What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-01 · 107 added, 220 removed, 297 unchanged (52% 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.

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.

Our historical collaboration and licensing revenues were generated under a business model from which we have 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.

We continue to generate product and service revenues through our Trans Ova and Exemplar subsidiaries, and in 2021 and 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.

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.

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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.

Our primary current revenues 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.

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• 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.

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.

Our Biopharmaceuticals segment is progressing preclinical and clinical programs that target urgent and intractable diseases in our core therapeutics areas of immuno-oncology, autoimmune disorders and infectious diseases, including PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, PRGN-2012, and AG019.

Exemplar's research and development activities relate to new and improved pig research models.

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.

The following table summarizes our research and development expenses incurred by

reportable segment and reconciles those expenses to research and development expenses on the consolidated statements of operations for the years ended December 31, 2021, 2020, and 2019.

Year Ended December 31,

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(In thousands)

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

ActoBio 11,110 17,999 35,388

Biopharmaceuticals $ 47,644 $ 38,992 $ 46,833

Exemplar 289 611 894

Trans Ova 2,222 2,228 2,037

Human Biotherapeutics 2,452 1,159 —

Total research and development expenses from reportable segments 50,155 41,831 49,764

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 — (171) 17,672

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Total consolidated research and development expenses $ 50,141 $ 41,644 $ 66,666

(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.

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

Selling, general and administrative expenses

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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.

Interest expense is expected to decrease in future periods upon the adoption of a new accounting standard effective January 1, 2022, which simplifies the accounting for the Convertible Notes as described in "Notes to the Consolidated Financial Statements - Note 2" appearing elsewhere in this Annual Report.

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

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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.

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.

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.

We define Segment Adjusted EBITDA as net income (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) gain or loss on disposals of assets, (viii) loss on impairment of goodwill and other noncurrent assets, (ix) equity in net 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.

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

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Selling, general and administrative 74,122 91,704 (17,582) (19.2) %

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

Impairment of goodwill — — — N/A

Impairment of other noncurrent assets 543 920 (377) (41.0) %

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Loss from continuing operations (96,765) (103,773) 7,008 (6.8) %

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) %

Income (loss) from discontinued operations, net of income tax benefit (2) 4,599 (66,748) 71,347 106.9 %

Net loss attributable to Precigen $ (92,166) $ (170,521) $ 78,355 (46.0) %

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(In thousands)

ZIOPHARM Oncology, Inc.

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

Alaunos Therapeutics, Inc.

(formerly ZIOPHARM Oncology, Inc.) $ 100 $ 200 $ (100)

Oragenics, Inc.

— 3,053 (3,053)

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

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

Castle Creek Biosciences, Inc.

388 17,810 (17,422)

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

Other 18 145 (127)

Total $ 506 $ 21,208 $ (20,702)

(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.

Collaboration and licensing revenues decreased $20.7 million, or 98 percent, from the year ended December 31, 2020, primarily due to the accelerated recognition of previously deferred revenue in the prior period upon the mutual terminations of collaborations with Castle Creek and Oragenics, Inc., or Oragenics, in 2020.

Product revenues and gross margin

Product revenues increased $2.9 million, or 12 percent, over the year ended December 31, 2020.

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.

The increase in product revenue was primarily due to higher customer demand for animals as a result of stronger beef and dairy industries in the current year.

Gross margin on products improved in the current period as a result of the increased revenues, increased focus on selling higher margin products, and operational efficiencies that have been gained through reductions in workforce and improved inventory management.

Service revenues and gross margin

Service revenues increased $18.7 million, or 33 percent, over the year ended December 31, 2020.

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.

Trans Ova's revenues and gross margins thereon improved primarily due to an increase in services performed as a result of higher customer demand as the beef and dairy industries have been stronger in the current year and a change in pricing structure with certain customers.

Additionally, Exemplar's service revenues and gross margins thereon improved in the current period due to an increase in services performed resulting from a higher demand from existing and new customers as well as a combination of price increases and a change in pricing structure with certain customers.

Research and development expenses

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.

Research and development expenses increased $8.5 million, or 20 percent, over the year ended December 31, 2020.

