Precigen, Inc. Q2 FY2022 Earnings Call

Good day, and welcome to the Precigen Second Quarter and First Half 2022 Financial Results Conference Call. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Steve Harasym, Vice President of Investor Relations. Please go ahead.

Thank you, operator, and thank you for joining us today. With me are Dr. Helen Sabzevari, President and CEO of Precigen and Harry Thomasian, our CFO. Helen will provide an update on the significant progress we have made across our pipeline programs and highlight our anticipated upcoming milestones. After which, Harry will review our second quarter and first half 2022 financial results. Following our prepared remarks, we will open the call to Q&A. Before we begin, please note that during today's call, we will make various forward-looking statements. Investors are cautioned that such 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 on forward-looking statements. Please read the safe harbor statement contained in this presentation as well as risk factors contained in Precigen's most recent SEC filings for a more complete discussion of the risks and uncertainties. I would now like to turn the call over to Dr. Sabzevari. Helen?

Thanks, Steve, and thanks to all of you for joining us today. We are all accurately aware of the seismic shifts shaping the new biopharma landscape. The rules of the past for biotech success in terms of access to capital, clinical trials, regulatory pathways, manufacturing, pricing, and commercialization are changing. Traditional funding methods have become more challenging, and supply chain issues have led to bottlenecks in traditional manufacturing approaches. Clinical trials that relied on centralized product manufacturing to supply products to sites were particularly hard hit, therefore creating the need for a new paradigm. Biotech companies are effectively having to reinvent themselves for these new times. My goal today is for you to leave this call with an understanding of Precigen’s efforts over the last several years that we believe have enabled us to thrive in these uncertain times. Not only that, but we are one of the few companies that have advanced multiple first-in-class clinical platforms and clinical programs in a highly efficient and rapid way during the pandemic. Localizing our manufacturing process has allowed us to eliminate many of the costs and time constraints inherent to the traditional production methods for cell therapies. This has enabled us to adapt to the new biotech landscape while also providing a robust foundation for advancing new treatments for patients quickly. The key to success is a strategically focused business model designed to optimize resources and generate returns for shareholders and, most importantly, treatments for many patients in need. The Precigen strategy consists of three core pillars as shown here: First, focus on markets with ultra-high unmet need. Our deep clinical pipeline intentionally prioritizes disease indications that require new approaches to treat underserved or unserved patient populations. Such indications usually offer potential for rapid development through accelerated regulatory approval pathways. The route to commercialization for these specialty indications includes a relatively focused prescriber base that could allow us to commercialize some of these products on our own. Over the last several years, we have carefully prioritized these indications within our pipeline. Next, we are optimizing our research, development, and manufacturing operations. Our approach employs resources such as Cooperative Research and Development Agreements, or CRADA, and making early decisions to favor therapies with a higher probability of success. Our platform technologies are designed to address critical limitations in cell and gene therapy to reduce economic barriers to care. For example, our overnight UltraCAR-T platform could enable cancer centers across the globe to deliver cutting-edge therapy to patients who require rapid treatment. We expect consistent manufacturing across multiple sites to decrease costs and provide access to a larger patient population. Finally, we are pursuing differentiated therapies at potentially disruptive prices. Platforms that produce truly differentiated products with substantially lower COGS relative to CGT benchmarks could enable a compelling competitive value proposition. We have changed the paradigm in the development and manufacturing chain to realize efficiencies whenever possible. We believe this commitment to continuous improvement would yield cost savings for the health system at large. Let me now provide an update on our clinical portfolio, which can be seen on the next slide. First, our UltraCAR-T trials. As previously announced, we received Fast Track designation for PRGN-3006, or UltraCAR-T therapy for acute myeloid leukemia, or AML, an indication with a high unmet need. Fast Track designation can help expedite the FDA review process and facilitate product development. Enrollment is ongoing in the Phase Ib expansion