Calyxt, Inc.
Q3 2018 Earnings Call Transcript

Published: 14 Nov 2018

[Operator:]

Greetings and welcome to the Calyxt Third Quarter 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Simon Harnest, Vice President of Corporate Strategy and Finance. Simon, please go ahead.

[Simon Harnest:]

Thanks a lot, Kevin, and thank you everyone. Welcome and thank you for joining is for Calyxt's third quarter 2018 financial results conference call. Joining me on the call today with prepared remarks are Jim Blome, our newly appointed Chief Executive Officer; Manoj Sahoo, our Chief Commercial Officer; and Eric Dutang, our Interim Chief Financial Officer. Yesterday evening, Calyxt issued a press release reporting our financial results for the three months ended September 30, 2018. This press release is available on our Web site at www.calyxt.com. As a reminder, we will make forward-looking statements regarding financial outlook in addition to regulatory and product development plans. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 10-K on file with the SEC. And with that, I would like to turn the call over to Jim.

[Jim Blome:]

Thank you, Simon. My name is Jim Blome, and I’m the newly appointed CEO of Calyxt, Inc. I’m delighted to be here today and would like to provide a brief summary of my background and to share my views on Calyxt's position and why I chose to join Calyxt in October. I was raised on a family corn in soybean farm in Central Iowa and that technology remains my lifelong passion. My 30 year professional career includes management positions in FMC, Ag Reliance, Sumitomo Chemical and Bayer. In my most recent position as CEO of Bayer Crop Sciences North American business, I was responsible for the crop protection business, the canola and cottonseed businesses as well as the USA's fastest-growing soybean seed business. I’ve spent the last two years as the commercial work stream leader for the Bayer and Monsanto North American Commercial Integration. Bayer divested significant assets including their North American seed businesses and selected crop protection businesses to comply with the government remedies and to finalize the Monsanto acquisition. As a result, I was available to join Calyxt. I chose Calyxt as my next opportunity because of the strong talent technology foundation, the world-class scientist and lab facilities, the clean license to operate and the extensive intellectual property assets. Talent is sound, proven science with very broad applications. I was also attracted by Calyxt's mission to be the first company to commercialize this technology with near-term events to publicly demonstrate the business plan. The opportunity to commercialize leading-edge technology and to own the first mover advantage in this space provides a strong talent magnet [ph] to build upon our leadership position. In addition, Calyxt's development pipeline addresses consumer demands for the healthier diets, food supply transparency and improved taste. Calyxt's technology will also provide valuable solutions to food companies who have customer and shareholder commitments to improve the sustainability by reducing inputs and waste. At Calyxt, we believe many of today's growing health problems like obesity, allergens, and diabetes are directly related to how we eat and we are building a company to help us all eat healthier. We are improving the healthy qualities of food and feed by applying our proven technology. I’m pleased to share with you today that over the last quarter we have put every element and infrastructure in place for a successful commercial launch of our high-oleic soybean product, a clear goal for Calyxt in 2018. Our key accomplishments for 2018 include

[Manoj Sahoo:]

Thank you, Jim. I will be summarizing the commercial section in three parts. Part one, will be an update on farmers 2018 harvest and 2019 contracted acres. Part two, status of the supply chain, especially crushing and refining to enable successful launch. Part three, progress on food company engagement and additional color on target markets and size of the opportunity. I will also give some color on the timeline on the launch of our new high-oleic soybean varieties. On the farmer side, we’ve made very good progress. Out of the 17,000 acres planted in 2018, we've harvested 90% of the acres. We expect their harvest to be completed as early as next week. To enhance the growing experience, our team of agronomist provided grower specific herbicide recommendations to control weeds given the fact that our high-oleic soybean is a non-GMO variety and retrain farmers in best practices in our identity preserved protocols. We are excited to inform that 100% of grain we’ve received in 2018 has met our quality requirements for advantageous presence which is the GMO content and trade purity which is the high-oleic purity. This is a key driver for our business model and is part of our head start in developing a proprietary network of growers with a 100% identity-preserved supply chain. On the contracting side, we are thrilled to say that, that as we are speaking we have already crossed last year, which is 2018, 17,000 acres. And this is just a few weeks into grower negotiations. With five months to go, we will continue to enroll high quality growers for 2019 contracts with the goal to at least double our acres from 2018, and then take thoughtful considerations for any additional growth in certain regions. On an average, growers have increased their committed acres till this date by 1.86x compared to 2018. We anticipate average acres for farmer to increase from last year's average of 220 acres. We also expect that we will be slightly increasing our share of soybean acres for grower from last year's 17%. The premium program for 2019 is very similar to 2018. We have though added a volume slot for growers committing more than 1,000 acres. With regard to target geographies, we will continue to focus on expanding our grower base in the upper Midwest region with specific focus on South Dakota, Minnesota and a little bit of Iowa and Nebraska. While we are developing new varieties to cover regions beyond this in line with our growth projections. Coming to the Section 2, we are pleased with the progress on our supply chain. Our supply chain is well-positioned for our growth and scale up. We executed a toll processing agreement with American Natural Processors, a leading provider of innovative non-GMO and organic cropping and processing of oils. We also executed a refining agreement with KemX, another leading provider of organic processing of oils with the capacity to refine up to 115 million pounds of oil per year. After harvest is complete, we intend to start crushing in coming weeks to make high-oleic soybean oil available for commercial launch. Section 3 is about food company engagement. In just past three months, we have increased engagements to a total of 30 food companies, which is a 50% increase. Of this 30 engagements, three companies are in active purchasing negotiations. This includes a global consumer packaged goods brand with the ability to easily take 100% of our current production volume of higher oleic soybean oil. But we have taken a strategy to develop a portfolio of food company relationships across multiple end users to support year-on-year t increase in acres contracted over last -- over the next two to five years. We plan to complete the price volume negotiation in the coming weeks, finalizing both spot purchases, as well as possible annual supply agreements with the food companies. With our high-oleic soybean oil, we are focusing on the premium oil segment. This market segment have grown by over 60 years in the last 15 years and today represents over one-third of the fats [ph] and oil market in United States. In 2017, the premium oil segment was estimated at a total of 14.5 billion pounds. This segment has been growing at a healthy rate of 5% to 6% annually. We are coming into this market segment with a very unique value proposition for our high-oleic soybean oil. First, its health profile. Our oil is completely trans fat free with no partially hydrogenated oil. With 20% less saturated fat and 3x the monounsaturated fat compared to commodity soybean oil. It is also gently processed i.e. it is expeller or mechanically processed. This means our processing is chemical free and done in organic refining facilities rejoicing in an oil which has much higher naturally occurring antioxidants. Second, part of our value proposition. It has 3x the fry life of commodity soybean oil, thereby reducing waste and better in terms of sustainability and providing a potential economic benefit. Third, it has a labeling advantage. Our oil is considered nonregulated by USDA, which is not regulated as a GMO, which carries certain labeling benefits for our customers and hence at premium potential. Fourth, it is refine at SQF Level 2 facilities, which are known with very high standards of food safety. Lastly, it is grown and processed in United States with a 100% trustability and identity-preservation. We believe this unique value proposition and our first mover advantage, it is achievable goal to capture 4% to 6% of the premium oil market by supplying to just 30 to 50 food company customers. The different oil segments which are potential customers are currently evaluating Calyxt's high-oleic soybean oil applications has increased in the last quarter to nine different areas. To summarize which the segments are

[Jim Blome:]

Thank you, Manoj. I would like to give you a brief update on our product portfolio outside of the high-oleic soybean. Our high-fiber wheat, we successfully transitioned high-fiber wheat to Phase 2 and completed our field trial harvest for the world's first gene edited consumer focused wheat product. We had already proven the increased fiber concept when our greenhouse grown trials demonstrated 3x the fiber of commodity white wheat flour. In the coming months, we will be testing to confirm our field grown trials replicate this 3x fiber results seen in our greenhouses. Additionally, we will test the field grown dried wheat flour in further studies to characterize the food applications desired by the food industry. We will also be bulking up seeds and crossing into a lead germplasm in preparation of the potential 2020, 2021 commercial launch of the product. We are indeed very excited about our wheat product as it will provide valuable opportunities for our food company customers to value differentiate their products in the consumer markets. Second, the improved quality alfalfa. The improved quality alfalfa product is the first ever alfalfa product to receive the nonregulated distinction from the USDA. Calyxt alfalfa offering increases the efficiency of alfalfa as a key protein feed source for animals by improving our alfalfa's digestibility. The result is a more efficient feed resource that significantly improves the economics and sustainability of our customers businesses. Before handing the call over to Eric for an overview of our financials, I just wanted to highlight some key talent additions to our commercial and supply chain teams. We have been successful in tracking strong talent with domain expertise and proven execution skills. Our new supply chain manager from Cargill has extensive experience in managing the fats and oil supply chain as well as implementing traceability. And he adds further depth to our supply chain management team. Our new food sales manager has strong history in specialty food ingredient sales and has valuable customer relationships and experience for time at Kerry ingredients and Dupont H&M. Our new Food Applications Director has more than 15 years of experience with General Mills, a large CPG company in addition to his food ingredient industry experience. We plan to double our field agronomy team as a result of the extremely positive feedback from our 2018 growers who value their agronomic advice during the soybean growing season. We see agronomy support as a valuable differentiation for Calyxt's conventional soybean system. We also expect other future team additions to progress our commercialization and the expansion of our supply chain. With that, I’d like to hand the call over to Eric Dutang, our Interim CFO for an overview of our financials.

[Eric Dutang:]

Thank you, Jim. I’m pleased that we continue to manage our cash position and cash burn in measured and disciplined approach. Calyxt successfully completed a follow on offering of $61 million before underwriting discounts and commissions in May 2018, and received $2.1 million cash inflows from stock option exercises. The cash burn, excluding financing activities was $14 million for the nine months of 2018. Our cash balance at the end of this quarter was an healthy $101.8 million. We expect our current cash position to be sufficient to fund operations to late 2020. Our cash spend in the first nine months of 2018 can be characterized by three buckets. The first bucket of cash spend is to support our product pipeline and build our industry leading portfolio of intellectual property. About 30% of the cash spend in the first nine months was for growing the product. The second bucket of cash was to prepare for the launch of our high-oleic soybeans. Our commercial team has successfully sold 17,000 acre of high-oleic soybeans beginning 2018. These activities include fixed sales, brand deliveries, economy logistics and commercial for [indiscernible] and commercial new activities with potential high-oleic soybean oil customers. The remainder of our cash is spend on general and administration activities. The team successfully managed the construction and furnishing of our state of the art facility which is generating laboratory, food demo kitchen and offices. The new facility is completed and is an inflection point in our development, and it will accelerate our R&D productivity and showcase our capabilities to produce healthier food ingredients. I’m pleased that the team continues to execute this strategy with extreme financial discipline. In the first nine months of 2018, we had a net operating loss of $19.4 million which include a total noncash stock option expense of $2.9 million. For the remainder of 2018, we anticipate we will incur working capital needs for grain purchases and capital expenditure for equipment for the new facility. To accomplish these goals, we guide to a cash burn of about $2 million per month on average in 2018. In parallel, we have engaged discussion with financial institutions to provide values financing alternatives to fund working capital and capital expenditures in 2019. We will share more details on the financing alternatives in upcoming quarters. With that, I would like to pass the call back to Jim for closing remarks.

[Jim Blome:]

Thanks, Eric. As 2018 comes to a close, we reflect on an important year for Calyxt as we continue our exciting transition from an R&D platform company to a commercial entity. We're on the cusp of our first food ingredient sales. These first sales will solidify our leadership position and differentiate Calyxt from the other R&D platform only companies. We're off to a very good start for 2019 by contracting more than 17,000 acres of high-oleic soybeans, which already exceeds our entire total 2018 acreage. And with more than five months remaining to sign up growers before 2019 soybean planting commences, we expect to more than double our 2018 actual. Our financial and development plans are on track. And we're excited to be a healthy food ingredient company. Back to you Simon.

[Simon Harnest:]

Thank you very much, Jim and team. With that, I would like to open the call for any questions you may have.

[Operator:]

Thank you. [Operator Instructions] Our first question is coming from Adam Samuelson from Goldman Sachs. Your line is now live.

[Adam Samuelson:]

Yes, thanks. Good morning, everyone.

[Jim Blome:]

Good morning.

[Adam Samuelson:]

I guess my first question and I apologize if I missed this in the prepared remarks. Was there -- do you have any additional clarity on what the realized yields were this year with the serving [ph] comp in the fields?

[Jim Blome:]

Manoj?

[Manoj Sahoo:]

Yes. So far from the harvest we’ve done the yields have ranged somewhere between 40 to 55 and it varies with the region or the counties we are planted in, which is in line with our expectations.

[Adam Samuelson:]

Okay. That's very helpful. And then on the 2019 plan, just to be clear, is the target to double or the target to more than double the present acres on the high-oleic soybeans?

[Jim Blome:]

Our target is to double, but we will absolutely have the seed capability desire to go beyond that. We are spending time carefully placing with agronomic advice, finding the strategic growers that really have the stewardship capabilities. And if we find more of those, we will continue to grow.

[Adam Samuelson:]

Okay. And then just finally for me, maybe this is for Eric. Can you talk about some of the different financing options that you're looking at to finance the working capital moving forward? Just give some ranges of expectations that you actually execute on those agreements in the next 12 months and any [indiscernible] of what those might look like?

[Eric Dutang:]

Yes. So we’re in discussion with banks and about create facilities and working capital financing. It's too early to talk about it, but we’re working on it for 2019. But right now we don’t have to -- we can finance the working capital for the 2018 and 2019.

[Adam Samuelson:]

Okay. I really appreciate the color. I will pass it on. Thanks.

[Operator:]

Thank you. Our next question today is coming from Daniel Jester from Citi. Your line is now live.

[Daniel Jester:]

Yes, hi. Good morning, everyone.

[Jim Blome:]

Good morning.

[Manoj Sahoo:]

Good morning.

[Daniel Jester:]

So maybe just step back a little bit and take 30,000 [indiscernible], can you just talk about how much high-oleic soybean acreage for the entire industry you think was planted in 2018, just so that we can kind of size where you are? And then, where do you think that market grows in totality in 2019, some of your GM competitors have some products as well. So I’m just wondering from an industrywide perspective how are you guys seeing the market this year into next?

[Manoj Sahoo:]

Yes. Dan, I’m happy to give you a little bit color now. This is -- there is no published USDA statistics which you can rely upon, because USDA looks at total soybean acres which was 80 million acres for 2018 planting and the harvest is going to be slightly less than that. Overall, if you look at high-oleic market, because its soybean and broader fats and oils, and then the high-oleic market which consists of soybean which is GMO canola, which is also GMO and sunflower which is all conventional which is non-GMO. So these are the three major high-oleic markets there. If you look at markets there are soybean among the high-oleic and I’m thinking completely aloud [ph] I don’t have any statistics. I’m expecting it to be a little less than one-third, high-oleic canola is lot more prevalent, but it is again imported. Now there were statistics by United Soybean Board, which kind of summarize the high-oleic soybean to be somewhere between 400,000 acres to 600,000 acres. But there has been no confirmation of those statistics and the forward-looking projections are kind of more a guesstimate than it. So overall, I think the market as I said in my prepared remarks, the premium oil segment has been going 5% to 6% versus the commodity segment which is growing at 1% to 2%, which is 3x the growth. So we expect this segment to grow significantly overall and we think we have a very unique value proposition for food companies and consumers overall as why it makes sense for especially consumers to prefer this kind of oil.

[Daniel Jester:]

Thank you. That’s very helpful. And just on that, can you just maybe talk a bit about your conversations with the farmer -- your farmer growers about using your product versus a competitor GMO product? Are there significant differences in terms of the services you provide or that the commercial terms which would allow you to have a more competitive product than some of the other products in the marketplace?

[Jim Blome:]

Yes, I think that our major differentiation, of course, growers are have normally been growing for more than 20 years GMO soybeans. So it's a different agronomic set of practices somewhat simplified from past conventional soybean uses. So to differentiate with our growers and the value they see with us versus others is that agronomic advice on picking the right soils to put this on, upping them break weed resistant cycles that they may or may not have on their area. And teaching them how to use conventional herbicides to grow our crop in our conventional soybeans, which are non-GMO.

[Daniel Jester:]

Okay. And then on the oil side, I appreciate the update on your customer engagement. Can you just talk a bit about the initial feedback you’ve got from customers as they’ve been testing the oil, anything that has been surprising about their feedback thus far?

[Manoj Sahoo:]

So, Dan, I think the testing has been as per planned. We -- as we said, we’ve engaged our food company engagements by 50% higher, which is awesome because there is demand from food companies for a premium oil, which is high-oleic. From a technical perspective, our oil has performed equally or better than other non-GMO oils available in the market. So customers are really excited, especially from a fatty acid composition prospective, because we have 3x as much oleic acid and consumers consider oleic acid as heart healthy. So there is that kind of [indiscernible] oleic acid. At the same time, also the commercial negotiations are going on very well. As we said, we have one large consumer package goods customer who can take significant volumes, in fact more than 100% of our capacity in all the next coming years. But as a strategy, we have decided to engage with multiple food companies, so that we can seed the market and enable year on growth for the next two to five years. So on track oil specifications are meeting our expectations and compares very well with other high-oleic oils available in the market.

[Daniel Jester:]

Okay. And then just one last one for me. Thank you. You talked about the $2 million a month cash burn rate. Any sense about how that could step up in 2019, as you grow your acreage and as you advance your R&D pipeline? Thank you very much.

[Jim Blome:]

Great point. It is our current plan to go about $2 million, but reasons for growing that would be faster acceleration of anything that might leapfrog in our pipeline, that we're finding in our characterizations, expanded acreage, and then any strategic alliances that would come in and put a media commercial opportunities in front of us that would change our current revenue plan.

[Daniel Jester:]

Great. Thank you.

[Operator:]

Thank you. Our next question today is coming from Akshay Jagdale from Jefferies. Your line is now live.

[Akshay Jagdale:]

Hey, good morning. Thanks for the question and welcome Jim. So, can I start with just a high-level question to you, Jim. So, as we look forward long-term, what impact do you think is going to have on the plan here, right? I mean, your -- you [indiscernible] summarizing experience and [indiscernible] high-level what do you think -- where do you think you will have the biggest impact in terms of commercializing or R&D etcetera. Can you help us like big picture, think through if you're successful, what are you thinking about doing? Does this mean more products and what’s in your pipeline, get commercialized down the road, did they get commercialized faster and scale faster? How should we think about your impact per se?

[Jim Blome:]

Great question and thank you, Akshay. What I found in my first few days at Calyxt is my value has been added because of my farm background, my agronomic background and my 30 years experience in relating to growers, understanding the value pitch to growers and expanding our grower-base quickly. I also have extensive relationships in the retail area in the agronomy services. So talking with them, helping build up our seed distribution plans in the future and relating and understanding their businesses well enough to put a value proposition, that's exciting to them is very helpful. I spent a lot of time in very large R&D innovation company, so my exposure in the processes to progress projects, the evaluation and prioritization of projects in the initial screens and development, experience is helping focus this wonderful laboratory of scientists who really can do all kinds of things, helping bring all of that enthusiasm from these young people into something that's focused and commercialized. And then from the strategic alliances, I have really brought experiences in the industries, different industries I’ve been around a long time and have chaired a lot of the industry association. So those types of opportunities to have chats in the hallway or those phone calls with friends really generates ideas and potential relationship to alliances that I think could really further or jumpstart this plan that was put together before I got here.

[Akshay Jagdale:]

And just as a follow-up and perhaps it is too early to answer, but with you being on board, is this more of a food ingredient company than it as a straight company or that’s to be determined and its well known [indiscernible] perspective on that?

[Jim Blome:]

Could you repeat the two choices on your question, its either this or this?

[Akshay Jagdale:]

Yes. I mean, just broadly speaking, it's -- is this more of a food ingredient company with you in charge as opposed to a farmer trait company.

[Jim Blome:]

Yes, we are very happy and proud to be a healthy food ingredient company and taking advantage of the consumer trends and pulling new markets and new opportunities for American growers to continue a pipeline in. Many years ago we used to export whole soybeans to China and they would -- I mean, we would crush the soybeans and export meal through hogs and pork and we'd export the oil to China as they built up their infrastructure we started to export whole soybeans and they captured the value on their end even relating into the Smithfield acquisition and really moving to Hogs that we used to feed here and send over there to the slaughterhouse technology and everything over there. And then now you know the issues this year with even sending our soybeans over from the U.S to China. So when we go into farmer communities and we talk about this new company that's creating a new supply chain and capturing all of that value here introducing a new seed supplier to them that have been facing a consolidated supplier market, we really get an embrace on that. And so that part of it is exciting, but for me it's also exciting that we have two sales forces, a group of agronomy sales people in the field, and this new group of commercial oil and food ingredient salespeople to our new customers on the food ingredient side. And I think that's where our pipeline development will come. In reverse engineering with our food companies where they see consumer demands, what the consumer might like that they can't quite reach, we can talk to them about those maybe do some reverse engineering and grow a crop with American growers in our infrastructure that value here that will bring these new products and really solidify the system. So we are building an identity-preserved supply chain. I think it's the first and the best really, and there are a lot of uses to it. And it's really a two-pronged approach to our leadership position, high innovation new products and also optimizing the supply chain for other users.

[Akshay Jagdale:]

Perfect. And a couple of questions for Manoj. Good morning, Manoj and congrats on some of the milestones you hit. So just to play level that to get a little bit, [indiscernible] key customers or potential customers in advanced talks, can you give us -- I mean, what does that mean? Does that mean you’re still on track by the end of the calendar year to actually sign agreement that will result in sales? That’s my first question. And, I guess, 3 is -- even if you have 1, right, it's on plan and my estimates from what you’ve said previously?

[Manoj Sahoo:]

Sure, Akshay. Happy to give you a color. So what does it mean? It means that all these customers have actually qualified [indiscernible]. So we have passed on the technical R&D innovation food hurdle and saying our high-oleic soybean oil is great and it can be incorporated in the food brand. Now what it does is [indiscernible] series of commercial negotiations with regards to the price, with regards to the logistics, with regards to the volume, with regards to the nature of contracting. And that can often take sometimes couple of weeks even in a month or two. So we remain on track for this discussions. Now we are developing that pipeline of three, but again we will be happy with one or more. It may be the end of '18 or early 2019. The reason is that the harvest was delayed by almost a month because of the heavy rains in upper Midwest, so farmers found it challenging to actually harvest. So -- but we remain on track and very excited about our food company relations.

[Akshay Jagdale:]

And just to follow-up on that, Manoj. So, what prevents that numbers of 3 out of 30, right, what prevents that from being 10 or 15 today, right at a high-level and is it bandwidth issue, there is a volume issue, but what is -- the 27 that are in advanced stages what is there -- what is the main reason why they aren't in a more advanced stage than what [indiscernible]?

[Manoj Sahoo:]

Well, the way I would think about is not to prevent, what needs to be true for our 30 customers. First is timeline. Some of these customers are very large global brands who take a lot of time in evaluating their product because for a company to put our oil into a $10 billion brand needs a lot of what Jim calls supply chain reliability or a proven supplier base. And we have established the supply chain, but we need to optimize it, so that it's highly reliable to serve the food company brands. So that’s number one. Second is that not everybody would pay that premium, because it translates to their value proposition as a brand. So there will be a natural fall off from those 30 customers with regards to when we expect a premium oil price. At the same time, the discussions with the small or medium-sized food companies which typically supply to the whole foods of the trader are much quicker and they’re quick to evaluate. So we expect them to be the first of the early adopters in 20 -- early 2019, hence allow us to be able to sell out 2019, which is basically 2018 plantings and crossed into oil. And then grow the portfolio of companies to actually sustain the momentum we’ve got on the farmer side to be able to scale up our acres as well as the supply chain.

[Akshay Jagdale:]

Okay. And one -- last one for you, Manoj is based on pricing on high-oleic price discovery, I’m sure [indiscernible] it's difficult to talk about specifically on a call like this, but can you just talk maybe about what’s [indiscernible] available items [indiscernible] that’s well understood. I mean, there's GM high-oleic varieties out there. There's plenty of other premium oil out there that has high-oleic content [indiscernible] I mean, you’ve in the past established a decent framework to help us understand that, but can you -- I mean, we’ve done some work on this that I would love to get your perspective on like the price discovery so far and what your impressions are? To my knowledge the -- pricing that you should be targeting should be well north of where these premium oils and aggregate trades. But I’m just curious to get your perspective on that?

[Manoj Sahoo:]

Thanks, Akshay for the question. As you know, if you look back probably 10 years, because it's a commodity goes up and down. The soybean oil price as a commodity GMO has went somewhere between $0.30 to $0.33, closer towards the $0.30 given the recent correction in soybean prices following trade war with China. We expect our oil to be trading at a significant premium to the commodity soybean oil prices. Now if you look at a basket of premium oils ranging from olive oil to high-oleic sunflower to even high-oleic canola, or other seed based oils like cottonseed oil, they tend to be around that $0.50 -- $0.50, $0.55 over the last 10 years, and they move in tandem. So I think we would continue to push our food company customers and achieve a more premium pricing. And these are non-negotiated. We're not negotiating a commodity based pricing. This will be typically fixed-price contracts or specific volumes or annual supply agreements. We are getting good traction on even annual supply agreements early on the process which is a positive momentum from us -- for us.

[Akshay Jagdale:]

That’s it. Thank you. I will pass it on.

[Operator:]

Thank you. Our next question is coming from John Baumgartner from Wells Fargo. Your line is now live.

[John Baumgartner:]

Good morning. Thanks for the questions. Manoj, I’ve a couple on the commercialization side. And I apologize if I missed this, but in the contents on the identity premiums, that came in I think better than you expected in 2018 originally. What are you thinking about for 2019? Should those premiums continue to kind of compress as the market comes to you or are we looking for more like a flattish IDP kind of year-on-year?

[Manoj Sahoo:]

John, thanks for the question. Yes, I think we provided some range and we broadly were on the lower end of the range, which is positive for us. And that’s because of we invested in the agronomy team. We build relationships by providing technical advice and getting the placement right in the farmers portfolio farms. We will continue to do that good work. So I anticipate that 2019 premiums to be very similar. The only difference is that we’ve got some good interest from larger farmers, hence we added additional premium for more than 1,000 acres. Again, that would help us sign up more acres in -- for 2019, which is good deliverance for us.

[John Baumgartner:]

Great. And then just on your choices, KemX and American Natural. How did you decided to partner with them? Was it largely just cost-based or the differentiated abilities they’re bringing to you as a customer? Why [indiscernible] the alternatives that are out there?

[Manoj Sahoo:]

So, to step back, I think we’ve been talking to multiple crushers and refiners. We used a evaluation criteria consisting of a couple of items. One, is the logistics and supply chain, not just for soybeans, but for the meal as well as the oil. Because the meal gets sold to feed companies or animal nutrition companies, and oil get sold to food customers. And so there was a integrated supply-chain model to help us understand the supply chain optimization potential, that’s number one. Number two, was their technical capabilities. This is the first ever gene-edited product in commercialized in the world. So we wanted to ensure that we’ve partners who have very strong technical abilities to be able to process our soybean into a high quality and still maintain that integrity as Jim said up 100% identity-preservation and flexibility. The third thing was the potential to grow in future. So that it's not about just 2018, '19, but ability to grow and they should have the capacity that to accommodate that growth we foresee in the coming years. And with these three things, KemX and AMP were the best strategic fit for us.

[John Baumgartner:]

Great. And then I just last question I have, in terms of your discussions with customers for your products, and -- HO bean oil specifically. I mean, clearly packaged food has a problem growing. Everybody is focused on health and wellness and we’ve seen big R&D cutbacks in the packaged food companies themselves. And I guess, at this point they’re more or less focused more on [indiscernible] and less than the -- on the [indiscernible]. So, I mean, are you hear -- discussions with customers or potential customers, are you hearing customers coming to you saying, listen, we like the soybean oil, but we have this other ingredient that we like to refine or improve. I mean, are you seeing any sort of like cross-pollination ideas, which you have applied, talents with next generation of cross maybe originally?

[Jim Blome:]

Yes. No, I think that is a great point where we were learning about the trends what their challenges are and how we might meet them as a strategic partner. So we have substitutability in a lot of the recipes that could change the way they [indiscernible]. We have major customer in the last week, sell their snack divisions, right. So they’re focused on healthier options. And some of that is taking old brands and making a new health statement in it. I think Calyxt present a wonderful opportunity for a partnership in allowing them to do that.

[John Baumgartner:]

Great. Thanks for your time.

[Operator:]

Thank you. Our next question today is coming from Ken Zaslow from Bank of Montreal. Your line is now live.

[Kenneth Zaslow:]

Hey, good morning, everyone. Just two quick questions. One is, Jim, what strategic changes will you be doing under the -- as the new CEO. More so, like is there a strategic direction or change? And then my second question is, I appreciate that doubling the acreage is a big [indiscernible] move. It seems like your demand is actually even greater than that. Would you think about partnering with a large [indiscernible] or someone who is out there accelerate your seed [indiscernible] farmers. And I [indiscernible] it there.

[Jim Blome:]

Great. Thank you. On the first question on strategic direction, we are very happy to be a healthy food ingredient company. So the plan that’s in place giving a sharper edge to our development plans to take advantage of our expense basis in the supply chains is probably taking a precedent. So that’s not new, but that’s sharper. And then understanding and taking full partnership position with the food companies in helping them explain what we can do in our opportunities, and having the trust. We see trust as an important part of the food business, an important part of sharing the brand and as we grow that we see it as a big opportunity of being first and we think it's an opportunity for us to learn quickly and understand how to present value for them. So the strategic direction is not really going to change, but we are going to sharpen it and put a sharper commercial edge on it, which is appropriate for a company at this stage of growth coming from R&D into commercialization. On your second question of -- is 2x the soybeans be appropriate point. We had a really important role this year in proof-of-concept and business and putting this business together and we've achieved that. Now as we grow, the 2x seems like a likely target for this year, understanding that we are with just one soybean variety this year. We are solving that by introducing 2 to 3 new varieties for the next planting season, which will allow us to expand our acreages beyond this 2x goal. But there are certain things of walk before you run and I think the wonderful lessons and the opportunities for optimization that we've done in doing this correctly. We have a responsibility as being the first to do it right and we are building an industry quite frankly not just the company and I think this is the proper rate. But I will take greater than 2x in 2019. Manoj is listening to me. So I agreeing with you.

[Manoj Sahoo:]

One aspect I think, Ken, you talked about is the ad conglomerate. So like what [indiscernible] talk to a big player under the strategic relationships. I think, yes, why not. And Jim has been part of those kind of discussions in this past life and brings a host of industry networks with him. And we will be engaging in such discussions to significantly scale up our food grid, on the farmer side as we look towards growing in the coming years.

[Kenneth Zaslow:]

Partnering with somebody who would accelerate your [indiscernible] 2x, what about like [indiscernible] if you partnered with somebody maybe a greater [indiscernible] you could be 8x in the next three years, rather than a slow [indiscernible] 2x is slow, but there's a great appreciation to monetize your first mover advantage. Is there not a concept in there? And then I will leave it there.

[Jim Blome:]

I think it's an excellent point in something that we’re focused on. So as we developed in the next 12 months in those opportunities, it's just about getting our varieties in place and scaling up the seed. We have the processing capacity already identified in relationships there. So it can go very quickly with the proper products and the proper strategic alliances.

[Operator:]

Thank you. We reached end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

[Jim Blome:]

Thank you everyone. I appreciate everyone taking time to come in and listen to the Calyxt story. It's been an exciting year for us here. We are very proud of the commercialization milestones, we shared with you. And we look forward to giving you additional updates as we progress along the next six months as this company grows. So thank you very much.

[Operator:]

Thank you. That does conclude today’s teleconference. You may now disconnect your line at this time and have a wonderful day. We thank you for your participation today.