SEC Filing - Precigen

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-36042

PRECIGEN, INC.

(Exact name of registrant as specified in its charter)



Virginia		26-0084895
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

20374 Seneca Meadows Parkway
Germantown,	Maryland	20876
(Address of principal executive offices)		(Zip Code)

(301) 556-9900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report date)

Securities registered pursuant to Section 12(b) of the Exchange Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	PGEN	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 30, 2020, 171,014,250 shares of common stock, no par value per share, were issued and outstanding.

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PRECIGEN, INC.

FORM 10-Q

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Item No.		Page
PART I - FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements (unaudited):	5
	Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2020 and 2019	7
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2020 and 2019	8
	Condensed Consolidated Statements of Shareholders' and Total Equity for the Three Months Ended March 31, 2020 and 2019	9
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019	10
	Notes to the Condensed Consolidated Financial Statements	12
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
3.	Quantitative and Qualitative Disclosures About Market Risk	51
4.	Controls and Procedures	52

PART II - OTHER INFORMATION
1.	Legal Proceedings	53
1A.	Risk Factors	53
2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
3.	Defaults on Senior Securities	54
4.	Mine Safety Disclosures	55
5.	Other Information	55
6.	Exhibits	55
	Signatures	56

Intrexon^®, Trans Ova Genetics^®, ActoBiotics^®, ViaGen^®, RheoSwitch^®, UltraVector^®, RTS^®, and RheoSwitch Therapeutic System^® are our and/or our affiliates' registered trademarks in the United States and GenVec™, Precigen™, AdenoVerse™, ActoBio Therapeutics™, Progentus™, AttSite™, and Precigen Therapeutics™ are our and/or our affiliates' common law trademarks in the United States. This Quarterly Report on Form 10-Q, or Quarterly Report, and the information incorporated herein by reference contain references to trademarks, service marks, and trade names owned by us or other companies. Solely for convenience, trademarks, service marks, and trade names referred to in this Quarterly Report and the information incorporated herein, including logos, artwork, and other visual displays, may appear without the ^® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks, service marks, and trade names. We do not intend our use or display of other companies' trade names, service marks, or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Other trademarks, trade names, and service marks appearing in this Quarterly Report are the property of their respective owners. Unless the context requires otherwise, references in this Quarterly Report to "Precigen", "we", "us", and "our" refer to Precigen, Inc.

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Special Note Regarding Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Quarterly Report, including statements regarding our strategy; future events, including their outcome or timing; future operations; future financial position; future revenue; projected costs; prospects; plans; objectives of management; and expected market growth, are forward-looking statements. The words "aim", "anticipate", "assume", "believe", "continue", "could", "due", "estimate", "expect", "intend", "may", "plan", "predict", "potential", "positioned", "project", "seek", "should", "target", "will", "would", and the negatives of these terms or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:


•	our ability to successfully enter new markets or develop product candidates, including the expected timing and results of investigational studies and preclinical and clinical trials, and our research and development programs;


•	the timing or likelihood of regulatory filings for any product candidates we develop and our ability to obtain and maintain regulatory approvals for such product candidates for any indication;


•	our intentions and ability to successfully commercialize our product candidates;


•	the rate and degree of market acceptance of any products developed by us;


•	our ability to successfully execute and achieve benefits from our recent leadership transition plan and organizational restructuring;


•	our efforts to hold or generate significant operating capital, including through partnering, potential asset sales of our non-healthcare assets, and operating cost reductions;


•	our cash position;


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


•	our estimates regarding expenses, future revenue, capital requirements, and our need for additional financing;


•	our strategy and overall approach to our business model, including our efforts to focus our business in the healthcare industry;


•	our ability to adapt to changes in laws, regulations, and policies;


•	our reliance on and the performance of third parties, including exclusive channel collaborations, or ECCs, and joint ventures, or JVs;


•	competition from existing technologies and products or new technologies and products that may emerge;


•	our expectations related to the use of proceeds from our public offerings and other financing efforts;


•	actual or anticipated variations in our operating results;


•	market conditions in our industry;


•	our ability to retain, recruit, and train key personnel, or the loss of key personnel as a result of illness or otherwise;


•	our ability to successfully enter into optimal strategic relationships with our subsidiaries and operating companies that we may form in the future;


•	the result of litigation proceedings or investigations that we currently face or may face in the future; and

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•	the effects, duration, and severity of the ongoing COVID-19 pandemic and the actions we and others have taken or may take in response.

Forward-looking statements may also concern our expectations relating to our subsidiaries and other affiliates. We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report, particularly in Part II, Item 1A. "Risk Factors," that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, JVs, or investments that we may make.

