What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-09 compared with 2022-08-08 · 130 added, 99 removed, 355 unchanged (39% of the section changed)

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The most advanced programs within PGEN Therapeutics are as follows:

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 , 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 initiated dosing at Dose Level 3 with lymphodepletion prior to IV administration of PRGN-3005.

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

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

Enrollment in the Phase 1 portion of the clinical trial has been completed and enrollment in the Phase 2 portion of the clinical trial is ongoing.

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

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

PRGN-2009 leverages our UltraVector and AdenoVerse platforms to optimize HPV type 16 and HPV type 18, antigen design for delivery via a proprietary gorilla adenovector with a large genetic payload capacity and the ability for repeat administrations.

PRGN-2009 is in a Phase 1/2 clinical trial as a monotherapy or in combination with bintrafusp alfa, or M7824, an investigational bifunctional fusion protein, for patients with HPV-associated cancers in collaboration with the National Cancer Institute, or NCI, pursuant to a cooperative research and development arrangement, or CRADA.

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.

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

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.

The Phase 1b expansion cohort of the clinical trial with lymphodepletion prior to IV administration of PRGN-3005 is ongoing.

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.

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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 target patient population for Arm 2 includes locally advanced

unresectable or metastatic histologically confirmed TNBC.

The study will enroll in two parts:

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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.

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 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 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.

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

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.

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

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In March 2020, we and Castle Creek terminated the original collaboration agreement by mutual agreement, with the parties agreeing that FCX-007 and FCX-013 would be treated as "Retained Products" under the terms of the original agreement.

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.

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.

Precigen Exemplar

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After the wind down of MBP Titan, certain assets and contractual obligations which were originally related to MBP Titan continue to be managed at the Precigen corporate level.

These remaining assets and contractual obligations include our equity interests in and collaboration agreements with Intrexon Energy Partners, LLC, or Intrexon Energy Partners, and Intrexon Energy Partners II, LLC, or Intrexon Energy Partners II, including the associated deferred revenue remaining under each collaboration agreement, as well as the associated intellectual property.

As disclosed in "Notes to Condensed Consolidated Financial Statements (Unaudited) - Note 1", on July 1, 2022, we entered into an agreement to sell 100% of the outstanding membership interests of Trans Ova (the "Trans Ova Sale"), our established bovine genetics company, which is expected to close in Q3 2022.

The consummation of the Trans Ova Sale is subject to customary closing conditions, including:

(i) the expiration of the waiting period applicable to the Purchase Agreement under the HSR act, as amended, (ii) the absence of any law or governmental order prohibiting the Trans Ova Sale, (iii) the absence of any material adverse effect on the business, assets, results of operation of Trans Ova and its subsidiaries since the signing of the Purchase Agreement, and (iv) the accuracy of the representations and warranties of each party (subject to materiality qualifiers) in the Purchase Agreement and the compliance by each party with its covenants in all material respects.

The consummation of the Trans Ova Sale is not subject to any financing contingency.

These remaining assets and contractual obligations include our equity interest in and collaboration agreements with Intrexon Energy Partners, LLC ("Intrexon Energy Partners"), and Intrexon Energy Partners II, LLC ("Intrexon Energy Partners II"), including the associated deferred revenue remaining under each collaboration agreement which was recognized as revenue in the third quarter of 2022 upon acquiring control of these entities as well as the associated intellectual property developed by MBP Titan to date.

These assets, liabilities, and related historical revenue and equity losses are included in our operating results from continuing operations in the condensed consolidated financial statements appearing in Item 1 of this form 10-Q for all periods presented as a result of our continuing involvement.

As disclosed in "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Notes 3 and 5 " appearing elsewhere in the Quarterly Report", effective as of August 18, 2022, Precigen completed the previously announced sale of 100% of the issued and outstanding membership interests of its wholly-owned subsidiary, Trans Ova.

See also "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 3" appearing elsewhere in this Quarterly Report for additional discussion of our discontinued operations.

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 June 30, 2022, our reportable segments were (i) Biopharmaceuticals and (ii) Exemplar.

These identified reportable segments met the quantitative thresholds to be reported separately for the six months ended June 30, 2022.

See also "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Notes 2, 4, 5 and 16" appearing elsewhere in this Quarterly Report for a discussion of Intrexon Energy Partners and Intrexon Energy Partners II.

As of September 30, 2022, our reportable segments were (i) Biopharmaceuticals and (ii) Exemplar.

These identified reportable segments met the quantitative thresholds to be reported separately for the nine months ended September 30, 2022.

The Company's segment presentation excludes amounts related to the operations of Trans Ova and MBP Titan which are reported as discontinued operations.

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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 Exemplar subsidiary, and in the six months ended June 30, 2022, generated positive Segment Adjusted EBITDA.

We continue to generate product and service revenues through our Exemplar subsidiary, and in the nine months ended September 30, 2022, 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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In addition, market changes and changes in judgements, assumptions, and estimates that we have made in assessing the fair value of goodwill could cause us to consider some portion or all of certain assets to become impaired.

See further discussion regarding our ability to continue as a going concern below under the Liquidity and capital resources section of Item 2.

Sources of revenue

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Other than for collaboration revenues recognized upon cancellation or modification of an existing collaboration or for revenues generated pursuant to future strategic transactions for any of our existing platforms or programs, we expect our collaboration revenues will continue to decrease in the near term.

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

Our revenues will also depend upon our ability to maintain or improve the volume and pricing of Exemplar's current product and service offerings.

As we focus on our healthcare business, we anticipate that our expenses will increase substantially if, and as, we continue to advance the preclinical and clinical development of our existing product candidates and our research programs.

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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, and AG019.

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

The following table summarizes our research and development expenses incurred by reportable segment and reconciles those expenses to research and development expenses on the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021.

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Exemplar 86 79 244 216

Total research and development expenses from reportable segments 11,954 13,184 23,755 23,321

Eliminations — — — —

Total consolidated research and development expenses $ 12,622 $ 12,434 $ 36,377 $ 35,755

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

Other significant SG&A expenses include rent and utilities, insurance, accounting, and legal services (including the cost of settling any claims and lawsuits), and expenses associated with obtaining and maintaining our intellectual property.

Other significant SG&A expenses include rent and utilities, insurance, accounting, and legal services (including the cost of settling certain claims and lawsuits), and expenses associated with obtaining and maintaining our intellectual property.

SG&A expenses may fluctuate in the future depending on the scaling of our corporate functions required to support our corporate initiatives and the outcomes of legal claims and assessments against us.

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

In September 2022, the Company retired Convertible Notes with principal of $117,560.

The net gain recorded on extinguishment of $0.9 million is included in Other income(expense), net.

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

The extinguishment of these Convertible Notes will alleviate us of $3.2 million in future cash interest payments had we held the Convertible Notes until maturity.

Equity in net income (loss) of affiliates

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

We define Segment Adjusted EBITDA as net income (loss) before (i) interest expense, (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.

from the sale of assets in the period sold.

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

See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 18" appearing elsewhere in this Quarterly Report for further discussion of Segment Adjusted EBITDA.

Results of operations

Comparison of the three months ended June 30, 2022 and the three months ended June 30, 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended September 30, 2022 and the three months ended September 30, 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

Three Months Ended

June 30, Dollar

September 30, Dollar

Change Percent

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Selling, general and administrative 10,137 10,977 (840) (7.7) %

Impairment of other noncurrent assets 638 543 95 17.5 %

Impairment of other noncurrent assets — — — N/A

Total operating expenses 24,336 24,863 (527) (2.1) %

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Total other expense, net (942) (4,850) 3,908 (80.6) %

Equity in net loss of affiliates 862 — 862 N/A

Loss from continuing operations before income taxes (7,694) (26,380) 18,686 (70.8) %

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(1) See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 5 " appearing elsewhere in this Quarterly Report.

(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 increased $14.5 million or greater than 200%, from the three months ended September 30, 2021 due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II in the third quarter of 2022 and therefore we recognized the remaining balance of deferred revenue associated with Intrexon Energy Partners and Intrexon Energy Partners II, less the amounts paid to acquire the membership interests of the investors.

See "Notes to the Condensed Financial Statements (Unaudited) – Notes 2, 4, 5 and 16” appearing elsewhere in this Quarterly Report for further discussion of Intrexon Energy Partners and Intrexon Energy Partners II.

Product revenues and gross margin

Product revenues decreased $0.1 million, or 11%, from the three months ended June 30, 2021.

Product revenues decreased $0.2 million, or 38%, from the three months ended September 30, 2021.

The decrease in product revenues was primarily due to product mix and lower customer demand.

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Service revenues and gross margin

Service revenues decreased $0.5 million, or 17%, from the three months ended June 30, 2021.

Service revenues decreased $0.9 million, or 34%, from the three months ended September 30, 2021.

The decrease in service revenues was primarily resulting from a lower demand from existing customers.

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Research and development expenses

Research and development expenses decreased $1.2 million, or 9%, from the three months ended June 30, 2021.

Contract research organization costs and lab supplies decreased $1.9 million due to timing differences, the completion of our 1b/2a clinical trial of AG019 in the fourth quarter of the prior year, as well as a continued prioritization of clinical product candidates with less expense incurred related to preclinical research programs for the comparable period.

This decrease was partially offset with an increase in salaries, benefits, and other personnel costs of $0.7 million primarily due to an increase in the hiring of employees to support the growth in our operations.

Research and development expenses increased $0.2 million, or 2%, from the three months ended September 30, 2021.

This increase was driven by an increase in salaries, benefits, and other personnel costs of $1.0 million primarily due to an

increase in the hiring of employees to support the growth in our operations and offset by $0.8 decrease in contract research organization costs and lab supplies due to timing differences, the completion of our 1b/2a clinical trial of AG019 in the fourth quarter of the prior year, as well as a continued prioritization of clinical product candidates with less expense incurred related to preclinical research programs for the comparable period.

Selling, general and administrative expenses

SG&A expenses decreased $2.3 million, or 15%, from the three months ended June 30, 2021.

SG&A expenses decreased $0.8 million, or 8%, from the three months ended September 30, 2021.

Salaries, benefits, and other personnel costs decreased $0.1 million primarily due to reduced stock compensation in 2022 and a reduction in salaries, benefits and other personnel costs due to reduced head count.

Professional fees decreased $0.4 million, primarily due to decreased legal fees associated with certain matters.

Professional fees decreased $0.6 million, primarily due to decreased legal and consulting fees associated with certain matters.

Total other expense, net

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

Total other expense, net, is primarily related to our Convertible Notes issued July 2018.

The decrease was also a result of the gain recorded on the early retirement of a portion of our Convertible Notes of $0.9 million.

The extinguishment of these Convertible Notes will alleviate us of $3.2 million in future cash interest payments had we held the Convertible Notes until maturity.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended June 30, 2022 and 2021, 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 September 30, 2022 and 2021, for each of our reportable segments as well as unallocated corporate costs.

Three Months Ended

June 30, Dollar

September 30, 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 June 30, 2022 and 2021, for each of our reportable segments.

The following table summarizes revenues from external customers for the three months ended September 30, 2022 and 2021, for each of our reportable segments.

Three Months Ended

June 30, Dollar

September 30, Dollar

Change Percent

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Biopharmaceuticals

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

Biopharmaceuticals collaboration and licensing revenues increased due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II and therefore we recognized the remaining balance of deferred revenue associated with Intrexon Energy Partners and Intrexon Energy Partners II in the third quarter of 2022 less the amounts paid to acquire the membership interests of the investors.

Revenues for Exemplar decreased due to a decrease in services performed resulting from a lower demand from existing customers.

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Unallocated corporate costs decreased primarily due to decreased professional fees including legal fees associated with certain matters and reduced head count.

Comparison of the six months ended June 30, 2022 and the six months ended June 30, 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

Six Months Ended

June 30, Dollar

Comparison of the nine months ended September 30, 2022 and the nine months ended September 30, 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021, together with the changes in those items in dollars and as a percentage:

Nine Months Ended

September 30, Dollar

Change Percent

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(1) See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 5 " appearing elsewhere in this Quarterly Report.

(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 increased $14.2 million or greater than 200%, from the nine months ended September 30, 2021 due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II in the third quarter of 2022 and therefore we recognized the remaining balance of deferred revenue associated with the Intrexon Energy Partners and Intrexon Energy Partners II, less the amounts paid to acquire the membership interests of the investors.

Product revenues and gross margin

Product revenues decreased $0.2 million, or 15%, from the six months ended June 30, 2021.

Product revenues decreased $0.4 million, or 22%, from the nine months ended September 30, 2021.

The decrease in product revenues was primarily due to product mix and lower customer demand.

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Service revenues and gross margin

Service revenues increased $1.8 million, or 35%, over the six months ended June 30, 2021.

The increase in service revenues was primarily due to 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.

Service revenues increased $1.0 million, or 12%, over the nine months ended September 30, 2021.

The increase in service revenues was primarily due to higher demand from existing and new customers in the early part of 2022 as well as a

combination of price increases and a change in the pricing structure with certain customers.

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 $0.4 million, or 2%, over the six months ended June 30, 2021.

Research and development expenses increased $0.6 million, or 2%, over the nine months ended September 30, 2021.

Salaries, benefits, and other personnel costs increased $2.2 million due to an increase in the hiring of employees to support the growth in the Company's development activities.

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Selling, general and administrative expenses

SG&A expenses decreased $2.9 million, or 10%, from the six months ended June 30, 2021.

Salaries, benefits, and other personnel costs decreased $3.5 million primarily due to reduced stock compensation in 2022 and reduced head count.

This decrease was partially offset with an increase in legal and professional fees of $1.1 million, primarily due to increased consulting fees and legal fees associated with certain matters.

SG&A expenses decreased $3.7 million, or 9%, from the nine months ended September 30, 2021.

Salaries, benefits, and other personnel costs decreased $3.6 million primarily due to $2.6 million 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.

Total other expense, net, is primarily related to 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, reduced non-cash interest expense and as well as a $0.9 million gain in connection with the early retirement of a portion of our Convertible Notes.

The extinguishment of these Convertible Notes will alleviate us of $3.2 million in future cash interest payments had we held the Convertible Notes until maturity.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the six months ended June 30, 2022 and 2021, for each of our reportable segments as well as unallocated corporate costs.

Six Months Ended

June 30, Dollar

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the nine months ended September 30, 2022 and 2021, for each of our reportable segments as well as unallocated corporate costs.

Nine Months Ended

September 30, Dollar

Change Percent

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The following table summarizes revenues from external customers for the six months ended June 30, 2022 and 2021, for each of our reportable segments.

Six Months Ended

June 30, Dollar

The following table summarizes revenues from external customers for the nine months ended September 30, 2022 and 2021, for each of our reportable segments.

Nine Months Ended

September 30, Dollar

Change Percent

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Biopharmaceuticals

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

Biopharmaceuticals collaboration and licensing revenues increased due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II in the third quarter of 2022 and therefore we recognized the remaining balance of deferred revenue associated with Intrexon Energy Partners and Intrexon Energy Partners II, less the amounts paid to acquire the membership interests of the investors.

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

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

The improvement in Segment Adjusted EBITDA was primarily due to the increased revenues in the first half of 2022.

Unallocated Corporate Costs

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Sources of liquidity

We have incurred losses from operations since our inception, and as of June 30, 2022, we had an accumulated deficit of $1.9 billion.

From our inception through June 30, 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 June 30, 2022, we had cash and cash equivalents of $49.5 million and short-term and long-term investments of $83.3 million.

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

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.

We have historically financed our operations primarily through public offerings and private placements of our capital stock, and up front and milestone consideration received under our collaboration and licensing agreements.

In addition, cash flows from our Exemplar segment and businesses previously sold (including proceeds from those sales) have provided sources of funds to finance our operations.

As of September 30, 2022, we had $71,327 in cash, cash equivalents, and short-term investments.

At-the-Market Sales Agreement

As disclosed in "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 13" appearing elsewhere in this Quarterly Report, on August 9, 2022, we entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co.

Pursuant to which we may issue and sell from time to time shares of Company’s common stock of up to $100,000.

The Company has no obligation to sell any of the Shares under the Sales Agreement, and may at any time suspend or terminate the offering of its common stock pursuant to the Sales Agreement upon notice and subject to other conditions.

The Company intends to use the proceeds of the offering, when and if utilized, to fund the development of clinical and preclinical product candidates and for working capital and other general corporate purposes.

Going Concern

During the nine months ended September 30, 2022, we incurred a loss from continuing operations of $57,601 and used $49,649 of cash in our operations, and as of September 30, 2022, had an accumulated deficit of $1,846,391.

We have also incurred operating losses since our inception and management expects operating losses and negative cash flows from operations to continue for the foreseeable future and, as a result, we will require additional capital to fund our operations and execute our business plan.

In addition, as of September 30, 2022, we had $153,770 in cash, cash equivalents, short-term investments, and restricted cash, and had no committed source of additional funding from either debt or equity financings, although we may, at our discretion, sell equity securities under the terms of the at-the-market sales agreement, subject to certain conditions and limitations.

See “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 13” appearing elsewhere in this Quarterly Report for further discussion of our at-the-market sales agreement.

Given our current cash position and forecasted negative cash flows from operating activities for the foreseeable future, as well as convertible notes of $82,440 that are due on July 1, 2023, management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern.

See “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 11” appearing elsewhere in this Quarterly Report for further discussion of our convertible debt agreement.

Our ability to fund operations on an ongoing basis is dependent upon the successful execution of management’s plans, which include raising additional capital in the near term.

This additional capital could be raised through a combination of non-dilutive financings (including collaborations, strategic alliances, monetization of non-core assets, marketing, distribution or licensing arrangements), dilutive financings (including equity and/or debt financings) and, in the longer term, from revenue related to product sales, to the extent its product candidates receive marketing approval and can be commercialized.

There can be no assurance that new financings or other transactions will be available to us on commercially acceptable terms, or at all.

Also, any collaborations, strategic alliances, monetization of non-core assets or marketing, distribution or licensing arrangement may require us to give up some or all of our rights to a product or technology, which in some cases may be at less than the full potential value of such rights.

If we are unable to obtain additional capital, we will assess our capital resources and we may be required to delay, reduce the scope of, or eliminate some or all of our operations, which may include research and development and clinical trials.

This may have a material adverse effect on our business, financial condition, results of operations and our ability to operate as a going concern.

We currently generate cash receipts primarily from sales of products and services at our Exemplar segment and from strategic transactions.

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

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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Cash flows from operating activities:

During the six months ended June 30, 2022, our net loss was $36.9 million, which includes the following significant noncash expenses totaling $12.4 million from continuing operations:

During the nine months ended September 30, 2022, our net income was $50.5 million, which includes the gain on sale of discontinued operations of $94.7 million which is presented as an adjustment to net income to net cash used in operating activities as the cash flows from the sale is presented within cash flows from investing activities;

additional significant noncash expenses totaling $17.0 million from continuing operations which also adjusted net income to net cash from operating activities included:

(i) $9.0 million of depreciation and amortization expense and (ii) $8.0 million of stock-based compensation expense

During the six months ended June 30, 2021, our net loss was $37.4 million, which includes the following significant noncash expenses totaling $21.6 million from both continuing and discontinued operations:

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.

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.

Our cash outflows from operations during the six months ended June 30, 2022 increased $1.7 million from the six months ended June 30, 2021 primarily due to decreased cash inflows provided by Trans Ova and Exemplar.

Our cash outflows from operations during the nine months ended September 30, 2022 increased $8.5 million from the nine months ended September 30, 2021 primarily due to decreased cash inflows provided by Trans Ova (which was sold in August 2022) and Exemplar.

Cash flows from investing activities:

During the six months ended June 30, 2022, we received $36.0 million of proceeds from maturities of investments.

During the six months ended June 30, 2021, we purchased $116.2 million of investments, net of maturities, primarily using the proceeds received from the underwritten public offering discussed below.

During the nine months ended September 30, 2022, we received $162.3 million of proceeds from the sale of discontinued operations and $57.0 million of proceeds from maturities of investments.

During the nine months ended September 30, 2021, we purchased $92.2 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 six months ended June 30, 2022, we made payments of long-term debt of $0.2 million.

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

During the nine months ended September 30, 2022, we repurchased Convertible Notes for $115.7 million.

Additionally, in October 2022, we made additional repurchases of Convertible Notes of $26.4 million.

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

Future capital requirements

We believe our existing liquid assets will enable us to fund our operating expenses and capital requirements for at least the next 12 months.

As discussed in the liquidity and capital resource section above in Item 2, we believe our existing liquid assets will not be sufficient to enable us to continue as a going concern for the next twelve months without additional capital in the near term.

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

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• the timing of regulatory approval of our product candidates and those of our collaborations;

• the timing, receipt, and amount of any payments received in connection with strategic transactions, including the sale of Trans Ova;

• the timing, receipt, and amount of upfront, milestone, and other payments, if any, from present and future collaborators, if any;

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Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments from continuing operations as of June 30, 2022 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 September 30, 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 June 30, 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 June 30, 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.

In addition to the obligations in the table above, as of September 30, 2022 we also have the following significant contractual obligations described below.

We are party to in-licensed research and development agreements with various academic and commercial institutions where we could be required to make future payments for annual maintenance fees as well as for milestones and royalties we might receive upon commercial sales of products that incorporate their technologies.

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

As of June 30, 2022, we also had research and development commitments with third parties totaling $19.5 million that had not yet been incurred.

As of September 30, 2022, we also had research and development commitments with third parties totaling $21.8 million that had not yet been incurred.

Net operating losses

As of June 30, 2022, we had net operating loss carryforwards of approximately $862.0 million for U.S.

As of September 30, 2022, we had net operating loss carryforwards of approximately $818.0 million for U.S.

federal income tax purposes available to offset future taxable income, including $603.0 million generated after 2017, U.S.

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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 June 30, 2022, Precigen has utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

As of June 30, 2022, approximately $41.4 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.

As of September 30, 2022, Precigen has utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

As of September 30, 2022, approximately $41.4 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