PRECIGEN, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

PRECIGEN, INC.  Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)
The following "Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with the unaudited
financial information and the notes thereto included in this Quarterly Report on
Form 10-Q, or Quarterly Report, and our Annual Report on Form 10-K for the year
ended December 31, 2021, or Annual Report.

The following discussion contains forward-looking statements that reflect our
plans, estimates, expectations, and beliefs. Our actual results could differ
materially from those discussed in the forward-looking statements and you are
cautioned not to place undue reliance on forward-looking statements. Factors
that could cause or contribute to these differences include those discussed
below and elsewhere in this Quarterly Report, particularly in "Special Note
Regarding Forward-Looking Statements" and "Risk Factors." The forward-looking
statements included in this Quarterly Report are made only as of the date
hereof.

Overview


We are a dedicated discovery and clinical-stage biopharmaceutical company
advancing the next generation of gene and cell therapies with the overall goal
of improving outcomes for patients with significant unmet medical needs. We are
leveraging our proprietary technology platforms to develop product candidates
designed to target urgent and intractable diseases in our core therapeutic areas
of immuno-oncology, autoimmune disorders, and infectious diseases. We have
developed an extensive pipeline of therapies across multiple indications within
these core focus areas.

We believe that our array of technology platforms uniquely positions us among
other biotechnology companies to advance precision medicine. Precision medicine
is the practice of therapeutic product development that takes into account
specific genetic variations within populations impacted by a disease to design
targeted therapies to improve outcomes for a disease or patient population. Our
proprietary and complementary technology platforms provide a strong foundation
to realize the core promise of precision medicine by supporting our efforts to
construct powerful gene programs to drive efficacy, deliver these programs
through viral, non-viral, and microbe-based approaches to drive lower costs, and
control gene expression to drive safety. Our therapeutic platforms, including
UltraCAR-T, AdenoVerse immunotherapy, and ActoBiotics, are designed to allow us
to precisely control the level and physiological location of gene expression and
modify biological molecules to control the function and output of living cells
to treat underlying disease conditions.

We are actively advancing our lead clinical programs, including: PRGN-3005 and
PRGN-3006, which are built on our UltraCAR-T platform; and PRGN-2009 and
PRGN-2012, which are based on our AdenoVerse immunotherapy platform. In
addition, we have completed a Phase 1b/2a study of AG019, which is built on our
ActoBiotics platform. We also have a robust pipeline of preclinical programs
that we are pursuing in order to drive long-term value creation.

We have developed a proprietary electroporation device, UltraPorator, designed
to further streamline and ensure the rapid and cost-effective manufacturing of
UltraCAR-T therapies. UltraPorator has received U.S. Food and Drug
Administration, or FDA, clearance for manufacturing UltraCAR-T cells in clinical
trials, and since November 2020, we have been dosing patients with UltraCAR-T
cells manufactured with UltraPorator in our PRGN-3005 and PRGN-3006 clinical
trials.

We exercise discipline in our portfolio management by systematically evaluating
data from our preclinical programs in order to make rapid "go" and "no go"
decisions. Through this process, we believe we can more effectively allocate
resources to programs that we believe show the most promise and advance such
programs to clinical trials.

Our healthcare business


Our healthcare business focuses on human therapeutics and developing research
models and services for healthcare research applications. Our Biopharmaceuticals
segment includes our wholly owned subsidiaries PGEN Therapeutics, Inc., or PGEN
Therapeutics, and Precigen ActoBio, Inc., or ActoBio, and our majority ownership
interest in Triple-Gene LLC, doing business as Precigen Triple-Gene, or
Triple-Gene, as well as royalty interests in therapeutics and therapeutic
platforms from companies not controlled by us. Exemplar Genetics LLC, doing
business as Precigen Exemplar, or Exemplar, is a wholly owned subsidiary which
is focused on developing research models and services for healthcare research
applications.

Biopharmaceuticals

PGEN Therapeutics

PGEN Therapeutics is a dedicated discovery and clinical stage biopharmaceutical
company advancing the next generation of gene and cell therapies using precision
technology to target urgent and intractable diseases in immuno-oncology,
autoimmune
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disorders and infectious diseases. PGEN Therapeutics operates as an innovation
engine, progressing a preclinical and clinical pipeline of well-differentiated
therapies toward clinical proof-of-concept and commercialization.

PGEN Therapeutics is developing therapies primarily built on our UltraCAR-T
therapeutics platform and our "off-the-shelf" AdenoVerse immunotherapy platform.
Through our UltraCAR-T therapeutics platform, we are able to precision-engineer
UltraCAR-T cells to produce a homogeneous cell product that simultaneously
expresses antigen-specific chimeric antigen receptor, or CAR, kill switch, and
our proprietary membrane-bound interleukin-15, or mbIL15, genes in any
genetically modified UltraCAR-T cell. Our decentralized and rapid proprietary
manufacturing process allows us to manufacture UltraCAR-T cells overnight at a
medical center's current good manufacturing practices facility, or cGMP, and
reinfuse the patient the following day after gene transfer. This process
improves upon current approaches to CAR-T manufacturing, which require extensive
ex vivo expansion following viral vector transduction to achieve clinically
relevant cell numbers that we believe can result in the exhaustion of CAR-T
cells prior to their administration, limiting their potential for persistence in
patients. We have developed a proprietary electroporation device, UltraPorator,
designed to further streamline and ensure the rapid and cost-effective
manufacturing of UltraCAR-T therapies. The UltraPorator system includes
proprietary hardware and software solutions and potentially represents major
advancements over current electroporation devices by significantly reducing the
processing time and contamination risk. UltraPorator is intended to be a viable
scale-up and commercialization solution for decentralized UltraCAR-T
manufacturing. Our AdenoVerse immunotherapy platform utilizes a library of
proprietary adenovectors for the efficient gene delivery of therapeutic
effectors, immunomodulators, and vaccine antigens. We have established
proprietary manufacturing cell lines and production methodologies from our
AdenoVerse immunotherapy platform, which we believe are easily scalable for
commercial supply. We believe that our proprietary gorilla adenovectors, part of
the AdenoVerse technology, have superior performance characteristics as compared
to current competition, including standard human adenovirus serotype 5, rare
human adenovirus types and other non-human primate adenovirus types.

The most advanced programs within PGEN Therapeutics are the following:


PRGN-2012 is a first-in-class, investigational "off-the-shelf" AdenoVerse
immunotherapy for the treatment of recurrent respiratory papillomatosis, or RRP.
PRGN-2012 is an innovative therapeutic vaccine with optimized antigen design
that uses our gorilla adenovector technology, part of our proprietary AdenoVerse
platform, to elicit immune responses directed against cells infected with HPV
type 6 and HPV type 11. PRGN-2012 is in a Phase 1/2 clinical trial for adult
patients with RRP. PRGN-2012 is being developed in collaboration with the Center
for Cancer Research at the NCI pursuant to a CRADA. Enrollment in the Phase 1
portion of the clinical trial has been completed and enrollment in the Phase 2
portion of the clinical trial is ongoing. PRGN-2012 has been granted Orphan Drug
designation for treatment of RRP by the FDA.