You should read this Quarterly Report, the documents that we reference in this Quarterly Report, our Annual Report on Form 10-K for the year ended December 31, 2019, the other reports we have filed with the Securities and Exchange Commission, or SEC, and the documents that we have filed as exhibits to our filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Precigen, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)



(Amounts in thousands, except share data)	March 31, 2020		December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	37,840	$	65,793
Short-term investments	111,332		9,260
Receivables
Trade, less allowance for credit losses of $5,725 and $5,201 as of March 31, 2020 and December 31, 2019, respectively	19,376		20,650
Related parties, less allowance for credit losses of $2,312 as of March 31, 2020 and December 31, 2019	252		600
Other	351		4,978
Inventory	14,636		16,097
Prepaid expenses and other	5,596		6,444
Current assets held for sale	—		110,821
Total current assets	189,383		234,643
Property, plant and equipment, net	59,627		60,969
Intangible assets, net	65,489		68,346
Goodwill	63,703		63,754
Investments in affiliates	1,108		1,461
Right-of-use assets	24,036		25,228
Other assets	1,326		1,362
Total assets	$	404,672	$	455,763

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)



(Amounts in thousands, except share data)	March 31, 2020			December 31, 2019
Liabilities and Total Equity
Current liabilities
Accounts payable	$	4,777		$	5,917
Accrued compensation and benefits	7,209			14,091
Other accrued liabilities	9,972			12,049
Deferred revenue, including $0 and $877 from related parties as of March 31, 2020 and December 31, 2019, respectively	11,141			5,697
Lines of credit	1,205			1,922
Current portion of long-term debt, including $31,446 and $31,211 to related parties as of March 31, 2020 and December 31, 2019, respectively	31,886			31,670
Current portion of lease liabilities	4,308			4,182
Related party payables	139			51
Current liabilities held for sale	—			47,333
Total current liabilities	70,637			122,912
Long-term debt, net of current portion, including $25,000 to related parties as of March, 31, 2020 and December 31, 2019	188,730			186,321
Deferred revenue, net of current portion, including $31,020 and $30,182 from related parties as of March 31, 2020 and December 31, 2019, respectively	32,877			48,136
Lease liabilities, net of current portion	22,414			23,849
Deferred tax liabilities	2,785			2,834
Total liabilities	317,443			384,052
Commitments and contingencies (Note 16)
Total shareholders' equity
Common stock, no par value, 400,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 170,656,834 shares and 163,274,880 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively	—			—
Additional paid-in capital	1,797,450			1,752,048
Accumulated deficit	(1,708,867		)	(1,652,869		)
Accumulated other comprehensive loss	(1,354		)	(27,468		)
Total shareholders' equity	87,229			71,711
Total liabilities and shareholders' equity	$	404,672		$	455,763

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)



(Amounts in thousands, except share and per share data)	Three Months Ended March 31,
(Amounts in thousands, except share and per share data)	2020			2019
Revenues
Collaboration and licensing revenues, including $198 and $4,790 from related parties during the three months ended March 31, 2020 and 2019, respectively	$	10,721		$	5,971
Product revenues	4,961			4,837
Service revenues	13,946			11,383
Other revenues	210			394
Total revenues	29,838			22,585
Operating Expenses
Cost of products	6,089			7,722
Cost of services	7,536			7,092
Research and development	18,891			26,938
Selling, general and administrative	23,018			31,049
Total operating expenses	55,534			72,801
Operating loss	(25,696		)	(50,216		)
Other Expense, Net
Unrealized and realized appreciation in fair value of equity securities and preferred stock, net	—			449
Interest expense	(4,592		)	(4,305		)
Interest and dividend income	673			1,361
Other income, net	64			546
Total other expense, net	(3,855		)	(1,949		)
Equity in net loss of affiliates	(351		)	(748		)
Loss from continuing operations before income taxes	(29,902		)	(52,913		)
Income tax benefit (expense)	(40		)	13
Loss from continuing operations	(29,942		)	(52,900		)
Loss from discontinued operations, net of income taxes	(26,056		)	(9,236		)
Net loss	$	(55,998	)	$	(62,136	)
Net loss attributable to the noncontrolling interests	—			1,427
Net loss attributable to Precigen	$	(55,998	)	$	(60,709	)
Amounts Attributable to Precigen
Net loss from continuing operations attributable to Precigen	$	(29,942	)	$	(51,473	)
Net loss from discontinued operations attributable to Precigen	(26,056		)	(9,236		)
Net loss attributable to Precigen	$	(55,998	)	$	(60,709	)
Net Loss per Share
Net loss from continuing operations attributable to Precigen per share, basic and diluted	$	(0.19	)	$	(0.34	)
Net loss from discontinued operations attributable to Precigen per share, basic and diluted	(0.16		)	(0.06		)
Net loss attributable to Precigen per share, basic and diluted	$	(0.35	)	$	(0.40	)
Weighted average shares outstanding, basic and diluted	160,338,743			152,948,058

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)



	Three Months Ended March 31,
(Amounts in thousands)	2020			2019
Net loss	$	(55,998	)	$	(62,136	)
Other comprehensive income (loss):
Unrealized gain on investments	572			47
Gain (loss) on foreign currency translation adjustments	(1,415		)	285
Release of cumulative foreign currency translation adjustments to loss from discontinued operations	26,957			—
Comprehensive loss	(29,884		)	(61,804		)
Comprehensive loss attributable to the noncontrolling interests	—			1,382
Comprehensive loss attributable to Precigen	$	(29,884	)	$	(60,422	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders' and Total Equity

(Unaudited)



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders' Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders' Equity
Balances at December 31, 2019	163,274,880	$	—	$	1,752,048	$	(27,468	)	$	(1,652,869	)	$	71,711
Stock-based compensation expense	—	—		4,372		—			—			4,372
Shares issued upon vesting of restricted stock units	668,786	—		—		—			—			—
Shares issued for accrued compensation	347,989	—		5,100		—			—			5,100
Shares issued as payment for services	392,483	—		930		—			—			930
Shares issued in private placement	5,972,696	—		35,000		—			—			35,000
Net loss	—	—		—		—			(55,998		)	(55,998		)
Release of cumulative translation adjustments to loss from discontinued operations	—	—		—		26,957			—			26,957
Other comprehensive loss	—	—		—		(843		)	—			(843		)
Balances at March 31, 2020	170,656,834	$	—	$	1,797,450	$	(1,354	)	$	(1,708,867	)	$	87,229



(Amounts in thousands, except share data)	Common Stock			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Precigen Shareholders' Equity			Noncontrolling Interests			Total Equity
(Amounts in thousands, except share data)	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Precigen Shareholders' Equity			Noncontrolling Interests			Total Equity
Balances at December 31, 2018	160,020,466	$	—	$	1,722,012		$	(28,612	)	$	(1,330,545	)	$	362,855		$	15,867		$	378,722
Stock-based compensation expense	—	—		8,990			—			—			8,990			64			9,054
Shares issued upon vesting of restricted stock units and for exercises of stock options and warrants	286,637	—		57			—			—			57			250			307
Shares issued for accrued compensation	150,908	—		1,102			—			—			1,102			—			1,102
Shares issued as payment for services	157,405	—		831			—			—			831			—			831
Shares and warrants issued in public offerings, net of issuance costs	—	—		—			—			—			—			6,611			6,611
Adjustments for noncontrolling interests	—	—		(384		)	—			—			(384		)	384			—
Net loss	—	—		—			—			(60,709		)	(60,709		)	(1,427		)	(62,136		)
Other comprehensive income	—	—		—			287			—			287			45			332
Balances at March 31, 2019	160,615,416	$	—	$	1,732,608		$	(28,325	)	$	(1,391,254	)	$	313,029		$	21,794		$	334,823

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended March 31,
(Amounts in thousands)	2020			2019
Cash flows from operating activities
Net loss	$	(55,998	)	$	(62,136	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	4,810			6,577
Loss on disposals of assets, net	217			493
Gain on sale of discontinued operations	(672		)	—
Loss on release of cumulative foreign currency translation adjustments to loss from discontinued operations	26,957			—
Unrealized and realized (appreciation) depreciation on equity securities and preferred stock, net	106			(70		)
Amortization of discounts on investments, net	(233		)	(352		)
Equity in net loss of affiliates	389			1,640
Stock-based compensation expense	4,372			9,054
Shares issued as payment for services	930			831
Provision for credit losses	523			64
Accretion of debt discount and amortization of deferred financing costs	2,517			2,213
Deferred income taxes	—			(508		)
Other noncash items	239			235
Changes in operating assets and liabilities:
Receivables:
Trade	438			1,306
Related parties	25			1,584
Other	1,736			642
Inventory	1,202			1,381
Prepaid expenses and other	927			(322		)
Other assets	7			13
Accounts payable	(917		)	(1,237		)
Accrued compensation and benefits	(1,941		)	(1,788		)
Other accrued liabilities	(2,974		)	(6,129		)
Deferred revenue	(10,437		)	1,330
Lease liabilities	(53		)	29
Related party payables	87			1,916
Net cash used in operating activities	(27,743		)	(43,234		)
Cash flows from investing activities
Purchases of investments	(119,267		)	—
Sales and maturities of investments	18,000			45,000
Proceeds from sales of equity securities	—			418
Investments in affiliates	—			(370		)
Purchases of property, plant and equipment	(3,152		)	(11,523		)
Proceeds from sale of assets	684			67
Proceeds from sale of discontinued operations, net of cash sold	64,240			—
Proceeds from repayment of notes receivable	2,942			—
Net cash provided by (used in) investing activities	(36,553		)	33,592

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Three Months Ended March 31,
(Amounts in thousands)	2020			2019
Cash flows from financing activities
Proceeds from issuance of shares in a private placement	35,000			—
Proceeds from issuance of shares and warrants in public offering, net of issuance costs	—			6,611
Advances from lines of credit	8,718			1,408
Repayments of advances from lines of credit	(9,435		)	(1,597		)
Proceeds from long-term debt, net of issuance costs	—			376
Payments of long-term debt	(132		)	(178		)
Proceeds from stock option and warrant exercises	—			307
Net cash provided by financing activities	34,151			6,927
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(39		)	(504		)
Net decrease in cash, cash equivalents, and restricted cash	(30,184		)	(3,219		)
Cash, cash equivalents, and restricted cash
Beginning of period	68,434			110,182
End of period	$	38,250		$	106,963
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	3,568		$	77
Cash paid during the period for income taxes	40			30
Significant noncash activities
Accrued compensation paid in equity awards	$	5,100		$	1,102
Purchases of property and equipment included in accounts payable and other accrued liabilities	369			2,531

