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Item 7. Management’s Discussion and Analysis

2024-03-19 compared with 2023-03-06 · 78 added, 134 removed, 214 unchanged (50% of the section changed)

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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 for each of the years in the period ended December 31, 2022 and 2021, Exemplar generated positive Segment Adjusted EBITDA.

We continue to generate product and service revenues through our Exemplar subsidiary.

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 judgments, assumptions, and estimates that we have made in assessing the fair value of goodwill could cause us to consider some portion or all of certain assets to become impaired.

See further discussion regarding our ability to continue as a going concern below under the Liquidity and capital resources section on Item 7.

Sources of revenue

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In future periods, in connection with our focus on healthcare, our revenues will primarily depend on our ability to advance and create our own programs and the extent to which we bring products enabled by our technologies to market.

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.

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 be minimal or zero 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.

We expect a significant period of time could pass before commercialization of our various product candidates or before the achievement of contractual milestones and the realization of royalties on product candidates commercialized under our collaborations.

We expect some period of time, and in most cases a significant period of time, could pass before commercialization of our various product candidates or before the achievement of contractual milestones and the realization of royalties on product candidates commercialized under our collaborations.

Accordingly, there can be no assurance as to the timing, magnitude, and predictability of revenues, if any, to which we might be entitled.

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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 consolidated statements of operations for the years ended December 31, 2022, 2021, and 2020.

The following table summarizes our research and development expenses on the consolidated statements of operations for the years ended December 31, 2023, 2022, and 2021 incurred by reportable segment.

Year Ended December 31,

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Exemplar 261 320 289

Total research and development expenses from reportable segments 47,170 47,933 39,603

Other research and development expenses, including from other operating segments — — (171)

Eliminations — — (4)

Total consolidated research and development expenses

$ 48,614 $ 47,170 $ 47,933

The amount of research and development expenses may be impacted by, among other things, the number and nature of our own proprietary programs, and the number and size of programs we may support on behalf of collaboration agreements.

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

We expect that our research and development expenses will increase as we continue to develop our own proprietary programs, including

progression of these programs into preclinical and clinical stages.

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

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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.

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 (including commercialization), 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.

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.

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

Other income (expense), net

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 consists primarily of interest on our Convertible Notes, which decreased in 2022 due to both the adoption of a new accounting standard effective January 1, 2022, which simplified the accounting for the Convertible Notes, and the redemption of a portion of our Convertible Notes.

See "Notes to the Condensed Consolidated Financial Statements - Note 2" appearing elsewhere in this Annual Report for further discussion regarding the adoption of the new accounting standard.

In the second half of 2022, we retired Convertible Notes with principal amounts of $156.7 million.

The net gain recorded on extinguishment of 1.0 million is included in Other income (expense), net.

Other income consists of gain on convertible debt retirement and 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.

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

See "Notes to the Condensed Consolidated Financial Statements - Note 10" appearing elsewhere in this Annual Report for further discussion.

The extinguishment of these Convertible Notes will alleviate us of $4.0 million in future cash interest payments had we held the Convertible Notes until maturity.

We expect interest expense to be significantly lower in the first half of 2023 and diminish to zero after anticipated retirement of all remaining Convertible Notes on or before July 1, 2023.

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.

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

See "Notes to the Consolidated Financial Statements - Note 16" appearing elsewhere in this Annual Report for further discussion of Segment Adjusted EBITDA.

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Selling, general and administrative 40,415 48,006 (7,591) (15.8) %

Impairment of goodwill 482 — 482 N/A

Impairment of goodwill 10,390 482 9,908 >200%

Impairment of other noncurrent assets 445 638 (193) (30.3) %

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Operating loss (99,758) (75,726) (24,032) 31.7 %

Total other expense, net (5,102) (19,016) 13,914 (73.2) %

Equity in loss of affiliates 862 (3) 865 >200%

Total other income (expense), net

3,396 (5,102) 8,498 166.6 %

Equity in net income of affiliates

— 862 (862) (100.0) %

Loss from continuing operations before income taxes (96,362) (79,966) (16,396) 20.5 %

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Income from discontinued operations, net of income tax benefit (1) — 108,094 (108,094) (100.0) %

Net loss attributable to Precigen $ 28,317 $ (92,166) $ 120,483 130.7 %

Net income (loss)

$ (95,904) $ 28,317 $ (124,221) >(400)%

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

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(In thousands)

Alaunos Therapeutics, Inc.