PRGN-2009 is a first-in-class, "off-the-shelf" investigational immunotherapy
designed to activate the immune system to recognize and target human
papillomavirus-positive, or HPV+, solid tumors. PRGN-2009 leverages our
UltraVector and AdenoVerse platforms to optimize HPV type 16 and HPV type 18,
antigen design for delivery via a proprietary gorilla adenovector with a large
genetic payload capacity and the ability for repeat administrations. PRGN-2009
is in a Phase 1/2 clinical trial as a monotherapy or in combination with
bintrafusp alfa, or M7824, an investigational bifunctional fusion protein, for
patients with HPV-associated cancers in collaboration with the National Cancer
Institute, or NCI, pursuant to a cooperative research and development
arrangement, or CRADA.

PRGN-3006 is a first-in-class, investigational autologous CAR-T therapy that
utilizes our UltraCAR-T platform to express a CAR to target CD33 (Siglec-3),
mbIL15 and a kill switch gene. PRGN-3006 is currently being evaluated in a Phase
1/1b clinical trial for the treatment of relapsed or refractory, or r/r, acute
myeloid leukemia, or AML, or high-risk myelodysplastic syndromes, or MDS. In
January 2022, we announced the completion of enrollment in the dose escalation
phase in both the non-lymphodepletion and the lymphodepletion cohorts of this
Phase 1 trial. The Phase 1b expansion arm is ongoing. In April 2022, we
announced that PRGN-3006 was granted Fast Track designation in patients with r/r
AML by the FDA. Previously PRGN-3006 was granted Orphan Drug Designation in
patients with AML by the FDA.

PRGN-3005 is a first-in-class, investigational autologous CAR-T therapy that
utilizes our UltraCAR-T platform to simultaneously express a CAR targeting the
unshed portion of the Mucin 16, mbIL15, and kill switch genes. PRGN-3005 is
currently being evaluated in a Phase 1/1b clinical trial for the treatment of
advanced, recurrent platinum-resistant ovarian , fallopian tube, or primary
peritoneal cancer. In January 2022, we announced the completion of enrollment in
the dose escalation Phase of both IP and IV arms without lymphodepletion in the
ongoing Phase 1 clinical trial. The Phase 1b expansion cohort of the clinical
trial with lymphodepletion prior to IV administration of PRGN-3005 is ongoing.

PRGN-3007 is a first-in-class, investigational autologous CAR-T therapy that
utilizes the next generation UltraCAR-T platform to express a CAR to target
ROR1, mbIL15, kill switch, and a novel mechanism for the intrinsic blockade of
the programmed death 1, or PD-1, gene expression. PRGN-3007 has received FDA
clearance to initiate a Phase 1/1b clinical trial for patients with advanced
receptor tyrosine kinase-like orphan receptor 1-positive, or ROR1+,
hematological (Arm 1) and solid tumors (Arm 2). The target patient population
for Arm 1 includes relapsed or refractory CLL, relapsed or refractory MCL,
relapsed or refractory B-ALL, and relapsed or refractory DLBCL. The target
patient population for Arm 2 includes locally advanced
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Histologically confirmed unresectable or metastatic TNBC. The study will consist of two parts: an initial dose increase of 3+3 in each arm followed by a dose expansion to the maximum tolerated dose. Arm 1 and Arm 2 will be enrolled in parallel.


In addition to our clinical programs, PGEN Therapeutics has a robust pipeline of
preclinical programs in our core therapeutic areas of immune-oncology,
infectious diseases, and autoimmune disorders that we are pursuing in order to
drive long-term value creation. Our pipeline includes a number of product
candidates, including UltraCAR-T therapeutics for various cancers, and
"off-the-shelf" AdenoVerse therapeutic platforms. We expect to continue
development of various preclinical programs to identify product candidates for
evaluation in clinical trials.

Precigen ActoBio, Inc.


ActoBio is pioneering a proprietary class of microbe-based biopharmaceuticals
that enable expression and local delivery of disease-modifying therapeutics. We
refer to these microbe-based biopharmaceuticals as ActoBiotics. Our ActoBiotics
platform is a unique delivery platform precisely tailored for specific disease
modification with the potential for superior efficacy and safety. ActoBiotics
combine the advantages of highly selective protein-based therapeutic agents with
local delivery by the well-characterized and food-grade bacterium Lactococcus
lactis, or L. lactis. ActoBiotics can be delivered orally in a capsule, through
an oral rinse, or in a topical solution. We believe ActoBiotics have the
potential to provide superior safety and efficacy via the sustained release of
appropriate quantities of select therapeutic agents as compared to injectable
biologics, while reducing the side effects commonly attributed to systemic
delivery and corresponding peaks in concentration. ActoBiotics work via
genetically modified bacteria that deliver proteins and peptides at mucosal
sites, rather than the insertion of one or more genes into a human cell by means
of a virus or other delivery mechanism. By foregoing this insertion, ActoBiotics
allow "gene therapy" without the need for cell transformation.

ActoBio's most advanced internal pipeline candidate, AG019, is a first-in-class
disease modifying antigen-specific, investigational immunotherapy for the
prevention, delay, or reversal of type 1 diabetes mellitus, or T1D. AG019 is an
easy-to-take capsule formulation of ActoBiotics engineered to deliver the
autoantigen human proinsulin, or hPINS, and the tolerance-enhancing cytokine
human interleukin-10 to the mucosal lining of gastro-intestinal tissues in
patients with T1D. We have completed a Phase 1b/2a clinical trial of AG019 for
the treatment of early-onset T1D. The Phase 1b portion of the study evaluated
the safety and tolerability of AG019 monotherapy administered as a single dose
and repeated daily doses in adult and adolescent patients. The Phase 2a
double-blind portion of the study investigated the safety and tolerability of
AG019 in combination with teplizumab, or PRV-031. The primary endpoint of
assessing safety and tolerability in both the Phase 1b AG019 monotherapy and the
Phase 2a AG019 combination therapy has been met. AG019 was well-tolerated when
administered to adults and adolescents either as monotherapy or in combination
with teplizumab. A single 8-week treatment cycle of oral AG019 as a monotherapy
and in combination with teplizumab showed stabilization or increase of C-peptide
levels during the first 6 months post treatment initiation in recent-onset T1D.

Precigen Triple-Gen


Triple-Gene is a clinical stage gene therapy company focused on developing
advanced treatments for complex cardiovascular diseases. Triple-Gene's most
advanced candidate, INXN-4001, is a non-viral triple-effector plasmid based on
our UltraVector platform designed for constitutive expression of human S100A1,
SDF-1a, and VEGF-165 to address multiple pathways of heart failure. Utilizing a
single plasmid comprising all three genes, instead of each individual gene on
separately delivered plasmids, INXN-4001 can control for delivery and ensure
expression of the three genes in all transfected cells.

