What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-08 · 104 added, 195 removed, 294 unchanged (50% of the section changed)

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PRGN-3005 and PRGN-3006, which are built on our UltraCAR-T platform;

PRGN-2009 and PRGN-2012, which are based on our AdenoVerse immunotherapy platform;

and AG019, which is built on our ActoBiotics platform.

In addition, we have completed a Phase 1 study of INXN-4001, a non-viral triple-effector plasmid DNA, which is built on our UltraVector platform.

and PRGN-2009 and PRGN-2012, which are based on our AdenoVerse immunotherapy platform.

In addition, we have completed a Phase 1b/2a study of AG019, which is built on our ActoBiotics platform.

We also have a robust pipeline of preclinical programs that we are pursuing in order to drive long-term value creation.

We have developed a proprietary electroporation device, UltraPorator, designed to further streamline and ensure the rapid and cost-effective manufacturing of UltraCAR-T therapies.

In October 2020, we announced that UltraPorator received U.S.

Food and Drug Administration, or FDA, clearance for manufacturing UltraCAR-T cells in clinical trials, and in November 2020, we announced that we have begun dosing patients with UltraCAR-T cells manufactured with UltraPorator in our PRGN-3005 and PRGN-3006 clinical trials.

UltraPorator has received U.S.

Food and Drug Administration, or FDA, clearance for manufacturing UltraCAR-T cells in clinical trials, and since November 2020, we have been dosing patients with UltraCAR-T cells manufactured with UltraPorator in our PRGN-3005 and PRGN-3006 clinical trials.

We exercise discipline in our portfolio management by systematically evaluating data from our preclinical programs in order to make rapid "go" and "no go" decisions.

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PGEN Therapeutics

PGEN Therapeutics is a dedicated discovery and clinical stage biopharmaceutical company advancing the next generation of gene and cell therapies using precision technology to target urgent and intractable diseases in immuno-oncology, autoimmune disorders and infectious diseases.

disorders and infectious diseases.

PGEN Therapeutics operates as an innovation engine, progressing a preclinical and clinical pipeline of well-differentiated therapies toward clinical proof-of-concept and commercialization.

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PRGN-3005 is a first-in-class, investigational autologous CAR-T therapy that utilizes our UltraCAR-T platform to simultaneously express a CAR targeting the unshed portion of the Mucin 16 antigen, mbIL15, and kill switch genes.

PRGN-3005 is currently being evaluated in a Phase 1/1b clinical trial for the treatment of advanced, recurrent platinum-resistant ovarian cancer, fallopian tube or primary peritoneal cancer.

A dose escalation phase of the intraperitoneal (IP) arm of the PRGN-3005 Phase 1 trial is ongoing, and an expansion phase is planned at the maximum tolerated dose, or MTD.

A dose escalation phase of the intravenous (IV) arm of the PRGN-3005 trial is ongoing concurrently with the IP arm.

PRGN-3006 is a first-in-class, investigational autologous CAR-T therapy that utilizes our UltraCAR-T platform to express a CAR to target CD33 (Siglec-3), mbIL15 and kill switch genes.

PRGN-3006 is currently being evaluated in a Phase 1/1b clinical trial for the treatment of relapsed or refractory acute myeloid leukemia, or AML, higher-risk myelodysplastic syndromes, or MDS, and chronic myelomonocytic leukemia, or CMML.

A dose escalation phase of each of the non-lymphodepletion and the lymphodepletion arms of this Phase 1 trial is ongoing concurrently.

PRGN-3005 is currently being evaluated in a Phase 1/1b clinical trial for the treatment of advanced, recurrent platinum-resistant ovarian , fallopian tube, or primary peritoneal cancer.

In January 2022, we announced the completion of enrollment in the dose escalation phase of both IP and IV arms without lymphodepletion in the ongoing Phase 1 clinical trial.

We have received FDA clearance to incorporate lymphodepletion at Dose Level 3 of the IV arm.

PRGN-3006 is a first-in-class, investigational autologous CAR-T therapy that utilizes our UltraCAR-T platform to express a CAR to target CD33 (Siglec-3), mbIL15 and a kill switch gene.

PRGN-3006 is currently being evaluated in a Phase 1/1b clinical trial for the treatment of relapsed or refractory, or r/r, acute myeloid leukemia, or AML, high-risk myelodysplastic syndromes, or MDS, and chronic myelomonocytic leukemia, or CMML.

In January 2022, we announced the completion of enrollment in the dose escalation phase in both the non-lymphodepletion and the lymphodepletion cohorts of this Phase 1 trial.

An expansion phase is planned at the MTD.

PRGN-3006 was granted Orphan Drug designation for the treatment of AML by the FDA.

On April 4, 2022, we announced that PRGN-3006 was granted Fast Track designation in patients with r/r AML by the FDA.

Previously PRGN-3006 was granted Orphan Drug Designation in patients with AML by the FDA.

PRGN-3007 is a first-in-class, investigational autologous CAR-T therapy that utilizes the next generation UltraCAR-T platform to express a CAR to target ROR1, mbIL15, kill switch, and a novel mechanism for the intrinsic blockade of the programmed death 1, or PD-1, gene expression.

PRGN-3007 has received FDA clearance to initiate a Phase 1/1b clinical trial for patients with advanced receptor tyrosine kinase-like orphan receptor 1-positive, or ROR1 + , hematological (Arm 1) and solid tumors (Arm 2).

The target patient population for Arm 1 includes relapsed or refractory CLL, relapsed or refractory MCL, relapsed or refractory B-ALL, and relapsed or refractory DLBCL.

The target patient population for Arm 2 includes locally advanced unresectable or metastatic histologically confirmed TNBC.

The study will enroll in two parts:

an initial 3+3 dose escalation in each arm followed by a dose expansion at the maximum tolerated dose.

Arm 1 and Arm 2 will enroll in parallel.

PRGN-2009 is a first-in-class, "off-the-shelf" investigational immunotherapy designed to activate the immune system to recognize and target human papillomavirus-positive, or HPV+, solid tumors.

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PRGN-2012 is a first-in-class, investigational "off-the-shelf" AdenoVerse immunotherapy for the treatment of recurrent respiratory papillomatosis, or RRP.

PRGN-2012 is an innovative therapeutic vaccine with optimized antigen design that uses our gorilla adenovector technology to elicit immune responses directed against cells infected with HPV type 6 and HPV type 11.

PRGN-2012 is an innovative therapeutic vaccine with optimized antigen design that uses our gorilla adenovector technology, part of our proprietary AdenoVerse platform, to elicit immune responses directed against

cells infected with HPV type 6 and HPV type 11.

PRGN-2012 is in a Phase 1/2 clinical trial for adult patients with RRP.

PRGN-2012 is being developed in collaboration with the Center for Cancer Research at the NCI pursuant to a CRADA.

PRGN-2012 was granted Orphan Drug designation for treatment of RRP by the FDA.

In addition to our clinical programs, PGEN Therapeutics has a robust pipeline of preclinical programs that we are pursuing in order to drive long-term value creation.

Our pipeline includes a number of product candidates, including UltraCAR-T therapeutics for various cancers, and "off-the-shelf" AdenoVerse immunotherapy for infectious disease, and a multifunctional therapeutic for solid tumors.

PRGN-2012 has been granted Orphan Drug designation for treatment of RRP by the FDA.

In addition to our clinical programs, PGEN Therapeutics has a robust pipeline of preclinical programs in our core therapeutic areas of immune-oncology, infectious diseases, and autoimmune disorders that we are pursuing in order to drive long-term value creation.

Our pipeline includes a number of product candidates, including UltraCAR-T therapeutics for various cancers, and "off-the-shelf" AdenoVerse therapeutic platforms.

We expect to continue development of various preclinical programs to identify product candidates for evaluation in clinical trials.

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We believe ActoBiotics have the potential to provide superior safety and efficacy via the sustained release of appropriate quantities of select therapeutic agents as compared to injectable biologics, while reducing the side effects commonly attributed to systemic delivery and corresponding peaks in concentration.

ActoBiotics work via genetically modified bacteria that deliver proteins and peptides at mucosal sites, rather than the insertion of one or more genes into a human cell by means of a virus or other delivery mechanism.

By foregoing this insertion, ActoBiotics allow "gene therapy" without the need for cell transformation.

