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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-10 · 141 added, 79 removed, 231 unchanged (49% of the section changed)

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Precision medicine is the practice of therapeutic product development that takes into account specific genetic variations within populations impacted by a disease to design targeted therapies to improve outcomes for a disease or patient population.

Our proprietary and complementary technology platforms provide a strong foundation to realize the core promise of precision medicine by supporting our efforts to construct powerful gene programs to drive efficacy, deliver these programs through viral, non-viral, and microbe-based approaches to drive lower costs, and control gene expression to drive safety.

Our therapeutic platforms, including UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, are designed to allow us to precisely control the level and physiological location of gene expression and modify biological molecules to control the function and output of living cells to treat underlying disease conditions.

We are actively advancing our lead clinical programs, including:

Our proprietary and complementary technology platforms provide a strong foundation to realize the core promise of precision medicine by supporting our efforts to construct powerful gene programs to drive efficacy, deliver these programs through viral, non-viral, and microbe-based approaches to maintain lower costs, and control gene expression to ensure safety.

Our therapeutic platforms, including UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, are designed to allow us to precisely control the level and physiological location of gene expression and modify biological molecules in order to control the function and output of living cells to treat underlying disease conditions.

We are advancing our lead clinical programs, including:

PRGN-3005, PRGN-3006 and PRGN-3007, which are built on our UltraCAR-T platform;

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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.

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

UltraPorator has received U.S.

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Our Biopharmaceuticals reportable segment is primarily comprised of the Company's legal entities of Precigen and ActoBio, as well as royalty interests in therapeutics and therapeutic platforms from companies not controlled by us.

In addition to human therapeutics, Exemplar Genetics LLC, doing business as Precigen Exemplar, or Exemplar, is our wholly owned subsidiary which is focused on developing research models and services for healthcare research applications.

Our Exemplar reportable segment is comprised of Exemplar Genetics LLC, doing business as Precigen Exemplar, or Exemplar, our wholly owned subsidiary focused on developing research models and services for healthcare research applications.

Biopharmaceuticals

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We believe that our proprietary gorilla adenovectors, part of the AdenoVerse technology, have superior performance characteristics as compared to current competition, including standard human adenovirus serotype 5, rare human adenovirus types and other non-human primate adenovirus types.

The most advanced programs 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.

We have completed enrollment in the Phase 1 dose escalation cohorts of the intraperitoneal (IP) and intravenous (IV) arms without lymphodepletion as well as in the lymphodepletion cohort in the IV arm and initiated Phase 1b expansion clinical trial.

Our most advanced programs are as follows:

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.

This clinical trial is being conducted in collaboration with the Center for Cancer Research at the NCI pursuant to a CRADA.

We have completed the Phase 1 clinical trial.

The Phase 2 clinical trial is ongoing.

PRGN-2012 has been granted Breakthrough Therapy Designation for the treatment of RRP by the FDA.

Previously, PRGN-2012 was granted Orphan Drug designation 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 designed for delivery via a proprietary gorilla adenovector with a large genetic payload capacity and the ability for repeat administrations.

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

A Phase 2 clinical trial of PRGN-2009 in newly diagnosed oropharyngeal squamous cell carcinoma patients is ongoing in collaboration with the NCI pursuant to a CRADA.

In addition, we have received FDA clearance of an IND to initiate a Phase 2 clinical trial of PRGN-2009 in combination with pembrolizumab to treat patients with recurrent or metastatic cervical cancer.

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.

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, and high-risk myelodysplastic syndromes, or MDS.

PRGN-3006 has been granted Fast Track designation in patients with r/r AML by the FDA.

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

We have completed the Phase 1 dose escalation study.

Phase 1b dose expansion trial is ongoing where PRGN-3006 is being evaluated following lymphodepletion.

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.

We have completed the Phase 1 dose escalation trial.

The Phase 1b dose expansion trial is ongoing where PRGN-3006 is being evaluated following lymphodepletion.

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.

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

PRGN-3007 is being evaluated in a Phase 1/1b clinical trial for patients with advanced receptor tyrosine kinase-like orphan receptor 1-positive, or ROR1 + , hematological (Arm 1) and solid tumors (Arm 2).