We have completed a first-in-human, open label Phase 1 study designed to
evaluate the safety of retrograde coronary sinus infusion, or RCSI, of INXN-4001
in outpatient left ventricular assist device, or LVAD, recipients. The Phase 1
trial met the primary endpoints to evaluate safety and feasibility for
INXN-4001.

Associate Program


We have partnered with Castle Creek Biosciences, Inc., or Castle Creek, to
advance product candidates D-Fi (debcoemagene autoficel), formerly designated
FCX-007, for the treatment of recessive dystrophic epidermolysis bullosa, or
RDEB, and FCX-013 for the treatment of localized scleroderma. Pursuant to a
previous collaboration, we licensed our technology platforms to Castle Creek for
use in certain specified fields, and in exchange, we received and were entitled
to certain access fees, milestone payments, royalties, and sublicensing fees
related to the development and commercialization of product candidates. In March
2020, we and Castle Creek terminated the original collaboration agreement by
mutual agreement, with the parties agreeing that FCX-007 and FCX-013 would be
treated as "Retained Products" under the terms of the original agreement. Castle
Creek retains a license to continue to develop and commercialize the Retained
Products within the field of use for so long as Castle Creek continues to pursue
such development and commercialization, and we are also entitled to certain
royalties with respect to the Retained Products.
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Precigen Exemplar

Exemplar is committed to enabling the study of life-threatening human diseases
through the development of MiniSwine Yucatan miniature pig research models and
services, as well as enabling the production of cells and organs in its
genetically engineered swine for regenerative medicine applications.
Historically, researchers have lacked animal models that faithfully represent
human diseases. As a result, a sizeable barrier has blocked progress in the
discovery of human disease mechanisms; novel diagnostics, procedures, devices,
prevention strategies and therapeutics; and the ability to predict in humans the
efficacy of those next-generation procedures, devices, and therapeutics.
Exemplar's MiniSwine models are genetically engineered to exhibit a wide variety
of human disease states, which provides a more accurate platform to test the
efficacy of new medications and devices.

Impact of COVID-19


COVID-19 has had and continues to have an extensive impact on the global health
and economic environments. Furthermore, there is uncertainty regarding the
duration and severity of the ongoing pandemic, and we could experience delays of
other pandemic-related events that may adversely impact our clinical as well as
preclinical pipeline candidates in the future.

We are also closely monitoring the impact of COVID-19 on all aspects of our business. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.

The health and safety of our employees is of paramount importance. We have implemented security measures in our facilities for the well-being of our employees and visitors. These measures have allowed us to continue advancing in our programs, with the ultimate goal of benefiting patients.

For more information on the risks associated with COVID-19 and its impact on our business, please see “Risk Factors” in Part II – Item 1A.

Discontinued operations


Historically, we developed technology platforms for application across a variety
of diverse end markets, including health, food, energy, and the environment. In
January 2020, we announced that we were increasing our focus on our healthcare
opportunities, which reflected our most advanced platforms, and in connection
therewith, we divested a number of our non-healthcare assets and changed our
name to Precigen, Inc.

In 2020, as a result of market uncertainty driven by the COVID-19 pandemic and
the state of the energy sector raising significant challenges for the strategic
alternatives pursued by MBP Titan, LLC, or MBP Titan, our methane bioconversion
business, we suspended MBP Titan's operations, preserved certain of MBP Titan's
intellectual property, terminated all of its personnel, and undertook steps to
dispose of its other assets and obligations. The wind down of MBP Titan's
activities was substantially complete by December 31, 2020, with the final
disposition of certain property and equipment and the facility operating lease
occurring in January 2021. After the wind down of MBP Titan, certain assets and
contractual obligations which were originally related to MBP Titan continue to
be managed at the Precigen corporate level.

These remaining assets and contractual obligations include our equity interest
in and collaboration agreements with Intrexon Energy Partners, LLC ("Intrexon
Energy Partners"), and Intrexon Energy Partners II, LLC ("Intrexon Energy
Partners II"), including the associated deferred revenue remaining under each
collaboration agreement which was recognized as revenue in the third quarter of
2022 upon acquiring control of these entities as well as the associated
intellectual property developed by MBP Titan to date. These assets, liabilities,
and related historical revenue and equity losses are included in our operating
results from continuing operations in the condensed consolidated financial
statements appearing in Item 1 of this form 10-Q for all periods presented as a
result of our continuing involvement.

As disclosed in the “Notes to the Summarized Consolidated Financial Statements (Unaudited) – Notes 3 and 5” appearing elsewhere in the Quarterly Report, effective as of August 18, 2022, Precigen completed the previously announced sale of 100% of the issued and outstanding membership interests of its wholly owned subsidiary, trans ova.


See also "Notes to the Condensed Consolidated Financial Statements (Unaudited) -
Note 3" appearing elsewhere in this Quarterly Report for additional discussion
of our discontinued operations.
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See also “Notes to the Summarized Consolidated Financial Statements (Unaudited) – Notes 2, 4, 5 and 16” appearing elsewhere in this Quarterly Report for a discussion of Intrexon Power Partners and Intrexon Energy Partners II.

segments


As of September 30, 2022, our reportable segments were (i) Biopharmaceuticals
and (ii) Exemplar. These identified reportable segments met the quantitative
thresholds to be reported separately for the nine months ended September 30,
2022. The Company's segment presentation excludes amounts related to the
operations of Trans Ova and MBP Titan which are reported as discontinued
operations.

Corporate expenses, which are not allocated to the segments and are managed at a
consolidated level, include costs associated with general and administrative
functions, including our finance, accounting, legal, human resources,
information technology, corporate communication, and investor relations
functions. Corporate expenses exclude interest expense, depreciation and
amortization, gain or loss on disposals of assets, stock-based compensation
expense, loss on settlement agreement, and equity in net loss of affiliates. See
"Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 18"
appearing elsewhere in this Quarterly Report for a discussion of our reportable
segments and Segment Adjusted EBITDA.

Financial Summary


We have incurred significant losses since our inception. We anticipate that we
may continue to incur significant losses for the foreseeable future, and we may
never achieve or maintain profitability. Our historical collaboration and
licensing revenues were generated under a business model from which we have
gradually transitioned, and we do not expect to expend significant resources
servicing our historical collaborations in the future. We may enter into
strategic transactions for individual platforms or programs in the future from
which we may generate new collaboration and licensing revenues. We continue to
generate product and service revenues through our Exemplar subsidiary, and in
the nine months ended September 30, 2022, generated positive Segment Adjusted
EBITDA. Products currently in our clinical pipeline will require regulatory
approval and/or commercial scale-up before they may commence significant product
sales and operating profits.

As we continue our efforts to focus our business and generate additional
capital, we may be willing to enter into transactions involving one or more of
our operating segments and reporting units for which we have goodwill and
intangible assets. These efforts could result in us identifying impairment
indicators or recording impairment charges in future periods. In addition,
market changes and changes in judgements, assumptions, and estimates that we
have made in assessing the fair value of goodwill could cause us to consider
some portion or all of certain assets to become impaired.

