Precigen, Inc.
Q2 2020 Earnings Call Transcript

Published: 11 Aug 2020

[Operator:]

Good afternoon. Welcome to the Precigen Second Quarter and First Half 2020 Financial Results and Business Update Conference call. [Operator Instructions]. I would now like to turn the conference over to Steven Harasym. Go ahead.

[Steven Harasym:]

Thank you, operator. I'm pleased to be joined today by Dr. Helen Sabzevari, President and CEO of Precigen; as well as Tom Samuelson, Head of Financial Strategy. [Operator Instructions]. Please turn to the next slide for our forward-looking statement. During today's call, we will make various forward-looking statements. Investors are cautioned that our forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those indicated by our forward-looking statements. Please read the safe harbor statement contained in this presentation as well as the risk factors contained in Precigen's most recent SEC filings for a more complete discussion of these risks and uncertainties. I would now like to turn the call over to Dr. Sabzevari. Helen?

[Helen Sabzevari:]

Thank you, Steve. I hope that this call finds all our listeners and their families safe and healthy as our nation continues to work through COVID-19 pandemic. At Precigen, the health and safety of our employees is of the utmost importance. Our R&D staff has been back in the office full-time and are getting tested on a regular basis. Employees are practicing appropriate safety measures, including social distancing, rigorous disinfection protocols and use of personal protective equipment while in our facility. Despite these challenging times, our team has adjusted well to this new normal, and currently, we remain on track to meet our previously stated clinical milestones and data readouts this year. This is meaningful for our team as we are able to execute on our mission to deliver novel treatment options to patients with unmet medical needs. Next slide, please. I would like to begin by giving brief financial update, highlighting our continued focus on fiscal and operational efficiency, all with the aim of increasing shareholder values. In the second quarter of 2020, Precigen spending, which includes segment adjusted EBITDA plus corporate costs, was approximately $13 million versus $30 million in the first quarter of 2020. This decrease was primarily attributable to suspending operations at MBP Titan and streamlining our corporate functions to feed the narrower focus of the company. We expect the spend at MBP to continue to substantially reduce as we evaluate the strategic options for this platform. Furthermore, our financial performance at both Trans Ova Genetics and Precigen Exemplar improved as the result of the efficiency measures we have implemented with both entities who are contributors of cash through Q2. These measures and other efforts have positioned us to operate comfortably into the late 2021 without the need for additional cash. Tom will provide additional details later in the call. Next slide, please. Turning now to our UltraCAR-T platform. When we began this journey at Precigen, our vision was to develop a nonviral rapid autologous T-cell therapy that can be scaled up in a cost-effective manner that is accessible to any cancer patient. We identified 3 major technical hurdles that we believe were essential to overcome in order for the nonviral Sleeping Beauty platform to cross the threshold of being commercially viable. The first challenge was to be able to generate a homogeneous cell product that can expand in vivo and, thus, forego lenti ex vivo expansion. We achieved this by optimizing the nonviral system to simultaneously express 3 genes

[Tom Samuelson:]

Thank you, Helen, and good afternoon to our stakeholders on the call. Today, we report progress in reducing our capital requirements and maximizing our cash runway. In Q2, Precigen acquired $13.1 million, a reduction of $18.8 million or 59% versus Q2 '19 and a reduction of $16.6 million or 56% versus our previous quarter Q1 '20. Unallocated corporate costs were $4.1 million or 36% lower than Q2 '19 due in large part to a 25% reduction in corporate employees and a decrease in professional fees as we streamlined our organization. Further savings were realized by our decision to suspend operations at MBP Titan and improved financial performance at operating subsidiaries, Trans Ova Genetics and Precigen Exemplar. At the beginning of this year, we identified a number of initiatives at Trans Ova aimed at increasing profitability, predominantly through growing out our high-margin service business and reducing various ancillary offerings and overhead costs. We are happy to report that despite ongoing economic challenges in the dairy and beef markets, H1 gross margins at Trans Ova expanded to $14.9 million, a $4.6 million or 45% increase over 2019, and segment AEBITDA doubled. We're also encouraged by continued growth in both revenue and segment AEBITDA at Precigen Exemplar, highlighting a growing market for predictive models of human diseases. Exemplar's H1 revenue grew $1.2 million to $4.3 million, and segment AEBITDA expanded $2.7 million to $0.9 million, reflecting growth despite reductions in operating costs. Both Trans Ova and Exemplar contributed cash to Precigen, and we anticipate that both will continue to do so. The present global economic conditions necessitate careful monitoring, and we will remain vigilant to developments that may occur in the industries in which we operate. While our net loss of $43.4 million or $0.26 per basic share exceeded that of Q2' 19, the majority of this loss, $31.7 million, was noncash. We recorded $22 million in noncash impairment charges in conjunction with the suspension of MBP Titan's operations. At June 30, we had cash, cash equivalents and short-term investments of approximately $133 million. Based on our present expectations, we anticipate these funds would be sufficient to fulfill our capital requirements into late 2021. We encourage you to read our 10-Q, which provides more information about all of the matters that I've discussed today. I would now like to turn the call back over to Helen.