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of March 31, 2020 and December 31, 2019 as shown above:



	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	37,840	$	65,793
Cash and cash equivalents included in current assets held for sale	—		2,223
Restricted cash included in other assets	410		418
Cash, cash equivalents, and restricted cash	$	38,250	$	68,434

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Precigen, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except share and per share data)

1. Organization

Precigen, Inc. ("Precigen"), a Virginia corporation, is a synthetic biology company with an increasing focus on its discovery and clinical stage activities to advance the next generation of gene and cellular therapies to target the most urgent and intractable challenges in immuno-oncology, autoimmune disorders, and infectious diseases.

PGEN Therapeutics, Inc. ("PGEN Therapeutics") is a dedicated discovery and clinical stage biopharmaceutical company advancing the next generation of gene and cellular therapies using precision technology to target urgent and intractable diseases in immuno-oncology, autoimmune disorders, and infectious diseases. PGEN Therapeutics is a wholly owned subsidiary of Precigen with primary operations in Maryland.

Precigen ActoBio, Inc. ("ActoBio") is pioneering a proprietary class of microbe-based biopharmaceuticals that enable expression and local delivery of disease-modifying therapeutics and is a wholly owned subsidiary of Precigen with primary operations in Belgium.

Exemplar Genetics, LLC, doing business as Precigen Exemplar, ("Exemplar") is committed to enabling the study of life-threatening human diseases through the development of MiniSwine Yucatan miniature pig research models and services, as well as enabling the production of cells and organs in its genetically engineered swine for regenerative medicine applications and is a wholly owned subsidiary of Precigen with primary operations in Iowa.

Trans Ova Genetics, L.C. ("Trans Ova"), and Progentus, L.C. ("Progentus"), providers of reproductive technologies, including services and products sold to cattle breeders and other producers, are wholly owned subsidiaries with primary operations in California, Iowa, Maryland, Missouri, New York, Oklahoma, Texas, and Washington.

Effective October 1, 2019, Precigen transferred substantially all of its proprietary methane bioconversion platform assets to a wholly owned subsidiary, MBP Titan LLC ("MBP Titan"), with primary operations in California. MBP Titan's proprietary methane bioconversion platform is designed to turn natural gas into more valuable and usable energy and chemical products through novel, highly engineered bacteria that utilize specific energy feedstocks. See Note 2 for further discussion. Prior to October 1, 2019, the operation transferred to MBP Titan was an operating division within Precigen.

Through April 8, 2019, Precigen consolidated AquaBounty Technologies, Inc. ("AquaBounty"), a company focused on improving productivity in commercial aquaculture and whose common stock is listed on the Nasdaq Stock Market. On April 9, 2019, AquaBounty completed an underwritten public offering that resulted in Precigen no longer having the contractual right to control AquaBounty's board of directors, and accordingly, Precigen deconsolidated AquaBounty. After deconsolidating the entity in April 2019, Precigen held its AquaBounty equity securities, which it accounted for using the fair value option, until October 2019 when the independent members of the Company's board of directors, with the recommendation of the audit committee and an independent special committee of the Board, unanimously approved the sale of the Company's common shares held in AquaBounty to an affiliate of Third Security, LLC ("Third Security"), a related party.

On January 31, 2020, Precigen completed the sale of the majority of its bioengineering assets and operations to an affiliate of Third Security, which are presented as discontinued operations for all periods presented. See Notes 3 and 13 for further discussion.

Precigen and its consolidated subsidiaries are hereinafter referred to as the "Company."

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Certain information and footnote disclosures normally included in the Company's annual financial statements have been condensed or omitted. These interim condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary for fair statement of the Company's financial position as of March 31, 2020 and results of operations and cash flows

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for the interim periods ended March 31, 2020 and 2019. The year-end condensed consolidated balance sheet data was derived from the Company's audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other future annual or interim period. The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

The accompanying condensed consolidated financial statements reflect the operations of the Company and its subsidiaries. All intercompany accounts and transactions have been eliminated.

Liquidity

Management believes that existing liquid assets as of March 31, 2020 will allow the Company to continue its operations for at least a year from the issuance date of these condensed consolidated financial statements. These condensed consolidated financial statements are presented in United States dollars and are prepared under U.S. GAAP. The Company is subject to a number of risks similar to those of other companies conducting high-risk, early-stage research and development of product candidates. 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 and its collaborators' product candidates. Additionally, the accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the three months ended March 31, 2020, the Company incurred a net loss attributable to Precigen of $55,998 and, as of March 31, 2020, has an accumulated deficit of $1,708,867. Management expects operating losses and negative cash flows to continue for the foreseeable future and, as a result, the Company will require additional capital to fund its operations and execute its business plan. In the absence of a significant source of recurring revenue, the Company's long-term success is dependent upon its ability to continue to raise additional capital in order to fund ongoing research and development, reduce uses of cash for operating and investing activities for non-healthcare businesses, obtain regulatory approval of its products, successfully commercialize its products, generate revenue, meet its obligations and, ultimately, attain profitable operations.

Risks and Uncertainties

In March 2020, the World Health Organization declared the novel strain of coronavirus, now known as COVID-19, a pandemic. COVID-19 has and continues to have an extensive impact on the global health and economic environments.

Commencing in the second half of March, the Company's healthcare business began to experience delays to certain of its clinical trials as a result of COVID-19. For example, starting in March, ActoBio temporarily suspended the Phase 1b/2a cohort for AG019 as a proactive measure to protect the welfare and safety of patients, caregivers, clinical site staff, its employees, and contractors. Additionally, from April to May 2020, enrollment of new patients in the Company's PRGN-3005 Phase 1 trial was temporarily suspended, due to a mandated hold on certain early and late-stage clinical trials at the Fred Hutchinson Cancer Research Center in Seattle instituted in light of the COVID-19 pandemic. Neither of these delays was related to safety issues in the studies, and recruitment has resumed in the Company's PRGN-3005 trial.

In April 2020, as a result of market uncertainty driven by the COVID-19 pandemic and the current state of the energy sector, the Company began the process of temporarily shutting down MBP Titan operations and assessing the appropriate next steps with respect to the future of MBP Titan.

The Company is closely monitoring the impact of COVID-19 on these and other aspects of its business, including Trans Ova and Exemplar. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on the Company's ongoing business, results of operations, and overall financial performance for the balance of 2020 and beyond cannot be reasonably estimated at this time, and it could have a material adverse effect on the Company's results of operations, cash flows, and financial position, including resulting impairments to goodwill, long-lived assets, and additional credit losses.

Equity Method Investments

The Company accounts for its investments in each of its JVs and for its investments in start-up entities backed by the Harvest Intrexon Enterprise Fund I, LP ("Harvest"), all of which are related parties, using the equity method of accounting based upon relative ownership interest. The Company's investments in these entities are included in investments in affiliates in the accompanying condensed consolidated balance sheets. See additional discussion related to certain of the Company's JVs in Note 4.

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Variable Interest Entities

As of March 31, 2020 and December 31, 2019, the Company determined that certain of its collaborators and JVs, as well as Harvest, were variable interest entities ("VIEs"). The Company was not the primary beneficiary for these entities since it did not have the power to direct the activities that most significantly impact the economic performance of the VIEs. The Company's aggregate investment balances of these VIEs as of March 31, 2020 and December 31, 2019 were $1,108 and $1,461, respectively, which represents the Company's maximum risk of loss related to the identified VIEs. See Note 4 for discussion of the Company's future funding commitments for the significant JVs.

Accounts Receivable

Effective January 1, 2020, the Company applies Financial Accounting Standards Board ("FASB") Accounting Standard Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.

The Company is exposed to credit losses primarily through sales of products and services by Trans Ova in the normal course of business. The Company's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' trade accounts receivables. The Company's monitoring activities include timely account reconciliation, routine follow-up on past due accounts, and consideration of customers' financial condition, as well as macroeconomic conditions. Past due status is determined based upon contractual terms. Balances are written off at the point when collection attempts have been exhausted.

Estimates are used to determine the loss allowance, which is based on assessment of anticipated payment and other historical, current, and future information that is reasonably available.

The following table shows the activity in the allowance for credit losses for the three months ended March 31, 2020:



Balance at December 31, 2019	$	7,513
Charged to operating expenses	523
Write offs of accounts receivable, net of recoveries	1
Balance at March 31, 2020	$	8,037

Segment Information

The Company realigned its business in April 2019, and as a result, its chief operating decision maker ("CODM") now regularly reviews disaggregated financial information for various operating segments. As of March 31, 2020, the Company's reportable segments were (i) PGEN Therapeutics, (ii) ActoBio, (iii) MBP Titan, (iv) Trans Ova, and (v) the Human Biotherapeutics division, which is an operating division of Precigen. All of Precigen's consolidated subsidiaries and operating divisions that did not meet the quantitative thresholds to report separately are combined and reported in a single category, All Other. See Note 1 for a description of PGEN Therapeutics, ActoBio, MBP Titan, and Trans Ova. See Note 19 for a description of the Human Biotherapeutics division. Corporate expenses, which are not allocated to the segments and are managed at a consolidated level, include costs associated with general and administrative functions, including the Company's finance, accounting, legal, human resources, information technology, corporate communication, and investor relations functions. Corporate expenses exclude interest expense, depreciation and amortization, stock-based compensation expense, and equity in net loss of affiliates and include unrealized and realized gains and losses on the Company's securities portfolio as well as dividend income. The Company's segment presentation has been recast to retrospectively reflect the change from one reportable segment to multiple reportable segments. See Note 19 for further discussion of the Company's segments.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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Recently Adopted Accounting Pronouncements

In October 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 ("ASU 2018-18"). The provisions of ASU 2018-18 clarify when certain transactions between collaborative arrangement participants should be accounted for under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"), and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities ("ASU 2018-17"). The provisions of ASU 2018-17 modify the guidance under ASC Topic 810 related to the evaluation of indirect interests held through related parties under common control when determining whether fees paid to decision makers and service providers are variable interests. Indirect interests held through related parties that are under common control are no longer considered to be the equivalent of direct interests in their entirety and instead should be considered on a proportional basis. This guidance more closely aligns with accounting of how indirect interests held through related parties under common control are considered for determining whether a reporting entity must consolidate a VIE. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract ("ASU 2018-15"). The provisions of ASU 2018-15 clarify the accounting for implementation costs of a hosting arrangement that is a service contract. The new standard requires an entity (customer) in a hosting arrangement that is a service contract to follow existing internal-use software guidance to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Capitalized implementation costs of a hosting arrangement that is a service contract should be amortized over the term of the hosting arrangement, which might extend beyond the noncancelable period if there are options to extend or terminate. ASU 2018-15 also specifies the financial statement presentation of capitalized implementation costs and related amortization, in addition to required disclosures for material capitalized implementation costs related to hosting arrangements that are service contracts. The Company adopted this standard effective January 1, 2020, on a prospective basis and there was no material impact to the accompanying consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurements (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurements ("ASU 2018-13"). The provisions of ASU 2018-13 modify the disclosures related to recurring and nonrecurring fair value measurements. Disclosures related to the transfer of assets between Level 1 and Level 2 hierarchies have been eliminated and various additional disclosures related to Level 3 fair value measurements have been added, modified, or removed. The Company adopted this standard effective January 1, 2020, and there was no impact to the accompanying consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, which modifies the impairment model to utilize an expected loss methodology in place of the previous incurred loss methodology, and requires a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company adopted this standard effective January 1, 2020, and there was no material impact to the accompanying consolidated financial statements.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU is intended to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those annual periods, with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within this ASU are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impact of the new standard on its consolidated financial statements and related disclosures.

3. Discontinued Operations

On January 1, 2020, the Company and TS Biotechnology Holdings, LLC ("TS Biotechnology"), a related party and an entity managed by Third Security, entered into a Stock and Asset Purchase Agreement pursuant to which the Company agreed to sell a majority of the Company's bioengineering assets and operations to TS Biotechnology for $53,000 and certain contingent

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payment rights (the "TS Biotechnology Sale"). The TS Biotechnology Sale closed on January 31, 2020. The assets and operations sold in the TS Biotechnology Sale included the following wholly owned subsidiaries, as well as certain equity securities held in Oragenics, Inc. ("Oragenics") and SH Parent, Inc. that were directly related to the subsidiaries sold:


•	Intrexon Produce Holdings, Inc., the parent company of two companies focused on the development and sale of non-browning apples, Okanagan Specialty Fruits, Inc. and Fruit Orchard Holdings, Inc. (collectively referred herein as "Okanagan");


•	Intrexon UK Holdings, Inc., the parent company of Oxitec Limited and its subsidiaries, which is a pioneering company in biological insect solutions (referred to herein as "Oxitec");


•	ILH Holdings, Inc., a company focused on the production of certain fine chemicals focused primarily on microbial production of therapeutic compounds ("Fine Chemicals"); and


•	Blue Marble AgBio LLC which was formed in January 2020 and included certain agriculture biotechnology assets and operations which were previously an operating division within Precigen ("AgBio").

Additionally, on January 2, 2020, the Company sold its equity interest in EnviroFlight, LLC ("EnviroFlight"), a JV with Darling Ingredients, Inc. ("Darling"), and related intellectual property rights to Darling for $12,200 (the "EnviroFlight Sale"). Unless referenced separately, the TS Biotechnology Sale and the EnviroFlight Sale are collectively referred to as the "Transactions".

The Transactions were approved by the Company's independent members of the board of directors in December 2019. The Transactions represented a strategic shift of the Company towards the Company becoming a primarily healthcare company advancing technologies and products that address complex healthcare challenges. The assets, liabilities, and operations related to the Transactions are reclassified and presented as discontinued operations in the accompanying condensed consolidated financial statements for all periods.

Upon the closing of the TS Biotechnology Sale in January 2020, the cumulative foreign currency translation losses totaling $26,957 were released to earnings and included in loss from discontinued operations. See further discussion below.

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The carrying values of the major classes of assets and liabilities included in assets and liabilities held for sale for the Transactions as of December 31, 2019 are as follows:



	TS Biotechnology Sale		EnviroFlight Sale		Total
Assets
Cash and cash equivalents	$	2,223	$	—	$	2,223
Other current assets	9,698		—		9,698
Property, plant and equipment, net	51,975		—		51,975
Intangible assets, net	20,891		4,383		25,274
Investments in affiliates	—		7,817		7,817
Right-of-use assets	13,622		—		13,622
Other noncurrent assets	212		—		212
Total assets held for sale	$	98,621	$	12,200	$	110,821
Liabilities
Deferred revenue, current (1)	$	8,723	$	—	$	8,723
Operating lease liabilities, current	2,459		—		2,459
Other current liabilities	3,058		41		3,099
Deferred revenue, net of current portion (2)	19,410		—		19,410
Operating lease liabilities, net of current portion	12,623		—		12,623
Other long-term liabilities	1,019		—		1,019
Total liabilities held for sale	$	47,292	$	41	$	47,333


(1)	Includes deferred revenue, current, from related parties of $1,243.


(2)	Includes deferred revenue, net of current portion, from related parties of $6,836.

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The following tables present the financial results of discontinued operations:



	Three Months Ended March 31, 2020
	TS Biotechnology Sale			EnviroFlight Sale			Total
Revenue (1)	$	1,294		$	—		$	1,294
Operating expenses	896			—			896
Operating income	398			—			398
Gain on sale of discontinued operations	633			39			672
Loss on release of cumulative foreign currency translation adjustment	(26,957		)	—			(26,957		)
Other expense, net	(129		)	—			(129		)
Equity in net loss of affiliates	—			(38		)	(38		)
Loss before income taxes	(26,055		)	1			(26,054		)
Income tax expense	(2		)	—			(2		)
Loss from discontinued operations	$	(26,057	)	$	1		$	(26,056	)


(1)	Includes revenue recognized from related parties of $436.



	Three Months Ended March 31, 2019
	TS Biotechnology Sale			EnviroFlight Sale			Total
Revenue (1)	$	750		$	—		$	750
Operating expenses	9,119			118			9,237
Operating loss	(8,369		)	(118		)	(8,487		)
Other expense, net	(422		)	—			(422		)
Equity in net loss of affiliates	—			(892		)	(892		)
Loss before income taxes	(8,791		)	(1,010		)	(9,801		)
Income tax benefit	565			—			565
Loss from discontinued operations	$	(8,226	)	$	(1,010	)	$	(9,236	)


(1)	Includes the reversal of revenue recognized from related parties of $978.

The following table presents the significant non-cash items and purchases of property, plant and equipment for the discontinued operations that are included in the accompanying condensed consolidated statements of cash flows.



	Three Months Ended March 31,
	2020			2019
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	$	—		$	1,233
Unrealized and realized depreciation on equity securities and preferred stock, net	106			379
Equity in net loss of EnviroFlight	38			892
Stock-based compensation expense	(1,346		)	806
Deferred income taxes	—			(481		)
Gain on sale of discontinued operations	(672		)	—
Loss on release of cumulative foreign currency translation adjustment	26,957			—
Cash flows from investing activities
Purchases of property, plant and equipment	(382		)	(7,700		)

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Also see Note 13 below.

Equity Method Investments

The Company accounted for its investment in EnviroFlight using the equity method of accounting.

Summarized financial data for equity method investments included in discontinued operations are shown in the following tables for the periods in which the Company held the equity method investments.



	December 31,
	2019
Current assets	$	703
Noncurrent assets	30,549
Total assets	31,252
Current liabilities	2,352
Non-current liabilities	88
Total liabilities	2,440
Net assets	$	28,812



	Three Months Ended March 31,
	2020			2019
Revenues	$	16		$	94
Operating expenses	92			1,881
Operating loss	(76		)	(1,787		)
Other, net	—			4
Net loss	$	(76	)	$	(1,783	)

Where applicable, the notes to the accompanying condensed consolidated financial statements have been updated to reflect information pertaining to the Company's continuing operations.

Out-of-Period Adjustment

During the three months ended March 31, 2020, the Company recorded an out-of-period adjustment of $26,572 to loss from discontinued operations which relates to the effect of cumulative foreign translation losses associated with the entities sold in the TS Biotechnology Transaction. This charge, which is entirely noncash, should have been recorded in the year ended December 31, 2019 as an additional impairment charge included in loss from discontinued operations. There was no impact to net loss from continuing operations, cash and short-term investments, cash flows, or Segment Adjusted EBITDA. The error also had no impact on the cash consideration received upon closing of the TS Biotechnology Transaction nor the representations and warranties made by the Company in the transaction. The Company evaluated the effects of this out-of-period adjustment, both qualitatively and quantitatively, and concluded that this adjustment was not material to the Company's financial position or results of operations for the three months ended March 31, 2020 or the year ended December 31, 2019.