arm at Dose Level 3 with lymphodepletion, and we plan to incorporate redosing this year as needed. We are pleased to announce activation at the Mayo Clinic in Minnesota, a world-renowned cancer center, as an expansion site for the Phase Ib study of PRGN-3006. Tech transfer was successfully completed, and the FDA has cleared Mayo Clinic as a manufacturing site. We anticipate dosing the first patient at Mayo Clinic very soon. This is an important milestone for us and for the platform, as the only company to demonstrate proof-of-concept for a streamlined tech transfer and scale-out of the decentralized UltraCAR-T manufacturing using the UltraPorator at multiple medical centers. We anticipate activating additional sites over the next several months. Finally, we are excited to provide Phase I data at a major scientific conference in Q4 2022. As announced earlier, we have also completed enrollment in the dose escalation phase of both the intraperitoneal and intravenous arms of the PRGN-3005 Phase I trial, our UltraCAR-T for the treatment of advanced ovarian cancer. After dosing the first patient at Dose Level 1 in the IV arm, the FDA cleared moving directly to Dose Level 3. This allowed us to rapidly complete enrollment in the IV arm of the Phase I dose escalation trial and introduced lymphodepletion at Dose Level 3 of the IV arm, which has now completed dosing. Patient follow-up is ongoing, and we are looking forward to reporting the Phase I data in the first half of 2023. The plan to initiate a multicenter expansion in a Phase Ib trial of PRGN-3005 with tech transfer and site activations is underway at multiple centers. In addition, we intend to incorporate redosing in this trial as needed. Our next UltraCAR-T trial, PRGN-3007, which is being evaluated in the treatment of advanced receptor tyrosine kinase-like orphan receptor 1-positive, or ROR1+, hematological, and solid tumors, uses our next-generation UltraCAR-T technology and incorporates intrinsic PD-1 checkpoint inhibition in addition to the three effector gene CAR, membrane-bound IL15, and a kill switch expressed in the first-generation UltraCAR-T technology. The Phase Ib umbrella trial in ROR1+ hematological tumors, including chronic lymphocytic leukemia, mantle cell leukemia, acute lymphoblastic leukemia, and diffuse large B-cell lymphoma, as well as solid tumors, including triple-negative breast cancer. Our team has been working diligently on the complex logistics of the first-in-class next-generation UltraCAR-T umbrella trial, which would allow for the enrollment of up to five different indications across hematological and solid tumors and decentralized manufacturing. I'm pleased to report that we are on track to initiate dosing soon. Now turning to our AdenoVerse platform, PRGN-2012. Our AdenoVerse Immunotherapy in recurrent respiratory papillomatosis, RRP, which began dosing in April of 2021, completed enrollment in the Phase I study, which included both dose escalation and dose expansion in less than nine months. Patient follow-up is ongoing. Last year, we provided an R&D update on our broader portfolio. This year, we are planning to provide more targeted updates and are excited to have the opportunity to present to you what we expect to be a compelling investigator-led presentation on the Phase I data in Q4. In addition, we have initiated dosing in the Phase II study and have enrolled 11 patients to date. We look forward to providing you with the regulatory updates as they become available, given the high unmet need of this indication. Finally, for an update on PRGN-2009, our AdenoVerse Immunotherapy in human papillomavirus HPV-associated cancers. Enrollment is now complete for six patients in the Phase I monotherapy and 11 patients in the combination therapy arms in patients with recurrent or metastatic HPV-associated cancers. Patient follow-up is ongoing. And we anticipate an investigator-led Phase I data presentation, both in the mono and combo arm in the first half of 2023. Enrollment is ongoing in the Phase II monotherapy arm in newly diagnosed oropharyngeal squamous cell carcinoma patients with 17 patients enrolled to date. We believe this program has broad potential as HPV-associated malignancies account for 5% of all cancers. We are evaluating potential opportunities in indications such as cervical, head and neck, and anal cancers. I would like to conclude this section with an update on AG019, our therapeutic candidate for Type 1 diabetes using our ActoBiotics platform. We continue discussions on the design and manufacturing of the Phase III trial with both the EMA and FDA. Given the chronic nature of the disease, it will require significant investment in Phase III trials, which we believe will be best served through a partnership. Meanwhile, partnership discussions are continuing, and we look forward to updating you on developments as they become available. I will now turn the call over to Harry, who will review the terms of the Trans Ova sale, our cost reduction initiatives, and our second-quarter 2022 financial highlights.

