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Precigen, Inc. (PGEN)

Q4 2019 Earnings Call· Tue, Mar 3, 2020

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Transcript

Operator

Operator

Good afternoon, and welcome to the Precigen Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, that this event is being recorded. I would now like to turn the conference over to Steve Harasym. Please go ahead.

Steve Harasym

Analyst

Thank you, operator. Welcome to Precigen Fourth Quarter and Full Year 2019 Business and Update Call. I'm Steve Harasym, Vice President of Investor Relations, and I'm pleased to be joined today by Dr. Helen Sabzevari, President and CEO of Precigen; and Tom Samuelson, Vice President of Finance. During today’s call, as seen on Slide 2, 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 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. Helen Sabzevari. Helen?

Helen Sabzevari

Analyst

Thank you, Steve. Please go to Slide 3. I’m extremely pleased to be here today as we have made great progress even since our last public presentation at JPMorgan Healthcare Conference in early January. We enter 2020 with renewed optimism about our ability to deliver on our aggressive goals and add value to shareholders. Precigen’s mission is to improve patient care through innovative gene and cell therapy based approaches. I will review our carefully curated portfolio of unique solutions to unmet needs in health in greater detail. Our approaches are novel and designed to treat conditions that are both difficult to treat and have limited treatment options for patients. Before we give a quick recap of the divestments and transactions that enabled us to advance towards our goal of becoming a dedicated health care company, I thought it would be useful to provide a recap of how far we have come in such a short time as shown in the Slight 3. In Q4 of 2018, we started on the path to becoming a standalone healthcare company by reacquiring the rights to our oncology assets from our former partners. In just under a year, we advance two programs from inception into the clinic and developed a pipeline of promising product candidates in immuno-oncology autoimmunity and infectious diseases. We also took the necessary steps to expand on an already robust [IP estate]. Finally, we consolidated the majority of our operation in our Maryland headquarters and continue to bolster our scientific team here. We believe the transactions that occurred over the last several year’s months put us firmly on the path to being able to devote our resources to advance our healthcare assets and become a major player in the gene and cell therapy field. As you may recall, this included divesting…

Tom Samuelson

Analyst

Thank you, Helen and good evening everyone. There are three key points that I would like to address today. First, as Helen mentioned, we’ve made material progress in narrowing the company's focus to our core healthcare programs and reducing our other capital requirement. A critical component of this pivot was the divestiture of a number of our legacy bioengineering assets, including our shares and AquaBounty for $86.8 million, plus certain contingent payment rights, and the sale of $35 million of common stock. The businesses sold in these recent transactions accounted for $46 million in 2019 segment adjusted EBITDA losses, capital that can be redeployed towards our healthcare assets in 2020. Please recall that Segment A EBITDA, which is more fully defined in our 10-K is generally the sum of net cash operating expenses and capital expenditures. The proceeds from these transactions combined with the company's cash and short-term investments on hand provide sufficient capital to remove the going concern qualification from our 2019 financial statement. We’ve adjusted our 2019 and prior financial statements to reflect the effects of these businesses as discontinued operations. Second, we reported fourth quarter and full year 2019 revenues of [$17 million and $90.7 million] in the consolidated financial results from continuing operations, as we continued our shift from the business model focused on collaboration and licensing revenues to one wholly focused on our internal programs, primarily in human health. Despite pivoting away from a collaboration model, we continue to own the rights to certain legacy milestones in royalties. Any of these, if successful, could result in additional sources of capital for us without requiring any further obligations on our part. Fourth quarter and full year Segment A EBITDA losses, including corporate cost were $37.8 million and $144.4 million, respectively. These annual losses included only $30.2…

Helen Sabzevari

Analyst

Thank you, Tom. In closing our call today, I want to confirm our optimism about precision potential to transform the healthcare landscape with our innovative and focused portfolio. I think you will agree that there has never been a more exciting and promising time at Precigen. As Precigen’s CEO, you have my commitment to manage our company in a financially prudent, fiscally disciplined, and a transparent manner with the paramount goal of achieving our mission to bring novel treatment options to patients. If we do this, all of our stakeholders will benefit. With that, we’ll now open the line for questions. Operator, please begin.

Operator

Operator

Thank you. [Operator Instructions] And our first question will come from Jason Butler of JMP Securities. Please go ahead.

Jason Butler

Analyst

Hi. Thanks for taking the questions and for providing all of the clarity and the updates. Helen, first one just on the UltraCAR-T trials for both 3005 and 3006 can you frame for us how we should think about the readout later this year in terms of patient numbers and maturity of data and maybe if is not specifically in terms of numbers then in terms of how it could inform next steps or potentially progression for pivotal study?

Helen Sabzevari

Analyst

Thank you, Jason. Good evening. Actually, we are very excited for this upcoming interim data, first of all in regard to the ovarian cancer, the IP arm and in regard to the AML that we have non-Lymphodepletion arm to report. As you might have seen in other slides, our trials currently are 3 plus 3 plus 3, there are three doses and as we finished those doses we obviously will be reporting on the safety and dose, which are the paramount aspects of the Phase 1, but at the same token as we have always emphasized what is the most important thing for us is also show that our manufacturing in vivo directly in patients to show the persistence and also the expansion of T cells. So, we are looking forward to show some of the interim data by the second half of 2020 and it’s quite exciting for us as we go through this journey and we continue to then expand these patients through Phase 1b.

Jason Butler

Analyst

Great. And then, I had a question on AG013 and the interim results upcoming, how should we think about the magnitude of treatment as tat get in terms of what would be clinically important to patients and then in terms of the oral mucositis endpoint, can you talk to us about subjectivity of the endpoint and how you're controlling for that and any expectations for either reduction in analgesic use or potential to prolong radiation dose? Thanks.

