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Item 7. Management’s Discussion and Analysis

2025-03-19 compared with 2024-03-19 · 128 added, 104 removed, 188 unchanged (55% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year 2023 compared to fiscal year 2022.

Financial overview

We have incurred significant losses since our inception.

We anticipate that we may continue to incur significant losses for the foreseeable future, and we may never achieve or maintain profitability.

Our historical collaboration and licensing revenues were generated under a business model from which we have transitioned, and we do not expect to expend significant resources servicing our historical collaborations in the future.

We may enter into strategic transactions for individual platforms or programs in the future from which we may generate new collaboration and licensing revenues.

We continue to generate product and service revenues through our 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.

As we continue our efforts to focus our business and generate additional capital, we may be willing to enter into transactions involving one or more of our operating segments and reporting units for which we have goodwill and intangible assets.

These efforts could result in us identifying impairment indicators or recording impairment charges in future periods.

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.

We are a dedicated discovery and clinical-stage biopharmaceutical company advancing the next generation of gene and cell therapies with the overall goal of improving outcomes for patients with significant unmet medical needs.

We are leveraging our proprietary technology platforms to develop product candidates designed to target urgent and intractable diseases in our core therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases.

We have developed an extensive pipeline of therapies across multiple indications.

We believe that our array of technology platforms uniquely positions us among other biotechnology companies to advance precision medicine.

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

UltraPorator has received FDA clearance for manufacturing UltraCAR-T cells in clinical trials, and we have been dosing patients with UltraCAR-T cells manufactured with UltraPorator in our clinical trials.

Our clinical pipeline includes PRGN-2012 and PRGN-2009, which are based on our AdenoVerse immunotherapy platform;

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

We have completed enrollment in the Phase 1b clinical trial of PRGN-3006.

As part of the strategic prioritization of our pipeline, we have paused enrollment in the PRGN-3005 and PRGN-3007 clinical trials.

In addition, we have completed a Phase 1b/2a study of AG019, which is built on our ActoBiotics platform, which we have completed the shut-down of, as discussed below under our Biopharmaceuticals segment (Precigen ActoBio, Inc.).

We have reduced our focus on preclinical programs, while continuing select projects that we believe could provide further near-term validation of our technology platforms.

Fiscal Year 2024 Business Update

In August 2024, we announced strategic prioritization of our pipeline to focus on development of our lead program, PRGN-2012.

We plan to minimize UltraCAR-T spend and focus on strategic partnerships to further advance UltraCAR-T programs.

As part of this restructuring, we have paused enrollment in PRGN-3005 and PRGN-3007 UltraCAR-T clinical trials.

In addition, we are continuing PRGN-2009 Phase 2 clinical trials under a cooperative research and development agreement ("CRADA") with the National Cancer Institute ("NCI") in recurrent/metastatic cervical cancer and in newly diagnosed HPV-associated oropharyngeal cancer.

We have reduced our focus on preclinical programs, while continuing select projects that we believe could provide further near-term validation of our technology platforms.

We have completed the shutdown of our ActoBio subsidiary operations, including the elimination of all ActoBio personnel.

In conjunction with this shutdown, ActoBio's portfolio of intellectual property is available for prospective transactions.

These strategic changes are designed to enable us to focus on pre-commercialization efforts on PRGN-2012, including supporting regulatory approval, conducting the confirmatory clinical trial, and manufacturing of commercial product.

Additionally, we will continue acceleration of commercial readiness efforts for a potential launch.

In December 2024, we announced the completion of the rolling submission for a BLA to the FDA for PRGN-2012 for the treatment of adults with RRP.

The FDA has accepted the BLA and granted priority review, with a PDUFA target action date set for August 27, 2025.

See further discussion of 2024 financing transactions below under the Liquidity and capital resources section of Item 7.

Financial operations overview

Sources of revenue

Although we have generated revenue in the past from collaboration agreements, our primary current revenues arise from Exemplar, which generates product and service revenues through the development and sale of genetically engineered miniature swine models.

Currently, our primary revenues arise from Exemplar, which generates product and service revenues through the development and sale of genetically engineered miniature swine models.

