pivotal clinical trial activities and professional fees incurred related to our manufacturing facility readiness for anticipated BLA submission increased compared to the prior year period. These increases were offset by lower costs incurred at contract research organizations for other programs compared to the same period in 2023.

### Selling, general and administrative expenses

SG&A expenses decreased by $0.5 million, or 2%, compared to the six months ended June 30, 2023. This decrease was primarily due to lower stock compensation and insurance expenses in 2024 compared to the same period in 2023. These decreases were offset by severance costs incurred in the second quarter of 2024 related to the suspension of ActoBio's operations that did not occur in the prior year period, and increased costs related to PRGN-2012 commercial readiness compared to the prior year period.

### Impairment of Goodwill and other noncurrent assets

In conjunction with the suspension of ActoBio’s operations, we recorded $34.5 million of impairment charges related to goodwill and long-lived assets in the second quarter of 2024.

### Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the six months ended June 30, 2024 and 2023, for each of our reportable segments.

*(In thousands)*

| Segment Adjusted EBITDA: | Six Months Ended June 30, 2024 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Biopharmaceuticals | $(51,394) | $(38,597) | $(12,797) | (33.2)% |
| Exemplar | (683) | 38 | (721) | N/A |

For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 14" appearing elsewhere in this Quarterly Report.

The following table summarizes revenues from external customers for the six months ended June 30, 2024 and 2023, for our one reportable segment for which revenue exists.

*(In thousands)*

|  | Six Months Ended June 30, 2024 2024 | 2023 | Dollar Change | Percent Change |
| --- | ---: | ---: | ---: | ---: |
| Exemplar | $1,782 | $3,618 | $(1,836) | (50.7)% |

#### Biopharmaceuticals

Segment Adjusted EBITDA loss increased primarily due to higher fees paid to contract research organizations related to the start of the PRGN-2012 confirmatory clinical trial and close out of the PRGN-2012 pivotal clinical trial activities and professional fees incurred related to the build-out of our manufacturing facility and cost associated with readiness for our anticipated BLA submission, offset by lower costs incurred at contract research organizations for other programs compared to the prior period. Additionally, capital expenditures were higher related to the build-out of our manufacturing facility for PRGN-2012 in the six months ended June 30, 2024, versus the six months ended June 30, 2023.

#### Exemplar

Revenues for Exemplar decreased due to a decrease in services performed resulting from a lower demand from existing customers. The decline in Segment Adjusted EBITDA was primarily due to the decreased revenues, offset by cost reduction initiatives implemented at Exemplar.

### Liquidity and capital resources

### Sources of liquidity

We have incurred losses from continuing operations since our inception, and as of June 30, 2024, we had an accumulated deficit of $2.0 billion. From our inception through June 30, 2024, we have funded our operations principally with proceeds received from private and public equity and debt offerings, cash received from our collaborators, and through product and service sales made directly to customers. As of June 30, 2024, we had cash and cash equivalents of $9.3 million and short-term investments of $10.2 million. Cash in excess of immediate requirements is typically invested primarily in money market funds, certificate of deposits and U.S. government debt securities in order to maintain liquidity and preserve capital.

In January 2023, we closed a public offering of 43,962,640 shares of our common stock, resulting in net proceeds to us of $72.8 million, after deducting underwriting discounts, fees, and other offering expenses.

Additionally, in August 2024, we closed a public offering of 39,878,939 shares of our common stock, resulting in net proceeds to us of approximately $31.4 million, after deducting underwriting discounts, fees, and an estimate of other offering expenses. This included the sale of 4,584,821 shares of our common stock pursuant to the underwriter’s exercise of its option to

purchase an additional 5,294,117 shares until September 6, 2024.

### Cash flows

The following table sets forth the significant sources and uses of cash for the periods set forth below:

*(In thousands)*

| Net cash (used in) provided by: | Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Operating activities | $(37,197) | $(34,156) |
| Investing activities | 39,000 | (26,905) |
| Financing activities | 52 | 29,589 |
| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (95) | (172) |
| Net decrease in cash, cash equivalents, and restricted cash | $1,760 | $(31,644) |

#### Cash flows from operating activities:

During the six months ended June 30, 2024, our net loss was $82.5 million, which includes the following significant noncash expenses and benefits totaling $40.4 million: (i) $34.5 million of impairment losses, (ii) $4.5 million of stock-based compensation expense, (iii) $3.2 million of depreciation and amortization expense, and (iv) $0.5 million of shares issued as payment for services, offset by non-cash benefits of $1.7 million due to deferred income taxes and $0.6 million due to amortization of discounts on investments. In addition, changes in operating assets and liabilities provided $4.8 million of cash for operating activities.