ActoBio's most advanced internal pipeline candidate, AG019, is a first-in-class disease modifying antigen-specific, investigational immunotherapy for the prevention, delay, or reversal of type 1 diabetes mellitus, or T1D.

AG019 is an easy-to-take capsule formulation of ActoBiotics engineered to deliver the autoantigen human proinsulin, or hPINS, and the tolerance-enhancing cytokine human interleukin-10 to the mucosal lining of gastro-intestinal tissues in patients with T1D.

AG019 is currently in a Phase 1b/2a clinical trial for the treatment of early-onset T1D.

The Phase 1b portion of the study evaluates the safety and tolerability of AG019 monotherapy administered as a single dose and repeated daily doses in adult and adolescent patients.

The Phase 2a portion of the study investigates the safety and tolerability of AG019 in combination with teplizumab, or PRV-031.

Enrollment and dosing in the Phase 1b and Phase 2a portions of the study are complete.

The primary endpoint of assessing safety and tolerability in both the Phase 1b monotherapy and the Phase 2a combination arms of the study was met.

No dose-related adverse events or serious adverse events were reported in either portion of this trial.

Interim data presented showed an encouraging trend in C-peptide levels, a biomarker for T1D disease progression, at six months after AG019 monotherapy treatment initiation.

AG019 monotherapy resulted in stabilization of glycated hemoglobin, or HbA1c, and insulin-dose adjusted HbA1c, or IDAA1c, levels, important indicators of long-term glycemic control in T1D patients, up to twelve months after treatment initiation.

Furthermore, AG019 monotherapy induced antigen-specific tolerance in conjunction with the reduction of disease-specific T cell responses six months post treatment initiation.

Interim data from the Phase 2a portion showed an encouraging trend in C-peptide levels at six months after treatment initiation and stabilization of HbA1c and IDAA1c levels up to twelve months after treatment initiation.

The combination of AG019 and teplizumab showed the induction of antigen-specific tolerance in conjunction with reduction of disease-specific T cell responses at six months post treatment initiation.

We have completed a Phase 1b/2a clinical trial of AG019 for the treatment of early-onset T1D.

The Phase 1b portion of the study evaluated the safety and tolerability of AG019 monotherapy administered as a single dose and repeated daily doses in adult and adolescent patients.

The Phase 2a double-blind portion of the study investigated the safety and tolerability of AG019 in combination with teplizumab, or PRV-031.

The primary endpoint of assessing safety and tolerability in both the Phase 1b AG019 monotherapy and the Phase 2a AG019 combination therapy has been met.

AG019 was well-tolerated when administered to adults and adolescents either as monotherapy or in combination with teplizumab.

A single 8-week treatment cycle of oral AG019 as a monotherapy and in combination with teplizumab showed stabilization or increase of C-peptide levels during the first 6 months post treatment initiation in recent-onset T1D.

Precigen Triple-Gene

Triple-Gene is a clinical stage gene therapy company focused on developing advanced treatments for complex cardiovascular diseases.

Triple-Gene's approach is to develop a holistic treatment for heart failure through improvements in angiogenesis, calcium homeostasis-associated cellular energetics, reductions in inflammatory signals, and the activation/recruitment of stem cells to support heart remodeling.

Triple-Gene's most advanced candidate, INXN-4001, a non-viral triple-effector plasmid based on our UltraVector platform designed for constitutive expression of human S100A1, SDF-1a, and VEGF-165, is engineered to address multiple pathways of heart failure.

Triple-Gene's most advanced candidate, INXN-4001, a non-viral triple-effector plasmid based on our UltraVector platform designed for constitutive expression of human S100A1, SDF-1a, and VEGF-165.

INXN-4001 is engineered to address multiple pathways of heart failure.

Utilizing a single plasmid comprising all three genes, instead of each individual gene on separately delivered plasmids, INXN-4001 can control for delivery and ensure expression of the three genes in all transfected cells.

A first-in-human, open label Phase 1 trial designed to evaluate the safety of retrograde coronary sinus infusion, or RCSI, of INXN-4001 in outpatient left ventricular assist device, or LVAD, recipients has been completed.

Six-month follow-up data demonstrated that the study met the primary endpoints to evaluate safety and feasibility for INXN-4001.