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

Intrexon Energy Partners, LLC — 3,768 (3,768)

Intrexon Energy Partners II, LLC — 10,793 (10,793)

Castle Creek Biosciences, Inc.

Other 75 100 (25)

Total $ 75 $ 14,661 $ (14,586)

Collaboration and licensing revenues increased $14.2 million from the year ended December 31, 2021, primarily due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II and ultimately dissolved in 2022 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.

Collaboration and licensing revenues decreased $14.6 million, or 99.5%, compared to the year ended December 31, 2022, primarily due to the fact we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II in 2022.

In obtaining control, 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 Consolidated Financial Statements - Note 5" appearing elsewhere in this Annual Report for further discussion of Intrexon Energy Partners and Intrexon Energy Partners II.

Product and services revenues, and gross margin

Product revenues decreased $(0.3) million, or (12) percent, over the year ended December 31, 2021.

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

Service revenues decreased $(1.0) million, or (9) percent, over the year ended December 31, 2021.

The decrease in service revenues was primarily the result of lower demand from existing customers.

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

Product and service revenues decreased $5.9 million or 48.8%, compared to the year ended December 31, 2022.

This decrease is 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.

Research and development expenses

Research and development expenses decreased $(0.8) million, or (1.6) percent, over the year ended December 31, 2021.

Salaries, benefits, and other personnel costs increased $1.8 million due to an increase in the hiring of employees to support the growth in the Company's development activities as well as increases in salaries of our continuing employees.

These increases were offset by a decrease in contract research organization costs and lab supplies of $2.4 million, primarily due to timing differences, the completion of our 1b/2a clinical trial of AG019 in the fourth quarter of 2021, and as well as a continued prioritization of clinical product candidates with less expense incurred related preclinical research programs compared to 2021.

Research and development expenses increased $1.4 million, or 3.1%, compared to the year ended December 31, 2022.

Salaries, benefits, and other personnel costs increased $2.8 million due to an increase in the hiring of employees to support the growth in the Company's development activities, and to a lesser extent, increases in salaries of our continuing employees.

These increases were offset by less expenses incurred related to preclinical research programs for the comparable period.

Selling, general and administrative expenses

SG&A expenses decreased $(4.0) million, or (8) percent, from the year ended December 31, 2021.

Salaries, benefits, and other personnel costs decreased $4.9 million in 2022 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.

This increase was partially offset by an increase of $0.9 million in legal and professional fees, primarily related to ongoing litigation.

Total other expense, net

Total other expense, net, which primarily includes interest expense related to our Convertible Notes issued July 2018 , decreased $13.9 million, or (73) percent.

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, as well as a $1.0 million gain in connection with the early retirement of a portion of our Convertible Notes.

SG&A expenses decreased $7.6 million, or 15.8%, compared to the year ended December 31, 2022.

This decrease was primarily driven by a reduction in professional fees of $6.5 million, due to decreased legal fees associated with certain litigation matters, and $0.7 million decreased insurance related premiums.

Impairment of goodwill

We recorded an impairment loss for the year ended December 31, 2023 of $10.4 million resulting from our annual test for goodwill in our Exemplar segment on December 31, 2023.

See "Notes to the Consolidated Financial Statements - Note 9" appearing elsewhere in this Annual Report for further discussion of Exemplar goodwill impairment.

Total other income (expense), net

Total other income (expense), net, went from a net expense of $(5.1) million in 2022 to $3.4 million income, net in 2023, or a change of $8.5 million, or 167% between the year ended December 31, 2022 to the year ended December 31, 2023.

This is primarily due to $6.3 million in reduced interest expense associated with the Convertible Notes as they were fully retired in the second quarter of 2023, and $3.1 million increased interest income due to higher interest rates on investments.

This increase was partially offset by a $0.9 million decrease in gain recorded on the early retirement of a portion of our Convertible Notes in the year ended December 31, 2023 compared to the year ended December 31, 2022.

