Precigen, Inc. Q1 FY2023 Earnings Call

Good morning and welcome to the Precigen First Quarter 2023 Financial Results and Business Update Call. All participants will be in listen-only mode. 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, Ryan, and thank you to everyone joining us this morning. With me today are Dr. Helen Sabzevari, President and CEO of Precigen; as well as Harry Thomasian, our CFO. Helen will provide an update on the progress we have made across our pipeline programs and highlight our upcoming milestones, after which Harry will review our first quarter 2023 financial results. Following our prepared remarks, we will open the call to Q&A. Before we begin, I'd like to briefly review our forward-looking statements. 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 from those indicated by our forward-looking statements. Please read the safe harbor statement as well as risk factors contained in present in the 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. Before I provide an update on our lead clinical programs, I want to emphasize the four clinical principles that are the foundation of our approach to innovating therapies that have the potential to transform patient care and outcomes. First, we focus on indications that have high unmet need and for which new therapeutic approaches are urgently needed. Second, we strive to develop therapies that are differentiated, not only by the clinical benefit they provide but also by potentially disruptive pricing. A key limitation of many recent breakthrough therapies, especially those in the cell and gene therapy spaces, is pricing that can create significant barriers to access and impose substantial financial burdens on health systems and payers. Thus, we are committed to innovating not only new treatment modalities but also novel modes of manufacture and delivery designed to enable more cost-effective pricing. Third, we pursue programs that we believe have potentially rapid paths to commercialization. This approach allows us to address unmet patient needs as rapidly as possible and moves us more quickly to generating product revenues that will build long-term value for our shareholders and sustain our ability to advance and expand our pipeline. Finally, we are committed to executing a cost-effective R&D model and maintaining fiscal discipline. As Harry will review later in the call, we currently have a capital run rate into late 2024, which we anticipate would allow us to continue demonstrating important progress across our clinical development portfolio. Now I'd like to provide you with highlights of our portfolio and capture what we have accomplished in the first quarter of this year. The first platform that I will be discussing is our AdenoVerse platform. I am sure many of our audience are familiar with this platform. This is a unique and differentiated platform that uses gorilla adenoviruses. We have full IP around this, and basically, these unique gorilla vectors allow us to introduce a large payload capacity, meaning you can put many genes—up to 12 kV—many epitopes that can be combined and delivered. Secondly, and very importantly, as far as differentiation is concerned with other platforms, such as AD5 retroviruses or lentiviruses, is the ability of complete redosing, which enhances the immune response. I highly recommend if you have not seen the video of this platform to please go to our website and take a look at this. The way this platform works is to educate your immune system directly from within, and by giving these therapeutic drugs, you can enhance the T cell responses while in antibodies at bay, which makes this platform we believe superior to other platforms. What we have done is brought two drug products. The first one that I will be addressing is our PRGN-2012. In January of this year, we showed a complete Phase 1 and the expansion in 2012. PRGN-2012 is a gorilla adenovirus that contains epitope—educating the immune system to HPV 6 and 11, which is the generation of a population we refer to as recurrent respiratory papillomatosis in this patient. These patients continually have the regeneration of this papilloma in their vocal cords and trachea. There is currently no therapy for this rare disease, and the only thing that can be done for this patient population is repeated surgery; some of these patients undergo hundreds of surgeries over their lifetime. The treatment works as a vaccination with a course of four vaccinations. With the data that we presented, first of all, it has a very favorable safety profile. We have not seen any more than grade 1 and 2 adverse effects, very similar to flu-like symptoms when they receive it subcutaneously. But at the same time, what we have shown in the data presentation at our R&D Day in January was in the severe patient population, 50% complete responses after 12 months of follow-up. These patients did not require any surgery over 12 months of follow-up, whereas some of them had up to seven or eight surgeries per year. In conjunction, we showed mechanism of action data, demonstrating that after the vaccinations, we see enhanced T cells correlating with the response rate. We are very excited about this. As we communicated, we are in very productive discussions with the FDA, and this is continuing. We are committed to sharing these results with our shareholders in the upcoming months. But at the same time, I'd like to highlight that our shareholders have seen the communications that have come from the FDA recently, especially regarding rare diseases like RRP, and the new guidance aims to expedite approvals for these drugs. So we are very excited and looking forward to communications in the upcoming months regarding PRGN-2012. Another drug product that is in clinical trials currently using the same AdenoVerse platform is our PRGN-2009. At the beginning of this year, we shared data on the full Phase I and combination cohort inhibitors with HPV-related cancer patients. PRGN-2009 targets HPV 16 and 18, which are major causes of HPV-related cancer indications such as cervical cancer, head and neck, anal, and others. Totally, 5% of all cancers in the world are actually HPV-related, representing a significant patient population in need and a huge market to address. If you look at what is currently available for this patient population, cervical cancer therapy achieves a 15% response rate, the best that checkpoint inhibitors have achieved in head and neck is 18%. So you can understand the need for innovative therapies, which we believe PRGN-2009 is. We are excited