Please see a more detailed discussion of our ability to continue as a going concern below in the Liquidity and Capital Resources section of Item 2.

sources of income


Historically, we have derived our collaboration and licensing revenues through
agreements with counterparties for the development and commercialization of
products enabled by our technologies. Generally, the terms of these
collaborations provide that we receive some or all of the following: (i)
technology access fees upon signing; (ii) reimbursements of costs incurred by us
for our research and development and/or manufacturing efforts related to
specific applications provided for in the collaboration; (iii) milestone
payments upon the achievement of specified development, regulatory and
commercial activities; and (iv) royalties on sales of products arising from the
collaboration.

Our technology access fees and milestone payments may be in the form of cash or
securities of the collaborator. Our collaborations contain multiple
arrangements, and we typically defer revenues from the technology access fees
and milestone payments received and recognize such revenues in the future over
the anticipated performance period. We are also entitled to sublicensing
revenues in those situations where our collaborators choose to license our
technologies to other parties.

As we continue to shift our focus on our healthcare business, we have and may
continue to mutually terminate collaboration agreements or repurchase rights to
the exclusive fields from collaborators, relieving us of any further performance
obligations under the agreement. Upon such circumstances or when we determine no
further performance obligations are required of us under an agreement, we may
recognize any remaining deferred revenue as either collaboration revenue or as a
reduction of operating expense, depending on the circumstances. See "Notes to
the Condensed Consolidated Financial Statements (Unaudited) - Note 5" appearing
elsewhere in the Quarterly Report for a discussion of changes to our significant
collaborations.
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We generate product and service revenues primarily through sales of products or
services that are created from technologies developed or owned by us. Exemplar
generates product and service revenues through the development and sale of
genetically engineered miniature swine models. We recognize revenue when control
of the promised product is transferred to the customer or when the promised
service is completed.

In future periods, in connection with our focus on healthcare, our revenues will
primarily depend on our ability to advance and create our own programs and the
extent to which we bring products enabled by our technologies to market. Other
than for collaboration revenues recognized upon cancellation or modification of
an existing collaboration or for revenues generated pursuant to future strategic
transactions for any of our existing platforms or programs, we expect our
collaboration revenues will continue to decrease in the near term. Our revenues
will also depend upon our ability to maintain or improve the volume and pricing
of Exemplar's current product and service offerings. As we focus on our
healthcare business, we anticipate that our expenses will increase substantially
if, and as, we continue to advance the preclinical and clinical development of
our existing product candidates and our research programs. We expect a
significant period of time could pass before commercialization of our various
product candidates or before the achievement of contractual milestones and the
realization of royalties on product candidates commercialized under our
collaborations and revenues sufficient to achieve profitability. Accordingly,
there can be no assurance as to the timing, magnitude, and predictability of
revenues to which we might be entitled.

Cost of products and services.


Cost of products and services includes primarily labor and related costs, drugs
and supplies, feed used in production, and facility charges, including rent and
depreciation. Fluctuations in the price of feed have not had a significant
impact on our operating margins and no derivative financial instruments are used
to mitigate the price risk.

Research and development expenses

We recognize research and development expenses as they are incurred. Our research and development expenses consist mainly of:

•salaries and benefits, including stock-based compensation expenses, for personnel in research and development roles;

•fees paid to consultants and contract research organizations that conduct research on our behalf and at our direction;

• costs related to laboratory supplies used in our research and development efforts and the acquisition, development and manufacture of materials for preclinical studies and clinical trials;

• costs related to certain reacquired rights to licensed technology or ongoing research and development;

•amortization of patents and related technologies acquired in mergers and acquisitions; Y

•Facility-related expenses, including direct depreciation costs and unallocated expenses for rental and maintenance of facilities and other operating costs.


Our research and development expenses are generally incurred by our reportable
segments and primarily relate to either costs incurred to expand or otherwise
improve our technologies or the costs incurred to develop our own products and
services. Our Biopharmaceuticals segment is progressing preclinical and clinical
programs that target urgent and intractable diseases in our core therapeutic
areas of immuno-oncology, autoimmune disorders, and infectious diseases,
including PRGN-3005, PRGN-3006, PRGN-3007, PRGN-2009, PRGN-2012, and AG019.
Exemplar's research and development activities relate to new and improved pig
research models. The following table summarizes our research and development
expenses incurred by reportable segment and reconciles those expenses to
research and development expenses on the condensed consolidated statements of
operations for the three and nine months ended September 30, 2022 and 2021.
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                                                           Three Months Ended                      Nine Months Ended
                                                              September 30,                           September 30,
                                                         2022                2021               2022                2021
Biopharmaceuticals                                  $    12,536          $  12,355          $   36,133          $   35,539
Exemplar                                                     86                 79                 244                 216

Total consolidated research and development
expenses                                            $    12,622          $  12,434          $   36,377          $   35,755



The amount of research and development expenses may be impacted by, among other
things, the number and nature of our own proprietary programs, and the number
and size of programs we may support on behalf of collaboration agreements. We
expect that our research and development expenses will increase as we continue
to develop our own proprietary programs, including progression of these programs
into preclinical and clinical stages. We believe these increases will likely
include increased costs paid to consultants and contract research organizations
and increased costs related to laboratory supplies.

Research and development expenses may also increase as a result of in-licensing
of technologies or ongoing research and development operations that we might
assume through mergers and acquisitions.

Selling, general and administrative expenses


Selling, general and administrative, or SG&A, expenses consist primarily of
salaries and related costs, including stock-based compensation expense, for
employees in executive, operational, finance, information technology, legal, and
corporate communications functions. Other significant SG&A expenses include rent
and utilities, insurance, accounting, and legal services (including the cost of
settling certain claims and lawsuits), and expenses associated with obtaining
and maintaining our intellectual property.

Selling, general and administrative expenses may fluctuate in the future depending on the scale of our corporate functions required to support our corporate initiatives and the results of legal claims and assessments against us.

Other income (expense), net


Interest income consists of interest earned on our cash and cash equivalents and
short-term and long-term investments and may fluctuate based on amounts invested
and current interest rates.

Interest expense decreased in the current period, and is expected to decrease in
future periods upon the adoption of a new accounting standard effective January
1, 2022, which simplified the accounting for the Convertible Notes. See "Notes
to the Condensed Consolidated Financial Statements (Unaudited) - Note 2"
appearing elsewhere in this Quarterly Report for further discussion.

In September 2022, the Company retired Convertible Notes with principal of
$117,560. The net gain recorded on extinguishment of $0.9 million is included in
Other income(expense), net. See "Notes to the Condensed Consolidated Financial
Statements (Unaudited) - Note 11" appearing elsewhere in this Quarterly Report
for further discussion. The extinguishment of these Convertible Notes will
alleviate us of $3.2 million in future cash interest payments had we held the
Convertible Notes until maturity.

Participation in the net profit (loss) of affiliates


Equity in net income or loss of affiliates is our pro-rata share of our equity
method investments' operating results, adjusted for accretion of basis
difference. We account for investments in our JVs using the equity method of
accounting since we have the ability to exercise significant influence, but not
control, over the operating activities of these entities.

segment performance


We use Segment Adjusted EBITDA as our primary measure of segment performance. We
define Segment Adjusted EBITDA as net income (loss) before (i) interest expense,
(ii) income tax expense or benefit, (iii) depreciation and amortization, (iv)
stock-based compensation expense, (v) loss on settlement agreements where
noncash consideration is paid, (vi) adjustments for accrued bonuses paid in
equity awards, (vii) gain or loss on disposals of assets, (viii) loss on
impairment of goodwill and other noncurrent assets, (ix) equity in net loss of
affiliates, and (x) recognition of previously deferred revenue associated with
upfront and milestone payments as well as cash outflows from capital
expenditures and investments in affiliates, but includes proceeds
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from the sale of assets in the period sold. Corporate expenses are not allocated
to the segments and are managed at a consolidated level. See "Notes to the
Condensed Consolidated Financial Statements (Unaudited) - Note 18" appearing
elsewhere in this Quarterly Report for further discussion of Segment Adjusted
EBITDA.

Results of operations

Comparison of the three months ended September 30, 2022 and the three months ended September 30, 2021


The following table summarizes our results of operations for the three months
ended September 30, 2022 and 2021, together with the changes in those items in
dollars and as a percentage:

                                                      Three Months Ended
                                                          September 30,                   Dollar               Percent
                                                    2022                2021              Change                Change
                                                                  (In thousands)
Revenues
Collaboration and licensing revenues (1)        $   14,561          $      22          $  14,539                       >200%
Product revenues                                       342                554               (212)                   (38.3) %
Service revenues                                     1,750              2,632               (882)                   (33.5) %
Other revenues                                          69                125                (56)                   (44.8) %
Total revenues                                      16,722              3,333             13,389                       >200%
Operating expenses
Cost of products                                       463                482                (19)                    (3.9) %
Cost of services                                     1,114                970                144                     14.8  %
Research and development                            12,622             12,434                188                      1.5  %
Selling, general and administrative                 10,137             10,977               (840)                    (7.7) %

Impairment of other noncurrent assets                    -                  -                  -                         N/A
Total operating expenses                            24,336             24,863               (527)                    (2.1) %
Operating loss                                      (7,614)           (21,530)            13,916                    (64.6) %
Total other expense, net                              (942)            (4,850)             3,908                    (80.6) %
Equity in net loss of affiliates                       862                  -                862                         N/A
Loss from continuing operations before income
taxes                                               (7,694)           (26,380)            18,686                    (70.8) %
Income tax benefit                                      50                 61                (11)                   (18.0) %
Loss from continuing operations                     (7,644)           (26,319)            18,675                    (71.0) %
Income from discontinued operations, net of
income taxes (2)                                    95,023             (3,445)            98,468                       >200%

Net loss                                        $   87,379          $ (29,764)         $ 117,143                       >200%

(1) See “Notes to the Summarized Consolidated Financial Statements (Unaudited) – Note 5” that appears elsewhere in this Quarterly Report.

(2) See “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 3” that appears elsewhere in this Quarterly Report.


Collaboration and licensing revenues
Collaboration and licensing revenues increased $14.5 million or greater than
200%, from the three months ended September 30, 2021 due to the fact we obtained
control of Intrexon Energy Partners and Intrexon Energy Partners II in the third
quarter of 2022 and therefore we recognized the remaining balance of deferred
revenue associated with Intrexon Energy Partners and Intrexon Energy Partners
II, less the amounts paid to acquire the membership interests of the investors.
See "Notes to the Condensed Financial Statements (Unaudited) - Notes 2, 4, 5 and
16" appearing elsewhere in this Quarterly Report for further discussion of
Intrexon Energy Partners and Intrexon Energy Partners II.


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Product revenue and gross margin


Product revenues decreased $0.2 million, or 38%, from the three months ended
September 30, 2021. The decrease in product revenues was primarily due to
product mix and lower customer demand. Gross margin on products declined in the
current period as a result of the decreased revenues and an increase in
salaries, benefits, and other personnel costs.

Service revenue and gross margin


Service revenues decreased $0.9 million, or 34%, from the three months ended
September 30, 2021. The decrease in service revenues was primarily resulting
from a lower demand from existing customers. Gross margin on services declined
in the current period as a result of decreased revenues and an increase in
salaries, benefits, other personnel costs.

Research and development expenses


Research and development expenses increased $0.2 million, or 2%, from the three
months ended September 30, 2021. This increase was driven by an increase in
salaries, benefits, and other personnel costs of $1.0 million primarily due to
an
increase in the hiring of employees to support the growth in our operations and
offset by $0.8 decrease in contract research organization costs and lab supplies
due to timing differences, the completion of our 1b/2a clinical trial of AG019
in the fourth quarter of the prior year, as well as a continued prioritization
of clinical product candidates with less expense incurred related to preclinical
research programs for the comparable period.

Selling, general and administrative expenses


SG&A expenses decreased $0.8 million, or 8%, from the three months ended
September 30, 2021. Salaries, benefits, and other personnel costs decreased $0.1
million primarily due to reduced stock compensation in 2022 and a reduction in
salaries, benefits and other personnel costs due to reduced head count.
Professional fees decreased $0.6 million, primarily due to decreased legal and
consulting fees associated with certain matters.

Total other expenses, net


Total other expense, net, is primarily related to our Convertible Notes issued
July 2018. The current period decrease is primarily due to the adoption of a new
accounting standard effective January 1, 2022 noted above, which simplified the
accounting for the Convertible Notes and reduced non-cash interest expense. The
decrease was also a result of the gain recorded on the early retirement of a
portion of our Convertible Notes of $0.9 million. The extinguishment of these
Convertible Notes will alleviate us of $3.2 million in future cash interest
payments had we held the Convertible Notes until maturity.

segment performance


The following table summarizes Segment Adjusted EBITDA, which is our primary
measure of segment performance, for the three months ended September 30, 2022
and 2021, for each of our reportable segments as well as unallocated corporate
costs.

                                  Three Months Ended
                                     September 30,            Dollar       Percent
                                  2022           2021         Change       Change
                                           (In thousands)
Segment Adjusted EBITDA:
Biopharmaceuticals            $  (12,417)     $ (12,661)     $   244         1.9  %
Exemplar                             346          1,617       (1,271)      (78.6) %

Unallocated corporate costs       (5,744)        (7,166)       1,422       (19.8) %

For a reconciliation of adjusted EBITDA by segment to net loss from continuing operations before income taxes, see “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 18” appearing elsewhere in this quarterly report.

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The following table summarizes revenues from external customers for the three
months ended September 30, 2022 and 2021, for each of our reportable segments.

                            Three Months Ended
                               September 30,                Dollar       Percent
                             2022               2021        Change       Change
                                     (In thousands)
Biopharmaceuticals   $      14,624            $  129      $ 14,495          >200%
Exemplar                     2,098             3,204        (1,106)      (34.5) %


Biopharmaceuticals

Biopharmaceuticals collaboration and licensing revenues increased due to the
fact we obtained control of Intrexon Energy Partners and Intrexon Energy
Partners II and therefore we recognized the remaining balance of deferred
revenue associated with Intrexon Energy Partners and Intrexon Energy Partners II
in the third quarter of 2022 less the amounts paid to acquire the membership
interests of the investors. See "Notes to the Condensed Financial Statements
(Unaudited) - Notes 2, 4, 5 and 16" appearing elsewhere in this Quarterly Report
for further discussion of Intrexon Energy Partners and Intrexon Energy Partners
II.

Exemplar

Exemplar’s revenues decreased due to a decrease in services provided as a result of lower demand from existing customers. The decrease in adjusted EBITDA by segment was mainly due to lower revenues and higher personnel costs.

Unallocated corporate costs

Unallocated corporate costs decreased primarily due to lower professional fees, including legal fees associated with certain matters, and a reduction in the number of employees.

Comparison of the nine months ended September 30, 2022 and the nine months ended
September 30, 2021


The following table summarizes our results of operations for the nine months
ended September 30, 2022 and 2021, together with the changes in those items in
dollars and as a percentage:

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                                                       Nine Months Ended
                                                          September 30,                   Dollar               Percent
                                                    2022                2021              Change                Change
                                                                  (In thousands)
Revenues
Collaboration and licensing revenues (1)        $   14,561          $     389          $  14,172                       >200%
Product revenues                                     1,455              1,860               (405)                   (21.8) %
Service revenues                                     8,896              7,935                961                     12.1  %
Other revenues                                         234                399               (165)                   (41.4) %
Total revenues                                      25,146             10,583             14,563                    137.6  %
Operating expenses
Cost of products                                     1,585              1,306                279                     21.4  %
Cost of services                                     3,497              2,858                639                     22.4  %
Research and development                            36,377             35,755                622                      1.7  %
Selling, general and administrative                 36,496             40,197             (3,701)                    (9.2) %
Impairment of goodwill                                 482                  -                482                         N/A
Impairment of other noncurrent assets                  638                543                 95                     17.5  %
Total operating expenses                            79,075             80,659             (1,584)                    (2.0) %
Operating loss                                     (53,929)           (70,076)            16,147                    (23.0) %
Total other expense, net                            (4,730)           (14,203)             9,473                    (66.7) %
Equity in net loss of affiliates                       861                 (3)               864                       >200%
Loss from continuing operations before income
taxes                                              (57,798)           (84,282)            26,484                    (31.4) %
Income tax benefit                                     197                173                 24                     13.9  %
Loss from continuing operations                    (57,601)           (84,109)            26,508                    (31.5) %
Income from discontinued operations, net of
income taxes (2)                                   108,094             16,977             91,117                       >200%

Net loss                                        $   50,493          $ (67,132)         $ 117,625                    175.2  %

(1) See “Notes to the Summarized Consolidated Financial Statements (Unaudited) – Note 5” that appears elsewhere in this Quarterly Report.

(2) See “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 3” that appears elsewhere in this Quarterly Report.

Collaboration revenue and licenses


Collaboration and licensing revenues increased $14.2 million or greater than
200%, from the nine months ended September 30, 2021 due to the fact we obtained
control of Intrexon Energy Partners and Intrexon Energy Partners II in the third
quarter of 2022 and therefore we recognized the remaining balance of deferred
revenue associated with the Intrexon Energy Partners and Intrexon Energy
Partners II, less the amounts paid to acquire the membership interests of the
investors. See "Notes to the Condensed Financial Statements (Unaudited) - Notes
2, 4, 5 and 16" appearing elsewhere in this Quarterly Report for further
discussion of Intrexon Energy Partners and Intrexon Energy Partners II.

Product revenue and gross margin

Product revenue decreased $0.4 millionor 22%, of the nine months ended
September 30, 2021. The decrease in product revenue was primarily due to product mix and lower customer demand. The gross margin for products decreased in the current period as a result of lower revenues and an increase in salaries, benefits and other personnel costs.

Service revenue and gross margin

Service revenue increased $1.0 millionor 12%, during the nine months ended
September 30, 2021. The increase in service revenue was primarily due to higher demand from new and existing customers in early 2022, as well as a

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combination of price increases and a change in the pricing structure with
certain customers. Gross margin on services remained comparable to the prior
year as increased revenues were offset by increased costs for supplies, drugs,
and personnel costs.


Research and development expenses


Research and development expenses increased $0.6 million, or 2%, over the nine
months ended September 30, 2021. Salaries, benefits, and other personnel costs
increased $2.2 million due to an increase in the hiring of employees to support
the growth in the Company's development activities. This increase was partially
offset with a decrease of contract research organization costs and lab supplies
of $1.6 million, primarily due to timing differences, the completion of our
1b/2a clinical trial of AG019 in the fourth quarter of the prior year, and as
well as a continued prioritization of clinical product candidates with less
expense incurred related preclinical research programs for the comparable
period.


Selling, general and administrative expenses


SG&A expenses decreased $3.7 million, or 9%, from the nine months ended
September 30, 2021. Salaries, benefits, and other personnel costs decreased $3.6
million primarily due to $2.6 million reduced stock compensation in 2022 and
reduced head count.

Total other expense, net

Total other expense, net, is primarily related to our Convertible Notes issued
July 2018. The current period decrease is primarily due to the adoption of a new
accounting standard effective January 1, 2022 noted above, which simplified the
accounting for the Convertible Notes, reduced non-cash interest expense and as
well as a $0.9 million gain in connection with the early retirement of a portion
of our Convertible Notes. The extinguishment of these Convertible Notes will
alleviate us of $3.2 million in future cash interest payments had we held the
Convertible Notes until maturity.

segment performance


The following table summarizes Segment Adjusted EBITDA, which is our primary
measure of segment performance, for the nine months ended September 30, 2022 and
2021, for each of our reportable segments as well as unallocated corporate
costs.

                                  Nine Months Ended
                                     September 30,            Dollar       Percent
                                 2022           2021          Change       Change
                                           (In thousands)
Segment Adjusted EBITDA:
Biopharmaceuticals            $ (35,286)     $ (34,055)     $ (1,231)       (3.6) %
Exemplar                          4,699          5,312          (613)      (11.5) %

Unallocated corporate costs     (24,718)       (24,835)          117        (0.5) %

For a reconciliation of adjusted EBITDA by segment to net loss from continuing operations before income taxes, see “Notes to the Condensed Consolidated Financial Statements (Unaudited) – Note 18” appearing elsewhere in this quarterly report.

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The following table summarizes revenues from external customers for the nine
months ended September 30, 2022 and 2021, for each of our reportable segments.

                           Nine Months Ended
                              September 30,               Dollar       Percent
                            2022              2021        Change       Change
                                    (In thousands)
Biopharmaceuticals   $     14,778           $  723      $ 14,055          >200%
Exemplar                   10,368            9,860           508         5.2  %


Biopharmaceuticals
Biopharmaceuticals collaboration and licensing revenues increased due to the
fact we obtained control of Intrexon Energy Partners and Intrexon Energy
Partners II in the third quarter of 2022 and therefore we recognized the
remaining balance of deferred revenue associated with Intrexon Energy Partners
and Intrexon Energy Partners II, less the amounts paid to acquire the membership
interests of the investors. See "Notes to the Condensed Financial Statements
(Unaudited) - Notes 2, 4, 5 and 16" appearing elsewhere in this Quarterly Report
for further discussion of Intrexon Energy Partners and Intrexon Energy Partners
II.

Copy

Revenues for Exemplar increased due to an increase in services performed
resulting from a higher demand from existing and new customers. The improvement
in Segment Adjusted EBITDA was primarily due to the increased revenues in the
first half of 2022.

Unallocated Corporate Costs

Unallocated corporate costs increased primarily due to increased professional fees, including legal fees associated with certain matters.

Liquidity and capital resources

Liquidity Sources


We have historically financed our operations primarily through public offerings
and private placements of our capital stock, and up front and milestone
consideration received under our collaboration and licensing agreements. In
addition, cash flows from our Exemplar segment and businesses previously sold
(including proceeds from those sales) have provided sources of funds to finance
our operations. As of September 30, 2022, we had $71,327 in cash, cash
equivalents, and short-term investments.

Market Sale Agreement


As disclosed in "Notes to the Condensed Consolidated Financial Statements
(Unaudited) - Note 13" appearing elsewhere in this Quarterly Report, on August
9, 2022, we entered into a Controlled Equity Offering Sales Agreement with
Cantor Fitzgerald & Co. Pursuant to which we may issue and sell from time to
time shares of Company's common stock of up to $100,000. The Company has no
obligation to sell any of the Shares under the Sales Agreement, and may at any
time suspend or terminate the offering of its common stock pursuant to the Sales
Agreement upon notice and subject to other conditions. The Company intends to
use the proceeds of the offering, when and if utilized, to fund the development
of clinical and preclinical product candidates and for working capital and other
general corporate purposes.

Going Concern

During the nine months ended September 30, 2022, we incurred a loss from
continuing operations of $57,601 and used $49,649 of cash in our operations, and
as of September 30, 2022, had an accumulated deficit of $1,846,391. We have also
incurred operating losses since our inception and management expects operating
losses and negative cash flows from operations to continue for the foreseeable
future and, as a result, we will require additional capital to fund our
operations and execute our business plan. In addition, as of September 30, 2022,
we had $153,770 in cash, cash equivalents, short-term investments, and
restricted cash, and had no committed source of additional funding from either
debt or equity financings, although we may, at our discretion, sell equity
securities under the terms of the at-the-market sales agreement, subject to
certain conditions and limitations. See "Notes to the Condensed Consolidated
Financial Statements (Unaudited) - Note 13" appearing elsewhere in this
Quarterly Report for further discussion of our at-the-market sales agreement.
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Given our current cash position and forecasted negative cash flows from
operating activities for the foreseeable future, as well as convertible notes of
$82,440 that are due on July 1, 2023, management believes that these matters
raise substantial doubt about the Company's ability to continue as a going
concern. See "Notes to the Condensed Consolidated Financial Statements
(Unaudited) - Note 11" appearing elsewhere in this Quarterly Report for further
discussion of our convertible debt agreement.

Our ability to fund operations on an ongoing basis is dependent upon the
successful execution of management's plans, which include raising additional
capital in the near term. This additional capital could be raised through a
combination of non-dilutive financings (including collaborations, strategic
alliances, monetization of non-core assets, marketing, distribution or licensing
arrangements), dilutive financings (including equity and/or debt financings)
and, in the longer term, from revenue related to product sales, to the extent
its product candidates receive marketing approval and can be commercialized.
There can be no assurance that new financings or other transactions will be
available to us on commercially acceptable terms, or at all. Also, any
collaborations, strategic alliances, monetization of non-core assets or
marketing, distribution or licensing arrangement may require us to give up some
or all of our rights to a product or technology, which in some cases may be at
less than the full potential value of such rights. If we are unable to obtain
additional capital, we will assess our capital resources and we may be required
to delay, reduce the scope of, or eliminate some or all of our operations, which
may include research and development and clinical trials. This may have a
material adverse effect on our business, financial condition, results of
operations and our ability to operate as a going concern.

We currently generate cash receipts primarily from sales of products and services in our Exemplary segment and from strategic transactions.

Cash flow


The following table sets forth the significant sources and uses of cash for the
periods set forth below:

                                                                             Nine Months Ended
                                                                                September 30,
                                                                          2022                2021
                                                                               (In thousands)
Net cash provided by (used in):
Operating activities                                                  $  (49,649)         $  (41,182)
Investing activities                                                     214,996             (90,469)
Financing activities                                                    (116,010)            121,297

Effect of exchange rate variations on cash, cash equivalents and restricted cash

                                                             (804)                264

Net increase (decrease) in cash, cash equivalents and restricted cash

                                                                  $   

48,533 $(10,090)



Cash flows from operating activities:
During the nine months ended September 30, 2022, our net income was $50.5
million, which includes the gain on sale of discontinued operations of $94.7
million which is presented as an adjustment to net income to net cash used in
operating activities as the cash flows from the sale is presented within cash
flows from investing activities; additional significant noncash expenses
totaling $17.0 million from continuing operations which also adjusted net income
to net cash from operating activities included: (i) $9.0 million of depreciation
and amortization expense and (ii) $8.0 million of stock-based compensation
expense

During the nine months ended September 30, 2021, our net loss was $67.1 million,
which includes the following significant noncash expenses totaling $30.5 million
from both continuing and discontinued operations: (i) $11.5 million of
stock-based compensation expense, (ii) $10.4 million of depreciation and
amortization expense, and (iii) $8.6 million accretion of debt discount and
amortization of deferred financing costs. These expenses were partially offset
by a $4.6 million noncash gain recognized upon the termination of our MBP Titan
facility lease in January 2021.

Our cash outflows from operations during the nine months ended September 30,
2022 increased $8.5 million from the nine months ended September 30, 2021
primarily due to decreased cash inflows provided by Trans Ova (which was sold in
August 2022) and Exemplar.

Cash flows from investing activities:


During the nine months ended September 30, 2022, we received $162.3 million of
proceeds from the sale of discontinued operations and $57.0 million of proceeds
from maturities of investments.
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During the nine months ended September 30, 2021, we purchased $92.2 million of
investments, net of maturities, primarily using the proceeds received from the
underwritten public offering discussed below.

Cash flows from financing activities:

During the nine months that ended September 30, 2022we repurchased Convertible Negotiable Obligations for $115.7 million. Also, in October 2022we made additional repurchases of Convertible Negotiable Obligations of $26.4 million.

During the nine months that ended September 30, 2021We received $121.0 million
product of the sale of our ordinary shares in a subscribed public offering.

Future capital requirements


As discussed in the liquidity and capital resource section above in Item 2, we
believe our existing liquid assets will not be sufficient to enable us to
continue as a going concern for the next twelve months without additional
capital in the near term. Our future capital requirements will depend on many
factors, including:

• progress in our research and development programs, as well as the magnitude of these programs;

•any delay or potential delay in our clinical trials as a result of the COVID-19 pandemic;

•the timing of regulatory approval of our product candidates and those of our collaborations;

•the timing, receipt, and amount of advance, milestone, and other payments, if any, from current and prospective employees, if any;

•the timing, receipt and amount of sales and royalties, if any, from our candidate products;

•the time and capital requirements to expand our various candidate product and service offerings and their acceptance by customers;

•our ability to maintain and establish additional collaborative agreements and/or new strategic initiatives;

•the resources, time and cost necessary for the preparation, presentation, processing, maintenance and fulfillment of our portfolio of intellectual property;

• strategic mergers and acquisitions, if any, including both the initial cost of acquisition and the cost of integration, maintenance and expansion of the strategic objective;


•the costs associated with legal activities, including litigation, arising in
the course of our business activities and our ability to prevail in any such
legal disputes; and

•the effects, duration, and severity of the ongoing COVID-19 pandemic and the
actions we have taken or may take in response, any of which could significantly
impact our business, operations, and financial results.

Until such time, if ever, as we can regularly generate positive operating cash
flows, we plan to finance our cash needs through a combination of equity
offerings, debt financings, government, or other third-party funding, strategic
alliances, sales of assets, and licensing arrangements. As the COVID-19 pandemic
continues to negatively impact the economy, our future access to capital on
favorable terms may be materially impacted. We may not be able to raise
sufficient additional funds on terms that are favorable to us, if at all. To the
extent that we raise additional capital through the sale of equity or
convertible debt securities, the ownership interests of our common shareholders
will be diluted, and the terms of these securities may include liquidation or
other preferences that adversely affect the rights of our common shareholders.
Our current stock price may make it more difficult to pursue equity financings
and lead to substantial dilution if the price of our common stock does not
increase. Debt financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures, or declaring dividends.
If we raise additional funds through strategic transactions, collaborations, or
licensing arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research programs, or
product candidates, or to grant licenses on terms that may not be favorable to
us.
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We are subject to a number of risks similar to those of other companies
conducting high-risk, early-stage research and development of product
candidates. Principal among these risks are dependence on key individuals and
intellectual property, competition from other products and companies, and the
technical risks associated with the successful research, development, and
clinical manufacturing of its product candidates. Our success is dependent upon
our ability to continue to raise additional capital in order to fund ongoing
research and development, adequately satisfy or renegotiate long-term debt
obligations, obtain regulatory approval of our products, successfully
commercialize our products, generate revenue, meet our obligations, and,
ultimately, attain profitable operations. Our ability to achieve what is
necessary for our success may be negatively impacted by the uncertainty caused
by the COVID-19 pandemic.

Please see the section titled “Risk Factors” in our Annual Report for additional risks associated with our material capital requirements.

Obligations and contractual commitments


The following table summarizes our significant contractual obligations and
commitments from continuing operations as of September 30, 2022 and the effects
such obligations are expected to have on our liquidity and cash flows in future
periods:

                                                       Less Than                                                        More Than
                                     Total              1 Year             1 - 3 Years           3 - 5 Years             5 Years
                                                                            (In thousands)
Operating leases                  $  12,819          $    1,988          $      4,336          $      3,079          $      3,416
Convertible debt (1)                 82,440              82,440                                           -                     -
Cash interest payable on
convertible debt                      2,850               2,850                                           -                     -

Total                             $  98,109          $   87,278          $      4,336          $      3,079          $      3,416


(1)See "Notes to the Condensed Consolidated Financial Statements (Unaudited) -
Notes 11" appearing elsewhere in this Quarterly Report for further discussion of
our convertible debt.

In addition to the obligations in the previous table, from September 30, 2022 We also have the following material contractual obligations described below.


We are party to in-licensed research and development agreements with various
academic and commercial institutions where we could be required to make future
payments for annual maintenance fees as well as for milestones and royalties we
might receive upon commercial sales of products that incorporate their
technologies. These agreements are generally subject to termination by us and
therefore no amounts are included in the tables above. As of September 30, 2022,
we also had research and development commitments with third parties totaling
$21.8 million that had not yet been incurred.

Net operating loss


As of September 30, 2022, we had net operating loss carryforwards of
approximately $818.0 million for U.S. federal income tax purposes available to
offset future taxable income, including $603.0 million generated after 2017,
U.S. capital loss carryforwards of $212.5 million, and U.S. federal and state
research and development tax credits of approximately $11.7 million, prior to
consideration of annual limitations that may be imposed under Section 382 of the
Internal Revenue Code of 1986, as amended, or Section 382. Net operating loss
carryforwards generated prior to 2018 have begun to expire in 2022, and capital
loss carryforwards will expire if unutilized beginning in 2024. Our foreign
subsidiaries included in continuing operations have foreign loss carryforwards
of approximately $64.2 million, most of which do not expire. Excluding certain
deferred tax liabilities totaling $2.1 million, our remaining net deferred tax
assets, which primarily relate to these loss carryforwards, are offset by a
valuation allowance due to our history of net losses.

As a result of our past issuances of stock, as well as due to prior mergers and
acquisitions, certain of our net operating losses have been subject to
limitations pursuant to Section 382. As of September 30, 2022, Precigen has
utilized all net operating losses subject to Section 382 limitations, other than
those losses inherited via acquisitions. As of September 30, 2022, approximately
$41.4 million of available domestic net operating losses were inherited via
acquisitions and are limited based on the value of the target at the time of the
transaction. Future changes in stock ownership may also trigger an ownership
change and, consequently, a Section 382 limitation.
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off-balance sheet arrangements

During the periods presented, we did not have, and currently do not have, any off-balance sheet arrangements as defined in SECOND rules.

Critical Accounting Policies and Estimates


Our management's discussion and analysis of our financial condition and results
of operations is based on our condensed consolidated financial statements, which
we have prepared in accordance with generally accepted accounting principles in
the United States. The preparation of these condensed consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported revenues and expenses during the reporting periods. We evaluate these
estimates and judgments on an ongoing basis. We base our estimates on historical
experience and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Our actual results may differ from these estimates under
different assumptions or conditions.

There have been no material changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in our Annual Report.

Recent Accounting Pronouncements


For information with respect to recent accounting pronouncements and the impact
of these pronouncements on our condensed consolidated financial statements, see
"Notes to the Condensed Consolidated Financial Statements (Unaudited) - Note 2"
appearing elsewhere in this Quarterly Report.

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