Segment performance

The following table summarizes Segment Adjusted EBITDA, which is our primary measure of segment performance, for the years ended December 31, 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 years ended December 31, 2023 and 2022, for each of our reportable segments.

December 31, Dollar

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Exemplar (726) 4,997 (5,723) (114.5) %

Unallocated corporate costs (32,913) (33,506) 593 1.8 %

For a reconciliation of Segment Adjusted EBITDA to net loss from continuing operations before income taxes, see "Notes to the Consolidated Financial Statements - Note 16" appearing elsewhere in this Annual Report.

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Biopharmaceuticals

The increase in revenues for Biopharmaceuticals was primarily due to the fact that 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 Note 5 for further detail.

Segment adjusted EBITDA is in line with previous year.

Revenues for Exemplar decreased due to a reduction in services performed with existing customers.

The deterioration in Segment Adjusted EBITDA was primarily due to the reduction in revenues and increase in personnel costs.

Unallocated Corporate Costs

Unallocated corporate costs are in line with previous year.

The reduction in personnel expenses was offset by higher legal and professional services.

The decrease in revenues for Biopharmaceuticals was primarily due to the fact that we obtained control of Intrexon Energy Partners and Intrexon Energy Partners II in the third quarter of 2022.

In obtaining control, 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 Consolidated Financial Statements - Note 5 " appearing elsewhere in this Annual Report for further detail.

Segment Adjusted EBITDA loss decreased primarily as a result of a reduction of Selling, general and administrative expenses.

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.

Liquidity and capital resources

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As of December 31, 2023, we had cash and cash equivalents of $7.6 million and short-term and long-term investments of $55.3 million.

We also had restricted cash (short term) of $43.3 million at December 31, 2022.

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

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

In addition, in January 2023, we closed a public offering of 43,962,640 shares of our common stock, resulting in net proceeds to us of approximately $73.0 million, after deducting underwriting discounts, fees, and other underwriting expenses.

At-the-Market Sales Agreement

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

(the "Sales Agreement"), pursuant to which we may issue and sell from time to time shares of our common stock of up to $100 million.

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

We intend to use the proceeds of any sales under the Sales Agreement, if any sales are made, to fund the development of clinical and preclinical product candidates and for working capital and other general corporate purposes.

Capital Resources

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 offering expenses.

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

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Cash flows from operating activities:

In 2022, our net income was $28.3 million, which includes a 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.

In 2023, our net loss was $95.9 million, which includes the following significant noncash expenses:

(i) $9.9 million of stock-based compensation expense, (ii) $10.8 million impairment losses, (iii) $6.7 million of depreciation and amortization expense, offset by (iv) $1.8 million due to amortization of discounts on investments.

In addition, changes in operating assets and liabilities increased cash from operating activities by $3.4 million.

In 2022, our net income was $28.3 million, which included a 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.

Additional adjustments to reconcile net income to net cash used in operating activities netted to approximately $24.0 million, from both continuing and discontinued operations, with the most significant adjustments including:

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

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

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

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

Our 2023 cash used in operations increased by $1.9 million from the year ended December 31, 2022, primarily due to decreased cash flow from operations provided by Trans Ova (which was sold in August 2022) and a decrease in cash flow from operations at Exemplar partially offset by a reduction in selling, general and administrative expenses, a decrease in interest paid in 2023 compared to 2022 due to the retirement in 2023 of our Convertible Notes, and cash paid to acquire Intrexon Energy Partners and Intrexon Energy Partners II membership interest, which was recorded as a reduction in revenue in 2022 that did not occur in 2023.

Our 2022 cash outflows used in operations increased $9.3 million from the year ended December 31, 2021 primarily due to decreased cash flow from operations provided by Trans Ova (which was sold in August 2022) and Exemplar.

Our 2021 cash outflows from operations decreased $21.3 million from the year ended December 31, 2020 primarily due to (i) increased cash inflows provided by Trans Ova and Exemplar due to increased revenues and gross margins thereon, (ii) the

reduction in cash requirements for MBP Titan as we suspended those operations in the second quarter of 2020, and (iii) reductions in operating expenses for our corporate operations as we streamlined operations in order to further prioritize the use of our capital.

Cash flows from investing activities:

During 2023, we purchased $185.0 million of investments, using both the proceeds received from the underwritten public offering discussed below under cash flows from financing activities as well as reinvesting a portion of the proceeds received from the $183.4 million sales and maturities of investments.

We also purchased $1.5 million of property plant and equipment.

During 2022, we received $68.4 million proceeds during the year from the maturities and sales of investments and $162.3 million from the sale of Trans Ova.

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

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

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

Cash flows from financing activities:

During 2022, we repurchased Convertible Notes for $154.7 million, Additionally, in January and February 2023, we made additional repurchases of Convertible Notes of $15.5 million.

During 2023, we received $72.8 million of proceeds from the sale of our common stock in an underwritten public offering and retired $43.2 million of our Convertible Notes using restricted cash.

During 2022, we repurchased Convertible Notes for $155.3 million using restricted cash.

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

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

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.

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

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

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

• capital expenditures to building out our manufacturing capabilities and preparing for commercial readiness;

• 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.

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

We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all.

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Principal among these risks are dependence on key individuals and intellectual property, competition from other products and companies, and the technical risks associated with the successful research, development, and clinical manufacturing of its product candidates.

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

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

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

Our consolidated financial statements as of and for the year ended December 31, 2023 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Based on our balance of cash, cash equivalents and short-term investments of $62.9 million at December 31, 2023 and forecasted negative cash flows from operating activities for the foreseeable future, there is substantial doubt about our ability to continue as a going concern within one year after the date that these financial statements are issued.

Our ability to continue as a going concern is dependent upon the successful execution of our 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 debt financings, collaborations, strategic alliances, monetization of non-core assets, marketing, distribution or licensing arrangements), dilutive financings (including equity and/or debt financings with an equity component) 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, and such financings may adversely affect the holdings or rights of our stockholders and may cause significant dilution to existing stockholders.

The consolidated financial statements do not include any

adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.

Contractual obligations and commitments

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Operating leases $ 9,710 $ 1,946 $ 3,418 $ 2,499 $ 1,847

Convertible debt (1) 43,340 43,340 — — —

Cash interest payable on convertible debt 1,517 1,517 — — —

Long-term debt, excluding convertible debt — — — — —

Leases not yet commenced 706 235 471 — —

Total $ 10,416 $ 2,181 $ 3,889 $ 2,499 $ 1,847

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

In addition to the obligations in the table above, as of December 31, 2023 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.

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Net operating losses

As of December 31, 2022, we had net operating loss carryforwards of approximately $819.1 million for United States federal income tax purposes available to offset future taxable income, including $604.2 million generated after 2017, United States capital loss carryforwards of $212.5 million, and United States federal and state research and development tax credits of

approximately $12.1 million, prior to consideration of annual limitations that may be imposed under Section 382.

As of December 31, 2023, we had net operating loss carryforwards of approximately $891.6 million for United States federal income tax purposes available to offset future taxable income, including $675.0 million generated after 2017, United States capital loss carryforwards of $212.5 million, and United States federal and state research and development tax credits of approximately $13.5 million, prior to consideration of annual limitations that may be imposed under Section 382.

Net operating loss carryforwards generated prior to 2018 begin to expire in 2023, and capital loss carryforwards will expire if unutilized beginning in 2024.

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

Critical accounting policies and estimates

Critical accounting estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which we have prepared in accordance with U.S.

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(i) identify the contract(s) with a customer, (ii) identify the promises and distinct performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy the performance obligations.

Collaboration and licensing revenues

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

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

(i) upfront payments upon consummation of the agreement;

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

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

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

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

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

We determine whether each of the promises is a distinct performance obligation.

As the nature of the promises in our collaboration and licensing agreements are highly integrated and interrelated, we typically combine most of our promises into a single performance obligation.

Because we are performing research and development services during early-stage development, the services are integral to the utilization of the technology license.

Therefore, we have determined that the technology license and research and development services are typically inseparable from each other during the performance period of our collaboration and licensing agreements.

Options to acquire additional services are considered to determine if they constitute material rights.

Contingent manufacturing services that may be

provided under certain of our agreements are considered to be a separate future contract and not part of the current collaboration or licensing agreement.

At contract inception, we determine the transaction price, including fixed consideration and any estimated amounts of variable consideration.

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

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

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

milestone payments upon the achievement of certain development, regulatory and commercial activities;

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

We determine the initial transaction price and exclude variable consideration that is otherwise constrained pursuant to the guidance in ASC 606.

The transaction price is allocated to the performance obligations in the agreement based on the standalone selling price of each performance obligation.

We typically group the promises in our collaboration and licensing agreements into one performance obligation so the entire transaction price relates to this single performance obligation.

The technology license included in the single performance obligation is considered a functional license.

However, it is typically combined into a single performance obligation as we provide interrelated research and development services along with other obligations over an estimated period of performance.

We utilize judgment to determine the most appropriate method to measure our progress of performance under the agreement, primarily based on inputs necessary to fulfill the performance obligation.

We evaluate our measure of progress to recognize revenue each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Our measure of performance and revenue recognition involves significant judgment and assumptions, including, but not limited to, estimated costs and timelines to complete our performance obligations.

We evaluate modifications and amendments to our contracts to determine whether any changes should be accounted for prospectively or on a cumulative catch-up basis.

Payments received for cost reimbursements for research and development efforts are recognized as revenue as the services are performed, in connection with the single performance obligation discussed above.

The reimbursements relate specifically to our efforts to provide services and the reimbursements are consistent with what we would typically charge other collaborators for similar services.

We assess the uncertainty of when and if the milestone will be achieved to determine whether the milestone is included in the transaction price.

We then assess whether the revenue is constrained based on whether it is probable that a significant reversal of revenue would not occur when the uncertainty is resolved.

Royalties, including sales-based milestones, received under the agreements will be recognized as revenue when sales have occurred because we apply the sales- or usage-based royalties recognition exception provided for under ASC 606.

We determined the application of this exception is appropriate because at the time the royalties are generated, the technology license granted in the agreement is the predominant item to which the royalties relate.

As we receive upfront payments in our collaboration and licensing agreements, we evaluate whether any significant financing components exist in our collaboration and licensing agreements.

Based on the nature of our collaboration and licensing agreements, there are no significant financing components as the purpose of the upfront payment is not to provide financing.

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

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

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

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

We recognized $14.7 million, $0.5 million, and $21.2 million of collaboration and licensing revenues in the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022 and 2021, we have $1.8 million and $23.0 million, respectively, of deferred revenue related to our receipt of upfront and milestone payments.

In 2022 and 2021, collaboration and licensing revenues was considered a critical accounting policy and estimate since the associated revenue or deferred revenue were significant.

Refer to Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K for management’s discussion of this critical accounting policy and estimate.

In 2023, such accounting policy and estimate is not considered critical as the associated revenue and deferred revenue are not significant.

Product and service revenues

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During the years ended December 31, 2023 and 2022, we recorded $10.8 million and $1.1 million, respectively, of impairment charges from continuing operations to write down the values of goodwill and other long-lived assets.

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

See additional discussion regarding these impairments in "Notes to the Consolidated Financial Statements - Note 8 and 9" appearing elsewhere in this Annual Report.

Research and Development Expense, Including Clinical Trial Accruals/Expenses

We consider that regulatory requirements inherent in the research and development of new products preclude us from capitalizing such costs.

Research and development costs consist of salaries and related costs of research and development personnel, including stock-based compensation expense, costs to acquire technology rights, contract research organizations and consultants, facilities, materials and supplies associated with research and development projects as well as various laboratory studies.

consultants, facilities, materials and supplies associated with research and development projects as well as various laboratory studies.

Clinical trial expenses are a significant component of research and development expense, and we outsource a significant portion of these costs to third parties.

5 unchanged sentences

Non-refundable advance clinical payments for goods or services that will be used or rendered for future research and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed.

When evaluating the adequacy of the accrued expenses, we analyze progress of the studies, including the phase or completion of

events, invoices received and contracted costs.

When evaluating the adequacy of the accrued expenses, we analyze progress of the studies, including the phase or completion of events, invoices received and contracted costs.

Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period.

4 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis