Circling Back On Precigen (NASDAQ:PGEN)

I have always found that mercy bears richer fruits than strict justice.”― Abraham Lincoln

We last took an in-depth look at Precigen, Inc. (NASDAQ:PGEN) in the beginning of 2022 in January. We noted that despite the developmental company having multiple “shots on goal” targeting potential lucrative parts of the market, the stock was an “avoid” at the time for several reasons. One of the most notable of which was its funding needs. The stock is off some 40% since that article ran and this summer the company sold off part of its business to raise needed capital. Therefore, it seems a good time to circle back on this small cap name. An analysis follows below.

Company Overview:

Precigen is a clinical-stage biopharmaceutical company based in Maryland. Precigen was a long time subsidiary of Intrexon (“XON”) and took its new form in 2021. Some more detail on that company’s history is contained in this article. Currently, the stock trades just above two bucks a share and sports an approximate market capitalization of approximately $425 million.

Precigen’s pipeline is built on top of its numerous therapeutic platforms: UltraCAR-T Advantage, AdenoVerse Immunotherapy Advantage, ActoBiotics Advantage, and the Multifunctional Therapeutics Advantage.

Recent Developments:

In early April, the company’s candidate PRGN-3006, which is targeting patients with relapsed or refractory acute myeloid leukemia, a cancer of the blood and bone marrow, garnered Fast Track Designation from the FDA. PRGN-3006 is an UltraCAR-T is a multigenic autologous chimeric antigen receptor [CAR]-T cell treatment within Precigen’s pipeline (below).

Then in early July, the company announced that it will sell its wholly-owned non-healthcare subsidiary, Trans Ova Genetics, to URUS. The transaction will net $170 million upfront payment when it closes this quarter as well as potential earn outs totaling $10 million in FY2022 and FY2023. The proceeds will bolster the Precigen’s balance sheet significantly and allow it solely to focus on advancing its pipeline.

It is important to note that Precigen’s pipeline is largely made up of early stage assets. Only two of the company’s candidates (PRGN-2009 and PRGN – 2012) have reached Phase II development and they both are still in the enrollment phase of this stage. PRGN-2009 is an “off-the-shelf” investigational immunotherapy designed to activate the immune system to recognize and target HPV-positive solid tumors. The candidate is being developed in cooperation with the National Cancer Institute. PRGN – 2012 is an AdenoVerse Immunotherapy targeting recurrent respiratory papillomatosis or RRP.

Analyst Commentary & Balance Sheet:

Analysts are largely sanguine on Precigen’s prospects. Since April, Wells Fargo ($17 price target), Stifel Nicolaus ($15 price target), JMP Securities ($13 price target) and H.C. Wainwright ($6 price target) have reissued Buy ratings on the stock. The last two above came right after second quarter numbers were posted.

Several insiders have been frequent but relatively small sellers of the share so far in 2022, disposing of just over $500,000 in aggregate of stock so far in the year. There has been no insider purchases to this point in 2022. Approximately one of our seven shares are currently held short. After using net cash of $25.8 million for operating activities in the first half of 2022, the company ended the quarter with just over $130 million in cash and marketable securities prior to the coming $170 million upfront payment for the company’s recent divesture. That payment provides the ability to pay off the outstanding convertible notes utilizing a non-dilutive funding source when they come due in July of next year. The company ended the second quarter with nearly $200 million worth of long term debt. Leadership stated on its second quarter conference call that it now has a ‘cash runway‘ into the fourth quarter of next year.

Verdict:

Precigen bought a little more wiggle room with its recent divesture plans. However, the company is still many, many years away from any potential commercialization. As can be seen above, while the pipeline is advancing, it is doing so at what sometimes seems a glacial pace. Another significant capital raise is likely in the first half of 2023, if not sooner.

So, despite some positives since we last looked at Precigen and some nice analyst support, our recommendation is still to stay on the sidelines until the company advances its diverse pipeline into later stage development.

10 percent of any population is cruel, no matter what, and 10 percent is merciful, no matter what, and the remaining 80 percent can be moved in either direction.” ― Susan Sontag