[Helen Sabzevari:]

Thank you, Tom. I'm extremely thankful to our team, which continues to advance our portfolio during this unprecedented time. In the second half, we have started to report a number of data sets and achieved milestones we set forth in early 2020. At Precigen, we realize that only by efficiently translating research into therapies can we deliver benefits to patients with unmet medical needs and, in turn, create value for shareholders. For this reason, we are setting ambitious drug development time lines for ourselves as evidenced by our progress since the start of this year. We remain confident in our innovative and focused portfolio and look forward to providing you with the updates in the coming weeks and months. With that, we will now open the line for questions. Operator, please begin.

[Operator:]

[Operator Instructions]. Our first question is from Jason Butler from JMP Securities.

[Douglas Buchanan:]

It's Roy in for Jason. I guess the first couple on the UltraPorator. Maybe I missed it, but did you say what the total manufacturing time you think you can achieve with this new device? How much further do you think it can be improved? And what process improvements are you considering to get to that time?

[Helen Sabzevari:]

Thank you for the question. Very good question. When we started actually advancing the UltraPorator CAR and in our discussions even with the FDA from the first moment was not only achieving all the criteria that was necessary, but what does it take for this process of overnight to be scalable globally and reduce the, really, handling and advance the, basically, technology to the point that we can go from hours of handling samples that is required for transaction and with the current electroporators, as you have seen in the slide, for instance. In order to process hundreds of millions, it takes many, many, many hours, which introduces a lot of issues with contamination, also mistakes. And we decided in conjunction and discussions with the FDA to -- as we were advancing the platform, to come up with a device that can basically withstand the commercially viable production of the UltraCAR-T, and as a result, was the UltraPorator. As you see in the slides -- and by the way, obviously, these slides are shown in a cartoon and -- to just get the point across. But currently, the UltraPorators are being implemented at our clinical sites, and especially as we are moving rapidly toward our expansion phases, which is quite exciting for us, it's being implemented and tech transfer is done. We are going and we are reducing number of hours in handling and processing of hundreds of [indiscernible], which otherwise would have been handled in a matter of -- to go from 2 to 3 hours to under 12 minutes process. This is how important this manufacturing device is, and it reduces the -- basically, the processing and handling, which can lead to contamination and others and failures of manufacturing. We anticipated this when we started this journey. And I am really proud of the team that they -- we have brought this forward in exact time lines that we had set and we had discussed with the FDA, and now we also have the FDA clearance for our clinical trial to implement it.

[Douglas Buchanan:]

Great, great. And a question on PRGN-3005. You're at the third dose level. What's the initial data readout going to include? And could that include more than the first three doses?

[Helen Sabzevari:]

Yes. So what we are currently doing, obviously, the safety, and it will have the kinetics, as we have discussed. And we will make a decision as we are enrolling other patients and move towards perhaps expansions. That's how we will communicate that also.

[Operator:]

[Operator Instructions]. Okay. At this time, we have no questions. We'll turn it back to Helen Sabzevari for closing remarks.

[Helen Sabzevari:]

Thank you again for joining us on today's call. We are very excited with our progress and look forward to providing further updates in the near future. Thank you.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.