Precigen, Inc. (NASDAQ:PGEN) Q1 2023 Earnings Call Transcript May 10, 2023

Precigen, Inc. misses on earnings expectations. Reported EPS is $-0.1 EPS, expectations were $-0.09.

Operator: Good morning and welcome to the Precigen First Quarter 2023 Financial Results and Business Update Call. All participants will be in the listen-only mode. [Operator Instructions] 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.

Steve Harasym: 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?

Helen Sabzevari: 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 4 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 the potentially disruptive prices. 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 past 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. And finally, we are committed to executing a cost-effective R&D model and maintaining a fiscal discipline. As Harry will review later in the call, we currently have 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. And I’m sure many of our audience are familiar with this platform. This is a unique and differentiated platform that uses gorilla adenoviruses. We have a full IP around this. And basically, these unique gorilla vectors allows, first of all, that you introduce a large payload capacity, meaning you can put many genes up to 12 kV many epitopes that can be combined and these vectors can deliver. 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 of that enhancing the immune system.

I highly recommend if you have not seen the video of this platform, please go to our website and take a look at this. The way this platform works is actually educate your own 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 all others [indiscernible] platform. What we have done is brought 2 drug products. The first one that I will be addressing is our PRGN-2012. In the January of this year, we showed a complete Phase 1 and the expansion in 2012. PRGN-2012, it’s a gorilla adenovirus that contains epitope. — there educating the immune system to HPV 6 and 11 which is basically generation of population which we refer to as recurrent respiratory petaloma disease in this patient.

These patients they continuously have the regeneration of this petaloma in their vocal cords and also in trachea. There is currently no therapies for this rare disease. And the only thing that can be done for this patient population is repeated surgery and some of these patients acquired hundreds of surgeries over their lifetime. The — works is a vaccination with the course of 4 vaccination that with the data that we presented, first of all, is a very favorable safety data. We have not seen any more than grade 1 and 2, very similar to flu-like symptoms when they receive it subcutaneously. But at the same token, what we have shown in the data presentation in our R&D Day on January was in the severe patient population, 50% complete responses after 12 months of follow-up.

These patients did not require any surgery in 12 months follow-up, whereas some of them had up to 7 or 8 surgery per year. At the same token, a very favorable safety profile. And in conjunction, we showed a mechanism of action data that after the vaccinations, how you have enhanced the T cells that corresponds exactly to this response rate. So we are very excited about this. As we have communicated, we are in very productive discussions with the FDA and this is continuing and we are committed to in the upcoming months, share their results. But at the same token, I’d like to highlight in the recent months, I’m sure our shareholders have seen the communications that is coming from the FDA, especially in regard to the rare diseases which RRP is one and the new guidances that are given and the attention of FDA for coming for fast solutions and approvals for these drugs.

So we are very, very excited and we are looking forward to communications in the upcoming months with our shareholders in regard to PRGN-2012. Another drug product that is in the clinical trials currently using the same AdenoVerse platform is our PRGN-2009. The beginning of this year, were sharing data on the full Phase I and combination cohort inhibitors with an HPV-related cancer patients. PRGN-2009 targets HPV 16 and 18 which is the major cause of HPV-related cancer indications such as cervical cancer, head and neck, anal and others. The totally 5% of all cancers in the world is actually HPV related, huge patient population in need and a huge market for addressing this. And to the — if you look at what currently is available to this patient at cervical cancer, 15% response rate on the secondary line is the best that checkpoint inhibitors have achieved on a head and neck is 18%.

So you can understand the need for coming up with the innovative therapies which we believe PRGN-2009 is one. And we are really excited about the data that will be presented in a stage IV patient population. This is all comers, both cervical cancer, head and neck cancer and the data that will be presented. And one thing that I should stress, these are patients that they have failed all other therapies, including the checkpoint inhibitors. And now the data that will be presented at ASCO will not only cover the safety and the dose response but also the preliminary clinical efficacy that we are excited and our investigators will be sharing that at ASCO. So I would encourage you to look for that. At the same token, what we have done is position PRGN-2009 and move it into front-line therapy in a new adjuvant setting.