Helen Sabzevari

Analyst

Absolutely. Thank you. So, actually the AG013 is a very exciting program for the platform of ActoBio. As you know that ActoBio platform uses our elective delivery mechanisms for delivering different protein specifically to the mucosal linings. In the case of overall mucositis, this is a devastating disease, especially after the treatment of head and neck cancer patients with chemo and radiation. There are tremendous also in the mouth, which is quite painful and currently there is really no treatment for this. In the phase 1 of the studies that was done, we have designed elective in such a way that it delivers a gene that protects and also stimulates the lining of the mucosal lining of the mouth and we had a very exciting result in the first Phase 1 showing reduction in the ulcers and actually the level of the pain and now we have entered and actually finished enrolment of the patients in 2019 in the Phase 2 that it’s done in a randomized fashion. So there is a placebo arm versus the treatment arm, which is quite important and one aspect that is quite exciting based on the Phase 1 data, FDA has given us a fast track for this indication currently. And this is, would be the first proof of this platform, actually for ActoBio, which we also have exciting trial ongoing in the T1D Type 1 diabetes, which we are anticipating to actually report on in second half of 2020, using similar actual platform, but delivering a proinsulin as well as IL-10, which suppresses the immune system, but actually it helps the onset of, it reduces the onset of diabetes and we had a very encouraging preclinical data, the Phase 1 data and now the Phase 2a will be recorded in second half.

Jason Butler

Analyst

Okay, great. That’s helpful. And then just one last financial question, and sorry if I missed this in your prepared comments, but should we expect any further reorganization charges and if so how should we think about those in terms of cash versus non-cash spend?

Helen Sabzevari

Analyst

So, currently I think we are not expecting any further reorganization charges and as we mentioned by the end of January all the assets will transferred to third security and currently we do not expect anything in that lab.

Jason Butler

Analyst

Okay, great. Thank you for taking the questions.

Helen Sabzevari

Analyst

Sure. Thank you, Jason.

Operator

Operator

[Operator Instructions] Our next question will come from will come from Swayampakula Ramakanth from H.C. Wainwright. Please go ahead.

Unidentified Analyst

Analyst

Thank you. This is RK from H.C. Wainwright. Good evening, Helen. A couple of quick questions. For the non-oncology asset AG019 and by an extent 4001 what do you plan for these assets in the long-term, the reason for that question is, as you can imagine as these assets get into late stage development they could become cash intensive because of the large clinical trials that you would need to conduct, would these be assets that can become currency in terms of out licensing?

Helen Sabzevari

Analyst

Thank you, RK. Great, questions. So, we agree. We have a portfolio of maybe I should just first give a few minutes on the reason that we have a portfolio that we have. The strength of our portfolio is that we are not a one drug product company. It becomes very important because when you are one drug product company, basically despite of what the science might be or might not be you are committed somehow. Whereas the way we have arranged our portfolio is that it’s in such a manner that we prioritize and make it go no-go decision based on data and we know the attrition of a portfolio and therefore it’s very, very important that we keep a fiscal responsibility with very, very laser-focused decision making to address our portfolio. In regards to the assets that we have highlighted for this year, actually this has been a our principal factor behind it. We are looking at our data, we are evaluating the rest of the data that come in its totality and then there will be decisions made that if these assets will go to the next levels of development or not. However, what is very important as a fourth pillar that I mentioned as part of our principal is a strategic partnership, and this is very, very important for us in our portfolio. And to your point, obviously and I'm going to stress this over and over again. We will not take every asset forward ourselves. We will also look into strategic partnership that will bring the most value for our shareholders. And I think this is a pillar for us that it would allow us to manage our portfolio accordingly and make the decision with the right partners with the right speed and with the right cash to make these things and move them forward and definitely as you have mentioned this is one of our strategic responsibility and platforms that we have for these assets.

Unidentified Analyst

Analyst

One other question of a similar range, the two non-held assets that you discussed about in your remarks and though you did state that at some point it would get divested, is there a time point when time point when you think you would diverse especially when they are currently giving you some revenues, which could help in your pipeline development and so once the pipeline gets certainly mature stage. Would that time be the right for the divestment of those two?

Helen Sabzevari

Analyst

Absolutely. So, for our MBP Titan subsidiary as currently we are obviously are not receiving revenues from this subsidiary. However, we are – as mentioned, we are committed to make sure that we are fiscally managing this subsidiary and the final end point for us is to partner or sell this asset. As far as time is concerned, as you know last year we have David Witte with us, who is currently managing the strategy for this partnership and in due time we will be actually reporting on that aspects. In regards to Trans Ova, you are absolutely correct. This is a subsidiary that as we mentioned, we have already implemented so the fiscal measures here that would allow us the Trans Ova to bring capital back to Precigen this year, and this was one of the reason that as we basically raised our $175 million by January, we saw that there was no rush in divesting this asset any further at that moment, especially due to the last year's challenges that dairy market had, and by making it cash positive actually you are absolutely correct. This can add value, but at the same token, we have our focus directly on health and expansion our health assets and what we will be doing is strategically looking at all of our options with having a fiscal responsibility in regard to Trans Ova and ensuring that Trans Ova is cash positive for the rest of Precigen.

Unidentified Analyst

Analyst

Thank you, Helen. Thank you for taking my questions.

Helen Sabzevari

Analyst

Thank you, RK.

Operator

Operator

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Helen Sabzevari for any closing remarks. Please go ahead man.

Helen Sabzevari

Analyst

Thank you for taking the time to join us for our business and pipeline update. We look forward to providing you with updates in the coming months and have a wonderful evening. Thank you, again.

Operator

Operator

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