We have completed a first-in-human, open label Phase 1 study designed to evaluate the safety of retrograde coronary sinus infusion, or RCSI, of INXN-4001 in outpatient left ventricular assist device, or LVAD, recipients.

The Phase 1 trial met the primary endpoints to evaluate safety and feasibility for INXN-4001.

Partnered Program

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In addition, D-Fi has been granted Rare Pediatric Disease designation, Fast Track designation, and Regenerative Medicine Advanced Therapy designation by the FDA for treatment of RDEB.

The FDA has granted Orphan Drug designation to FCX-013 for the treatment of localized scleroderma.

In addition, FCX-013 has been granted Rare Pediatric Disease designation

and Fast Track designation for the treatment of moderate to severe localized scleroderma.

The FDA has granted Orphan Drug designation to

FCX-013 for the treatment of localized scleroderma.

In addition, FCX-013 has been granted Rare Pediatric Disease designation and Fast Track designation for the treatment of moderate to severe localized scleroderma.

Pursuant to the collaboration, we licensed our technology platforms to Castle Creek for use in certain specified fields, and in exchange, we received and were entitled to certain access fees, milestone payments, royalties, and sublicensing fees related to the development and commercialization of product candidates.

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Castle Creek retains a license to continue to develop and commercialize the Retained Products within the field of use for so long as Castle Creek continues to pursue such development and commercialization, and we are also entitled to certain royalties with respect to the Retained Products.

We are also required to perform certain drug product manufacturing activities related to the Retained Products.

Precigen Exemplar

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Our Non-Healthcare Business

At September 30, 2021, our only non-healthcare business is our established bovine genetics company, Trans Ova Genetics, L.C., or Trans Ova.

At March 31, 2022, our only non-healthcare business is our established bovine genetics company, Trans Ova Genetics, L.C., or Trans Ova.

Trans Ova is internationally recognized as a provider of industry-leading bovine reproductive technologies.

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COVID-19 has had and continues to have an extensive impact on the global health and economic environments.

Furthermore, there is uncertainty regarding the duration and severity of the ongoing pandemic, and we could experience delays of other pandemic-related events that may adversely impact our clinical as well as preclinical pipeline candidates in the future.

We are also closely monitoring the impact of COVID-19 on all aspects of our businesses.

Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations, and overall financial performance cannot be reasonably estimated at this time.

The health and safety of our employees is of the utmost importance.

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These measures have permitted us to continue to advance our programs, with the ultimate goal of benefiting patients.

Commencing in the second half of March 2020, our healthcare business began to experience delays to certain of our clinical trials as a result of COVID-19.

For example, starting in March 2020, we temporarily suspended the last cohort of the Phase 1b/2a clinical trial for AG019 as a proactive measure to protect the welfare and safety of patients, caregivers, clinical site staff, our employees, and contractors.

The temporary suspension of the AG019 trial was voluntary and was not related to any patient safety issues in the study.

The voluntary suspension of the AG019 trial was lifted in June 2020, and recruitment in the study resumed.

Additionally, from April to May 2020, enrollment of new patients in our PRGN-3005 Phase 1 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.

Recruitment resumed in the PRGN-3005 trial in May 2020.

Although these suspensions did not result in significant overall delay, there is uncertainty regarding the duration and severity of the ongoing pandemic, and we could experience further delays of other pandemic-related events that may adversely impact our clinical as well as preclinical pipeline candidates in the future.

Notwithstanding the foregoing, as the COVID-19 pandemic continues to evolve, we may experience additional delays to our clinical trials, including related to enrollment, site closures, reduced availability of key personnel, or our ability to receive the necessary approvals from the FDA or other regulatory agencies to advance our programs.

We are also closely monitoring the impact of COVID-19 on other aspects of our business.

While Trans Ova and Exemplar have not experienced any significant impacts as a result of COVID-19 at this time, we are unable to reliably quantify or estimate what the future impacts may be.

For more information regarding the risks associated with COVID-19 and its impact on our business, see "Risk Factors" in Part II - Item 1A.

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See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 4" appearing elsewhere in this Quarterly Report for a discussion of Intrexon Energy Partners and Intrexon Energy Partners II.

As of September 30, 2021, our reportable segments were (i) Biopharmaceuticals, (ii) Exemplar, and (iii) Trans Ova.

These identified reportable segments met the quantitative thresholds to be reported separately for the nine months ended September 30, 2021.

As of March 31, 2022, our reportable segments were (i) Biopharmaceuticals, (ii) Exemplar, and (iii) Trans Ova.

These identified reportable segments met the quantitative thresholds to be reported separately for the three months ended March 31, 2022.

Corporate expenses, which are not allocated to the segments and are managed at a consolidated level, include costs associated with general and administrative functions, including our finance, accounting, legal, human resources, information technology, corporate communication, and investor relations functions.

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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 the nine months ended September 30, 2021, 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 the three months ended March 31, 2022, 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.

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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 therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases, including PRGN-3005, PRGN-3006, PRGN-2009, PRGN-2012, AG019, and INXN-4001.

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 following table summarizes our research and development expenses incurred by reportable segment and reconciles those expenses to research and development expenses on the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

Biopharmaceuticals

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Total research and development expenses from reportable segments 12,762 10,522

Other research and development expenses — — — (173)

Eliminations (2) (1)

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Selling, general and administrative expenses

Selling, general and administrative, or SG&A, expenses consist primarily of salaries and related costs, including stock-based compensation expense, 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 (including the cost of settling any claims and lawsuits), and expenses associated with obtaining and maintaining our intellectual property.

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Other income (expense), net

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 3.50% convertible senior notes due 2023 issued in July 2018.

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.

Interest expense decreased in the current period, and is expected to decrease in future periods upon the adoption of a new accounting standard effective January 1, 2022, which simplified the accounting for the Convertible Notes.

See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 2" appearing elsewhere in this Quarterly Report for further discussion.

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 joint ventures, or 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 the Harvest Intrexon Enterprise Fund I, LP, or 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.

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.

Segment performance

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Results of operations

Comparison of the three months ended September 30, 2021 and the three months ended September 30, 2020

The following table summarizes our results of operations for the three months ended September 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended March 31, 2022 and the three months ended March 31, 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

Three Months Ended

September 30, Dollar

March 31, Dollar

Change Percent

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Selling, general and administrative 19,576 18,702 874 4.7 %

Impairment of other noncurrent assets — 920 (920) (100.0) %

Impairment of goodwill 482 — 482 N/A

Total operating expenses 49,917 42,199 7,718 18.3 %

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Total other expense, net (1,412) (4,205) 2,793 (66.4) %

Equity in loss of affiliates — (523) 523 (100.0) %

Equity in net loss of affiliates (1) (3) 2 (66.7) %

Loss from continuing operations before income taxes (19,309) (21,896) 2,587 (11.8) %

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Loss from continuing operations (19,251) (21,844) 2,593 (11.9) %

Income (loss) from discontinued operations, net of income taxes (2) 60 (1,972) 2,032 103.0 %

Income from discontinued operations, net of income taxes (1) — 4,526 (4,526) (100.0) %

Net loss $ (19,251) $ (17,318) $ (1,933) 11.2 %

(1) Includes $0 and $2,823 from related parties for the three months ended September 30, 2021 and 2020, respectively.

(1) See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 3" appearing elsewhere in this Quarterly Report.

Collaboration and licensing revenues

Collaboration and licensing revenues decreased $5.2 million, or 100%, from the three months ended September 30, 2020 primarily due to accelerated recognition of previously deferred revenue upon the mutual termination of a collaboration with Oragenics, Inc., or Oragenics, in July 2020 and a decrease in the recognition of previously deferred revenue in the current period resulting from fewer services being performed pursuant to a March 2020 termination agreement with Castle Creek.

Product revenues and gross margin

Product revenues were comparable to the three months ended September 30, 2020 as expected.

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

Product revenues increased $2.3 million, or 37%, over the three months ended March 31, 2021.

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 and increased focus on selling higher margin products.

Service revenues and gross margin

Service revenues increased $2.8 million, or 25%, over the three months ended September 30, 2020.

Service revenues increased $5.3 million, or 29%, over the three months ended March 31, 2021.

Trans Ova's revenues 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 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 the pricing structure with certain customers.

Gross margin on services declined in the current period as a result of increased costs for supplies and drugs.

Gross margin on services remained comparable to the prior year as increased revenues were offset by increased costs for supplies, drugs, and personnel costs.

Research and development expenses

Research and development expenses increased $2.7 million, or 27%, over the three months ended September 30, 2020.

Research and development expenses increased $2.2 million, or 21%, over the three months ended March 31, 2021.

Contract research organization costs and lab supplies increased $1.6 million with the advancement of our clinical and preclinical programs.

Selling, general and administrative expenses

SG&A expenses decreased $3.7 million, or 16%, from the three months ended September 30, 2020.

Salaries, benefits, and other personnel costs decreased $2.2 million 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 for previously granted awards that became fully vested in 2021.

There was a reduction of $2.5 million for the nonrecurring settlement with the Securities and Exchange Commission, or SEC, in the prior period.

This was partially offset by an increase in professional fees of $0.7 million, primarily due to increased legal fees associated with certain litigation matters.

SG&A expenses increased $0.9 million, or 5%, over the three months ended March 31, 2021.

Professional fees increased $1.6 million, primarily due to increased legal fees associated with certain litigation matters.

This increase was partially offset with a decrease in salaries, benefits, and other personnel costs of $1.3 million primarily due to reduced stock compensation in 2022 and reduced head count.

Total other expense, net

Total other expense, net, is comprised primarily of interest expense associated with our Convertible Notes issued July 2018.

The current period decrease is primarily due to the adoption of a new accounting standard effective January 1, 2022 noted above, which simplified the accounting for the Convertible Notes and reduced non-cash interest expense.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended September 30, 2021 and 2020, for each of our reportable segments as well as unallocated corporate costs.

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended March 31, 2022 and 2021, for each of our reportable segments as well as unallocated corporate costs.

Three Months Ended

September 30, Dollar

March 31, Dollar

Change Percent

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For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 18" appearing elsewhere in this Quarterly Report.

The following table summarizes revenues from external customers for the three months ended September 30, 2021 and 2020, for each of our reportable segments.

The following table summarizes revenues from external customers for the three months ended March 31, 2022 and 2021, for each of our reportable segments.

Three Months Ended

September 30, Dollar

March 31, Dollar

Change Percent

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Biopharmaceuticals

The decrease in revenues for Biopharmaceuticals was primarily due to accelerated recognition of previously deferred revenue upon the mutual termination of a collaboration with Oragenics in July 2020 and due to a decrease in the recognition of

previously deferred revenue in the current period resulting from fewer services being performed pursuant to a termination agreement with Castle Creek.

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.

Segment Adjusted EBITDA was comparable period over period as expected.

The improvement in Segment Adjusted EBITDA was primarily due to the increased revenues.

Revenues for Trans Ova increased primarily due to (i) higher customer demand for pregnant cows, (ii) more procedures performed as a result of stronger beef and dairy industries in the current year, and (iii) a change in the pricing structure with certain customers.

Segment Adjusted EBITDA declined due to (i) increased costs for supplies and drugs, (ii) increased costs for certain legal matters, and (iii) increased provision for credit losses driven by increased sales.

Unallocated Corporate Costs

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.

Comparison of the nine months ended September 30, 2021 and the nine months ended September 30, 2020

The following table summarizes our results of operations for the nine months ended September 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage:

Nine Months Ended

September 30, Dollar

Change Percent

(In thousands)

Collaboration and licensing revenues (1) $ 389 $ 20,259 $ (19,870) (98.1) %

Product revenues 22,013 20,397 1,616 7.9 %

Service revenues 56,851 42,615 14,236 33.4 %

Other revenues 399 574 (175) (30.5) %

Total revenues 79,652 83,845 (4,193) (5.0) %

Operating expenses

Cost of products 19,201 21,526 (2,325) (10.8) %

Cost of services 24,258 20,197 4,061 20.1 %

Research and development 37,122 30,973 6,149 19.9 %

Selling, general and administrative 57,359 61,665 (4,306) (7.0) %

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

Total operating expenses 138,483 135,281 3,202 2.4 %

Operating loss (58,831) (51,436) (7,395) 14.4 %

Total other expense, net (13,070) (11,660) (1,410) 12.1 %

Equity in loss of affiliates (3) (1,125) 1,122 (99.7) %

Loss from continuing operations before income taxes (71,904) (64,221) (7,683) 12.0 %

Income tax benefit 173 130 43 33.1 %

Loss from continuing operations (71,731) (64,091) (7,640) 11.9 %

Income (loss) from discontinued operations, net of income taxes (2) 4,599 (64,769) 69,368 107.1 %

Net loss $ (67,132) $ (128,860) $ 61,728 (47.9) %

(1) Includes $0 and $3,053 from related parties for the nine months ended September 30, 2021 and 2020, respectively.

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

Collaboration and licensing revenues

Collaboration and licensing revenues decreased $19.9 million, or 98%, from the nine months ended September 30, 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 in 2020.

Product revenues and gross margin

Product revenues increased $1.6 million, or 8%, over the nine months ended September 30, 2020.

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 $14.2 million, or 33%, over the nine months ended September 30, 2020.

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 increased $6.1 million, or 20%, over the nine months ended September 30, 2020.

Contract research organization costs and lab supplies increased $5.9 million with the advancement of our clinical and preclinical programs.

Selling, general and administrative expenses

SG&A expenses decreased $4.3 million, or 7%, from the nine months ended September 30, 2020.

Salaries, benefits, and other personnel costs decreased $3.8 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 $2.5 million for the nonrecurring settlement with the SEC in the prior period.

This was partially offset by an increase in professional fees of $1.5 million, primarily due to an increase in legal fees associated with certain litigation matters.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the nine months ended September 30, 2020 and 2020, for each of our reportable segments as well as unallocated corporate costs.

Nine Months Ended

September 30, Dollar

Change Percent

(In thousands)

Segment Adjusted EBITDA:

Biopharmaceuticals

$ (34,055) $ (26,106) $ (7,949) (30.4) %

Exemplar 5,312 2,511 2,801 111.5 %

Trans Ova 15,881 7,417 8,464 114.1 %

Unallocated corporate costs (25,412) (29,102) 3,690 (12.7) %

The following table summarizes revenues from external customers for the nine months ended September 30, 2021 and 2020, for each of our reportable segments.

Nine Months Ended

September 30, Dollar

Change Percent

(In thousands)

Biopharmaceuticals

$ 723 $ 20,703 $ (19,980) (96.5) %

Exemplar 9,860 7,230 2,630 36.4 %

Trans Ova 69,069 55,858 13,211 23.7 %

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.

Segment Adjusted EBITDA declined due to (i) increased costs for supplies and drugs, (ii) increased costs for certain legal matters, and (iii) increased salaries, benefits, and other personnel costs.

Unallocated Corporate Costs

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.

Unallocated corporate costs increased primarily due to increased professional fees including legal fees associated with certain litigation matters.

Liquidity and capital resources

Sources of liquidity

We have incurred losses from operations since our inception, and as of September 30, 2021, we had an accumulated deficit of $1.9 billion.

From our inception through September 30, 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 September 30, 2021, we had cash and cash equivalents of $41.7 million and short-term and long-term investments of $139.6 million.

We have incurred losses from operations since our inception, and as of March 31, 2022, we had an accumulated deficit of $1.9 billion.

From our inception through March 31, 2022, 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 March 31, 2022, we had cash and cash equivalents of $40.3 million and short-term and long-term investments of $101.7 million.

Cash in excess of immediate requirements is typically invested primarily in money market funds and U.S.

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

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

As of September 30, 2021, Trans Ova was in compliance with these debt covenants or had obtained appropriate waivers from the bank.

Trans Ova is subject to certain restrictive covenants under its line of credit, which matured on April 1, 2022, which is discussed in "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 11" appearing elsewhere in this Quarterly Report.

As of March 31, 2022, 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:

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

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Cash flows from operating activities:

During the nine months ended September 30, 2021, our net loss was $67.1 million, which includes the following significant noncash expenses totaling $30.5 million from both continuing and discontinued operations:

(i) $11.5 million of stock-based compensation expense, (ii) $10.4 million of depreciation and amortization expense, and (iii) $8.6 million accretion of debt discount and amortization of deferred financing costs.

During the three months ended March 31, 2022, our net loss was $19.3 million, which includes the following significant noncash expenses totaling $7.5 million from continuing operations:

(i) $3.6 million of stock-based compensation expense, (ii) $3.3 million of depreciation and amortization expense, and (iii) $0.6 million of shares issued as payment for services.

During the three months ended March 31, 2021, our net loss was $17.3 million, which includes the following significant noncash expenses totaling $12.3 million from both continuing and discontinued operations:

(i) $5.4 million of stock-based compensation expense, (ii) $3.5 million of depreciation and amortization expense, (iii) $2.8 million accretion of debt discount and amortization of deferred financing costs, and (iv) $0.6 million of shares issued as payment for services.

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.

During the nine months ended September 30, 2020, our net loss was $128.9 million, which includes the following significant noncash expenses totaling $85.4 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) $13.9 million of stock-based compensation expense, (iv) $13.7 million of depreciation and amortization expense, and (v) $7.8 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.

Our cash outflows from operations during the nine months ended September 30, 2021 decreased $19.4 million from the nine months ended September 30, 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 cash outflows from operations during the three months ended March 31, 2022 increased $2.4 million from the three months ended March 31, 2021 primarily due to increased costs associated with the advancement of our clinical and preclinical programs.

Cash flows from investing activities:

During the nine months ended September 30, 2021, we purchased $92.2 million of investments, net of maturities and sales, primarily using the proceeds received from the underwritten public offering discussed below.

During the nine months ended September 30, 2020, we purchased $75.4 million of investments, net of maturities, primarily using the $64.2 million of proceeds received from the Transactions, net of cash sold, and the private placement discussed below.

During the three months ended March 31, 2022, we received $18.0 million of proceeds from maturities of investments.

During the three months ended March 31, 2021, we purchased $133.7 million of investments, net of maturities, primarily using the proceeds received from the underwritten public offering discussed below.

Cash flows from financing activities:

During the nine months ended September 30, 2021, we received $121.0 million net proceeds from the sale of our common stock in an underwritten public offering.

During the nine months ended September 30, 2020, we received $35.0 million proceeds from the sale of our common stock in a private placement to TS Biotechnology Holdings, LLC.

During the three months ended March 31, 2022, we made payments of long-term debt of $0.2 million.

During the three months ended March 31, 2021, we received $121.0 million proceeds from the sale of our common stock in an underwritten public offering.

Future capital requirements

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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.

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Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments from continuing operations as of September 30, 2021 and the effects such obligations are expected to have on our liquidity and cash flows in future periods:

The following table summarizes our significant contractual obligations and commitments from continuing operations as of March 31, 2022 and the effects such obligations are expected to have on our liquidity and cash flows in future periods:

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

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

In addition to the obligations in the table above, as of September 30, 2021 we also have the following significant contractual obligations described below.

In addition to the obligations in the table above, as of March 31, 2022 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.

As of September 30, 2021, our remaining capital contribution commitments to our JVs were $14.2 million.

As of March 31, 2022, our remaining capital contribution commitments to our JVs were $14.2 million.

These future capital contributions are not included in the table above due to the uncertainty of the timing and amounts of such contributions.

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These agreements are generally subject to termination by us and therefore no amounts are included in the tables above.

As of September 30, 2021, we also had research and development commitments with third parties totaling $15.7 million that had not yet been incurred.

As of March 31, 2022, we also had research and development commitments with third parties totaling $22.7 million that had not yet been incurred.

Net operating losses

As of September 30, 2021, we had net operating loss carryforwards of approximately $836.6 million for U.S.

As of March 31, 2022, we had net operating loss carryforwards of approximately $861.0 million for U.S.

federal income tax purposes available to offset future taxable income, including $609.0 million generated after 2017, U.S.

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federal and state research and development tax credits of approximately $11.3 million, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended, or 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.

Net operating loss carryforwards generated prior to 2018 have begun 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 $74.2 million, most of which do not expire.

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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 of September 30, 2021, Precigen has utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

As of September 30, 2021, approximately $42.1 million of domestic net operating losses were inherited via acquisitions and are limited based on the value of the target at the time of the transaction.

As of March 31, 2022, Precigen has utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

As of March 31, 2022, approximately $42.1 million of available domestic net operating losses were inherited via acquisitions and are limited based on the value of the target at the time of the transaction.

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

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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-Q

Item 2. Management’s Discussion and Analysis