During the six months ended June 30, 2023, our net loss was $43.1 million, which includes the following significant noncash expenses and benefits totaling $8.5 million: (i) $5.3 million of stock-based compensation expense, (ii) $3.4 million of depreciation and amortization expense and (iii) $0.5 million of shares issued as payment for services, offset by non-cash benefits of $0.7 million due to amortization of discounts on investments. In addition, changes in operating assets and liabilities provided $0.5 million of cash for operating activities.

#### Cash flows from investing activities:

During the six months ended June 30, 2024, we received $45.7 million of investments, from sales and maturities, net of purchases, and purchased $6.7 million of property, plant and equipment, primarily related to the build-out of our manufacturing facility.

During the six months ended June 30, 2023, we purchased $26.7 million of investments, net of sales and maturities.

#### Cash flows from financing activities:

During the six months ended June 30, 2024, we received $0.1 million of proceeds from stock option exercises.

During the six months ended June 30, 2023, we received $72.8 million proceeds from the sale of our common stock in an underwritten public offering and retired $43.2 million of our Convertible Notes (including cost to retire).

### Future capital requirements

Our future capital requirements will depend on many factors, including:

- progress in our research and development programs, as well as the magnitude and speed of development of these programs;
- capital expenditures to building out our manufacturing capabilities and preparing for commercial readiness;
- the timing of regulatory approval of our product candidates and those of our collaborations;
- the timing, receipt, and amount of any payments received in connection with strategic transactions;
- the timing, receipt, and amount of upfront, milestone, and other payments, if any, from present and future collaborators, if any;
- the timing, receipt, and amount of sales and royalties, if any, from our product candidates;
- the timing and capital requirements to scale up our various product candidates and service offerings and customer acceptance thereof;
- our ability to maintain and establish additional collaborative arrangements and/or new strategic initiatives;
- the resources, time, and cost required for the preparation, filing, prosecution, maintenance, and enforcement of our intellectual property portfolio;
- strategic mergers and acquisitions, if any, including both the upfront acquisition cost as well as the cost to integrate, maintain, and expand the strategic target; and
- the costs associated with legal activities, including litigation, arising in the course of our business activities and our ability to prevail in any such legal disputes.

Until such time, if ever, as we can regularly generate positive operating cash flows, we plan to finance our cash needs through a combination of equity offerings, debt or royalty monetization financings, government, or other third-party funding, strategic alliances, sales of assets, and licensing arrangements. We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Our current stock price may make it more difficult to pursue equity financings and lead to substantial dilution if the price of our common stock does not increase. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional funds through strategic transactions, collaborations, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates, or to grant licenses on terms that may not be favorable to us.

We are subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development, and clinical manufacturing of its product candidates. Our success is dependent upon our ability to continue to raise additional capital in order to fund ongoing research and development, adequately satisfy or renegotiate long-term debt obligations, obtain regulatory approval of our products, successfully commercialize our products, generate revenue, meet our obligations, and, ultimately, attain profitable operations.

Our consolidated financial statements as of June 30, 2024 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Based on our balance of cash, cash equivalents and investments of $19.5 million at June 30, 2024 and forecasted negative cash flows from operating activities for the foreseeable future, there is substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued.

See the section entitled "Risk Factors" in our Annual Report for additional risks associated with our substantial capital requirements.

### Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments from continuing operations as of June 30, 2024 and the effects such obligations are expected to have on our liquidity and cash flows in future periods:

*(In thousands)*

|  | Total | Less Than 1 Year | 1 - 3 Years | 3 - 5 Years | More Than 5 Years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Operating leases | $8,584 | $1,941 | $2,916 | $2,526 | $1,201 |
| Total | $8,584 | $1,941 | $2,916 | $2,526 | $1,201 |

In addition to the obligations in the table above, as of June 30, 2024, we are party to license agreements with various third parties that contain future milestones and royalty payment obligations related to development milestones and/or commercial sales of products that incorporate or use their technologies. Because these agreements are generally subject to termination by us or are dependent on certain condition precedents within our control, no amounts are included in the tables above. As of June 30, 2024, we also had research and development commitments with third parties totaling $16.9 million that had not yet been incurred.

### Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under SEC rules.

### Critical accounting policies and estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies from those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual Report.

### Recent accounting pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, see "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 2" appearing elsewhere in this Quarterly Report.

## Market risk

As filed, 1,256 characters.

The following sections provide quantitative information on our exposure to interest rate risk. We make use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

### Interest rate risk

We had cash, cash equivalents and short-term investments of $19.5 million and $62.9 million as of June 30, 2024 and December 31, 2023, respectively. Our cash and cash equivalents and short-term investments consist of cash, money market funds, U.S. government debt securities, certificates of deposit, and corporate bonds. The primary objectives of our investment activities are to preserve principal, maintain liquidity, and maximize income without significantly increasing risk. Our investments consist of U.S. government debt securities, certificates of deposit, and corporate bonds which may be subject to market risk due to changes in prevailing interest rates that may cause the fair values of our investments to fluctuate. We believe that a hypothetical 100 basis point increase in interest rates would not materially affect the fair value of our interest-sensitive financial instruments and any such losses would only be realized if we sold the investments prior to maturity.

## Controls and procedures

As filed, 1,429 characters.

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation, under supervision and with the participation of our management, including our Chief Executive Officer ("CEO"), who is our principal executive officer, and our Chief Financial Officer ("CFO"), who is our principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, as of the end of the period covered by this report, our CEO and CFO concluded that our disclosure controls and procedures are effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,234 characters.

As disclosed in "Summary of Risk Factors" and "Item 1A. Risk Factors" in our Annual Report, there are a number of risks and uncertainties that may have a material effect on the operating results of our business and our financial condition. There are no additional material updates or changes to our risk factors since the filing of our Annual Report, except as discussed below.

In evaluating our risks, readers also should carefully consider the risk factors discussed in our Annual Report, which could materially affect our business, financial condition, or operating results, in addition to the other information set forth in this report and in our other filings with the SEC.

### Risks related to our business, financial position and capital needs

***Our strategic prioritization and streamlining of resources undertaken to extend our cash runway and focus more of our capital resources on PRGN-2012 might not achieve our intended outcome.***

On August 6, 2024, we publicly announced a strategic prioritization of our clinical portfolio and streamlining of resources, including a reduction of over 20% of our work force, to focus on potential commercialization of PRGN-2012 for the treatment of RRP. In connection with the implementation of our strategic prioritization and streamlining of resources, we recorded non-cash impairment charges to goodwill and other assets of approximately $32.9 million, net of tax, in the second quarter of 2024 and also estimate we will record severance costs of approximately $3.0 million in the aggregate between the second and third quarters of 2024, of which $2.1 million was recorded in the second quarter of 2024. We may incur additional expenses not currently contemplated due to events associated with strategic prioritization and streamlining of resources; for example, the reduction in force may have a future impact on other areas of our liabilities and obligations, which could result in losses in future periods. The reduction in force may result in unintended consequences and costs, such as the loss of institutional knowledge and expertise, attrition beyond the intended number of employees, and decreased morale among our remaining employees. In addition, while positions have been eliminated, certain functions necessary to our operations remain, and we might not successfully distribute the duties and obligations of our terminated employees among our remaining employees. The reduction in workforce could also make it difficult for us to pursue, or prevent us from pursuing, new opportunities and initiatives due to insufficient personnel, or require us to incur additional and unanticipated costs to hire new personnel to pursue such opportunities or initiatives. Moreover, we may not realize, in full or in part, the anticipated benefits and savings from this strategic prioritization and streamlining of resources due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the anticipated benefits from the strategic prioritization and streamlining of resources, or if we experience significant adverse consequences from such actions, our business, financial condition and results of operations may be materially adversely affected. In addition, we may need to undertake additional workforce reductions or restructuring activities in the future.

***Despite the proceeds received from our August 2024 public offering, we will still require significant additional capital funding and such capital may not be available to us.***

We recently raised approximately $31.4 million in net proceeds in an offering of equity securities in August 2024. The net proceeds of the offering, together with our recently announced strategic prioritization and streamlining of resources and cash on hand, are expected to fund our operations into early 2025. This projection is based on our current expectations regarding cost structure, cost savings from the strategic prioritization and streamlining of resources, cash burn rate and other operating assumptions. In the event that our operating expenses are higher than anticipated, or our cost savings from the strategic prioritization and streamlining of resources are less than we anticipate, we may be required to implement contingency plans within our control to conserve and/or enhance our liquidity to meet operating needs, including potential financings. We have no additional committed external sources of funds and there can be no assurance that new financings or other transactions will be available to us on commercially acceptable terms, or at all, and such financings may adversely affect the holdings or rights of our stockholders and may cause significant dilution to existing stockholders. If additional financing is not available when required or is not available on acceptable terms, we may need to delay, modify or abandon our plans for our product candidates, which could have a material adverse effect on our business, results of operations and financial condition. If we are unable to fund our operations without additional external financing and therefore cannot sustain future operations, we may be required to delay, reduce and/or cease our operations and/or seek bankruptcy protection.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001356090-24-000017. Last ingested by Listed: Nov 4, 2026, 17:17 ET. No prices; not investment advice.