We all know how important it is for this therapy is to move to the front line. And in our Phase II study that is currently ongoing, we have 2 arms in the neoadjuvant head and neck therapy that PRGN-2009 is actually positioned in front of the standard of care. And this is very exciting. We have finished the monotherapy on of this. And I’m excited to tell you that a combination therapy with KEYTRUDA will be starting in the upcoming months. And that will address the patient population that basically will receive our drug products prior to their standard of care and then they will be followed up and especially for the enhancement of immune responses which is very, very important in this setting. So that would be — we will be reporting at the interim data by the end of this year as we have promised on PRGN-2009.

And I think this is quite an exciting program that addresses not only the latest stages but also it addresses the early onset of the disease. So with that, 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 a unique and differentiated from all other classical CAR-Ts, TCRs in the fact that you actually can modify autologous T cells of the patient overnight. And this is we believe it’s the only truly overnight platform that you modify the T cells of the patient and the next day you infuse them back. We currently have actually 3 clinical trials that are ongoing. The first one is our PRGN-3006 which this is the UltraCAR-T that addresses in the AML patient population Target CD33, it includes membrane-bound IL-15 as well as the kill switch.

And this is in a patient population that truly there is not anything left. These patients have failed all other therapies with a very, very limited time which conventional CAR-Ts or other cell and gene therapy will not even have enough time for the manufacturing for these patients. At ASH, we reported not only on the safety of favorable, very favorable safety of our UltraCAR-T but also the preliminary data from our Phase I and the expansion of that arm that it almost showed 30% objective responses in patients that they have failed all the other lines prior. And we showed not only or the UltraCAR-T expand and persist in these patients but can be effective against the tumors in their patients. Currently, on the multiple sites, we are expanding to a Phase 1b.

The FDA has not only given us the unmet — the orphan drug disease designation but also a fast track designation and also the ability to redose now in this patient. And why is that important? Because we believe this is the only UltraCAR-T platform that in a cost-effective manner, overnight manufacturing, you can redose the patients as they need it over the period of time with keeping the cost at bay. And this is very, very important for the field of cell and gene therapy. As we have promised, we will be presenting data in 2024 on our Phase 1b expansion cohort and we look forward to that. In regard to our next UltraCAR-T platform, is our PRGN-3005 which directly targets month 16 on ovarian cancer, it also includes membrane-bound IL-15 and kill switch.

And as you recall, we had 2 arms in this trial, both intraperitoneal and IV. And FDA also allowed us to open the lymphodepletion arm. We have finished the dosing in all. The data, as promised in early January will be presented at ASCO and we are excited about this because not only we show the mechanism of action of these that they can — these UltraCAR-T can expand persist in these patients but also a preliminary efficacy data. And with that, we also have moved to Phase 1b expansion which that the data will be presented in 2024. But also one other aspect that is very important based on the data that will be presented at ASCO, we have added an additional arm that would be a split dosing in expansion cohort that it will — patients will receive both IV and IP based on the safety and the efficacy that you will see at ASCO.

And this is going to be very, very exciting. And in the upcoming months, we will start this arm as well in our expansion phase and we will be reporting on that in 2024. So please make sure that you go to the ASCO poster and take a look at the data that will be presented by our investigators. The third UltraCAR-T that I would like to touch base on is our PRGN-3007. And PRGN-3007, it’s what we refer to as the next generation of our CAR-Ts. What do we mean by that? It’s simple. It has become evident that cause in general. And now a lot of people are moving in conjunction with combination with other therapies, especially checkpoint inhibitor. And you can imagine from that perspective, you’re adding the systemic toxicity of a checkpoint inhibitor that has to be given but also the cost of that which already is quite tremendous when you use a classical CAR-Ts. In our next-generation setup, what we have done is design our UltraCAR-T that not only expresses the car of interest, in this case, ROR1 which is expressed on both hematological and solid tumors but also it has membrane-bound IL-15, kill switch and an intrinsic mechanism that expresses or down regulates the checkpoint inhibitor.

So it basically makes it irrelevant for the use of systemic checkpoint inhibitors and obviously, the cost of that. We are excited and we have — as you have seen with the press release, the first patient was dosed in this quarter. And the patients are being enrolled as we speak in this trial. We will be having an interim data presented by the end of this year as we have put that as part of our goals. And one of the most important parts of this with PRGN-3007, as I mentioned, not only it will be addressing hematological diseases such as CLL in DCL as well as the solid tumors, such as triple-negative breast cancer and this is an umbrella trial. And this has brought us one step closer to our vision of having a library of UltraCAR-T that can be basically made for various indications overnight as it’s needed for the patients.

And finally, what I’d like to stress after our PRGN-3007, is regaining the rights for CD19 and BCMA. We are very excited about that for various reasons. Number one, these are validated targets that already has shown that they can be very effective in these indications. At the same token, now we have shown that our platform of UltraCAR-T, UltraPorator platform, now we have validated this across various indications, both in hematological and solid tumors. And the combination of these 2, we believe will offer they change the paradigm for patients for treatment for the cost for their ability to be redosed. And this is quite exciting with having both under the same roof. And our fees at Precigen has been moving forward rapidly. And our aim is to be Phase I ready by the end of this year for CD19 and then we will address also BCMA.

So from that perspective, we are excited that we can take these drug products to the market. The most important thing is we are aware that there are approved drugs currently and classical CAR-Ts out there. These are the first in a class but sometimes being the best in the class. That’s what is important, not only for the patient but also as far as taking the portion of the market. And we believe between our platform and the validity of the targets, we have a very good path forward to be best in the class. And with that, this is why we are excited and moving these programs very rapidly. At the same token, part of regaining the rights for our CD19 and BCMA, we also regained the rights for IL-12 and especially our Gorilla IL-12 pack with a controlled sewage.

And why is that important? In the past decades, the role of IL-12 has always been considered as one of the best molecules for enhancement of immune responses and in combination. However, the biggest issue has always been the control for IL-12 and we are, we believe, the only company who has now the highest amount of clinical data with the control switch with IL-12. This makes it very unique and absolutely very appropriate for our portfolio, especially in combination with our current molecules for the future. Why I’m saying that in the recent data that have been shown across various indications but specifically head and neck the role of IL-12 has become up and center. And now we have one of the most potent molecules under the same roof with our portfolio.

We are excited about that and we will be discussing this in the upcoming months and half of the year. So with that, I would like now to transfer to Harry to address our financial reports. Harry?

Harry Thomasian: Thanks, Alan 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 cost 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’ve retired $186.2 million face value of our original $200 million of convertible notes prior to maturity which has saved 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 that time, through a focus on efficiencies as well as settlement or progress towards settlement of older litigation matters, we believe that 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 that our first quarter G&A spend approximates what we anticipate for the remaining quarters this year. You’ll also see in our reported financial information, our research and development costs have increased in comparison 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 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 versus $18.8 million in the year ago quarter. Our cash burn was positively impacted by our reduced G&A and interest costs. These costs more than offset the positive cash flow in last year’s first quarter of approximately $2 million from our previously owned Transova business prior to its sale in the third quarter of 2022. In addition, we were able to increase our R&D spend while still reducing our burn for the current quarter compared to the first quarter of 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.

Q&A Session

Operator: Thank you. [Operator Instructions] Our first question comes from Jason Butler with JMP Securities.

Operator: Our next question comes from Jennifer Kim from Cantor Fitzgerald.

Operator: Our next question comes from Ben Burnett from Stifel.

Operator: Our next question comes from the line of Arthur He from H.C. Wainwright.

Operator: Ladies and gentlemen, this concludes our question-and-answer session. Now I’d like to turn the conference back to Dr. Marks [ph].

Helen Sabzevari: Thank you. As I mentioned, this is really where we are making significant progress in advancing multiple clinical — the 5 clinical programs discuss clinical principles of the call. Thus, while our goal pipeline provides multiple shots [indiscernible] indications and rare diseases, we’ve demonstrated unmet need, it is also aligned with our business strategy and organized to meet actives. At this point, I would like to sincerely thank all of our patients for putting it us in us and their faith and everyone at Precigen for their focus on dedication to our clinical and strategic objectives which I’m honored to stand next to them. And to once again acknowledge our shareholders, whose support is essential to our ongoing progress.

I look forward to updating you in the months ahead as we make progress toward realizing our vision of developing transformative therapies with disruptive pricing that can improve outcomes for patients and the economics of safe and effective cancer therapy. Thank you, again.

Operator: Thank you. The conference of Precision has now concluded. Thank you for your participation and you may now disconnect your lines.