We recognize revenue when control of the promised product or service is transferred to the customer.

As we have shifted our focus to our healthcare business, we have and may continue to mutually terminate historical collaboration agreements or repurchase rights to the exclusive fields from collaborators, relieving us of any further performance obligations under the agreement.

Upon such circumstances or when we determine no further performance obligations are required of us under an agreement, we may recognize any remaining deferred revenue as either collaboration revenue or as a reduction of operating expense, depending on the circumstances.

See "Notes to the Consolidated Financial Statements - Note 5" appearing elsewhere in this Annual Report for a discussion of changes to our significant collaborations.

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.

In future periods, 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 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.

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

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 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.

We do not expect any revenues that we may generate in the near term to be significant enough to fund our operations.

Cost of products and services

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Our research and development expenses consist primarily of:

• salaries and benefits, including stock-based compensation expense, for personnel in research and development functions;

• salaries and benefits, including stock-based compensation expense, as well as severance costs related to personnel in research and development functions;

• fees paid to consultants and contract research organizations who perform research on our behalf and under our direction;

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• facility-related expenses, which include direct depreciation costs and unallocated expenses for rent and maintenance of facilities and other operating costs.

Our research and development expenses are generally incurred by our two reportable segments and primarily relate to either costs incurred to expand or otherwise improve our technologies or the costs incurred to develop our own products and services.

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

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.

Prior to August 2024, our Biopharmaceuticals segment was progressing preclinical and clinical programs that targeted urgent and intractable diseases in our core therapeutic areas of immuno-oncology, autoimmune disorders, and infectious diseases, including PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, AG019 and PRGN-2012.

As discussed in "Notes to the Consolidated Financial Statements - Note 1 " appearing elsewhere in this Annual Report, in August 2024, we announced a strategic prioritization of our clinical portfolio and streamlining of resources, to focus on potential commercialization of the PRGN-2012 AdenoVerse ® gene therapy for the treatment of RRP.

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

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$ 53,070 $ 48,614 $ 47,170

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

In addition to the strategic prioritization, the amount of research and development expenses may be impacted by, among other things, the number and nature of our own proprietary programs.

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

Selling, general and administrative expenses

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.

Selling, general and administrative, or SG&A, expenses consist primarily of salaries and related costs, including stock-based compensation expense and severance, 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, the build-up of our commercialization efforts 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 strategic prioritization, the build-up of our commercialization efforts and the outcomes of legal claims and assessments against us.

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.

Equity in net income (loss) of affiliates

Equity in net income or loss of affiliates is our pro-rata share of our equity method investments' operating results, adjusted for accretion of basis difference.

We account for investments in our JVs using the equity method of accounting since we have the ability to exercise significant influence, but not control, over the operating activities of these entities.

Other income consists of interest earned on our cash and cash equivalents and short-term and long-term investments (which may fluctuate based on amounts invested and current interest rates), gain on dispositions of intellectual and property rights (for 2024), and gain on convertible debt retirement (for 2023).

Other expense consists primarily of interest on our convertible notes, which were fully retired in the second quarter of 2023, and the reclassification of cumulative foreign translation losses due to closing the operations of ActoBio in the third quarter of 2024.

See "Notes to the Consolidated Financial Statements - Notes 10 and 12 " appearing elsewhere in this Annual Report for further discussion.

Segment performance

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 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.

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 income (loss) of affiliates, (x) reclassification of cumulative translation gain (loss), and (xi) 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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Comparison of the year ended December 31, 2024 to the year ended December 31, 2023

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

The following table summarizes our results of operations for the years ended December 31, 2024, and 2023, together with the changes in those items in dollars and as a percentage (dollar amounts in thousands):

December 31, Dollar

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Operating loss (135,029) (99,758) (35,271) 35.4 %

Total other income (expense), net

Total other income net

7,001 3,396 3,605 106.2 %

Equity in net income of affiliates

Loss before income taxes

(128,028) (96,362) (31,666) 32.9 %

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

Income tax benefit 1,793 458 1,335 >200%

Loss from continuing operations (95,904) (79,777) (16,127) 20.2 %

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

Net income (loss)

$ (126,235) $ (95,904) $ (30,331) 31.6 %

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

Collaboration and licensing revenues

The following table shows the collaboration and licensing revenue recognized for the years ended December 31, 2023 and 2022, together with the changes in those items.