4. Investments in Joint Ventures

Intrexon Energy Partners

In March 2014, the Company and certain investors (the "IEP Investors"), including an affiliate of Third Security, a related party, entered into a Limited Liability Company Agreement that governs the affairs and conduct of business of Intrexon Energy Partners, LLC ("Intrexon Energy Partners"), a JV formed to optimize and scale-up the Company's methane bioconversion platform technology for the production of certain fuels and lubricants. The Company also entered into an ECC with Intrexon Energy Partners providing exclusive rights to the Company's technology for the use in bioconversion for the production of certain fuels and lubricants, as a result of which the Company received a technology access fee of $25,000 while retaining a 50% membership interest in Intrexon Energy Partners. The IEP Investors made initial capital contributions, totaling $25,000 in

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the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners totaling 50%. In addition, Precigen has committed to make capital contributions of up to $25,000, and the IEP Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners, have committed to make additional capital contributions of up to $25,000, at the request of Intrexon Energy Partners' board of managers (the "Intrexon Energy Partners Board") and subject to certain limitations. As of March 31, 2020, the Company's remaining commitment was $4,225. Intrexon Energy Partners is governed by the Intrexon Energy Partners Board, which has five members. Two members of the Intrexon Energy Partners Board are designated by the Company and three members are designated by a majority of the IEP Investors. The Company and the IEP Investors have the right, but not the obligation, to make additional capital contributions above the initial limits when and if solicited by the Intrexon Energy Partners Board.

The Company's investment in Intrexon Energy Partners was $(422) and $(423) as of March 31, 2020 and December 31, 2019, respectively, and is included in other accrued liabilities in the accompanying condensed consolidated balance sheets, which represents the Company's equity in losses for contractually committed contributions to Intrexon Energy Partners.

Intrexon Energy Partners II

In December 2015, the Company and certain investors (the "IEPII Investors"), including Harvest, entered into a Limited Liability Company Agreement that governs the affairs and conduct of business of Intrexon Energy Partners II, LLC ("Intrexon Energy Partners II"), a JV formed to utilize the Company's methane bioconversion platform technology for the production of 1,4-butanediol, an industrial chemical used to manufacture spandex, polyurethane, plastics, and polyester. The Company also entered into an ECC with Intrexon Energy Partners II that provides exclusive rights to the Company's technology for use in the field, as a result of which the Company received a technology access fee of $18,000 while retaining a 50% membership interest in Intrexon Energy Partners II. The IEPII Investors made initial capital contributions, totaling $18,000 in the aggregate, in exchange for pro rata membership interests in Intrexon Energy Partners II totaling 50%. In December 2015, the owners of Intrexon Energy Partners II made a capital contribution of $4,000, half of which was paid by the Company. Precigen has committed to make additional capital contributions of up to $10,000, and the IEPII Investors, as a group and pro rata in accordance with their respective membership interests in Intrexon Energy Partners II, have committed to make additional capital contributions of up to $10,000, at the request of Intrexon Energy Partners II's board of managers (the "Intrexon Energy Partners II Board") and subject to certain limitations. As of March 31, 2020, the Company's remaining commitment was $10,000. Intrexon Energy Partners II is governed by the Intrexon Energy Partners II Board, which has five members. One member of the Intrexon Energy Partners II Board is designated by the Company and four members are designated by a majority of the IEPII Investors. The Company and the IEPII Investors have the right, but not the obligation, to make additional capital contributions above the initial limits when and if solicited by the Intrexon Energy Partners II Board.

The Company's investment in Intrexon Energy Partners II was $(433) and $(435) as of March 31, 2020 and December 31, 2019, respectively, and is included in other accrued liabilities in the accompanying condensed consolidated balance sheets, which represents the Company's equity in losses for contractually committed contributions to Intrexon Energy Partners II.

5. Collaboration and Licensing Revenue

The Company's collaborations and licensing agreements may provide for multiple promises to be satisfied by the Company and typically include a license to the Company's technology platforms, participation in collaboration committees, and performance of certain research and development services. Based on the nature of the promises in the Company's collaboration and licensing agreements, the Company typically combines most of its promises into a single performance obligation because the promises are highly interrelated and not individually distinct. Options to acquire additional services are considered to determine if they constitute material rights. At contract inception, the transaction price is typically the upfront payment received and is allocated to the performance obligations. The Company has determined the transaction price should be recognized as revenue based on its measure of progress under the agreement primarily based on inputs necessary to fulfill the performance obligation.

The Company recognizes the reimbursement payments received for research and development efforts in the period when the services are performed, in connection with the single performance obligation discussed above. The reimbursements relate specifically to the Company's efforts to provide services and the reimbursements are consistent with what the Company would typically charge other collaborators for similar services. The Company assesses the uncertainty of when and if any milestones will be achieved to determine whether the milestone is included in the transaction price. The Company then assesses 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 the Company applies the sales- or usage-based royalties recognition exception provided for under ASC Topic 606. The Company determined the application of this exception is appropriate because at the

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time the royalties are generated, the technology license granted in the agreement is the predominant item to which the royalties relate.

The Company determines whether collaborations and licensing agreements are individually significant for disclosure based on a number of factors, including total revenue recorded by the Company pursuant to collaboration and licensing agreements, collaborators or licensees with equity method investments, or other qualitative factors. Collaboration and licensing revenues generated from consolidated subsidiaries are eliminated in consolidation.

The following table summarizes the amounts recorded as revenue from continuing operations in the condensed consolidated statements of operations for each significant counterparty to a collaboration or licensing agreement for the three months ended March 31, 2020 and 2019.



	Three Months Ended March 31,
	2020		2019
ZIOPHARM Oncology, Inc.	$	100	$