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The target patient population for Arm 2 includes locally advanced unresectable or metastatic histologically confirmed TNBC Arm 1 and Arm 2 will enroll in parallel.

The study is enrolling in two parts:

The study is designed to enroll in two parts:

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

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-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.

We have completed the Phase 1 clinical trial.

Phase 2 clinical trial is ongoing.

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

The Phase 1 dose escalation trial is ongoing.

In addition to our clinical programs, we have a robust pipeline of preclinical programs in order to drive long-term value creation.

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Our ActoBiotics platform is a unique delivery platform precisely tailored for specific disease modification with the potential for superior efficacy and safety.

ActoBiotics combine the advantages of highly selective protein-based therapeutic agents with local delivery by the well-characterized and food-grade bacterium Lactococcus lactis , or L.

ActoBiotics combine the advantages of highly selective protein-based therapeutic agents with local delivery by the well-characterized, food-grade bacterium Lactococcus lactis , or L.

ActoBiotics can be delivered orally in a capsule, through an oral rinse, or in a topical solution.

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.

We believe ActoBiotics have the potential to provide superior safety and efficacy through 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 which 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 enable "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 an easy-to-take capsule formulation of ActoBiotics engineered to deliver 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.

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

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

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In March 2020, we and Castle Creek terminated the original collaboration agreement by mutual agreement, with the parties agreeing that certain product candidates 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.

we are also entitled to certain royalties with respect to the Retained Products.

One such Retained Product is D-Fi (debcoemagene autoficel), formerly designated FCX-007, for the treatment of recessive dystrophic epidermolysis bullosa, or RDEB.

Precigen Exemplar

Exemplar is committed to enabling the study of life-threatening human diseases through the development of MiniSwine Yucatan miniature pig research models and services, as well as enabling the production of cells and organs in its genetically engineered swine for regenerative medicine applications.

Exemplar is committed to enabling the study of life-threatening human diseases through the development of MiniSwine Yucatan miniature pig research models and services, and by enabling the production of cells and organs in its genetically engineered swine for regenerative medicine applications.

Historically, researchers have lacked animal models that faithfully represent human diseases.

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novel diagnostics, procedures, devices, prevention strategies and therapeutics;

and the ability to predict in humans the efficacy of those next-generation procedures, devices, and therapeutics.

as well as the ability to predict in humans the efficacy of next-generation procedures, devices, and therapeutics.

Exemplar's MiniSwine models are genetically engineered to exhibit a wide variety of human disease states, which provides a more accurate platform to test the efficacy of new medications and devices.

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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.

As of March 31, 2023, our reportable segments were (i) Biopharmaceuticals and (ii) Exemplar.

These identified reportable segments met the quantitative thresholds to be reported separately for the three months ended March 31, 2023.

As of June 30, 2023, 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, 2023.

Prior to January 1, 2023, corporate expenses, were not allocated to the segments and were managed at a consolidated level.

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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 three months ended March 31, 2023, it produced positive Segment Adjusted EBITDA.

We continue to generate product and service revenues through our Exemplar subsidiary, and in the six months ended June 30, 2023, it produced 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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Other than for collaboration revenues recognized upon cancellation or modification of an existing collaboration or for revenues generated pursuant to future strategic transactions for any of our existing platforms or programs, we expect our collaboration revenues will continue to decrease in the near term, although if any new collaboration agreements or strategic transactions are entered into, revenue could be positively impacted .

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

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

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

The following table summarizes our research and development expenses incurred by reportable segment and reconciles those expenses to research and development expenses on the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022.

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Biopharmaceuticals

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fluctuate based on amounts invested and current interest rates.

Other expense consists primarily of interest on our Convertible Notes, which decreased in 2022 due redemption of a portion of our Convertible Notes.

Other expense consists primarily of interest on our Convertible Notes, which decreased in 2023 due to retirements of our Convertible Notes.

See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 9" appearing elsewhere in this Quarterly Report for further discussion.