Thank you, Helen. Good afternoon to everyone joining us today. As announced last month, we have entered into a definitive agreement for the sale of our Trans Ova Genetics subsidiary to the URUS group. Under the terms of the transaction, which we expect to close in the third quarter of this year, we will receive $170 million in cash upfront and up to $10 million in total earnouts tied to Trans Ova's performance in 2022 and 2023. The proceeds from this sale will provide non-dilutive funds to pay our convertible notes, which we intend to do so when due, and will significantly strengthen our balance sheet. The closing of this transaction remains subject to certain conditions, including HSR approval. The slide on the screen now summarizes our second quarter and first half 2022 financial highlights. As Helen alluded to earlier, we have pursued a variety of cost reduction initiatives. This includes the right-sizing of our corporate overhead and prioritizing our portfolio to efficiently maximize our investments to advance programs through the clinic. In addition, as we pay down our convertible notes, we will not have future interest costs. I'd like to take a few minutes to review our second quarter and first half financial results. Net cash used in operating activities was $25.8 million during the six months ended June 30, 2022, compared to $24.2 million during the six months ended June 30, 2021. This increase in cash used in operations is primarily due to the reduced cash inflows from our Trans Ova and Exemplar businesses, which we believe to be timing differences. Cash, cash equivalents, short-term and long-term investments totaled $132.8 million as of June 30, 2022. In addition, consistent with my comment on focusing on cost reduction initiatives, selling, general, and administrative costs have decreased for both the three and six months ended June 30, 2022, compared to the prior year periods. Finally, it's important to note that as a result of the anticipated Trans Ova Genetics sale, the Trans Ova Genetics business is now classified as a discontinued operation, with its assets, liabilities, and operations in the prior periods reclassified to conform to the current presentation. In regards to the Trans Ova sale, as I mentioned a moment ago, the proceeds from this sale provide non-dilutive capital that we can use to address our convertible debt. Taking into account our cash on hand, including investments, cost reduction initiatives, and expectations for the convertible notes, we believe that we have cash runway into the fourth quarter of 2023. We continue to focus rigorously on the support of our clinical priorities. I will now turn the call back to Helen.

Thank you, Harry. Realizing the clinical and commercial potential of our core assets requires continued execution of our clinical and corporate strategies, and we expect to achieve a number of important milestones in 2022 shown here. On the corporate side, the sale of Trans Ova Genetics is expected to close in the third quarter, allowing us to address our convertible debt. On the clinical side, we expect to increase our decentralized manufacturing footprint across multiple geographically diverse sites, which expands patient access to our UltraCAR-T investigational treatments. We expect to initiate the Phase I study of PRGN-3007 in patients with ROR1-positive tumors across five different hematological and solid cancers. We also expect to initiate a multicenter expansion of the ongoing Phase I/Ib trial of PRGN-3006 in patients with AML and Phase Ib trial of PRGN-3005 in patients with advanced recurrent platinum-resistant ovarian cancer. The expansion of both trials will incorporate repeat dosing as needed, and the PRGN-3005 trial will also incorporate lymphodepletion at Dose Level 3 of the intravenous arm. We look forward to presenting additional compelling data from the ongoing Phase I and Ib trials of PRGN-3006 at a major medical conference in Q4, and for PRGN-2012, we are looking forward to sharing compelling data and providing strategic regulatory updates as they become available. That concludes our prepared remarks for today, and we are now happy to take your questions.

We will now begin the question-and-answer session. The first question is from Nick Abbott with Wells Fargo. Please go ahead.

Good afternoon. Thanks for taking our questions and congratulations on the Trans Ova sale. It must be a relief. The first question is on Exemplar. Is that business something you want to keep or something that you want to sell to further extend the runway? And then I have a follow-up. Thanks.

Hi, Nick. Thank you for the question. And as we have mentioned in prior question and answers, our subsidiaries such as Trans Ova as well as Exemplar both are strategic subsidiaries, and we have been very happy with the way that we have maximized the value of Trans Ova, which, as you can see now, can really address our convertible note. Similarly, for Exemplar, of course, this is a strategic asset that we have, and we are currently evaluating the position of Exemplar and how in the future we can maximize its value as well as how we can use it for advancing the health portfolio of Precigen.

Okay, thanks, Helen. So it sounds like you might want to keep that because it's a strategic asset for the company's internal pipeline. Is that a way to…

The way we look at this subsidiary is not necessarily to see at what point and from what perspective we have maximized the value and how financially that can be used to advance the health portfolio. And if a sale would be the outcome, then obviously that's one of the paths that we have, and we have used that for Trans Ova.

Okay, thanks. And then through your prepared remarks, for the UltraCAR-T that the FDA has cleared Mayo as the site for clinical manufacturing, what does that entail this process of getting FDA approval to manufacture on site?

Yes. So actually this is quite exciting because, number one, it shows the power of decentralized manufacturing. As you know, with all the other CAR-T and TCRs, and in general, all cell therapies, all of the companies are using certified manufacturers on one site usually, which they have to be certified by the FDA. What we have done is really unprecedented because no other company has been able to manufacture their CAR-Ts on multiple sites and especially in the hospitals overnight. The process, obviously since this is first-in-class and differentiated, the FDA had to look at the comparability of the manufacturing between the sites. For instance, and as you can see that with the tech transfers and engineering runs done at the Mayo Clinic, we were able to establish that comparability, and we are very excited about not only expanding this decentralized manufacturing but also having sites such as the Mayo Clinic, which is a world-renowned center of excellence to join us. One other thing I would like to add is that we have a group of sites that will be joining us in the coming months across various states including California, New York, Illinois, and Arizona, and in metropolitan areas around Maryland, DC, and Virginia. So we have a number of excellent cancer centers that you will be seeing in the very, very near future for our expansion sites. And we are very excited about that because it solidifies these decentralized manufacturing ideas.

Thanks, Helen. And are there any Precigen employees on site?

No.

Manufacture? No.

No. Absolutely not. And that's, again, speaking to the way that we started and perceived this manufacturing. The whole purpose was that this would become differentiated manufacturing that can be done at the hospitals at the cancer centers overnight with the employees of the hospital, and that's exactly what we have done.

Terrific. Thanks, Helen.

Sure. Thank you, Nick.

The next question is from Ben Burnett with Stifel. Please go ahead.

Hi, Ben.

Hi, thanks for taking our question. We just have one quick one regarding PRGN-2012. I'm wondering if you could provide any additional details about the Phase I update planned for the fourth quarter, specifically regarding patient size or data that may be presented. Thank you.

Absolutely. So based on what we mentioned, we finished the Phase I and Phase Ib in December of 2021 with a total of 15 patients, and we are really excited. In the next few months, we will have a dedicated presentation by our investigators on that data, and we will show, as mentioned, we feel this is extremely compelling data for this rare disease, especially for the first time showing the power of our AdenoVerse platform in this setting. At the same time, our investigators have moved very rapidly to Phase II. As mentioned, they have already enrolled 15 patients in the Phase II since December, and it is a very exciting time for us with the AdenoVerse platform and in the RRP setting. So in the next few months, we will be communicating the exact date and time, and we look forward to showing a very comprehensive set of data.

The next question comes from Jason Butler with JMP. Please go ahead.

Hi. Thanks for taking the questions and congrats on all the progress. I just had another one on the UltraCAR-T platform and the tech transfer process. Can you just give us a sense of what you've learned from this first process with the Mayo Clinic and how essentially process-driven you think that the incorporation of new sites can be in the future, how quickly it could take to get new sites up and running not just for the same program but for anything under the platform eventually?

Yes. Thank you, Jason. Excellent question. That's exactly the purpose because when we set the first sites and obviously throughout the Phase I arms of the trials, we had generated a substantial amount of data on the manufacturing as well as the assays involved and the requirements. Now that we've finalized the doses and are moving to the expansion Phase Ib, it was extremely important to show that this manufacturing can be replicated at multiple sites because the biggest issue that the field of cell therapy has in general, and it doesn't matter if you look at it from the details all the way to the conventional CAR-T cells, is manufacturing. The classic manufacturing has one set of CROs that do this; it's centralized. The fact that we can go from one center to another center and have generated SOPs that transfer from centers and generate similar databases has really changed the paradigm here. Of course, now as we have the first site with Mayo coming online, you can expect that in the next few months, very rapidly, other sites will come on board. This allows the vision we had for decentralized manufacturing around the U.S. and eventually globally. As we will show in the next few months, we have centers across the United States that have gone through engineering runs and tech transfers and are starting to dose patients; this requires comparability of manufacturing. Otherwise, you cannot do this if you have not shown that. This is a very significant part of our manufacturing that no other company has had.

That's great. Thanks, Helen. And then on PRGN-2012, obviously you're continuing dialogue with FDA on the regulatory path, but can you give us any updated thoughts on what you think the right pivotal program looks like for RRP? Thanks.

Sure. We are in discussions with the FDA regarding the regulatory path. Of course, this is a rare disease, and we would like to see our Phase II in discussions with the FDA on how we can reduce the time to approvals for this patient population, who are underserved and have no other choice except surgeries. We have a very dynamic dialogue with the FDA, and I can tell you this is very exciting because we are seeing how we can rapidly bring this asset to approval and commercialization for the patients who deserve it. We will be reporting on that in the next few months, and as I mentioned, the first set of data on the first 15 patients will also be reported, which we are very excited about. I think that will give a flavor of how important this platform is for the patients.

Okay, great. And then just last one for me. Is there any benefit to retiring the convertible notes earlier than the maturity date? Or does that not make sense for you guys? Thanks.

We're still looking into that. We do not plan to formalize a tender offer, but we may negotiate individually with…

Yes. And of course, the advantage is we can always look at the reduction of what the factors we can do and get some relief from the interest that we have.