December 31, Dollar

(In thousands)

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

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

Other 75 100 (25)

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

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

Collaboration and licensing revenues decreased $0.1 million, or 100.0%, compared to the year ended December 31, 2023, primarily due to the termination of the License Agreement with Alaunos in 2024.

Product and services revenues, and cost of products and services

Product and service revenues decreased $2.2 million or 36.6%, compared to the year ended December 31, 2023.

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.

This decrease is related to reductions in products sold and services performed at Exemplar.

Costs of products and services declined in the current year primarily for the same reason as the revenue declined.

Research and development expenses

Research and development expenses increased $4.5 million, or 9.2%, compared to the year ended December 31, 2023.

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.

This increase was primarily the result of $3.1 million of increased costs associated with the initiation of the PRGN-2012 confirmatory clinical trial, increased drug manufacturing material costs related to PRGN-2012 for potential commercial use, and professional fees incurred in conjunction with the Company’s completed BLA submission and commercial readiness planning as well as the design and implementation of our manufacturing facility.

Additionally, employee-related expenses rose by $3.0 million primarily due to severance charges incurred as a result of the Precigen workforce reduction in 2024 and the suspension of ActoBio's operations.These increases were partially offset by a $1.9 million reduction in depreciation and amortization expense as a result of the impairment of noncurrent assets related to the suspension of ActoBio’s operations during the second quarter of 2024, as well as a reduction in clinical study expenses associated with programs that were deprioritized during the third quarter of 2024.

Selling, general and administrative expenses

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.

SG&A expenses increased $0.9 million, or 2.2%, compared to the year ended December 31, 2023.

As a result of the Company's increased focus on PRG-2012, commercial readiness cost increased in the current quarter versus prior year period.

In addition, the second and third quarters of 2024 included higher severance cost associated with the suspension of ActoBio's operations and the 2024 Precigen workforce reduction.

These increases were partially offset by a decrease in stock compensation and insurance rates in 2024 compared to the same period in 2023.

Impairment of goodwill and other noncurrent assets

In connection with the suspension of ActoBio’s operations, the Company recorded $34.5 million of impairment charges related to goodwill and long-lived assets in the second quarter of 2024.

Additionally, we recorded $5.8 million of impairment charges related to our Exemplar reporting segment, compared to a $10.8 million impairment loss recorded during the year ended December 31, 2023.

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

Total other income, net, increased $3.6 million, or 106% compared to the year ended December 31, 2023.

This increase was primarily derived from an $8.5 million gain on the sale of intellectual property rights and royalty rights related to FCX-007 in December 2024 as well as a $0.5 million reduction in interest expense due to the final retirement of our Convertible Notes in the second quarter of 2023.

This increase was partially offset by a reclassification of cumulative translation losses of $2.9 million, which resulted from the final closing of the ActoBio facilities in the third quarter of 2024, as well as a reduction of $1.8 million in interest income due to lower investment balances compared to the same period in 2023.

See "Notes to the Consolidated Financial Statements - Note 2" appearing elsewhere in this Annual Report for further discussion on gain on transfers of nonfinancial assets.

Segment performance

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Biopharmaceuticals

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.

The decline in revenues for Biopharmaceuticals was primarily due to the cancellation of the License Agreement with Alaunos in 2024.

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.

The increase in Segment Adjusted EBITDA loss was driven by capital expenditures incurred related to the build out of our cGMP manufacturing capabilities for PRGN-2012 production, costs associated with our BLA submission, the confirmatory clinical trial for PRGN-2012, the conclusion of pivotal clinical trial activities for PRGN-2012 and an increase in severance expenses linked to the closure of ActoBio and restructuring expenses at Precigen.

There was also an increase in commercialization cost in preparation for PRGN-2012’s market readiness.

These increased costs were partially offset by the sale of intellectual property and royalty rights related to FCX-007 in December 2024.

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.

