Precigen agrees to $79.0 million private placement of convertible preferred stock

Precigen, Inc. (Nasdaq: PGEN) agreed to sell 8.00% Series A Convertible Perpetual Preferred Stock in a private placement for anticipated gross proceeds of $79.0 million before offering expenses. The company announced the deal in a press release dated December 27, 2024, filed with an 8-K. The offering was expected to close on or before December 30, 2024, subject to customary closing conditions.

The preferred stock and warrants were offered directly to investors. The release says they were sold without a placement agent, underwriter, broker or dealer, so the filing names no bank or adviser for the deal. The securities were issued under Section 4(a)(2) of the Securities Act, which exempts private sales from registration.

Terms of the preferred and warrants

Investors also receive warrants to buy 52,666,669 shares of common stock at $0.75 per share. The preferred converts into common stock at an initial conversion price of about $1.125, which the release says is 150% of the warrant exercise price. That conversion price can be adjusted upward based on the valuation of the common stock from time to time.

Dividends are payable annually in cash if the board declares them. For the first two years, they are paid in kind, by increasing the liquidation preference of the preferred. The company must also issue warrants for 50% of each in-kind dividend, divided by the exercise price. Those in-kind payments and the warrants require shareholder approval, as defined in the securities purchase agreement.

Holders can convert only after the later of the six-month anniversary of issue and the date on which Precigen has obtained shareholder approval. The warrants become exercisable after that approval too. Precigen may redeem the preferred for cash at any time on or after the issue date, at its liquidation preference plus accumulated and unpaid dividends. Registration rights cover the preferred, the conversion shares and the warrant shares.

Who is buying

The placement was led by affiliates of Patient Capital Management. The release also names participation from Bill Miller and from Randal J. Kirk, the company's executive chairman, along with other investors. The release does not give the size of any individual investor's commitment. The chairman is among the buyers, and the release does not describe how the terms were set.

The net proceeds will be used for working capital and general corporate purposes. The release says the company has broad discretion in how it spends them, and it does not set out a use-of-proceeds budget.

The runway and what it depends on

Precigen says that, based on its current operating assumptions, the financing together with its cash on hand will extend its cash runway well into 2026. The company ties that runway to the anticipated commercial launch of PRGN-2012 in the second half of 2025, which it says is subject to approval. The runway claim therefore depends on that approval.

The release gives no cash balance, net loss or burn figure, so the runway claim cannot be checked against any number in the document. It describes the company as a discovery and clinical stage biopharmaceutical company working on gene and cell therapies in immuno-oncology, autoimmune disorders and infectious diseases, with preclinical and clinical programs, but it does not state the trial results or regulatory steps for any of them.

The release also says there can be no assurance the company will complete the private placement on the anticipated terms, or at all. It points readers to the risk factors in the most recent annual report on Form 10-K for further risks. For the company, the trade-off is clear: $79.0 million in new capital now, in exchange for a preferred that can convert at a price above the $0.75 warrant strike, and warrants for more than 52 million shares that dilute existing holders once approval is obtained.

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