about the data that will be presented in the stage IV patient population; this includes all comers, both cervical and head and neck cancer, and the data will be presented. I should stress, these are patients who have failed all other therapies, including the checkpoint inhibitors. The data presented at ASCO will cover not only the safety and dose response but also the preliminary clinical efficacy that we are excited about, and our investigators will share that at ASCO. I encourage you to look for that. We have positioned PRGN-2009 into frontline therapy in a new adjuvant setting. It is essential for therapies to move to the front line. In our Phase II study that is currently ongoing, we have two arms in the neoadjuvant head and neck therapy, and PRGN-2009 is positioned ahead of the standard of care. This is very exciting. We have finished the monotherapy arm. I am excited to tell you that a combination therapy with KEYTRUDA will be starting in the upcoming months. This will address the patient population that will receive our drug products prior to their standard of care and then be followed up, especially for the enhancement of immune responses, which is very critical in this setting. We will be reporting interim data by the end of this year, as we have promised on PRGN-2009, and I believe this is an exciting program that addresses both late-stage and early onset of the disease. Now I'd like to move to our UltraCAR-T platform and give you an overview of what we have done. As you all know, our UltraCAR-T platform is unique and differentiated from all other classical CAR-Ts and TCRs in that we can modify autologous T cells of the patient overnight. We believe this is the only truly overnight platform that modifies the T cells of the patient and infuses them back the next day. We currently have three clinical trials that are ongoing. The first one is our PRGN-3006, which is the UltraCAR-T addressing patients with AML, targeting CD33, and includes membrane-bound IL-15 as well as a kill switch. This is in a patient population for whom there truly are no other options left. These patients have failed all other therapies with very limited time, where conventional CAR-Ts or other cell and gene therapies would not have enough time for manufacturing for these patients. At ASH, we reported not only high safety of our UltraCAR-T but also preliminary data from our Phase I and the expansion arm showing almost 30% objective responses in patients who failed all other lines of therapy. We showed that the UltraCAR-T expands and persists in these patients and can effectively target tumors. We are currently expanding to a Phase 1b at multiple sites. The FDA has provided us with unmet orphan drug disease designation, fast track designation, and the ability to redose the patients. Why is this important? Because we believe this is the only UltraCAR-T platform that in a cost-effective manner with overnight manufacturing can redose patients as needed over time while keeping costs manageable. We will be presenting data in 2024 on our Phase 1b expansion cohort, and we look forward to that. Regarding our next UltraCAR-T platform, PRGN-3005, this directly targets ovarian cancer, also includes membrane-bound IL-15 and a kill switch. As you recall, we have two arms in this trial, both intraperitoneal and IV. The FDA has also allowed us to open the lymphodepletion arm. We have finished dosing in all. The data will be presented at ASCO in early January, and we are excited about it. Our data will show not only the mechanism of action but also preliminary efficacy. With that, we are moving to Phase 1b expansion based on the data presented at ASCO. Additionally, we have added an extra arm for a split dosing in the expansion cohort. Patients will receive our drug products both IV and IP due to the safety and efficacy guidance shown at ASCO. This is going to be very exciting, and we will start this arm in our expansion phase in the upcoming months, reporting results in 2024. Please be sure to check the ASCO poster for the data we will present by our investigators. The third UltraCAR-T that I would like to discuss is our PRGN-3007. PRGN-3007 represents the next generation of our CAR-Ts. This is significant because many advancements are currently being made regarding combination therapies, especially with checkpoint inhibitors. By adding systemic toxicity from a checkpoint inhibitor, the costs rise significantly, making these therapies less accessible. In our next-generation setup, we have designed our UltraCAR-T to not only express the CAR of interest, in this case, ROR1, which is expressed in both hematological and solid tumors, but also to include membrane-bound IL-15, a kill switch, and an intrinsic mechanism to downregulate checkpoint inhibitors. This makes the combination irrelevant regarding the use of systemic checkpoint inhibitors. We are excited, and as you have seen in our press release, the first patient was dosed during this quarter. Patients are being enrolled as we speak in this trial. We will present interim data by the end of this year, as this is part of our goals. One of the most important aspects of PRGN-3007 is regaining the rights for CD19 and BCMA. We are very excited about this for several reasons. First, these are validated targets that have shown effectiveness in their respective indications. Additionally, we have validated our UltraCAR-T platform and our UltraPorator platform across multiple indications, confirming our ability to use them in hematological and solid tumors. We believe that the combination of this validation with established targets like CD19 and BCMA can change the treatment paradigm for patients, particularly regarding cost and their ability to be redosed. This is very exciting as we advance these programs rapidly. Furthermore, part of regaining the rights for CD19 and BCMA includes acquiring rights for IL-12, especially our Gorilla IL-12 pack with a controlled switch. This is important because, historically, IL-12 has been viewed as a potent molecule for enhancing immune responses, yet control has always been a concern. We believe we possess the most clinical data with controlled IL-12, making it unique and very appropriate for our portfolio, especially in combination with current molecules. Recent data across various indications, particularly head and neck involvement, has underscored the significance of IL-12. We anticipate a robust platform combined with an array of potent molecules for the future. I would now like to transition to Harry to address our financial reports.

Thanks, Helen, and good morning to all of you on the call. I appreciate your participation in our quarterly update. During the first quarter, we continued to make progress on strengthening our financial footing while containing costs to support our business objectives. I want to spend a few minutes updating you on the progress we continue to make from a financial perspective. I’ll start with an update on our convertible notes. During the first quarter, we repurchased an additional $29.5 million face value of convertible notes at a discount to par. As of March 31, the remaining balance of our convertible notes was $13.8 million, which will be paid at or before maturity on July 1 of this year. We will continue to utilize our restricted cash balance in the retirement of these securities. To date, we have retired $186.2 million face value of our original $200 million of convertible notes prior to maturity, saving the company close to $7 million. Secondly, when I started at Precigen approximately 1.5 years ago, we set a goal to reduce our G&A spend. Since then, through a focus on efficiencies and progress towards settlement of older litigation matters, we have rightsized our G&A function costs. I am pleased to announce that our G&A expense has decreased by 15% in the first quarter of this year compared to the same period last year. We believe our first quarter G&A spend approximates what we anticipate for the remaining quarters of this year. You’ll also see in our reported financial information that our research and development costs have increased compared to the prior year quarter. With the reduction in interest and G&A costs, we have been able to redirect our capital towards our mission of drug discovery. We expect this trend to continue with the further advancement of our product candidates. Turning to our cash burn, our net cash used in operations for the current quarter was $18.4 million, compared to $18.8 million in the same quarter last year. Our cash burn was positively impacted by our reduced G&A and interest costs. These savings offset the positive cash flow last year of approximately $2 million from our previously owned Transova business before its sale in the third quarter of 2022. Additionally, we successfully increased our R&D spending while still reducing our burn for the current quarter compared to Q1 2022. In summary, our program of financial discipline, combined with our public equity offering in January and the early retirement of our debt, has provided a solid cash runway to support our priorities into late 2024. This is consistent with our previously provided guidance on our cash runway. I thank you for your support of Precigen. We'll now be happy to take your questions. Ryan, if you could let questions come in from the queue, that would be great.

Thank you. Our first question comes from Jason Butler with JMP Securities.

All right. And congrats on the progress. Two for me. The first one on PRGN-2009. Can you give us more details on the data you're going to present at ASCO? Will we see data from all enrolled patients here or a subset? And how should we think about the duration of follow-up? And then secondly, for PRGN-3007, Helen, can you maybe just give us some color on the mechanistic rationale for ROR1 in solid tumors?

Absolutely. In regards to PRGN-2009, there will be a full data presentation on the Phase 1 and also the expansion cohort including details on safety, the mechanism of action, and some scientific rationale for the efficacy. I am excited to mention there will be presentations on objective responses, which is unique for this patient population where the best case—compared to conventional therapies—achieves only a 15% to 18% response rate. This data will span patients across the cervical and head and neck cohorts. Additionally, we will also discuss the durability of these responses at the patient level. For PRGN-3007, ROR1 is an exciting target due to its expression on both hematological and solid tumors. Our trial design allows for patients from multiple types of hematological settings such as CLL, BCL, and ALL, while also including triple-negative breast cancer, especially in patients who have limited options currently available. Notably, processes such as inhibiting checkpoint inhibitors are key challenges our therapies directly address, giving our UltraCAR-T an advantage over off-the-shelf conventional approaches.

I have a few questions here. Maybe to start with 3007. I think I heard in your comments that you plan to present some interim data this year. I wonder, since it is an umbrella trial, is there anything in terms of what you flagged and what you'd want to see in that initial look? Are there certain tumor types that you're interested in solid tumor versus others, etc.? And then my second question is, I think you also mentioned for 3005 something about pursuing split dosing. Could you go into detail about what that entails and its implications?

Regarding PRGN-3007, we are currently in Phase 1. By the end of the year, we hope to provide some insights on dose completion. The full data for Phase 1 and expansion cohorts will be presented in 2024. However, we will discuss how the Phase 1 trial is progressing, including some preliminary data. Regarding PRGN-3005 and the pursuit of split dosing, the upcoming ASCO presentation will showcase unique mechanisms in the data comparing intraperitoneal versus IV administration. This will also reflect how the coupling of lymphodepletion affects efficacy. Observing these different arms reveals the critical role of both the delivery method and dosing strategy. We are excited about the data presented at ASCO and will initiate this split dosing in the next few months. Regarding PRGN-2012, our update on the timing of FDA discussions is that we are consistently progressing. I want to remind everyone that PRGN-2012 started its Phase 1 study in April 2021. We reported full Phase 1 data, including the expansion cohort, in January 2023. We have also completed the enrollment for the Phase 2 trial. We are currently in the 12-month follow-up of all patients involved, which is very exciting. Discussions with the FDA are ongoing, and I respect the sensitivities involved in public communication about those discussions. Given that this is a rare disease, the ongoing dialogues are productive, particularly in light of the guidance shifts from OTAT on speeding up approvals. We will, of course, communicate as needed.

Hello. This is Carolina Ibanez Ventoso for Ben Burnett. Congratulations on all the progress and thank you for taking our question. A follow-up on the PRGN-2012 program. I think Helen said in her prepared remarks that you plan to present additional results in a few months. Could you confirm that? And what can we expect in terms of the number of patients out of the 35 that you already have involved in follow up time in this update? Will we see results before the complete follow-up?

In regard to PRGN-2012, there will be no further presentation of the already shared data. The comprehensive Phase 1 and the expansion cohort were fully engaged in January, showing strong safety and a 50% complete response ratio. The next data presentation will naturally involve the full context of Phase 2, which is now in the full follow-up phase for 12 months.

I have two questions. First, regarding the 3005 and 3006 repeat dosing. Could you remind us how the repeating dosing can be determined by the physician or patient need? Additionally, how many doses can be obtained from one production batch for repeat dosing?

The determination for repeat dosing is based on the discretion of the physician, looking at patient need. Since we are dealing with patients who often face grave circumstances, clinicians make that determination. On average, we can generate a significant number of doses from one production batch. The capability of our platform allows us to freeze for subsequent use as needed. Our strategy regarding regaining rights for CD19 and BCMA is focused on manufacturing scalability and affordability. We are keenly aware that these targets work. It’s vital to our strategy that we create a platform that can effectively address both patient access and overall costs, which we aim to achieve through our UltraCAR-T platform. Thank you! We are making significant progress in advancing multiple clinical programs, guided by our clinical principles. Our pipeline addresses unmet needs, aligned with our strategic vision. Our aim remains focused on developing transformative therapies at disruptive pricing, aiming to improve both patient outcomes and the economic model of effective cancer therapy. Thank you once again, and I look forward to updating you in the coming months.

Thank you. The conference call has now concluded. Thank you for your participation, and you may now disconnect your lines.