The decline in Segment Adjusted EBITDA was primarily due to the decreased revenues, offset by cost reduction initiatives implemented at Exemplar.

Liquidity and capital resources

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As of December 31, 2024, we had cash and cash equivalents of $29.5 million and short-term and long-term investments of $68.4 million.

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

Cash in excess of immediate requirements is typically invested primarily in money market funds, United States government debt securities, and certificates of deposit 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 offering expenses.

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

In August 2024, we closed a public offering of 39,878,939 shares of our common stock, resulting in net proceeds to us of $30.9 million, after deducting underwriting discounts, fees, and an estimate of other offering expenses.

In December 2024, we issued 79,000 shares of 8.00% Series A Convertible Perpetual Preferred Stock with an initial liquidation preference and stated value of $1,000 per share, together with warrants to purchase 52,666,669 shares of common stock for net proceeds of approximately $78.5 million, after deducting offering expenses, which expenses had not been paid as of December 31, 2024.

The following table sets forth the significant sources and uses of cash for the periods set forth below (dollar amounts in thousands):

Year Ended December 31,

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Cash flows from operating activities:

In 2024, our net loss was $126.2 million, which includes the following significant noncash expenses and benefits totaling $55.1 million:

(i) $40.3 million impairment losses, (ii) $9.5 million of stock-based compensation expense, (iii) $4.5 million of depreciation and amortization expense, (iv) $2.9 million due to reclassification of cumulative translation losses, and (v) $0.6 million of shares issued as payment for services, partially offset by non-cash benefits of $1.8 million due to deferred income taxes and $0.9 million due to amortization of discounts on investments.

In addition, changes in operating assets and liabilities provided $2.7 million of cash for operating activities.

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

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In addition, changes in operating assets and liabilities reduced net income by $22.7 million, which the most significant change being a reduction in deferred revenue of $23.4 million.

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

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

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

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 2024 cash used in operations increased by $1.2 million from the year ended December 31, 2023, primarily due to increase in cash outflows related to ActoBio during 2024 as we ceased operations and paid severance cost.

and Intrexon Energy Partners II membership interest, which was recorded as a reduction in revenue in 2022 that did not occur in 2023.

Cash flows from investing activities:

During 2024, we purchased $12.2 million of investments, net, and purchased $8.6 million of property plant and equipment, primarily related to the build-out of our cGMP manufacturing facility.

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.

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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.

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

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

Cash flows from financing activities:

During 2024, we received $31.2 million of proceeds, net of certain issuance costs, from the sale of our common stock in an underwritten public offering, $79.0 million of gross proceeds from the issuance of the Series A Preferred Stock and the Warrants and $0.3 million of proceeds from stock option exercises.

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.

Future capital requirements

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

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

• capital expenditures related to 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.

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.

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 and/or royalty financings, government, or other third-party funding, strategic alliances, sales of assets, and licensing arrangements.

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

To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders.

To the extent that we raise additional capital through the sale of equity, convertible debt, warrants or preferred securities, the ownership interests of our common shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders.

Our current stock price may make it more difficult to pursue equity financings and lead to substantial dilution if the price of our common stock does not increase.

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Our consolidated financial statements as of and for the year ended December 31, 2024 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.

Based on current projections, management believes that its existing cash, cash equivalents and short-term investments, combined with anticipated potential revenue from the commercialization of PRGN-2012, which is outside of our direct control, will enable us to continue our operations for at least one year from the date of this filing.

These assumptions include the receipt of future payments that are dependent upon the successful FDA approval of the PRGN-2012 BLA, and therefore revenue from this product is uncertain at this time.

Based on this factor, we do not know when, or if, we will generate sufficient revenue from commercialization to offset our operating expenses.

We are subject to all of the risks inherent in the development of new products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.

In addition, because our forecasted potential revenues are currently outside of our direct control, they have not been included in our going concern analysis.

These conditions raise substantial doubt about our ability to continue as a going concern for at least 12 months after the issuance of the accompanying consolidated financial statements.

Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our ability to continue as a going concern is dependent upon the successful execution of management’s plans, which include the successful commercialization of PRGN-2012.

In addition, we may decide, or be required to raise additional capital.