Contract research organization costs and lab supplies increased $6.7 million with the advancement of our clinical and preclinical programs.

Selling, general and administrative expenses

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

SG&A expenses decreased $17.6 million, or 19 percent, from the year ended December 31, 2020.

Salaries, benefits, and other personnel costs decreased $4.9 million in 2021 primarily due to (i) a reduced headcount as we scaled down our corporate functions to support our more streamlined organization and (ii) reduced stock compensation costs for previously granted awards that became fully vested in early 2021.

There was a reduction of $13.9 million for the nonrecurring settlements with Harvest and the SEC in the prior period (see "Notes to the Consolidated Financial Statements - Notes 16 and 17" appearing elsewhere in this Annual Report).

This was partially offset by an increase in professional fees of $1.1 million, primarily due to an increase in legal fees associated with certain litigation matters.

Impairment of other noncurrent assets

Impairment losses for the year ended December 31, 2021 of $0.5 million arose primarily from an impairment of the right-of-use asset at one of the Company's leased facilities.

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, 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.

Total other expense, net, which primarily includes interest expense, increased $1.5 million, or 9 percent, over the year ended December 31, 2020.

Interest income earned on our short-term investments decreased in 2021 due to lower interest rates.

Additionally, interest expense increased associated with our Convertible Notes issued in July 2018 due to the noncash amortization of the related debt discount and debt issuance costs.

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.

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the years ended December 31, 2021 and 2020, for each of our reportable segments, as well as unallocated corporate costs.

December 31, Dollar

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Segment Adjusted EBITDA:

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

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

Biopharmaceuticals $ (45,754) $ (35,378) $ (10,376) (29.3) %

Exemplar 6,898 4,004 2,894 72.3 %

Trans Ova 17,420 13,530 3,890 28.8 %

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

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

Unallocated corporate costs (33,506) (37,479) 3,973 10.6 %

For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Consolidated Financial Statements - Note 18" 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.

The following table summarizes revenues from external customers for the years ended December 31, 2021 and 2020, for each of our reportable segments.

December 31, Dollar

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(In thousands)

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

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

Biopharmaceuticals $ 922 $ 21,780 $ (20,858) (95.8) %

Exemplar 13,345 10,158 3,187 31.4 %

Trans Ova 89,606 71,186 18,420 25.9 %

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 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.

Biopharmaceuticals

The decrease in revenues for Biopharmaceuticals was primarily due to the accelerated recognition of previously deferred revenue in the prior period upon the mutual terminations of collaborations with Castle Creek and Oragenics in 2020.

Segment Adjusted EBITDA declined as we had increased costs associated with the advancement of our clinical and preclinical programs.

Revenues for Exemplar increased due to an increase in services performed resulting from a higher demand from existing and new customers.

Revenues also increased due to price increases as well as a change in the pricing structure with certain customers.

The improvement in Segment Adjusted EBITDA was primarily due to the increased revenues and reduced costs as a result of operational efficiencies gained through reductions in workforce and improved inventory management.

Revenues for Trans Ova increased primarily due to higher customer demand for pregnant cows and more procedures performed as a result of stronger beef and dairy industries in the current year.

Revenues also increased due to a change in the pricing structure with certain customers.

The improvement in Segment Adjusted EBITDA was primarily due to the increased revenues, as well as reduced costs as a result of operational efficiencies gained through reductions in workforce and improved inventory management.

Unallocated Corporate Costs

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.

Unallocated corporate costs decreased primarily due to decreased legal fees associated with certain litigation matters, including our settlement with the SEC in the prior period, and due to a reduction of corporate employees as we scaled down our corporate functions to support our more streamlined organization.

Comparison of the year ended December 31, 2020 to the year ended December 31, 2019

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)

Collaboration and licensing revenues (1) $ 14,059 $ 69,540 $ (55,481) (79.8) %

Product revenues 23,780 28,486 (4,706) (16.5) %

Service revenues 51,803 52,419 (616) (1.2) %

Other revenues 1,080 733 347 47.3 %

Total revenues 90,722 151,178 (60,456) (40.0) %

Operating expenses

Cost of products 31,930 35,087 (3,157) (9.0) %

Cost of services 29,471 27,589 1,882 6.8 %

Research and development 66,666 333,007 (266,341) (80.0) %

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

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 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 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) %

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

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

Collaboration and licensing revenues

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)

Intrexon Energy Partners, LLC 2,596 6,929 (4,333)

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

Castle Creek Biosciences, Inc.

3,713 1,394 2,319

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

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.;

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 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 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 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.

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.

For a comparison of our results of operations for the years ended December 31, 2020 and 2019, see "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Form 10-K for the year ended December 31, 2020, filed with the SEC on March 1, 2021.

As a result of the revision of our reportable segments and the definition of Segment Adjusted EBITDA in 2021, as discussed in "Notes to the Consolidated Financial Statements - Notes 2 and 18" appearing elsewhere in this Annual Report, the discussion of segment performance for the years ended December 31, 2020 and 2019, has been restated below to conform to the revised segment determination and revised calculation of Segment Adjusted EBITDA.

Segment performance

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Segment Adjusted EBITDA:

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

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

Biopharmaceuticals $ (35,378) $ (44,552) $ 9,174 20.6 %

Exemplar 4,004 (1,586) 5,590 >200%

Trans Ova 13,530 (2,836) 16,366 >200%

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

All Other — (3,501) 3,501 100.0 %

5 unchanged sentences

(In thousands)

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

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

Biopharmaceuticals $ 21,780 $ 6,259 $ 15,521 >200%

Exemplar 10,158 6,958 3,200 46.0 %

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

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

All Other — 4,873 (4,873) (100.0) %

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.

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.

Biopharmaceuticals

The increase in revenues for Biopharmaceuticals was primarily due to the accelerated recognition of previously deferred revenue upon the mutual terminations of collaborations with Castle Creek and Oragenics in 2020.

Additionally, fewer

AG019 trial costs were incurred in the second quarter of 2020 due to the temporary suspension of the last cohort of the Phase 1b/2a clinical trial.

Costs related to Biopharmaceutical's' 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 Exemplar increased due to an increase in services performed resulting from a higher demand from existing.

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.

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

Segment Adjusted EBITDA improved period over period as a result of 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.

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

Liquidity and capital resources

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From our inception through December 31, 2021, 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, 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.

As of December 31, 2021, we had cash and cash equivalents of $42.9 million and short-term and long-term investments of $120.8 million.

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 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.

Trans Ova is subject to certain restrictive debt covenants under its line of credit which is discussed in "Notes to the Consolidated Financial Statements - Note 11" appearing elsewhere in this Annual Report.

As of December 31, 2021, Trans Ova was in compliance with these debt covenants.

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

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Effect of exchange rate changes on cash, cash equivalents, and restricted cash 217 353 (810)

Net increase (decrease) in cash, cash equivalents, and restricted cash $ (16,184) $ (41,748) $ 34,637

Net decrease in cash, cash equivalents, and restricted cash $ (8,907) $ (16,184) $ (41,748)

Cash flows from operating activities:

In 2021, our net loss was $92.2 million, which includes the following significant noncash expenses totaling $39.4 million from both continuing and discontinued operations:

(i) $13.9 million of stock-based compensation expense, (ii) $13.8 million of depreciation and amortization expense, and (iii) $11.7 million accretion of debt discount and amortization of deferred financing costs.

These expenses were partially offset by a $4.6 million noncash gain recognized upon the termination of our MBP Titan facility lease in January 2021.

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.

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These expenses were partially offset by $7.8 million of unrealized and realized appreciation on equity securities and preferred stock, net.

In 2018, our net loss was $514.7 million, which includes the following significant noncash expenses totaling $440.0 million from both continuing and discontinued operations:

(i) $236.7 million of expense related to reacquired in-process research and development previously licensed to certain of our collaborators, (ii) $60.5 million of impairment loss, (iii) $36.3 million of stock-based compensation expense, (iv) $33.1 million of depreciation and amortization expense, (v) $30.2 million of net unrealized and realized losses on our equity securities and preferred stock, (vi) $20.9 million of loss on disposal of assets, (vii) $11.6 million of equity in net loss of affiliates, and (viii) $10.7 million of shares issued as payment for services.

These expenses were partially offset by (i) $21.3 million of net changes in deferred income taxes and (ii) $14.8 million of noncash dividend income.

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.

Our 2021 cash outflows from operations decreased $21.3 million from the year ended December 31, 2020 primarily due to (i) increased cash inflows provided by Trans Ova and Exemplar due to increased revenues and gross margins thereon, (ii) the reduction in cash requirements for MBP Titan as we suspended those operations in the second quarter of 2020, and (iii) reductions in operating expenses for our corporate operations as we streamlined operations in order to further prioritize the use of our capital.

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.

Cash flows from investing activities:

During 2021, we purchased $174.2 million of investments, primarily using the $121.0 million of proceeds received from the underwritten public offering discussed below.

We also reinvested a portion of the $100.2 million proceeds we received during the year from the maturities and sales of investments.

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.

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$21.6 million proceeds from the sale of our AquaBounty securities, and we used $37.9 million for purchases of property, plant and equipment.

During 2018, we used $112.7 million for purchases of short-term investments, net of maturities;

$41.6 million for purchases of property, plant and equipment;

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

Cash flows from financing activities:

During 2021, we received $121.0 million proceeds from the sale of our common stock in an underwritten public offering.

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.

Future capital requirements

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.

We believe our existing liquid assets 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:

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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.

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

As the COVID-19 pandemic continues to 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.

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.

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, obtain regulatory approval of our products, successfully commercialize our products, generate revenue, meet our obligations and, ultimately, attain profitable operations.

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

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Total $ 233,296 $ 10,082 $ 212,402 $ 4,854 $ 5,958

(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.

(1) See "Notes to the Consolidated Financial Statements - Note 11" appearing elsewhere in this Annual Report for further discussion of our convertible debt.

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Net operating losses

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.

As of December 31, 2021, we had net operating loss carryforwards of approximately $856.4 million for United States federal income tax purposes available to offset future taxable income, including $603.7 million generated after 2017, United States capital loss carryforwards of $212.5 million, and United States federal and state research and development tax credits of approximately $11.1 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.

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Excluding certain deferred tax liabilities totaling $2.5 million, our remaining net deferred tax assets, which primarily relate to these loss carryforwards, are offset by a valuation allowance due to our history of net losses.

As a result of our past issuances of stock, as well as due to prior mergers and acquisitions, certain of our net operating losses have been subject to limitations pursuant to Section 382.

As a result of our past issuances of our common stock, as well as due to prior mergers and acquisitions, certain of our net operating losses have been subject to limitations pursuant to Section 382.

As of December 31, 2021, Precigen has utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

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Future changes in stock ownership may also trigger an ownership change and, consequently, a Section 382 limitation.

The Tax Act introduced certain limitations on utilization of net operating losses that are generated after 2017, generally limiting utilization of those losses to 80 percent of future annual taxable income.

However, net operating losses generated after 2017 will generally have an indefinite carryforward period.

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

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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 upfront payment received upon consummation of the agreement is fixed and nonrefundable.

Variable consideration is subject to a constraint and amounts are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

variable consideration is subsequently resolved.

Variable consideration may include reimbursements for costs incurred by us for research and development efforts;

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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 evaluate each promised product or service under our contracts and identify performance obligations for each distinct product or services.

We then allocate the transaction price of the contract to each performance obligation, recognizing 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 $102.9 million, $81.2 million, and $75.6 million of product and service revenues for the years ended December 31, 2021, 2020, and 2019, respectively.

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Impairment losses on goodwill are recognized based solely on a comparison of their fair value to carrying value, without consideration of any recoverability test.

The fair value of the reporting units are primarily determined based on the income approach.

When we perform quantitative evaluations, the fair value of the reporting units are primarily determined based on the income approach.

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.

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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 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.

During the years ended December 31, 2021 and 2020, we recorded $0.5 million and $0.9 million, respectively, of impairment charges from continuing operations to write down the values of other long-lived assets.

See additional discussion regarding these impairments in "Notes to the Consolidated Financial Statements - Note 9" appearing elsewhere in this Annual Report.

Recent accounting pronouncements

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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