Okay, great. Thanks again for taking the questions.

Sure. Thank you very much, Jason.

The next question is from Arthur He with H.C. Wainwright. Please go ahead.

Good afternoon, everyone. First, congratulations on the progress during the quarter. I have two quick questions. The first is about the 3005 and 3006 program for repeat dosing. Are there any standard operating procedures included in the protocols for the repeat dosing, or is it left to the physician's discretion?

No. First of all, we had to get amendments from the FDA for the clinical protocols, which we have received for all the programs. However, this is at the discretion of the physicians and investigators. That’s important to emphasize because, unlike some of the off-the-shelf products that require multiple dosing right upfront, like 300 million every week for three weeks, which brings you to a billion, our investigators have been following the patients and looking at the patient data. We do not have that kind of requirement. Therefore, this is at the discretion of the investigators to see if a patient might need it based on the kinetics of the expansion or persistence or the course of the disease. If that is the case, then they have the option to use this. This really speaks to the differentiated path of UltraCAR-T versus off-the-shelf or all the other CAR-T therapies because this allows you to go in any time that you want, and if you need to redose or give another dose, then you add, and that’s the advantage we have, but no other companies have this available at the moment.

Got it. Thanks for that color. And my second question regards the 3007 program. Besides the triple-negative breast cancer, could you tell us if there are any other solid tumors included in the basket cohort and why specifically you focus on the triple-negative breast cancer first? Thank you.

Yes, thank you for asking regarding 3007. This is one of the more complex programs because of the umbrella nature of it. It was necessary to pass through the IRBs that oversee both the hematological side and solid tumors. That is one of the aspects we are looking at; once we receive the IND and we are dosing this year, that's number one. I want to mention the complexity of the sites that they have to do this. In regard to 3005, this can be expanded in other solid tumors like pancreatic and lung cancers, but currently, with the triple-negative breast cancer, that represents another underserved area for CAR-Ts. Solid tumors are overall underserved, but we currently have one in ovarian cancer. There are very limited treatments for patients with triple-negative breast cancer; it's quite aggressive. We believe that our UltraCAR-T targeting ROR1 has a very high possibility for this patient population whose response rates are similar to ovarian cancer, or even worse. For that reason, we chose this. Also, ROR1 expression is high on other solid tumors such as lung and pancreatic, so that can also be added to the bucket.

Thank you for taking my question.

Sure. Thank you very much.

The next question is from Jennifer Kim with Cantor Fitzgerald. Please go ahead.

Hi, Jennifer.

Hey, everyone. Congrats on the progress this quarter and thanks for taking my questions. I have two here. I guess my first question is I understand that the repeat dosing is at the discretion of the investigators. So I'm wondering, do you have a timeline in mind on when we might anticipate having data on patients who do receive repeat dosing? My second question is broader, with the Trans Ova divestiture, has anything changed in your mind in terms of portfolio prioritization and added flexibility to explore opportunities that you weren't able necessarily to consider beforehand? Thanks so much.

Sure. Thank you, Kim. So in regards to the redosing, we expect that, especially in both hematological and solid tumors, that some of our investigators will introduce redosing as they follow their current patients. This is one of the things that we mentioned over time, one of the shortcomings of cell therapies, other CAR-Ts and TCRs is that you can only manufacture once and give one time. Then that course is over, both because of the complexity of manufacturing but also from the perspective of price tags associated with them. In regard to the Trans Ova and how that shapes our portfolio, it is very important because the convertible note being addressed in a non-dilutive form has provided significant benefits to the company. Now we do not have to divert resources to pay non-convertible notes. As Harry mentioned, we have a solid runway through the fourth quarter of 2023, which allows us to expand our clinical timelines for reporting data, benefitting from this financial strength without having to divert funds from our clinical trials to resolve convertible notes. This effectively reduces pressure on us during financial times and prevents dilution of our investor base. We are very happy about that. We have prioritized our portfolio according to the three pillars of strategy we have mentioned. Even regarding our AG019 program for type 1 diabetes, we feel it is best served with a partnership, and discussions continue. We look forward to reporting on that soon.

All right. Very helpful. Thanks so much and congrats again.

Thank you very much.

This concludes our question-and-answer session. At this time, I would like to turn the conference back to Dr. Sabzevari for closing remarks.

Thank you, and thank you for taking the time to join us for our update call. We look forward to communicating further in the near future, and we will be in touch for the announcement of our discussions on PRGN-2012 in the upcoming months. Thank you very much.

This concludes the conference. Thank you for attending today's presentation. You may now disconnect.