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, ultimately from revenue related to product sales, to the extent our 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.

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

The following table summarizes our significant contractual obligations and commitments from continuing operations as of December 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 December 31, 2024 and the effects such obligations are expected to have on our liquidity and cash flow in future periods:

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

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Operating leases $ 7,382 $ 1,556 $ 2,718 $ 2,555 $ 553

Leases not yet commenced 706 235 471 — —

Total $ 7,382 $ 1,556 $ 2,718 $ 2,555 $ 553

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Net operating losses

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.

Our foreign subsidiaries included in continuing operations have foreign loss carryforwards of approximately $73.8 million, most of which do not expire.

Excluding certain deferred tax liabilities totaling $1.8 million, our remaining net deferred tax assets, which primarily relate to these loss carryforwards, are offset by a valuation allowance due to our history of net losses.

As of December 31, 2024, we had net operating loss carryforwards of approximately $969.9 million for United States federal income tax purposes available to offset future taxable income, including $757.0 million generated after 2017, United States capital loss carryforwards of $100.9 million, and United States federal and state research and development tax credits of approximately $16.2 million, prior to consideration of annual limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended, ("Section 382").

Net operating loss carryforwards generated prior to 2018 will expire if unutilized from 2025 to 2037, and capital loss carryforwards will expire if unutilized from 2025 to 2027.

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

As of December 31, 2024, we had utilized all net operating losses subject to Section 382 limitations, other than those losses inherited via acquisitions.

As of December 31, 2024, approximately $35.8 million of domestic net operating losses were acquired via acquisition 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.

As of December 31, 2024, our direct foreign subsidiaries included in continuing operations had foreign loss carryforwards of approximately $69.8 million, most of which do not expire.

Our net deferred tax assets, which primarily relate to these loss carryforwards, are offset by a valuation allowance due to our history of net losses.

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

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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.

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.

In 2022 and 2021, collaboration and licensing revenues were 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.

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 2024, such accounting policy and estimate is not considered critical as the associated revenue and deferred revenue are not significant.

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We recognized $3.9 million, $6.1 million, and $12.0 million of product and service revenues for the years ended December 31, 2024, 2023, and 2022, respectively.

Pre-Launch Inventory

Prior to an initial regulatory authorization for our drug product candidates, we expense costs relating to raw materials and inventory production as research and development expenses in our consolidated statements of operations in the period incurred.

We capitalize the costs of production as inventory when we believe regulatory authorization and subsequent commercialization is considered probable and we expect to realize future economic benefit from the sales of the drug product candidate.

We have not capitalized any inventory to date in our Biopharmaceuticals reporting segment.

Valuation of goodwill and long-lived assets

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

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

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

The income approach is a valuation technique in which fair value is based on forecasted future cash flows, discounted at the appropriate rate of return commensurate with the risk as well as current rates of return for equity and debt capital as of the valuation date.

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

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.

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.

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

Third party clinical trial expenses include investigator fees, site and patient costs, CRO costs, costs for central laboratory testing, and data management costs.

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These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as a prepaid expenses and other or other accrued liabilities .

These third party agreements are generally cancellable, and related costs are recorded as research and development expense as incurred.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected on the consolidated balance sheets as prepaid expenses and other or other accrued liabilities.

These third-party agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred.

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 the 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.

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The historical clinical accrual estimates have not been materially different from the actual costs.

Warrant liabilities

The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying consolidated balance sheet.

The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the consolidated statement of operations.

Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

We determined the initial value of the Warrants using a combination of the Black-Scholes option pricing model and Monte Carlo model, which are considered Level 3 fair value measurements.

These models consider several variables and assumptions in estimating the fair value of financial instruments, including the per-share fair value of the underlying common stock, exercise price, expected term, risk-free interest rate, expected stock price volatility over the expected term, and expected annual dividend yield.

Certain inputs utilized in our Black-Scholes option pricing model may fluctuate in future periods based upon factors which are outside of the Company’s control.

A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statement of operations.

See additional discussion in "Notes to the Consolidated Financial Statements - Note 7 and 12" appearing elsewhere in this Annual Report.

Recent accounting pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis