Cibus, Inc.
Q1 2022 Earnings Call Transcript

Published: 8 May 2022

[Operator:]

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Calyxt’s First Quarter 2022 Earnings Result Conference Call and Webcast. This conference is being recorded today, May 5, 2022. At this time, I would like to turn the conference over to Bill Koschak, Calyxt’s Chief Financial Officer. Please go ahead.

[Bill Koschak:]

Thank you and good afternoon. This is Bill Koschak, the Chief Financial Officer of Calyxt. I would like to thank you for taking time to join us for Calyxt’s first quarter 2022 earnings results conference call and webcast. Presenting with me today is Michael A. Carr, our President and Chief Executive Officer. A press release detailing these results crossed the wire after today’s market close and is available on our company’s website, calyxt.com. Before we begin the formal presentation, I’d like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects are forward-looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company’s SEC filings for a list of associated risks. This presentation also includes a discussion of adjusted net loss and adjusted net loss per share. Both are non-GAAP financial measures and in Calyxt’s press release and its SEC filings, each of which was posted on the company’s website at calyxt.com, you will find additional disclosure regarding these non-GAAP financial measures. References to these non-GAAP financial measures should be considered in addition to GAAP financial measures and should not be considered a substitute for results that are presented in accordance with GAAP. Lastly, this conference call is being webcast. The webcast link is available in the Investor Relations section of calyxt.com. At this time, I would like to turn the call over to Michael for his opening remarks. Michael?

[Michael Carr:]

Thank you, Bill and thank you for joining us on Calyxt’s earnings call today. For those of you who maybe getting up to speed with our story following our October 2021 announcement in which we repositioned Calyxt, I will take this moment to remind you we are a plant-based synthetic biology company committed to bringing the biomanufacturing capabilities of plants to innovative companies within our target end markets

[Bill Koschak:]

Thank you, Michael. In addition to our focus on the PlantSpring-driven product development for BioFactory production, we are also canvassing a wide range of potential licensees for both our technology and historically developed traits. In the first quarter of 2022, we finalized our strategy for optimizing potential revenue from the licensing of our technology and plant traits. The strategy is two-pronged. It reflects both the broad outreach to companies in the plant gene editing and biotechnology space for their licensing of our intellectual property assets and the monetization of the company’s historically developed agricultural traits. Calyxt intends to monetize these traits through their license to counterparties, including seed companies, processors and others. We are offering licenses for the many gene editing and breeding technologies in our patent portfolio, including our TALEN patent estate. As it relates to the licensing of our agricultural traits, active discussions are occurring on several, including our soybean and wheat offerings. We are targeting the execution of licenses in both the technology and trait licensing categories in 2022. Finally, a brief update on a project for the large food ingredient manufacturer who contracted with us to develop a soybean intended to produce an oil that could serve as a replacement for palm oil. The project began in the fourth quarter of 2021 and remains on track for completion in the first quarter of 2024. The food ingredient manufacturer is funding our development costs over the 2-year term of the agreement and holds an option for future development and commercialization. On a related note, you may have seen the news last week reporting that the government of Indonesia has banned palm oil exports in an effort to control consumer prices of palm oil in that country, a move which has the potential to exacerbate global inflation in food and many other products, including cosmeceuticals. We believe this development may drive further interest in additional palm oil alternatives and that Calyxt is particularly well suited to bring forward solutions based upon our proprietary technology and expertise in plant-based synthetic biology. Earlier today, we issued a press release describing our first quarter 2022 results, and we also filed our Form 10-Q for the quarter this afternoon. First, our cash, cash equivalents and restricted cash were $17.9 million as of March 31, 2022, including net proceeds of $10 million that was raised in mid-February from the SEC-registered offering. Now to the P&L. Revenue was nominal for the quarter, compared to $4.4 million in the prior year period. The decrease in revenue was driven by the late-2021 completion of the wind-down of Calyxt’s soybean product line. All revenue in the first quarter of 2022 was associated with the agreement with a food ingredient manufacturer to develop a palm oil alternative. And looking ahead, we expect revenues to decline meaningfully from 2021 levels because of the wind-down of our soybean product line and the shift in the company’s business to that of a synthetic biology company. Total operating expenses were $6.1 million in the quarter, compared to $7.3 million in the prior year period. The decrease was primarily driven by the recapture of non-cash stock compensation expense from the forfeiture of unvested stock awards in the first quarter of 2022 and lower operating expenses. Net loss was $5.6 million in the first quarter, or $0.13 per share, compared to $10 million, or $0.27 per share, in the prior year period. The improvement in net loss was driven by the completion of the wind-down of the soybean product line, which drove an improvement in gross margin and lower operating expenses, and the improvement in net loss per share was driven by the improvement in net loss and a year-over-year increase in weighted average shares outstanding. Adjusted net loss was $6 million in the first quarter, or $0.14 per share, compared to $8.8 million, or $0.24 per share, in the prior year period. The improvement in adjusted net loss and adjusted net loss per share was driven by the improvement in net loss and the year-over-year increase in weighted average shares outstanding. As Michael and I mentioned, our business plans have been supported by the $10 million of net proceeds we received from the offering we completed in February, enhancing our balance sheet and positioning us for future success. We are extremely proud of this financing, which was accomplished in spite of difficult capital market conditions and with a well-respected institutional investor. We intend to continue to be disciplined in our uses of cash and anticipate the proceeds from the offering will be used to support the continued growth and scaling of our BioFactory business model and selective hiring to support the progression and expansion of our AIML capabilities. This growth plan is resonating with investors. As a result of the successful offering of our common stock and warrants and based on our current business plan, we now expect Calyxt’s cash runway to extend to early 2023, inclusive of planned spending to support the growth and scale of our BioFactory business model. That runway only includes committed customer payments for licensing and product development as of today. And as a result, any customer cash flows from new deals would serve to extend our cash runway even further. For additional details about our financials for the first quarter of 2022, please refer to our press release or filings with the SEC. As part of Calyxt’s ongoing validation of its platform technology, we are on track to realize several important milestone targets across PlantSpring and the BioFactory, first, within PlantSpring, and building on our current gene targeting capability, to have AIML capabilities for the identification of pathways in the design phase of development by midyear 2022. Second, building on our lab-scale reactor AIML rollout, to have AIML capabilities fully functioning within the pilot BioFactory by midyear 2022. Third, to design additional PCMs using PlantSpring for production in the BioFactory. These PCM structures provide the foundational precursors to developing chemistries and molecules that are of interest to a broad range of customers within our target end markets. And finally, for commercial-scale production, to have one infrastructure partner engaged by the end of 2022. We also continue to make great progress toward our commercial milestones, which include having two to four customer demand-driven compounds under development, and we are targeting the execution of multiple licenses in both technology and trait licensing by the end of 2022. I’ll now turn the call back to Michael for his closing remarks.

[Michael Carr:]

Thanks, Bill. I’d like to reiterate that the first quarter of 2022 was a period of instrumental advancement for Calyxt. We have evaluated 28 molecules from potential customers, including several others where the potential customer has been unsuccessful with other synthetic biology companies. We have completed multiple test runs of the pilot BioFactory and added AIML capabilities into its lab-scale reactors, enabling pilot-scale implementation of the AIML capability later this year. We progressed targeted metabolomics analysis that identifies more than 15,000 chemical signatures, including, based on interest from potential customers, rosmarinic acid, and identified six other compounds of interest for prospective customers. We have demonstrated at least a 35-fold increase in yield from land-based production to lab-scale bioreactor, leveraging these results projecting further increases as production moves to pilot scale, potentially driving an increase in yields of as much as 130-fold over land-based production. We continue to hire for key roles supporting our strategy and business model. Significantly, we are capitalized to support our business into early 2023 and potentially beyond, depending on our success with our licensing and product development agreements and related cash flows in 2022. We are on track to achieve several upcoming milestone targets, both in the lab and on the commercial front. We look forward to maintaining our pace and momentum and to providing you with updates on our accomplishments in the future. Operator, that concludes our prepared remarks. Please open the line for questions.

[Operator:]

Thank you, sir. Our first question comes from Bobby Burleson with Canaccord. Please go ahead.

[Bobby Burleson:]

Thank you. I was worried there for a second that my question didn’t go through. So I guess probably the first one is just understanding the palm oil alternative. The agreement that you have in place right now, where you’re, I guess, funded through the next couple of years and there is an option for commercialization with that partner, does that preclude you or prevent you from inking other agreements with – on that particular plant trait?

[Michael Carr:]

Bobby, it’s a great question, one that is certainly interesting and time really interesting and driven by, I think, the change by Indonesia, but the challenge around palm oil. I mean, at Calyxt, one thing we are focused on certainly is driving value in all aspects of our business. And one of that is really leveraging our IP portfolio and the history of IP development, and it really speaks to this deal. But to specifically answer your question, no, it does not. And so it will be interesting to see the implications that we’re going to unfold as it relates to palm oil and the global supply around the world.

[Bobby Burleson:]

Great. And then with your production scale partner, I guess you want to have one of those in place by the end of the year, it sounds like. Is there a – would this be a one-stop shop for you or would you need to have additional partners based on the molecules or the compounds that you ultimately plan on ramping?

[Michael Carr:]

As you know, we commissioned our pilot-scale bioreactor here at the end of Q4 last year. And the goal is, as you state, to have one infrastructure partner by the end of the year, if not more. Our business model is really fundamentally driven by our customers. As a result, it’s sort of demand driven. And that will go a lot into not only identifying and cementing infrastructure partners, but also, to your question, the variability of those partners and the number of partners. So it will be really driven by our customer needs, first and foremost.

[Bobby Burleson:]

Okay. Great. And then just a last one for me, and then I’ll jump back into the queue. But just understanding there are several, I guess, molecules that were identified by some prospective customers, where their synthetic biology development partner was unable to really scale or figure out a way to produce successfully. Does that give you – do you have insights as to why that was the case and how Calyxt is better positioned to have success with those molecules? Is there something fundamentally with your different approach that will allow you to have success there?

[Michael Carr:]

Yes. Great question. Obviously, we’re very excited about the commercial success we’ve had that we’ve shared today, with being able to review over 58 molecules from customers and continuing that evaluation on an additional 28. What’s interesting about those molecules, those 28 molecules, they come from 12 different chemical classes in five different functional areas. So think of antimicrobial, anti-inflammatory areas. And they originate from eight different potential customers. So real diversity there. As it relates to our positioning, this really is what we’ve laid out when we made our transition in October of last year. As a plant-based synthetic biology company, we’re differentiated in the sense that we’re using multicellular approach. This is through our proprietary Plant Cell Matrix. And in comparison to other synthetic biology approaches, primarily microbes, which are single-cell and utilize fermentation, in some cases they are unable to address the complexities of compounds that need to be produced. So we’ve been very excited about our positioning and our capabilities as it relates to complexity of compounds. And what we’re seeing is that it’s really proving out by communications with these customers.

[Bobby Burleson:]

Great. Thank you.

[Operator:]

Our second question will come from Amit Dayal with H.C. Wainwright. Please go ahead.

[Amit Dayal:]

Thank you. Good afternoon, guys. Appreciated for taking the questions. With respect to these 28 molecules, the press release said that other attempts by other providers were not successful. Our efforts based on the technology, is that what differentiates us? I’m just trying to understand what kind of solutions or approaches were being applied by these other providers versus what we are doing.

[Michael Carr:]

We don’t know the real specifics as to the other solutions. Typically, that you’ll find in synthetic biology is a microbial-based approach and fermentation. And what we’re focused on is, again, our PlantSpring platform and BioFactory, which uses a plant-based approach, a natural approach, where we’re using the multicellular structures. And again, really, the heart of that is the proprietary Plant Cell Matrix. And for us, what’s exciting about that is the modularity nature of it, meaning that it produces multiple chemistries at the same time. So not only can we address a given customer that has more than one compound need, but we can address multiple customers potentially at the same time. So there are several different ways that we’re differentiated. Also, when you compare our approach to fermentation, for example, we bathe our Plant Cell Matrix with our nutrient media, our proprietary media, as opposed to submerge it, which you would find in fermentation. So there are several different aspects that differentiates and separates us from other SynBio approaches, which we think lend to a lot of the discussions that we’ve not only had with customers now, but potentially customers in the future.

[Amit Dayal:]

Understood. Thank you for that. And has work started on any of these? Or are you still sort of negotiating with potential customers on which molecules to – that could work on?

[Michael Carr:]

What’s interesting is late last year we did a run in our BioFactory and did a metabolomics analysis and came up with over 15,000 chemical signatures. And within one of those chemical signatures, we’ve shown that rosmarinic acid was present, and that had been surfaced several different times by customers as a potential interest. Now, we don’t have a signed development agreement as it relates to that individual compound, but we are using that within our pilot BioFactory to further advance its capabilities and scale, while we are simultaneously having those discussions with the potential customers now with regards to those 28 molecules. And obviously, we are continuing to have additional customer conversations as we look out forward.

[Amit Dayal:]

Okay. And just last one, in terms of the AIML part of the approach are we completely ready with what we need to help move the process faster with the help of these tools or are we still developing some of these tools?

[Michael Carr:]

Well, that’s what’s exciting about AIML, is that it’s, one, data-driven and, two, builds upon itself, no different than as a snowball. And so we had been using it primarily in our gene targeting. We’re now establishing it as we look at pathways and actually the engineering of the compounds. We’re building it into our lab-scale reactors, which are very, very iterative. They move rather quickly. And then that continues to drive data and drive information. So as we mentioned during our opening remarks, we feel that that 36-month development cycle will continue to be decreased over time and, of course, with the utilization of AIML. And as we incorporate it to a further degree, not only in PlantSpring, which is a development, but also in the BioFactory, we expect those cycles to be further compressed. So it’s definitely one of the areas that we’re really excited about within our business. Clearly, data, in no matter what industry, is hugely important. And how we use our data, incorporate it into our process, again, tie it into that differentiation in terms of the other synthetic biology companies, we think uniquely positions us.

[Amit Dayal:]

Understood. That’s all I have, guys. Thank you so much.

[Michael Carr:]

Thank you.

[Bill Koschak:]

Thank you.

[Operator:]

Our next question will come from Brian Wright with ROTH Capital Partners. Please go ahead.

[Brian Wright:]

Thanks. Good afternoon. Just trying to dig in here a little deeper on the situation with rosmarinic acid and the six other compounds and I just want to make sure I’m understanding kind of what you all have said. So I apologize. But it sounds like you’ve identified this compound as potentially being able to be developed in the BioFactory and you’ve also had multiple customers come with this compound and saying, hey, this is something we would be interested in having you produce. You’ve done it at the lab scale now, and then you’re – then the question is bumping it up to the pilot scale. Is that generally kind of the gist of the situation thus far?

[Michael Carr:]

Yes, Brian, I think you said it well. I mean, we were able to identify it in that test run late last year. And simultaneously, some customers had expressed interest in it. While we don’t have that definitive signed deal for that specific molecule, we know it is of interest. So as we, in parallel, have conversations with these customers that we’ve outlined about the specific demand-driven molecules, it’s a great utilization of it to be able to assist in the development of the capabilities and the scaling of the pilot BioFactory.

[Brian Wright:]

And then I just – I can’t help but ask. Are those potential customers aware that there is more than one person looking at that kind of – somebody needs – there is multiple shoppers at the house kind of thing?

[Michael Carr:]

Well, you certainly surfaced it, for sure, with the comments here today. But again, to our model, we’re very focused on demand-driven and very focused on the individual customers and what their specific needs are. But yes, there certainly could be some specific interest drawn out of the conversation here.

[Brian Wright:]

Okay. And then if I could just follow-up on one more, the additional such other compounds, just is that a similar situation where they have been identified by customers, you have identified them in those 15,000 initial signatures, you’ve produced it at the lab scale and now it’s further discussions and you’re producing it and you’re starting the production in the lab scale? And these are kind of where you’re getting these yield kind of numbers that you’re talking about, as well?

[Michael Carr:]

The other six were identified on our part. They haven’t necessarily been serviced by customers, but the potential for that is certainly there, as they fall really into the same classifications, as I mentioned earlier, with those molecules. We’ve only seen of the 28 from the customers that have been provided, 12 chemical classes. Those other six are of a similar vein. So the potential is there, but not at the same level that we are seeing right now with rosmarinic. They are at a different pace.

[Brian Wright:]

Okay. Okay. Got it. And there is other compounds beyond these six as well that I imagine, because you have got enough capacity to work on identification of a lot more. Is that safe to say?

[Michael Carr:]

Exactly. That’s why that discovery process where we went through the metabolomics analysis and found those 15,000 different chemistries provided those 28 customer molecules that we talked with that came from customers. But when you go back to that 15,000 chemical signatures, it creates a library for us to work off of and then develop other stuff for our customers.

[Bill Koschak:]

I think – Brian, this is Bill. One other thing that’s important in all of this is we’ve evaluated 86 molecules that have come from customers beyond rosmarinic and the six that were in the 15,000 signatures that we identified. So from our perspective, we are really pleased with the intake of the molecules that we’re evaluating. And there are 28 of that 86 that we are pursuing further, with both discussing with customers as well as evaluating from a science perspective where we go with those. So, again, trying to get to the two to four that we want to have in development by the end of the year, that’s part of that funnel that progresses us to that two to four.

[Michael Carr:]

Good point. There is really two separate topics there

[Brian Wright:]

Perfect. Great. That’s super helpful, there is much more I want to dig in but I don’t want to take up the whole call. So at another time that will be great. Thank you.

[Operator:]

This concludes our question-and-answer session. I’d now like to turn the call back over to Michael Carr.

[Michael Carr:]

Well, thank you to everyone for joining us on our call today. If you were not able to address all your questions on today’s call, please feel free to contact us, or our Investor Relations firm, Argot Partners, would be happy to help you. Operator, back to you.

[Operator:]

This concludes today’s conference call. Thank you all for your participation.