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Results of operations

Comparison of the three months ended March 31, 2023 and the three months ended March 31, 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022, together with the changes in those items in dollars and as a percentage:

Comparison of the three months ended June 30, 2023 and the three months ended June 30, 2022

The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022, together with the changes in those items in dollars and as a percentage:

Three Months Ended

March 31, Dollar

June 30, Dollar

Change Percent

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Selling, general and administrative 9,316 12,670 (3,354) (26.5) %

Impairment of other noncurrent assets — 638 (638) (100.0) %

Total operating expenses 22,887 27,073 (4,186) (15.5) %

Operating loss (21,120) (24,162) 3,042 (12.6) %

Total other income (expense), net 736 (1,986) 2,722 137.1 %

Loss from continuing operations before income taxes (20,384) (26,148) 5,764 (22.0) %

Income tax benefit 65 89 (24) (27.0) %

Loss from continuing operations (20,319) (26,059) 5,740 (22.0) %

Income from discontinued operations, net of income taxes (1) — 8,424 (8,424) (100.0) %

Net loss $ (20,319) $ (17,635) $ (2,684) 15.2 %

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

Revenues and gross margin

Revenues decreased $1.1 million, or 39%, from the three months ended June 30, 2022.

This decrease related to reductions in services performed at Exemplar.

Gross margin on product and services declined in the current period primarily as a result of the decreased revenues, with a smaller impact due to increases in salaries, benefits, and other personnel costs at Exemplar.

Research and development expenses

Research and development expenses decreased $0.1 million, or 1%, compared to the three months ended June 30, 2022.

This decrease was primarily driven by less expense incurred related to preclinical research programs for the comparable period.

Selling, general and administrative expenses

SG&A expenses decreased $3.4 million, or 27%, compared to the three months ended June 30, 2022.

This decrease was primarily driven by a reduction in professional fees of $2.2 million, due to decreased legal fees associated with certain litigation matters, as well as a $1.1 million reduction in salaries, benefits, and other personnel costs due to reduced head count .

Total other income (expense), net

Total other income, net, increased $2.7 million compared to the three months ended June 30, 2022.

This is primarily due to reduced interest expense associated with our Convertible Notes issued July 2018 as they were retired in the second quarter of 2023, and increased interest income due to higher interest rates on our investments.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended June 30, 2023 and 2022, for each of our reportable segments.

Three Months Ended

June 30, Dollar

Change Percent

(In thousands)

Segment Adjusted EBITDA:

Biopharmaceuticals

$ (17,880) $ (19,997) $ 2,117 10.6 %

Exemplar (83) 795 (878) (110.4) %

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 15" appearing elsewhere in this Quarterly Report.

The following table summarizes revenues from external customers for the three months ended June 30, 2023 and 2022, for each of our reportable segments.

Three Months Ended

June 30, Dollar

Change Percent

(In thousands)

Biopharmaceuticals

$ — $ 70 $ (70) (100.0) %

Exemplar 1,767 2,841 (1,074) (37.8) %

Biopharmaceuticals

Segment Adjusted EBITDA increased primarily due to our reduction in Selling, general and administrative expenses within the reportable segment.

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

The decline in Segment Adjusted EBITDA was primarily due to the decreased revenues.

Comparison of the six months ended June 30, 2023 and the six months ended June 30, 2022

The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022, together with the changes in those items in dollars and as a percentage:

Six Months Ended

June 30, Dollar

Change Percent

(In thousands)

Product revenues $ 648 1,113 $ (465) (41.8) %

Service revenues 2,965 7,146 (4,181) (58.5) %

Other revenues 5 165 (160) (97.0) %

Total revenues 3,618 8,424 (4,806) (57.1) %

Operating expenses

Cost of product and services 3,224 3,505 (281) (8.0) %

Research and development 24,037 23,755 282 1.2 %

Selling, general and administrative 20,954 26,359 (5,405) (20.5) %

Impairment of goodwill — 482 (482) (100.0) %

Impairment of other noncurrent assets — 638 (638) (100.0) %

Total operating expenses 48,215 54,739 (6,524) (11.9) %

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Revenues and gross margin

Revenues decreased $3.7 million, or 66%, from the three months ended March 31, 2022.

This decrease related to the recognition of revenue in the first quarter of 2022 related to agreements for which revenue was previously deferred that did not occur in the first quarter of 2023 of $1.0 million, as well as declines in services performed resulting from a lower demand from existing customers at Exemplar.

