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Item 7. Management’s Discussion and Analysis

2021-03-01 compared with 2020-03-02 · 233 added, 200 removed, 284 unchanged (60% of the section changed)

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We anticipate that we may continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.

Outside of collaboration and license fee payments and sales of products and services, which vary over time, we have not generated significant revenues, including revenues or royalties from product sales by us or our collaborators.

Certain of our consolidated subsidiaries require regulatory approval and/or commercial scale-up before they may commence significant product sales and operating profits.

In April 2019, we initiated efforts to better deploy resources, realize inherent synergies, and position us for growth with a core focus on healthcare and initiated plans to achieve this through various corporate activities, including partnering, potential asset sales, and operating cost reductions.

In conjunction with these efforts, our CODM began assessing the operating performance of, and allocated resources for, our operating segments using Segment Adjusted EBITDA as defined below.

In January 2020, we furthered our plans to enhance our focus on the healthcare industry when we sold a number of our bioengineering assets in the TS Biotechnology Sale to TS Biotechnology.

The assets divested in the TS Biotechnology Sale included our domain name dna.com and all of our equity interests in (1) Blue Marble AgBio, a Delaware limited liability company, that we formed to hold our agricultural biotechnology assets, (2) ILH Holdings, a Delaware corporation, which housed our yeast fermentation technology platform for the biologic production of active pharmaceutical ingredients and other fine chemicals, (3) IPHI, a Delaware corporation, which owns Okanagan Specialty Fruits, the agricultural company developing non-browning apples without the use of any artificial additives, (4) Intrexon UK Holdings, a Delaware corporation, which owns Oxitec, the developer of an insect-based biological control system, (5) Oragenics, a Florida corporation, which is developing antibiotics against infectious disease and, in collaboration with ActoBio, treatments for oral mucositis, and (6) SH Parent, a Delaware corporation, which held our ownership interests in Surterra, a cannabinoid-based wellness company.

In addition, in January 2020, in a separate transaction, we sold our interest in EnviroFlight to Darling, referred to collectively with the TS Biotechnology Sale as the Transactions.

Beginning in the fourth quarter of 2019, we determined that assets, liabilities and operations sold in the Transactions collectively met the criteria for discontinued operations.

As such, the assets, liabilities, and operations related to the Transactions are reclassified and presented as discontinued operations for all periods.

See "Notes to the Consolidated Financial Statements - Note 3 " appearing elsewhere in this Annual Report for a discussion of the Transactions and the discontinued operations.

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 Trans Ova and Exemplar subsidiaries, and in 2020, both of these subsidiaries generated positive Segment Adjusted EBITDA.

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.

In January 2020, as part of our efforts to focus our business on the healthcare industry, we sold a number of our non-healthcare assets to TS Biotechnology and separately sold our interest in EnviroFlight to Darling, referred to collectively as the Transactions.

We determined that the assets, liabilities and operations sold in the Transactions collectively met the criteria for discontinued operations and have been reclassified and presented as such for all periods.

As a result of market uncertainty driven by the COVID-19 pandemic and the state of the energy sector raising significant challenges for the strategic alternatives pursued by MBP Titan, beginning in the second quarter of 2020 and throughout the remainder of 2020, we suspended MBP

Titan's operations, preserved certain of MBP Titan's intellectual property, terminated all of its personnel, and undertook steps to dispose of its other assets and obligations.

The wind down of MBP Titan's activities was substantially complete by December 31, 2020, with the final disposition of certain property and equipment and the facility operating lease occurring in January 2021.

As of December 31, 2020, we determined that the assets, liabilities, and expenses related to the discontinued operations of MBP Titan met the criteria for discontinued operations.

See "Notes to the Consolidated Financial Statements - Note 3" appearing elsewhere in this Annual Report for further discussion of discontinued operations.

Additionally, 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 our identifying impairment indicators or recording impairment charges in future periods.

These efforts could result in us identifying impairment indicators or recording impairment charges in future periods.

In addition, market changes and changes in judgments, 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.

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We are also entitled to sublicensing revenues in those situations where our collaborators choose to license our technologies to other parties.

As we continue to shift our focus on our healthcare business, we expect to cancel collaboration agreements or we may 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 in-process research and development expense, depending on the circumstances.

As we continue to shift our focus on our healthcare business, we have and may continue to mutually terminate collaboration agreements or repurchase rights to the exclusive fields from collaborators, relieving us of any further performance obligations under the agreement.

See "Notes to the Consolidated Financial Statements - Note 6" appearing elsewhere in this Annual Report for a discussion of changes to our significant collaborations.

We generate product and service revenues primarily through sales of products or services that are created from technologies developed or owned by us.

Our primary current offerings arise from Trans Ova and include sales of advanced reproductive technologies, including our bovine embryo transfer and IVF processes and from genetic preservation and sexed semen processes, and applications of such processes to other livestock, as well as sales of livestock and embryos produced using these processes and used in production.

Exemplar also 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 is transferred to the customer or when the promised service is completed.

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.

We expect our collaboration revenues will continue to decrease in the near term as the number of collaborations to which we are party declines and as we fulfill our obligations under any remaining ECCs.

Our revenues will also depend upon our ability to maintain or improve the volume and pricing of Trans Ova's current product and service offerings and to develop and scale up production of new offerings from the various technologies of our subsidiaries.

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.

Our revenues will also depend upon our ability to maintain or improve the volume and pricing of Trans Ova's and Exemplar's current product and service offerings and to develop and scale up production of new offerings from the various technologies of our subsidiaries.

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.

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• amortization of patents and related technologies acquired in mergers and acquisitions;

facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We currently have no individually significant research and development projects, and our research and development expenses primarily relate to either the costs incurred to expand or otherwise improve our technologies, the costs incurred to develop our own products and services, or the costs incurred to develop a specific application of our technologies in support of current partners.

Research and development expenses, including costs for preclinical and clinical development, incurred for programs we support pursuant to an ECC agreement are typically reimbursed by the partner at cost, and all other research and development programs may be terminated or otherwise deferred at our discretion.

The amount of our 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 an ECC.

We expect that our research and development expenses will increase as we continue to develop our own proprietary programs, including the progression of these programs into pre-clinical or clinical stages.

We believe these increases will likely include increased costs related to the hiring of additional personnel in research and development functions, increased costs paid to consultants and contract research organizations, and increased costs related to laboratory supplies.

• facility-related expenses, which include direct depreciation costs and unallocated expenses for rent and maintenance of facilities and other operating costs.

Our research and development expenses are generally incurred by our operating 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.

PGEN Therapeutics is progressing preclinical and clinical programs in immuno-oncology, autoimmune disorders and infectious diseases, including PRGN-3005 and PRGN-3006 which are both in Phase 1/1b clinical trials.

ActoBio has a portfolio of candidates available for clinical development across a number of potential indications using our ActoBiotics platform, including its most advanced candidate, AG019, that is currently in a Phase 1b/2a clinical trial.

Trans Ova's research and development activities support new and improved product and service offerings for its customers.

The Human Biotherapeutics division supports our INXN-4001 product candidate with Triple-Gene and our partnered program with Castle Creek.

Other operating segment research and development primarily relates to Exemplar's research and development activities related to new and improved pig research models.

The following table summarizes our research and development expenses incurred by reportable segment for the years ended December 31, 2020, 2019, and 2018.

Year Ended December 31,

2020 2019 2018

(In thousands)

PGEN Therapeutics $ 25,245 $ 26,669 $ 151,647

ActoBio 11,110 17,999 35,388

Trans Ova 2,228 2,037 2,481

Human Biotherapeutics 2,452 1,159 —

Total research and development expenses from reportable segments 41,035 47,864 189,516

All Other 625 8,777 23,123

Total research and development expenses from operating segments $ 41,660 $ 56,641 $ 212,639

The following table reconciles research and development expenses by reportable segments to research and development expenses on the consolidated statements of operations for the years ended December 31, 2020, 2019, and 2018.

Year Ended December 31,

2020 2019 2018

(In thousands)

Total research and development expenses from reportable segments $ 41,035 $ 47,864 $ 189,516

Other research and development expenses, including from other operating segments (1) 625 19,572 175,803

Eliminations (16) (770) (32,312)

Total consolidated research and development expenses $ 41,644 $ 66,666 $ 333,007

(1) Includes corporate research and development expenses not allocated to operating segments, as well as certain expenses incurred to reacquire previously licensed technology rights in the year ended December 31, 2018.

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 an ECC.

We expect that our research and development expenses will increase as we continue to develop our own proprietary programs, including progression of these programs into preclinical and clinical stages.

We believe these increases will likely include increased costs paid to consultants and contract research organizations, and increased costs related to laboratory supplies.

Research and development expenses may also increase as a result of ongoing research and development operations that we might assume through mergers and acquisitions or in-licensing of technologies.

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Selling, general and administrative, or SG&A, expenses consist primarily of salaries and related costs, including stock-based compensation expense, for employees in executive, operational, finance, information technology, legal, and corporate communications functions.

Other significant SG&A expenses include rent and utilities, insurance, accounting, and legal services, and expenses associated with obtaining and maintaining our intellectual property.

SG&A expenses may fluctuate in the future depending on the number and nature of transactions we may undertake with certain of our operations and subsidiaries.

These fluctuations could be related to personnel, legal fees, outside consultants, and other professional services.

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, and the outcomes of legal claims and assessments against us.

Other income (expense), net

We have historically held equity securities and preferred stock of private and publicly traded companies, including investments received and/or purchased from certain collaborators.

We evaluate whether to elect the fair value option on an individual investment basis.

We elected the fair value option to account for our equity securities and preferred stock held in publicly traded companies.

These equity securities and preferred stock are recorded at fair value at each reporting date.

Unrealized appreciation (depreciation) resulting from fair value adjustments are reported as other income (expense) in the consolidated statements of operations.

We account for our investments in private companies using either the equity method or the measurement alternative method for equity securities without readily determinable fair values, which represents cost and any adjustments for impairment or observable price changes in certain transactions.

See "Notes to the Consolidated Financial Statements - Note 2 " appearing elsewhere in this Annual Report.

We expect minimal gains (losses) on our securities portfolio in future periods as we expect to finish liquidating our portfolio in early 2020.

Interest expense is expected to increase in future periods due to the noncash amortization of the long-term debt discount and debt issuance costs related to the Convertible Notes issued in July 2018.

Interest income consists of interest earned on our cash and cash equivalents and short-term and long-term investments.

Dividend income historically consisted of the monthly preferred stock dividends received from our investments in preferred stock, virtually all of which has been liquidated as of December 31, 2019.

We historically held equity securities and preferred stock of private and publicly traded companies, including investments received and/or purchased from certain collaborators.

These equity securities and preferred stock were recorded at fair value at each reporting date.

Unrealized appreciation (depreciation) resulting from fair value adjustments were reported as other income (expense) in the consolidated statements of operations.

In January 2020, as part of the TS Biotechnology Sale, we sold our remaining equity securities and investment in preferred stock, and therefore, no future gains (losses) will be incurred.

Interest expense is expected to increase in future periods due to the noncash amortization of the long-term debt discount and debt issuance costs related to the Convertible Notes due July 2023.

Interest income consists of interest earned on our cash and cash equivalents and short-term investments and may fluctuate based on amounts invested and current interest rates.

Dividend income historically consisted of the monthly preferred stock dividends received from our investments in preferred stock, all of which have been liquidated as of December 31, 2020.

Equity in net income (loss) of affiliates

Equity in net income or loss of affiliates is our pro-rata share of our equity method investments' operating results, adjusted for accretion of basis difference.

We account for investments in our JVs and start-up entities backed by Harvest Intrexon Enterprise Fund I, LP, or Harvest, using the equity method of accounting since we have the ability to exercise significant influence, but not control, over the operating activities of these entities.

We account for investments in our JVs using the equity method of accounting since we have the ability to exercise significant influence, but not control, over the operating activities of these entities.

We previously accounted for our investments in start-up entities backed by Harvest using the equity method of accounting.

In December 2020, we entered into an agreement with Harvest to resolve matters related to the parties' contractual and equity relationships and our remaining equity interests in start-up entities backed by Harvest were terminated.

Segment performance

We use Segment Adjusted EBITDA as our primary measure of segment performance.

(vii) recognition of previously deferred revenue associated with upfront and milestone payments as well as cash outflows from capital expenditures and investments in affiliates.

We define Segment Adjusted EBITDA as net loss before (i) interest expense, (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) loss on impairment of goodwill and other noncurrent assets, (viii) equity in net loss of affiliates, and (ix) recognition of previously deferred revenue associated with upfront and milestone payments as well as cash outflows from capital expenditures and investments in affiliates.

Corporate expenses are not allocated to the segments and are managed at a consolidated level.

See "Notes to the Consolidated Financial Statements - Note 20" appearing elsewhere in this Annual Report for further discussion of Segment Adjusted EBITDA.

Results of operations

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The following table summarizes our results of operations for the years ended December 31, 2020 and 2019, together with the changes in those items in dollars and as a percentage:

December 31, Dollar

Change Percent

(In thousands)

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Selling, general and administrative 91,704 98,634 (6,930) (7.0) %

Impairment loss

Impairment of goodwill — 29,820 (29,820) (100.0) %

Impairment of other noncurrent assets 920 990 (70) (7.1) %

Total operating expenses 189,781 257,511 (67,730) (26.3) %

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Loss from discontinued operations, net of income tax benefit (2) (66,748) (153,582) 86,834 (56.5) %

Net loss (170,521) (323,916) 153,395 (47.4) %

Net loss attributable to noncontrolling interests — 1,592 (1,592) (100.0) %

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(1) Including $3,053 and $11,832 from related parties for the years ended December 31, 2020 and 2019, respectively.

The results of operations in the table above include the operations related to the Transactions, as well as adjustments to those businesses as a result of the Transactions, in loss from discontinued operations, net of income tax benefit.

The increase in the loss from discontinued operations in 2019 is due to additional impairment losses recorded related to the Transactions.

(2) See "Notes to the Consolidated Financial Statements - Note 3" appearing elsewhere in this Annual Report.

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The following table shows the collaboration and licensing revenue recognized for the years ended December 31, 2020 and 2019, together with the changes in those items.

December 31, Dollar

(In thousands)

ZIOPHARM Oncology, Inc.

Ares Trading S.A.

$ 200 $ 2,171 $ (1,971)

Oragenics, Inc.

Intrexon T1D Partners, LLC

3,053 (564) 3,617

Intrexon Energy Partners, LLC — 2,596 (2,596)

Intrexon Energy Partners II, LLC — 1,217 (1,217)

Fibrocell Science, Inc.

Castle Creek Biosciences, Inc.

17,810 3,713 14,097

Harvest start-up entities (1) — 4,862 (4,862)

For the years ended December 31, 2019 and 2018, revenue recognized from collaborations with Harvest start-up entities include Exotech Bio, Inc.;

AD Skincare, Inc.;

and Thrive Agrobiotics, Inc.

For the year ended December 31, 2018, revenues recognized from collaborations with Harvest start-up entities also include Genten Therapeutics, Inc.

and CRS Bio, Inc.

Collaboration and licensing revenues decreased $55.5 million , or 80 percent , from the year ended December 31, 2018 primarily due to the reacquisition of rights previously licensed to certain collaborators, including ZIOPHARM, Ares Trading, and certain of the Harvest start-up entities, the result of which eliminated or substantially reduced revenues generated from those collaborations.

Additionally, in 2018, we recognized additional revenues which arose from the acceleration of previously deferred revenue upon mutual termination of certain collaborations.

Other 145 64 81

Total $ 21,208 $ 14,059 $ 7,149

(1) For the year ended December 31, 2019, revenue recognized from collaborations with Harvest start-up entities include Thrive Agrobiotics, Inc.;

Exotech Bio, Inc.;

and AD Skincare, Inc.

Collaboration and licensing revenues increased $7.1 million, or 51 percent, over the year ended December 31, 2019 primarily due to the accelerated recognition of previously deferred revenue upon the mutual terminations of collaborations with Castle Creek and Oragenics in 2020.

This increase was partially offset by a decrease in collaboration revenues related to programs that have been paused since the second half of 2019 while the other parties evaluate the status of the projects and their desired future development activities.

Product revenues and gross margin

Product revenues decreased $4.7 million , or 17 percent , from the year ended December 31, 2018.

The decrease in product revenues was primarily due to lower customer demand in the beef and dairy industries resulting in fewer sales of pregnant cows and calf products.

Gross margin on products declined in the current period as a result of fewer products sold.

Product revenues increased $0.6 million, or 2 percent, over the year ended December 31, 2019.

The increase in product revenue was primarily due to higher customer demand for animal products.

Gross margin on products improved in the current period as a result of operational efficiencies gained through reductions in workforce and improved inventory management and a decrease in the cost of cows used in production.

Service revenues and gross margin

Service revenues decreased $0.6 million , or 1 percent , from the year ended December 31, 2018.

Trans Ova's service revenues and gross margin thereon declined slightly due to fewer services performed and underutilized capacity as a result of lower customer demand.

Service revenues increased $5.1 million, or 10 percent, over the year ended December 31, 2019.

Trans Ova's service revenues and gross margins thereon increased due to an increase in services performed for new and existing customers and the expansion of its commercial dairy business.

Gross margin also increased due to a reduction in third-party royalty rate obligations for certain licensed technologies and reductions in workforce.

Additionally, Exemplar's service revenues increased in the current period due to an increase in services performed resulting from higher demand from existing customers, which also improved gross margin on services performed.

Research and development expenses

Research and development expenses decreased $264.4 million , or 72 percent , from the year ended December 31, 2018.

The 2018 research and development expenses include $236.7 million of expenses related to in-process research and development reacquired from former collaborators.

Research and development expenses decreased $25.0 million, or 38 percent, from the year December 31, 2019.

Salaries, benefits, and other personnel costs decreased $7.3 million and contract research organization costs and lab supplies decreased $13.9 million in 2020 as we deprioritized certain programs at ActoBio and closed two of our operating divisions in 2019.

Selling, general and administrative expenses

SG&A expenses decreased $24.9 million , or 20 percent , from the year ended December 31, 2018.

Salaries, benefits and other personnel costs decreased $14.9 million primarily due to decreased share-based compensation expense as a result of the reversal of previously recognized expense for unvested options granted to former employees as well as the conclusion of the

vesting period for other previously granted stock options.

Legal and professional fees decreased $6.1 million primarily due to fewer legal fees associated with Trans Ova.

Impairment loss

Impairment loss for the year ended December 31, 2019 of $30.8 million arose primarily from a goodwill impairment charge related to Trans Ova.

As a result of our annual goodwill impairment test in the fourth quarter, we determined that it was more-likely-than-not that the fair value of Trans Ova was less than its carrying value.

As a result, we performed a quantitative analysis and recorded a $29.6 million impairment charge.

SG&A expenses decreased $6.9 million, or 7 percent, from the year ended December 31, 2019, and include a decrease in professional fees payable to certain third-party vendors and reduced personnel costs as we scaled down our corporate functions to support a more streamlined organization.

Other corporate expenses decreased $2.6 million as part of the streamlined organization and the impact of the COVID-19 pandemic on travel.

These decreases were partially offset by increased share-based compensation expense attributable to equity grants made in the first quarter of 2020, one-time severance costs for

terminated employees, and increased legal fees associated with litigation matters, including our settlements with Harvest and the SEC.

Impairment of goodwill and other noncurrent assets

Impairment losses for the year ended December 31, 2020 of $0.9 million were due to the impairment of the right-of-use assets for certain of our leased facilities.

Impairment losses for the year ended December 31, 2019 of $30.8 million arose primarily from a goodwill impairment charge related to Trans Ova.

Total other expense, net

Total other expense, net, decreased $15.2 million , or 88 percent , over the year ended December 31, 2018.

This decrease was primarily attributable to an improvement in unrealized and realized appreciation (depreciation) on our securities portfolio of $36.6 million primarily due to unrealized losses on our ZIOPHARM preferred stock in 2018 and a realized gain on the sale of our common shares held in AquaBounty in October 2019, net of a decrease in dividend income of $15.1 million following the return of our investment in ZIOPHARM preferred stock to ZIOPHARM in October 2018.

Additionally, these decreases were partially offset by an increase in interest expense of $8.6 million associated with our Convertible Notes issued in July 2018.

Total other expense, net, which primarily includes interest expense, increased $14.1 million, or over 200 percent, over the year ended December 31, 2019.

In 2019, our equity securities and investments in preferred stock, which were fully liquidated by early 2020, had net unrealized and realized appreciation of $8.3 million that partially offset interest expense of $17.7 million.

As these investments were fully liquidated by early 2020, there was no such appreciation to offset interest expense of $18.4 million in 2020.

Additionally, interest income earned on our short-term investments decreased in 2020 due to lower interest rates.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the years ended December 31, 2020 and 2019, for each of our reportable segments and for All Other segments combined, as well as unallocated corporate costs.

December 31, Dollar

Change Percent

(In thousands)

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PGEN Therapeutics $ (25,611) $ (30,164) $ 4,553 15.1 %

ActoBio (7,861) (13,662) 5,801 42.5 %

Trans Ova 2,624 (6,337) 8,961 141.4 %

Human Biotherapeutics (2,139) (1,051) (1,088) (103.5) %

All Other 4,274 (4,901) 9,175 187.2 %

Unallocated corporate costs (37,566) (46,011) 8,445 18.4 %

For a reconciliation of Segment Adjusted EBITDA to net loss before income taxes, see "Notes to the Consolidated Financial Statements - Note 20 " appearing elsewhere in this Annual Report.

For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Consolidated Financial Statements - Note 20" appearing elsewhere in this Annual Report.

The following table summarizes revenues from external customers for the years ended December 31, 2020 and 2019, for each of our reportable segments and for All Other segments combined.

December 31, Dollar

Change Percent

(In thousands)

PGEN Therapeutics $ 776 $ 2,227 $ (1,451) (65.2) %

ActoBio 3,053 (364) 3,417 >200%

Trans Ova 71,186 68,672 2,514 3.7 %

Human Biotherapeutics 17,810 3,713 14,097 >200%

All Other 10,299 12,514 (2,215) (17.7) %

PGEN Therapeutics

Revenues for PGEN Therapeutics declined from 2018 to 2019 primarily due to the reacquisition of rights previously licensed to certain collaborators, which eliminated or significantly reduced collaboration revenues from research and development services provided and recognition of previously deferred revenue.

In 2018, ActoBio reacquired rights previously licensed to certain collaborators, including Intrexon T1D Partners, Inc., resulting in the elimination of collaboration revenues from research and development services performed in 2019.

Research and development services performed on our partnered programs have declined in the current period as we focus more resources on our unpartnered platform, resulting in a decline in both Segment Adjusted EBITDA and revenues for this segment.

The decrease in Trans Ova's Segment revenues was primarily attributable to lower product revenues due to lower customer demand.

The Segment Adjusted EBITDA of All Other improved period over period due our closure of two reporting units in 2019 and write-downs of certain long-lived assets in 2018.

Revenues in All Other declined in 2019 as result of fewer research and development services performed for collaborations with Harvest start-up entities.

Revenues for PGEN Therapeutics declined from 2019 to 2020 because we had no significant collaborations requiring services in 2020.

Segment Adjusted EBITDA improved due to higher costs for contract research organizations incurred in 2019 for preclinical activities on certain programs prior to moving to clinical trials and the manufacturing of clinical trial materials in

advance of initiation of the trials.

Additionally, fewer costs related to the PRGN-3005 Phase 1 trials were incurred in the second quarter of 2020 as enrollment of new patients in this trial was temporarily suspended due to a mandated hold on certain early and late-stage clinical trials at the Fred Hutchinson Cancer Research Center in Seattle that was instituted in light of the COVID-19 pandemic.

Costs related to PGEN Therapeutics' clinical trials are expected to increase in 2021 as the trials progress and as we initiate new clinical trials for new clinical programs.

Finally, capital expenditures decreased in the current period as PGEN Therapeutics completed an expansion of its lab facilities in 2019.

Revenues for ActoBio increased primarily due to accelerated recognition of previously deferred revenue upon the mutual termination of a collaboration with Oragenics in July 2020.

Segment Adjusted EBITDA has improved as ActoBio incurred fewer costs with contract research organizations due to deprioritizing certain programs in late 2019 and fewer AG019 trial costs in the second quarter of 2020 due to the temporary suspension of the last cohort of the Phase 1b/2a clinical trial.

Revenues for Trans Ova increased primarily as a result of more procedures performed for new and existing customers and the expansion of its commercial dairy business.

The improvement in Segment Adjusted EBITDA was primarily due to operational efficiencies gained through reductions in workforce and improved inventory management, a decrease in the cost of cows used in production, and a reduction in third-party royalty rate obligations for certain licensed technologies.

Human Biotherapeutics

The increase in Human Biotherapeutics' revenues was due to the accelerated recognition of previously deferred revenue upon the mutual termination of a collaboration with Castle Creek in 2020.

Segment Adjusted EBITDA declined due to one-time severance costs associated with workforce reductions in the first quarter of 2020 and increased costs for contract research organizations related to our INXN-4001 program.

Revenues in All Other decreased in 2020 as our partnered programs with Harvest start-up entities were paused since the third quarter of 2019.

These decreases were partially offset by an increase in Exemplar's revenues as a result of higher demand from its existing customers.

Segment Adjusted EBITDA improved period over period as a result of improved Segment Adjusted EBITDA at Exemplar due to its higher revenues and reduced costs, as well as the closure of two operating segments in 2019.

Unallocated Corporate Costs

Unallocated corporate costs decreased primarily due to an improvement in unrealized and realized appreciation (depreciation) on our securities portfolio of $36.6 million primarily due to unrealized losses on our ZIOPHARM preferred stock in 2018 and a realized gain on the sale of our common shares held in AquaBounty in October 2019, net of a decrease in dividend income of $15.1 million following the return of our investment in ZIOPHARM preferred stock to ZIOPHARM in October 2018.

Additionally, consolidated costs from AquaBounty decreased in 2019 due to our deconsolidation in April 2019.

Unallocated corporate costs decreased primarily due to a reduction of corporate employees as well as a decrease in certain professional fees as we scaled down our corporate functions to support our more streamlined organization.

These decreases were partially offset by an increase in legal fees associated with litigation matters, including our settlement with the SEC.

Comparison of the year ended December 31, 2019 to the year ended December 31, 2018

The following table summarizes our results of operations for the years ended December 31, 2019 and 2018, together with the changes in those items in dollars and as a percentage:

December 31, Dollar

Change Percent

(In thousands)

9 unchanged sentences

Selling, general and administrative 98,634 125,162 (26,528) (21.2) %

Impairment loss

Impairment of goodwill 29,820 — 29,820 N/A

Impairment of other noncurrent assets 990 — 990 N/A

Total operating expenses 257,511 520,845 (263,334) (50.6) %

Operating loss (166,789) (369,667) 202,878 (54.9) %

Total other income (expense), net

Total other expense, net (2,059) (17,259) 15,200 (88.1) %

Equity in loss of affiliates (2,416) (8,986) 6,570 (73.1) %

Loss from continuing operations before income taxes (171,264) (395,912) 224,648 (56.7) %

Income tax benefit (expense)

Income tax benefit 930 15,425 (14,495) (94.0) %

Loss from continuing operations (170,334) (380,487) 210,153 (55.2) %

Loss from discontinued operations, net of income tax benefit (2) (153,582) (134,219) (19,363) 14.4 %

Net loss (323,916) (514,706) 190,790 (37.1) %

Net loss attributable to noncontrolling interests 1,592 5,370 (3,778) (70.4) %

Net loss attributable to Precigen $ (322,324) $ (509,336) $ 187,012 (36.7) %

Revenues in 2018 are accounted for under ASC 606 and revenues in 2017 are accounted for under ASC 605.

We adopted ASC 606 on January 1, 2018 using the modified retrospective method, which applies the changes in accounting prospectively and does not restate prior periods.

(1) Including $11,832 and $55,573 from related parties for the years ended December 31, 2019 and 2018, respectively.

The results of operations in the table above include the operations related to the Transactions in loss from discontinued operations, net of income tax benefit.

The increase in the loss from discontinued operations in 2018 is due to additional impairment losses recorded at Oxitec.

(2) See "Notes to the Consolidated Financial Statements - Note 3" appearing elsewhere in this Annual Report.

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The following table shows the collaboration and licensing revenue recognized for the years ended December 31, 2019 and 2018, together with the changes in those items.

December 31, Dollar

(In thousands)

ZIOPHARM Oncology, Inc.

$ 2,171 $ 16,298 $ (14,127)

Ares Trading S.A.

— 11,175 (11,175)

Oragenics, Inc.

(564) 1,353 (1,917)

Intrexon T1D Partners, LLC — 2,502 (2,502)

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Intrexon Energy Partners II, LLC 1,217 2,998 (1,781)

Fibrocell Science, Inc.

S & I Ophthalmic, LLC

Castle Creek Biosciences, Inc.

3,713 1,394 2,319

Harvest start-up entities (1) 4,862 14,447 (9,585)

For the years ended December 31, 2018 and 2017, revenue recognized from collaborations with Harvest start-up entities include Genten Therapeutics, Inc.;

CRS Bio, Inc.;

Other 64 12,444 (12,380)

Total $ 14,059 $ 69,540 $ (55,481)

(1) For the years ended December 31, 2019 and 2018, revenue recognized from collaborations with Harvest start-up entities include Thrive Agrobiotics, Inc.;

Exotech Bio, Inc.;

AD Skincare, Inc.;

and Thrive Agrobiotics, Inc.

For the year ended December 31, 2017, revenues recognized from collaborations with Harvest start-up entities also include Relieve Genetics, Inc.

Collaboration and licensing revenues decreased $65.1 million, or 48 percent, from the year ended December 31, 2017 due to (i) the mutual termination in 2017 of our second ECC with ZIOPHARM for the treatment of graft-versus-host disease, (ii) a decrease in research and development services for certain of our ECCs as we redeployed certain resources towards supporting prospective new platforms and partnering opportunities and began to focus more on the further development of relationships and structures that provide us with more control and ownership over the development process and commercialization path, including programs where we reacquired the previously licensed technology rights in 2018, and (iii) a decrease in research and development services we perform for collaborators upon the transition of program execution to our collaborators.

and AD Skincare, Inc.

For the year ended December 31, 2018, revenues recognized from collaborations with Harvest start-up entities also include Genten Therapeutics, Inc.

and CRS Bio, Inc.

Collaboration and licensing revenues decreased $55.5 million, or 80 percent, from the year ended December 31, 2018 primarily due to the reacquisition of rights previously licensed to certain collaborators, including ZIOPHARM, Ares Trading, and certain of the Harvest start-up entities, the result of which eliminated or substantially reduced revenues generated from those collaborations.

Additionally, in 2018, we recognized additional revenues which arose from the acceleration of previously deferred revenue upon mutual termination of certain collaborations.

Product revenues and gross margin

Product revenue decreased $5.1 million, or 15 percent, from the year ended December 31, 2017.

The decrease in product revenues was primarily due to lower milk prices which in turn resulted in lower customer demand for live calves, cows previously used in production, and cloned products.

Gross margin on products declined in the current period as a result of the lower product sales and increased operating costs associated with new product offerings and cloned products.

Product revenues decreased $4.7 million, or 17 percent, from the year ended December 31, 2018.

The decrease in product revenues was primarily due to lower customer demand in the beef and dairy industries resulting in fewer sales of pregnant cows and calf products.

Gross margin on products declined in the current period as a result of fewer products sold.

Service revenues and gross margin

Service revenue increased $1.8 million, or 4 percent, over the year ended December 31, 2017.

The increase in service revenues and gross margin thereon relates to pricing changes and an increase in the number of embryos produced per bovine in vitro fertilization cycle performed due to improved production results.

Service revenues decreased $0.6 million, or 1 percent, from the year ended December 31, 2018.

Trans Ova's service revenues and gross margin thereon declined slightly due to fewer services performed and underutilized capacity as a result of lower customer demand.

Research and development expenses

Research and development expenses increased $257.1 million, or 236 percent, over the year ended December 31, 2017.

Current period research and development expenses include $236.7 million of expenses related to in-process research and development reacquired from former collaborators.

Research and development expenses decreased $266.3 million, or 80 percent, from the year ended December 31, 2018.

The 2018 research and development expenses include $236.7 million of expenses related to in-process research and development reacquired from former collaborators.

Selling, general and administrative expenses

SG&A expenses decreased $26.5 million, or 21 percent, from the year ended December 31, 2018.

Legal and professional fees decreased $6.2 million primarily due to (i) decreased legal fees associated with ongoing litigation and (ii) decreased fees incurred for regulatory and other consultants.

Impairment loss

Impairment loss for the year ended December 31, 2017 of $13.8 million resulted from our annual test for goodwill and indefinite-lived intangible asset impairment in the fourth quarter.

Based on the price per share received by AquaBounty in its then-recent underwritten public offering, we determined that it was more likely than not that the fair value of our AquaBounty reporting unit was less than the carrying value and recorded a $13.0 million impairment charge representing the estimated excess of carrying value over fair value of this reporting unit.

Total other income (expense), net

Total other income (expense), net, decreased $47.2 million, or 158 percent, from the year ended December 31, 2017.

This decrease was primarily attributable to losses on our investment in ZIOPHARM preferred stock prior to returning this investment to ZIOPHARM in October 2018, as well as an increase in interest expense related to the Convertible Notes issued in July 2018.

Salaries, benefits and other personnel costs decreased $16.4 million primarily due to decreased share-based compensation expense as a result of the reversal of previously recognized expense for unvested options granted to former employees as well as the conclusion of the vesting period for other previously granted stock options.

Legal and professional fees decreased $7.0 million primarily due to fewer legal fees associated with Trans Ova.

Impairment of goodwill and other noncurrent assets

Impairment losses for the year ended December 31, 2019 of $30.8 million arose primarily from a goodwill impairment charge related to Trans Ova following an annual goodwill impairment test where we determined that it was more-likely-than-not that the fair value of Trans Ova was less than its carrying value

Total other expense, net

Total other expense, net, decreased $15.2 million, or 88 percent, over the year ended December 31, 2018.

This decrease was primarily attributable to an improvement in unrealized and realized appreciation (depreciation) on our securities portfolio of $36.6 million primarily due to unrealized losses on our ZIOPHARM preferred stock in 2018 and a realized gain on the sale of our common shares held in AquaBounty Technologies, Inc., or AquaBounty, in October 2019, net of a decrease in dividend income of $15.1 million following the return of our investment in ZIOPHARM preferred stock to ZIOPHARM in October 2018.

Additionally, these decreases were partially offset by an increase in interest expense of $8.6 million associated with our Convertible Notes issued in July 2018.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the years ended December 31, 2019 and 2018, for each of our reportable segments and for All Other segments combined, as well as unallocated corporate costs.

December 31, Dollar

Change Percent

(In thousands)

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PGEN Therapeutics $ (30,164) $ (32,832) $ 2,668 8.1 %

ActoBio (13,662) (12,797) (865) (6.8) %

Trans Ova (6,337) (5,730) (607) (10.6) %

Human Biotherapeutics (1,051) — (1,051) N/A

All Other (4,901) (10,708) 5,807 54.2 %

Unallocated corporate costs (46,011) (74,609) 28,598 38.3 %

For a reconciliation of Segment Adjusted EBITDA to net loss before income taxes, see "Notes to the Consolidated Financial Statements - Note 20 " appearing elsewhere in this Annual Report.

The following table summarizes revenues from external customers for the years ended December 31, 2019 and 2018, for each of our reportable segments and for All Other segments combined.

December 31, Dollar

Change Percent

(In thousands)

PGEN Therapeutics $ 2,227 $ 29,021 $ (26,794) (92.3) %

ActoBio (364) 6,684 (7,048) (105.4) %

Trans Ova 68,672 75,178 (6,506) (8.7) %

Human Biotherapeutics 3,713 — 3,713 N/A

All Other 12,514 30,213 (17,699) (58.6) %

PGEN Therapeutics

Revenues for PGEN Therapeutics declined from 2017 to 2018 due to a reduction in the level of services requested by our collaborators during the first half of the year and declined further in late 2018 upon the reacquisition of rights previously licensed to certain collaborators.

The decline in Segment Adjusted EBITDA resulted from both the decline in revenues and also the increased costs of funding our own internal programs beginning in 2018.

The decrease in ActoBio's Segment Adjusted EBITDA and revenues is due to the Company reacquisition of rights previously licensed during 2018 to certain collaborators, including T1D and certain of the Harvest start-up entities.

The result of which eliminated or substantially reduced revenues generated from those collaborations.

Research and development services performed on our partnered programs have declined in 2018 as we focused more resources on our unpartnered platform, resulting in a decline in both Segment Adjusted EBITDA and revenues for this segment.

The decline in Segment Adjusted EBITDA in 2018 was partially offset by a reduction in capital expenditure investments at MBP Titan's facility.

The decrease in Trans Ova's Segment Adjusted EBITDA was primarily attributable to lower product revenues and margins thereon due to lower customer demand, as well as the cost of capital expenditure investments in Progentus' breeding herd and facility improvements in the 2018.

The Segment Adjusted EBITDA and revenues of All Other decreased due to the terminations of ECCs with certain collaborators.

The decrease in Trans Ova's Segment revenues was primarily attributable to lower product revenues due to lower customer demand.

Human Biotherapeutics

Human Biotherapeutics was a new segment in 2019 and the revenue is associated with our collaboration with Castle Creek.

Segment Adjusted EBITDA includes the costs associated with our collaboration with Castle Creek as well as our INXN-4001 program.

The Segment Adjusted EBITDA of All Other improved period over period due our closure of two reporting units in 2019 and write-downs of certain long-lived assets in 2018.

Revenues in All Other declined in 2019 as result of fewer research and development services performed for collaborations with Harvest start-up entities.

Unallocated Corporate Costs

Unallocated corporate costs increased primarily due to a decline in the unrealized and realized appreciation (depreciation) in our securities portfolio of $38.4 million primarily from unrealized losses on our ZIOPHARM preferred stock, which was partially offset with decreases in professional fees due to decreased fees incurred for regulatory and other consultants.

Additionally, consolidated costs from AquaBounty decreased in 2019 due to our deconsolidation in April 2019.

Liquidity and capital resources

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From our inception through December 31, 2020, 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 December 31, 2019 , we had cash and cash equivalents of $65.8 million and short-term

investments of $9.3 million .

As of December 31, 2020, we had cash and cash equivalents of $51.8 million and short-term investments of $48.3 million.

In January 2021, we closed an underwritten public offering of our common stock, resulting in net proceeds of approximately $121.2 million, after deducting underwriting discounts and estimated offering expenses.

Cash in excess of immediate requirements is typically invested primarily in money market funds and United States government debt securities in order to maintain liquidity and preserve capital.

We currently generate cash receipts primarily from sales of products and services, reimbursement of research and development services performed by us, and from strategic transactions involving our subsidiaries.

In January 2020, we also received proceeds of $65.2 million from the Transactions and an additional $35.0 million from the sale of our common stock in a private placement.

We currently generate cash receipts primarily from sales of products and services and from strategic transactions.

As of December 31, 2020, Trans Ova was in compliance with the debt covenants associated with its line of credit as discussed in "Notes to the Consolidated Financial Statements - Note 12" appearing elsewhere in this Annual Report.

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

Year Ended December 31,

2020 2019 2018

(In thousands)

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In 2020, our net loss was $170.5 million, which includes the following significant noncash expenses totaling $107.9 million from both continuing and discontinued operations:

(i) $27.0 million of accumulated foreign currency translation losses that were realized upon the closing of the Transactions, (ii) $23.0 million of impairment losses related to goodwill and long-lived assets, (iii) $18.4 million of stock-based compensation expense, (iv) $17.5 million of depreciation and amortization expense, (v) $11.4 million loss on settlement agreement with Harvest, and (vi) $10.6 million accretion of debt discount and amortization of deferred financing costs.

These expenses were partially offset by the recognition of $12.8 million of previously deferred revenue upon the mutual terminations of collaboration agreements with Castle Creek and Oragenics in 2020.

In 2019, our net loss was $323.9 million, which includes the following significant noncash expenses totaling $191.0 million from both continuing and discontinued operations:

(i) $120.5 million of impairment loss, (ii) $24.9 million of depreciation and amortization expense, (iii) $19.0 million of stock-based compensation expense, (iv) $10.4 million of shares issued for payment of services, (v) $9.5 million accretion of debt discount and amortization of deferred financing costs, and (vi) $6.7 million of equity in net loss of affiliates.

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Additionally, we had a $20.0 million net increase in our operating assets and liabilities primarily as a result of the recognition of previously deferred revenue.

In 2017, our net loss was $126.8 million, which includes the following significant noncash expenses totaling $114.9 million from both continuing and discontinued operations:

(i) $41.6 million of stock-based compensation expense, (ii) $31.1 million of depreciation and amortization expense, (iii) $16.8 million of impairment losses, (iv) $14.3 million of equity in net loss of affiliates, and (v) $11.1 million of shares issued as payment for services.

These expenses were partially offset by $16.8 million of noncash dividend income.

Additionally, we had a $74.6 million net increase in our operating assets and liabilities primarily as a result of the recognition of previously deferred revenue.

Our 2020 cash outflows from operations decreased $58.9 million from the year ended December 31, 2019 primarily due to (i) the reduction in cash required to fund the businesses sold in the TS Biotechnology Sale, (ii) the reduction in cash requirements for MBP Titan as we wound down those operations starting in the second quarter of 2020, and (iii) reductions in operating expenses for our ActoBio and corporate operations as we streamlined both in order to further prioritize the use of our capital.

Our 2019 cash outflows from operations increased $11.7 million over the year ended December 31, 2018 due to increased expenses primarily for our clinical programs combined with the lack of reimbursement for research and development services we used to receive under certain key collaborations which we reacquired in 2018.

Our 2018 cash outflows from operations increased $20.5 million over the year ended December 31, 2017 primarily due to a decrease in revenues from research and development services for certain of our collaborations as we redeployed certain resources towards supporting prospective new platforms and partnering opportunities and began to focus more on the further

development of relationships and structures that provide us with more control and ownership over the development process and commercialization path.

Cash flows from investing activities:

During 2020, we purchased $171.4 million of investments, primarily using the $64.2 million of proceeds received from the Transactions, net of cash sold, and the private placement discussed below.

We also reinvested a portion of the $133.0 million proceeds we received during the year from the maturities of investments.

During 2019, we received proceeds of $111.4 million from the maturities and sales of investments, net of purchases;

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and $16.6 million for investments in our JVs, and we received $15.5 million in an asset acquisition.

During 2017, we received proceeds of $174.5 million from the maturity of short-term investments, and we used $46.7 million for purchases of property, plant and equipment;

$14.2 million for the purchase of a land-based aquaculture facility by AquaBounty;

and $11.2 million for investments in our JVs.

Cash flows from financing activities:

During 2019, we received $6.6 million net proceeds from public offerings through our consolidated subsidiary, AquaBounty, which we deconsolidated in April 2019.

During 2020, we received $35.0 million proceeds from the sale of our common stock in a private placement to TS Biotechnology.

During 2019, we received $6.6 million in net proceeds from underwritten public offerings completed by AquaBounty.

During 2018, we received $219.9 million net proceeds from the issuance of long-term debt and $88.0 million net proceeds from public financings.

During 2017, we received $13.7 million proceeds from a private placement of our common stock with an affiliate of Third Security and paid $8.7 million of deferred consideration to former shareholders of acquired businesses.

Future capital requirements

We believe our existing liquid assets, including the cash received from the Transactions and the private placement in January 2020, will enable us to fund our operating expenses and capital requirements for at least the next 12 months.

We believe our existing liquid assets, including the net proceeds from our underwritten public offering in January 2021, will enable us to fund our operating expenses and capital requirements for at least the next 12 months.

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

• progress in our research and development programs, as well as the magnitude of these programs;

the timing of regulatory approval of products of our collaborations and operations;

• any delays or potential delays to our clinical trials as a result of the COVID-19 pandemic;

• 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;

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• 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;

• the effects, duration, and severity of the ongoing COVID-19 pandemic and the actions we have taken or may take in response, any of which could significantly impact our business, operations, and financial results.

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 financings, government, or other third-party funding, strategic alliances, sales of assets, and licensing arrangements.

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.

As the COVID-19 pandemic continues to negatively impact the economy, our future access to capital on favorable terms may be materially impacted.

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.

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Our success is dependent upon our ability to continue to raise additional capital in order to fund ongoing research and development, obtain regulatory approval of our products, successfully commercialize our products, generate revenue, meet our obligations and, ultimately, attain profitable operations.

Our ability to achieve what is necessary for our success may be negatively impacted by the uncertainty caused by the COVID-19 pandemic.

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

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The following table summarizes our significant contractual obligations and commitments from continuing operations as of December 31, 2020 and the effects such obligations are expected to have on our liquidity and cash flows in future periods:

Less Than 1 Year

More Than 5 Years

Total Less Than 1 Year 1-3 Years 3-5 Years More Than 5 Years

(In thousands)

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Long-term debt, excluding convertible debt 3,735 360 757 763 1,855

Contingent consideration

Of the $256.2 million convertible debt, $200.0 million may be converted into Precigen common stock, and $56.2 million may be converted into either Precigen common stock or the stock of certain of our subsidiaries.

See "Notes to the Consolidated Financial Statements - Note 12 " appearing elsewhere in this Annual Report for further discussion of these instruments.

In addition to the obligations in the table above, as of December 31, 2019 we also have the following significant contractual obligations from continuing operations described below.

Total $ 237,646 $ 10,968 $ 220,236 $ 3,720 $ 2,722

(1) See "Notes to the Consolidated Financial Statements - Notes 3 and 23" appearing elsewhere in this Annual Report for further discussion of our operating lease related to MBP Titan which is included in discontinued operations.

(2) See "Notes to the Consolidated Financial Statements - Note 12" appearing elsewhere in this Annual Report for further discussion of our convertible debt.

In addition to the obligations in the table above, as of December 31, 2020 we also have the following significant contractual obligations described below.

In conjunction with the formation of our JVs, we committed to making future capital contributions subject to certain conditions and limitations.

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Net operating losses

As of December 31, 2019 , we had net operating loss carryforwards of approximately $568.8 million for United States federal income tax purposes available to offset future taxable income, including $316.1 million generated after 2017, United States capital loss carryforwards of $111.6 million , and United States federal and state research and development tax credits of approximately $9.6 million , prior to consideration of annual limitations that may be imposed under Section 382.

Net operating loss carryforwards generated prior to 2018 begin to expire in 2022 and capital loss carryforwards will expire if unutilized by 2024.

As of December 31, 2020, we had net operating loss carryforwards of approximately $756.2 million for United States federal income tax purposes available to offset future taxable income, including $503.5 million generated after 2017, United States

capital loss carryforwards of $211.5 million, and United States federal and state research and development tax credits of approximately $10.2 million, prior to consideration of annual limitations that may be imposed under Section 382.

Net operating loss carryforwards generated prior to 2018 begin to expire in 2022 and capital loss carryforwards will expire if unutilized beginning in 2024.

Our foreign subsidiaries included in continuing operations have foreign loss carryforwards of approximately $82.3 million, most of which do not expire.

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Off-balance sheet arrangements

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

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

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While our significant accounting policies are more fully described in "Notes to the Consolidated Financial Statements - Note 2" appearing elsewhere in this Annual Report, we believe that the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Revenue recognition (for the years ended December 31, 2019 and 2018)

Effective January 1, 2018, we apply ASC 606.

Under ASC 606, we recognize revenue when our customer obtains control of the promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

Revenue recognition

We recognize revenue when our customer obtains control of the promised goods or services, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that are within the scope of ASC 606, we perform the following five steps:

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(i) upfront payments upon consummation of the agreement;

(ii) reimbursements for costs incurred by us for research and development and/or

manufacturing efforts related to specific applications provided for in the agreement;

(ii) reimbursements for costs incurred by us for research and development and/or manufacturing efforts related to specific applications provided for in the agreement;

(iii) milestone payments upon the achievement of specified development, regulatory and commercial activities;

and (iv) royalties on sales of products arising from the collaboration or licensing agreement.

The agreement typically continues in perpetuity unless terminated and each of our collaborators retains a right to terminate the agreement upon providing us written notice a certain period of time prior to such termination, generally 90 days.

The agreement typically continues in perpetuity unless terminated and each of our

collaborators retains a right to terminate the agreement upon providing us written notice a certain period of time prior to such termination, generally 90 days.

Our collaboration and licensing agreements typically contain multiple promises, including technology licenses, research and development services and, in certain cases, manufacturing services.

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The purpose is to provide the collaborator with assurance that we will complete our obligations under the contract or to secure the right to a specific product or service at the collaborator's discretion.

In addition, the variable payments generally align with

the timing of performance or the timing of the consideration varies on the basis of the occurrence or nonoccurrence of a future event that is not substantially within the control of the collaborator or us.

In addition, the variable payments generally align with the timing of performance or the timing of the consideration varies on the basis of the occurrence or nonoccurrence of a future event that is not substantially within the control of the collaborator or us.

From time to time, we and certain collaborators may cancel our agreements, relieving us of any further performance obligations under the agreement.

Upon such cancellation or when we have determined no further performance obligations are required of us under an agreement, we recognize any remaining deferred revenue as revenue.

We recognized $14.1 million and $69.5 million of collaboration and licensing revenues in the years ended December 31, 2019 and 2018 , respectively.

We recognized $21.2 million, $14.1 million, and $69.5 million of collaboration and licensing revenues in the years ended December 31, 2020, 2019, and 2018, respectively.

As of December 31, 2020 and 2019, we have $23.4 million and $50.6 million, respectively, of deferred revenue related to our receipt of upfront and milestone payments.

Product and service revenues

Our product and service revenues are generated primarily through Trans Ova and include sales of advanced reproductive technologies, including our bovine embryo transfer and in vitro fertilization processes and from genetic preservation and sexed semen processes and applications of such processes to other livestock, as well as sales of livestock and embryos produced using these processes and used in production.

Our product and service revenues are generated primarily through Trans Ova and include sales of advanced reproductive technologies, including our bovine embryo transfer and IVF processes and from genetic preservation and sexed semen processes and applications of such processes to other livestock, as well as sales of livestock and embryos produced using these processes and used in production.

Exemplar also generates product and service revenues through the development and sale of genetically engineered miniature swine models.

As each promised product or service is distinct, we recognize the transaction price as revenue at a point in time when control of the promised product is transferred to the customer or when the promised service is rendered.

Payment terms are typically due within 30 days of invoicing, which occurs prior to or when revenue is recognized.

We recognized $68.7 million and $75.2 million of these product and service revenues from Trans Ova for the years ended December 31, 2019 and 2018 , respectively.

Revenue recognition (for the year ended December 31, 2017)

Collaboration and licensing revenues

We have historically generated collaboration and licensing revenue through agreements with collaborators and licensing agreements whereby the collaborators or the licensees obtain exclusive access to our proprietary technologies for use in the research, development, and commercialization of products and/or treatments in a contractually specified field of use.

Generally, the terms of these agreements provide that we receive some or all of the following:

(i) upfront payments upon consummation of the agreement;

(ii) reimbursements for costs incurred by us for research and development and/or manufacturing efforts related to specific applications provided for in the agreement;

(iii) milestone payments upon the achievement of specified development, regulatory and commercial activities;

and (iv) royalties on sales of products arising from the collaboration or licensing agreement.

Our collaborations and licensing agreements typically contain multiple elements, or deliverables, including technology licenses, research and development services, and in certain cases manufacturing services.

We identify the deliverables within the agreements and evaluate which deliverables represent separate units of accounting.

Analyzing the agreements to identify deliverables requires the use of judgment.

A deliverable is considered a separate unit of accounting when the deliverable has value to the collaborator or licensee on a standalone basis based on the consideration of the relevant facts and circumstances for each agreement.

Consideration received is allocated at the inception of the agreement to all identified units of accounting based on their relative selling price.

When available, the relative selling price for each deliverable is determined using vendor specific objective evidence, or VSOE, of the selling price or third-party evidence of the selling price, if VSOE does not exist.

If neither VSOE nor third-party evidence of the selling price exists, we use our best estimate of the selling price for the deliverable.

The amount of allocable consideration is limited to amounts that are fixed or determinable.

The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.

We recognize the revenue allocated to each unit of accounting as we deliver the related goods or services.

If we determine that certain deliverables should be treated as a single unit of accounting, then the revenue is recognized using either a proportional performance or straight-line method, depending on whether we can reasonably estimate the level of effort required to complete our performance obligations under an arrangement and whether such performance obligations are provided on a best-efforts basis.

As we cannot reasonably estimate our performance obligations related to our collaborators or licensees, we recognize revenue on a straight-line basis over the period we expect to complete our performance obligations, which is reevaluated each reporting period.

The terms of our agreements may provide for milestone payments upon achievement of certain defined events.

We apply the Milestone Method for recognizing milestone payments.

Under the Milestone Method, we recognize consideration that is

contingent upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone is substantive in its entirety.

A milestone is considered substantive when it meets all of the following criteria:

The consideration is commensurate with either the entity's performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the entity's performance to achieve the milestone;

The consideration relates solely to past performance;

The consideration is reasonable relative to all of the deliverables and payment terms within the arrangement.

In the event that a milestone is not considered substantive, we recognize the milestone consideration as revenue using the same method applied to the upfront payments.

Research and development services are a deliverable satisfied by us in accordance with the terms of the collaboration and licensing agreements and we consider these services to be inseparable from the license to the core technology;

therefore, reimbursements of services performed are recognized as revenue.

Because reimbursement (i) is contingent upon performance of the services by us, (ii) does not include a profit component, and (iii) does not relate to any future deliverable, the revenue is recognized during the period in which the related services are performed and collection of such amounts is reasonably assured.

Payments received for manufacturing services will be recognized when the earnings process related to the manufactured materials has been completed.

Royalties to be received under the agreements will be recognized as earned.

From time to time, we and certain collaborators may cancel the agreements, relieving us of any further performance obligations under the agreement.

When no further performance obligations are required of us under an agreement, we recognize the remaining balance of deferred revenue.

We recognized $134.6 million of collaboration and licensing revenues in the year ended December 31, 2017 .

Product and service revenues

Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) services have been rendered or delivery has occurred such that risk of loss has passed to the customer, (iii) the price is fixed or determinable, and (iv) collection from the customer is reasonably assured.

We recognized $78.8 million of these product and service revenues from Trans Ova for the year ended December 31, 2017 .

We recognized $81.2 million, $75.6 million, and $80.9 million of product and service revenues for the years ended December 31, 2020, 2019, and 2018, respectively.

Valuation of goodwill and long-lived assets

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The income approach is a valuation technique in which fair value is based from forecasted future cash flows, discounted at the appropriate rate of return commensurate with the risk as well as current rates of return for equity and debt capital as of the valuation date.

The forecast used in our estimation of fair value was developed by management based on historical operating results, incorporating

adjustments to reflect management's planned changes in operations and market considerations.

The forecast used in our estimation of fair value was developed by management based on historical operating results, incorporating adjustments to reflect management's planned changes in operations and market considerations.

The discount rate utilizes a risk adjusted weighted average cost of capital.

To assess the reasonableness of the calculated reporting unit fair values, we compare the sum of the reporting units' fair values to our market capitalization (per share stock price times the number of shares outstanding) and calculate an implied control premium (the excess of the sum of the reporting units' fair values over the market capitalization) and then assess the reasonableness of our implied control premium.

During the year ended December 31, 2019 , we recorded $30.8 million of impairment charges from continuing operations to write down the values of goodwill and other long-lived assets.

See additional discussion regarding this impairment in "Notes to the Consolidated Financial Statements - Notes 10 and 11 " appearing elsewhere in this Annual Report.

During the years ended December 31, 2020 and 2019, we recorded $0.9 million and $30.8 million, respectively, of impairment charges from continuing operations to write down the values of goodwill and other long-lived assets.

See additional discussion regarding these impairments in "Notes to the Consolidated Financial Statements - Notes 10 and 11" appearing elsewhere in this Annual Report.

Recent accounting pronouncements

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis