Precigen Inc (PGEN) 2022 Q2 法說會逐字稿

Good day, and welcome to the Precigen Second Quarter and First Half 2022 Financial Results Conference Call. (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.

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 the 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 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 acutely aware of the seismic shifts that are shaping a new biopharma landscape. The rules of the past for biotech success in terms of access to capital, clinical trials, regulatory pathways, manufacturing, pricing and commercializations are changing. Traditional funding methods have become more challenging and supply chain issues have led to bottlenecks in traditional manufacturing approaches. Clinical trials that relies on centralized product manufacturing to supply products to sites were particularly hard hit, therefore creating the need for a new paradigm.

Biotech companies are basically 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 enable 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 3 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 CRADAs and making early decisions to favor therapies with the 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 is expected to decrease cost and provide access to a larger patient population. And 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 in terms of us delivering better, faster, cheaper products. 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 to 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, our 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 it's 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 a scale-up 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 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 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 introduce lymphodepletion at the Dose Level 3 of the IV arm, which has now completed dosing. Patient follow-up is ongoing, and we are looking forward to report 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 are 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 positive hematological and solid tumors uses our next-generation UltraCAR-T technology and incorporates intrinsic PD-1 checkpoint inhibition in addition to the 3 effective genes, a CAR, membrane-bound IL-15 and a kill switch expressed in the first-generation UltraCAR-T technology.

The Phase Ib umbrella trial in ROR1 positive hematological tumors, including chronic lymphocytic leukemia, CLL, mantle cell leukemia, MCL, acute lymphoblastic leukemia, ALL and diffuse large B-cell lymphoma, DLBCL and solid tumors, including triple negative breast cancer, TNBC. 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 enrollment of up to 5 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 Phase I study, which included both dose escalation and dose expansion in less than 9 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 6 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 a 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 it 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. Harry?

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 earn-outs 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 2021 (sic) [2022] financial highlights. As Helen alluded to earlier, we have pursued a variety of cost reduction initiatives. This includes the rightsizing 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 6 months ended June 30, 2022 compared to $24.2 million during the 6 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 difference. 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 3 and 6 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. Helen?

Thank you, Harry. Realizing the clinical and commercial potential of our core assets require 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 treatment.

We expect to initiate the Phase I study of PRGN-3007 in patients with ROR positive tumors across 5 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 a 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 the major medical conference in Q4 and for PRGN-2012, we are looking forward to sharing a compelling data and providing a strategic regulatory updates as they become available.

That concludes our prepared remarks for today, and we are now happy to take your questions. Operator?

(Operator Instructions) The first question is from Nick Abbott with Wells Fargo.

Congratulations on the Trans Ova sale, must be a relief. So that's -- the first question is 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.

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 our 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, it really can address our convertible notes. Similarly, for an Exemplar, of course, this is the strategic assets that we have, and we are currently evaluating also the position of Exemplar and how in the future can be actually 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 part of that then is you might want to keep that because it a strategic asset for the company's internal pipeline? Is that a way to try and understand?

Well, actually, the way we look at this subsidiary is not as necessarily, we are looking at this subsidiary to see at what point and from what perspective we have maximized the value and how financially then that can be used to advance the health portfolio.

Okay. Understood. Yes.

And if the sale would be the outcome, then obviously, that's one of the paths that we have as we have used for Trans Ova.

Okay. And then during your prepared remarks, so the UltraCAR-T, you said that FDA has cleared Mayo as a site, the clinical manufacturer. 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 a decentralized manufacturing. As you know, with all the other CAR-Ts, TCRs and in general, all the cell therapies, the -- all of the companies are using certified manufacturers on one site usually, which they have to be certified by FDA. What we have done is really unprecedented, because no other company has been able to basically manufacture the CAR-Ts on multiple sites and especially in the hospitals overnight. And the process, obviously, since this is the 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 that was done at the Mayo Clinic, we were able to establish that comparability. And we are very excited about not only expanding this decentralized manufacturing as part of also these sites being reviewed by FDA, but also having sites such as Mayo Clinic, which is world renowned and they are very excellent centers of excellence to join.

And one other thing that I would like to add, as we have discussed, this Mayo Clinic is one of the first, but we have a group of sites that will be joining us in the next months to come across various states in California, New York, Illinois, in Arizona and in metropolitan around Maryland and D.C. areas and Virginia. So we have a number of the excellent cancer centers that you will be seeing in the very, very near future in upcoming months for our expansion sites. And we are very excited about that, because this really solidifies the decentralized manufacturing ideas.

And so are there any Precigen employees on site to manufacture?

No.

No.

No, actually, absolutely not. And that's again speaking to the way that we started and perceived this manufacturing and implemented the whole purpose was that this will become a differentiation 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.

The next question is from Ben Burnett with Stifel.

This is (inaudible) on for Ben. We just had one quick one regarding PRGN-2012. I'm just wondering, I know that you guys are planning an update for the Phase I in the fourth quarter. Could you guys give us any additional color or details of what we might see there in terms of patient size or data presented?

Absolutely. So based on what we mentioned, we finished the Phase I and Phase Ib in December of 2021, 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. And especially for the first time showing the power of our AdenoVerse platform in this setting. At the same token, our investigators have moved very rapidly to Phase II.

As mentioned, they have already enrolled 15 patients in the Phase II since December. And a very, very exciting time for us with this -- with AdenoVerse platform and in RRP setting. So in the next few months, we will be communicating the exact date and time, and we are looking forward to show a very comprehensive set of data.

(Operator Instructions) The next question comes from Jason Butler with JMP.

Congrats on all of 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. No, 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 substantial amount of data on the manufacturing as well as the assays that are involved and basically the requirements. And as now we finalized the doses and basically going to the expansion, Phase Ib, it was extremely important to show that this manufacturing is actually can be replicated, similarly, on a number of 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 TILs all the way to the conventional CARs or T-cells is manufacturing, manufacturing, manufacturing.

And the classic manufacturing, you really have one set of CROs that they do this, it's one site, and that's why it's centralized, and they keep repeating the same thing and nothing changes there. The fact that we can go from one center to another center, and we have basically generated SOPs that they can transfer from centers and generate similar data basis, this was really changed the paradigm here. And, of course, now as first site has come with Mayo, and you can see that in the next few months very rapidly other sites will come on board.

And I think this allows the vision that we had for this decentralized manufacturing around the U.S. and eventually globally, because as we will show in the next few months, we have centers across United States that they have gone through the engineering runs, tech transfers and they start dosing the patients, which requires comparability of manufacturing, otherwise, you cannot do this if you have not shown that. And that is a very, very important and significant part of our manufacturing which no other company has.

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

Sure. So from -- as you mentioned, we are in discussions with the FDA and regulatory path. Of course, this is a rare disease, and we would like to see that our Phase IIs and in discussions with the FDA how we can basically reduce the time to approvals for this patient population, which are underserved, and they have no other choice except surgeries.

And we have a very, very dynamic dialogue with the FDA that I can tell you, very exciting in regard to see how we can basically rapidly bring this asset to the approval and then basically commercialization for the patients that they deserve. So we will be reporting on that in the next few months. And as I mentioned, the first set of the data on the first 15 patients also we will be reporting on which we are very excited about. And 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.

Sure.

Is there any benefit to retiring the convertible notes earlier than the maturity date or does that not make sense for you guys?

Harry?

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

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

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

Helen, this is Arthur in for RK. First, congratulations on the progress during the quarter. I have 2 quick questions. First is regarding the PRGN-3005 and PRGN-3006 program for the repeat dosing, I just wonder, is there any SOP included in the protocols for the repeat dosing or it's meaning at the physician discretion?

No, this was -- first of all, we had to get amendments from FDA for the clinical protocols which we have received for both programs. However, this is at the discretion of the physicians and our investigators. And that's important to emphasize because unlike some of the off-the-shelf that there is a requirement for multiple dosing right upfront, like 300 million every week for 3 weeks, which brings you to 1 billion. We -- obviously, our investigators have been following the patients are looking at the patient, we do not have that kind of a requirement. And therefore, this is at the discretion of the investigators to see if a patient might need based on the kinetic of the expansion or persistent or the course of the disease.

And if that is the case then they have the option to use this. And again, this really speaks to the differentiated path of UltraCAR-T versus off-the-shelf or all the other CARs, because this is -- allows you at any time that you go in and if you need to redose or give another dose, then you add. And that's the advantage that we have, but no other companies at the moment has that advantage.

Got you. And my second one is regarding the PRGN-3007 program. Besides the triple negative breast cancer, could you tell us, is there any other solid tumor included in the basket cohort or -- and why specifically you focus on the triple negative breast cancer first?

So the -- yes, thank you for asking in regard to PRGN-3007, because this is one of the more complex programs because of the umbrella nature of it. And we -- therefore, it was necessary to pass through the IRBs that really looked at both from a hematological side and the solid tumors. And therefore, that's one of the aspects that once we receive the IND and we are dosing this year, that's number one. I want to really mention that to our basically, analysts as well as our review of the complexity of this and decide that they have to do this. Therefore, they have to have a different review process and a more complex review process. That's number one.

Number two, in regard to the [3005], this can be expanded in other solid tumors like pancreatic as well as the lung cancers. But currently, with the triple negative breast cancer, this is another, I would say, unserved area for CAR-Ts in general, solid tumors are, but we currently have one in ovarian cancer. And as you know, there is very limited treatment for the patients with the triple negative breast cancer. It's quite aggressive. And we believe that this UltraCAR-T targeting ROR1 has a very high possibility for this patient population that are the response rates are very similar to ovarian cancer or I might say even worse. And for that reason, we chose this. At the same token, the ROR1 expression is high on other solid tumors such as lung and pancreatic and definitely, that can be also added to the bucket.

The next question is from Jennifer Kim with Cantor Fitzgerald.

Congrats on the progress this quarter. I have 2 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 time line in mind on when we might anticipate having data on patients who do receive repeat dosing? And then 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?

Sure. Thank you, Jennifer. So in regard to the redosing, we obviously expect, especially, I think one of the areas that will be quite -- both in hematological as well as solid tumors, that some of our investigators as they are following their current patients, they will be introducing the redosing. And this is one of the things that we have mentioned over time that one of the shortcomings of the cell therapies, other CAR-Ts and TCRs is that you can only manufacture once and give one time, and then that course is over. And both because of the complexity of manufacturing, but also from perspective of the price tag that is associated, which it's -- in regard to UltraCARs, we have a differentiation here.

Yes, we do expect that some of the patients will receive redosing, and we look forward in the near future as our investigators following these patients, they will be reporting on that. And this is one of the reason also, especially as we go to the solid tumors because the follow-ups are extremely important. And so we can obviously talk about the safety, which on both trials, we have had a great safety data. But at the same token, the follow-ups are important and prematurely, we do not want to, especially on the solid tumors discuss the results. So we look forward in the upcoming months and in the first -- the next half of this year and the first half of 2023 that our investigators will be actually presenting a comprehensive set of data on both hematological and ovarian cancer.

In regard to the Trans Ova and how that shapes our portfolio. Well, actually, this is very important, because having the convertible notes being addressed in a non-dilutive form, I think it has been very, very important for the company, because now we do not have to take our other resources and our financial resources to devote to the payment of our nonconvertible notes. As Harry mentioned, we have a solid runway well to the fourth quarter of 2023, which has allowed us to basically go through our -- some of the clinical time lines that we have for reporting the data, and I think that's going to be very good.

And we basically do not have to take anything from the financial strength that we have or I should say, the money that we have currently that is dedicated to our clinical trial and be diverting this for our convertible notes. And that's obviously, it's a huge, I think pressure off at this point, especially during the financial times and not diluting our investor base. So we are very happy about that. We have prioritized our portfolio as we have mentioned in our slides and according to the 3 pillar of the strategy that we have, and as we mentioned, for instance, even in regard to our AG019, which is a very exciting program for type 1 diabetes, we feel that this is our best with partnership, which the discussions on our partnerships are ongoing, and we look forward to report on that in the near future.

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 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.