Gross margin on product and service declined in the current period as a result of the decreased revenues and an increase in salaries, benefits, and other personnel costs at Exemplar.

Revenues decreased $4.8 million, or 57.1%, from the six months ended June 30, 2022.

This decrease primarily related to reductions in services performed at Exemplar as well as the recognition of revenue in the first quarter of 2022 related to agreements for which revenue was previously deferred that did not occur in 2023 of $1.0 million at Exemplar.

Gross margin on product and service declined in the current period primarily as a result of the decreased revenues, with a smaller impact due to increases in salaries, benefits, and other personnel costs at Exemplar.

Research and development expenses

Research and development expenses increased $0.4 million, or 3%, compared to the three months ended March 31, 2022.

Research and development expenses increased $0.3 million, or 1.2%, compared to the six months ended June 30, 2022.

This increase was primarily driven by a continued prioritization of clinical product candidates.

Selling, general and administrative expenses

SG&A expenses decreased $2.1 million, or 15%, compared to the three months ended March 31, 2022.

This decrease was primarily driven by a reduction in professional fees of $2.0 million, due to decreased legal fees associated with certain litigation matters.

SG&A expenses decreased $5.4 million, or 20.5%, compared to the six months ended June 30, 2022.

This decrease was primarily driven by a reduction in professional fees of $4.2 million, due to decreased legal fees associated with certain litigation matters, as well as a $1.1 million reduction in salaries, benefits, and other personnel costs due to reduced head count.

Total other income (expense), net

Total other income, net, increased $2.5 million compared to the three months ended March 31, 2022.

This is primarily due to reduced interest expense associated with our Convertible Notes issued July 2018 as they have been mostly retired, and increased interest income due to higher interest rates on our investments.

Total other income, net, increased $5.2 million compared to the six months ended June 30, 2022.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the three months ended March 31, 2023 and 2022, for each of our reportable segments as well as unallocated corporate costs.

Three Months Ended

March 31, Dollar

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the six months ended June 30, 2023 and 2022.

Six Months Ended

June 30, Dollar

Change Percent

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The following table summarizes revenues from external customers for the three months ended March 31, 2023 and 2022, for each of our reportable segments.

Three Months Ended

March 31, Dollar

The following table summarizes revenues from external customers for the six months ended June 30, 2023 and 2022, for each of our reportable segments.

Six Months Ended

June 30, Dollar

Change Percent

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Biopharmaceuticals

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

Segment Adjusted EBITDA increased primarily as a result of a reduction of Selling, general and administrative expenses partially offset by a higher adjustment related to bonuses settled in equity awards in 2023 and other segment EBITDA adjustments.

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

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Sources of liquidity

We have incurred losses from operations since our inception, and as of March 31, 2023, we had an accumulated deficit of $1.9 billion.

From our inception through March 31, 2023, 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, 2023, we had cash and cash equivalents of $9.7 million and short-term and long-term investments of $101.8 million.

We also had restricted cash of $13.8 million at March 31, 2023.

This cash is restricted for the permitted purposes related to our Convertible Notes, including the resolution of such notes.

We have incurred losses from operations since our inception, and as of June 30, 2023, we had an accumulated deficit of $1.9 billion.

From our inception through June 30, 2023, 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, 2023, we had cash and cash equivalents of $16.5 million and short-term and long-term investments of $79.0 million.

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

government debt securities in order to maintain liquidity and preserve capital.

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

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

Three Months Ended

Six Months Ended

(In thousands)

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Cash flows from operating activities:

During the three months ended March 31, 2023, our net loss was $22.7 million, which includes the following significant noncash expenses totaling $5.3 million:

During the six months ended June 30, 2023, our net loss was $43.1 million, which includes the following significant noncash expenses totaling $9.2 million:

(i) $5.3 million of stock-based compensation expense, (ii) $3.4 million of depreciation and amortization expense, and (iii) $0.5 million of shares issued as payment for services.

During the three months ended March 31, 2022, our net loss was $19.3 million, which includes the following significant noncash expenses totaling $8.3 million from both continuing and discontinued operations:

(i) $3.6 million of stock-based compensation expense, (ii) $3.3 million of depreciation and amortization expense, (iii) $0.3 million accretion of debt discount and amortization of deferred financing costs, (iv) $0.6 million of shares issued as payment for services, and (vi) $0.5 million of goodwill impairment.

Our cash outflows from operations during the three months ended March 31, 2023 were $0.4 million lower than the three months ended March 31, 2022 primarily due the settlement in 2023 of previously accrued short-term incentive bonuses in stock awards whereas the majority of our 2021 short-term incentive bonuses were paid in cash in the first quarter of 2022.

During the six months ended June 30, 2022, our net loss was $36.9 million, which includes the following significant noncash expenses totaling $14.7 million from both continuing and discontinued operations:

(i) $5.9 million of stock-based compensation expense, (ii) $6.5 million of depreciation and amortization expense, (iii) $0.6 million accretion of debt discount and amortization of deferred financing costs, (iv) $0.6 million of shares issued as payment for services, and (vi) $1.1 million of asset impairments.

Our cash outflows from operations during the six months ended June 30, 2023 were $8.3 million lower than the six months ended June 30, 2022 primarily due to decreased cash inflows provided by Trans Ova and Exemplar.

Cash flows from investing activities:

During the three months ended March 31, 2023, we purchased $50.3 million of investments, net of sales and maturities, primarily using the proceeds received from the underwritten public offering discussed below under cash flows from financing activities.

During the three months ended March 31, 2022, we received proceeds of $18.0 million related to the sale and maturity of investments.

During the six months ended June 30, 2023, we purchased $26.7 million of investments, net of sales and maturities, primarily using the proceeds received from the underwritten public offering discussed below under cash flows from financing activities.

During the six months ended June 30, 2022, we received proceeds of $36.0 million related to the sale and maturity of investments, partially offset by $3.3 million of purchases of property plant and equipment primarily in Trans Ova.

Cash flows from financing activities:

During the three months ended March 31, 2023, we received $73.5 million proceeds from the sale of our common stock in an underwritten public offering and retired $29.3 million of our Convertible Notes using restricted cash.

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

During the six months ended June 30, 2023, we received $72.8 million proceeds from the sale of our common stock in an underwritten public offering and retired $43.1 million of our Convertible Notes using restricted cash.

During the six months ended June 30, 2022, we made payments of long-term debt of $0.3 million .

Future capital requirements

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

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

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

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• the costs associated with legal activities, including litigation, arising in the course of our business activities and our ability to prevail in any such legal disputes;

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

Until such time, if ever, as we can regularly generate positive operating cash flows, we plan to finance our cash needs through a combination of equity offerings, debt financings, government, or other third-party funding, strategic alliances, sales of assets, and licensing arrangements.

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Contractual obligations and commitments

The following table summarizes our significant contractual obligations and commitments from continuing operations as of March 31, 2023 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 June 30, 2023 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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Operating leases $ 11,002 $ 2,235 $ 3,803 $ 2,485 $ 2,479

Convertible debt (1) 13,845 13,845 — — —

Cash interest payable on convertible debt 242 242 — — —

Total $ 11,002 $ 2,235 $ 3,803 $ 2,485 $ 2,479

(1) See "Notes to the Condensed Consolidated Financial Statements (Unaudited) - Notes 9" appearing elsewhere in this Quarterly Report for further discussion of our convertible debt.

In addition to the obligations in the table above, as of March 31, 2023, we are party to license agreements with various third parties that contain future milestones and royalty payment obligations related to development milestones and/or commercial sales of products that incorporate or use their technologies.

In addition to the obligations in the table above, as of June 30, 2023, we are party to license agreements with various third parties that contain future milestones and royalty payment obligations related to development milestones and/or commercial sales of products that incorporate or use their technologies.

Because these agreements are generally subject to termination by us or are dependent on certain condition precedents within our control, no amounts are included in the tables above.

As of March 31, 2023, we also had research and development commitments with third parties totaling $18.2 million that had not yet been incurred.

As of June 30, 2023, we also had research and development commitments with third parties totaling $19.5 million that had not yet been incurred.

Off-balance sheet arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis