Steakholder Foods Ltd.
Q2 2021 Earnings Call Transcript

Published: 16 Aug 2021

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the MeaTech First-Half 2021 Results Conference Call. All participants are at present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact MeaTech's Investor Relations team at GK Investor and Public Relations at 1-646-688-3559, or view it in the news section of the company's Web site www.meatech3d.com. I would now like to hand over the call to Ehud Helft of Edison. Mr. Helft, would you like to begin please?

[Ehud Helft:]

Yes. Thank you, Operator. Welcome to 2021 MeaTech's first-half of 2021 results conference call. I would like to also thank management for hosting this call. Let me introduce management who will be on the call with us today. Sharon Fima, MeaTech's CEO and CTO with over two decades worth of experience in hi-tech, including the 3D printing industry; Omri Schanin, Co-Founder of MeaTech and Deputy CEO, a seasoned entrepreneur that oversees MeaTech ongoing operations; Guy Hefer, CFO, managing MeaTech's financial activities; and Simon Fried, Head of Business Development, overseeing and developing MeaTech's business strategy and opportunities. We will provide a brief introduction, discuss some of the key recent highlights, and discuss the company's strategy. We will then move over to Guy for a short financial summary. This will be followed by the Q&A session, which all of MeaTech's management will participate. Please be advised that certain information discussed on this call will contain forward-looking statements. While forward-looking statement is at good faith, beliefs, and best judgments based upon current information, they're not guarantee of future performance. They are subject to known and unknown uncertainties and risk factors including those detailed from time to time in company's filing with the SEC. MeaTech assume no obligation to update any forward-looking statements or information, which speaks as of effective date. The full Safe Harbor Provision are set forth in the press release we issued earlier today, and which also is available on MeaTech's Web site. And with that, I would now hand over the call to the company Co-Founder and Deputy CEO, Omri Schanin. Omri, go ahead please.

[Omri Schanin:]

Thank you, Ehud. I would like to welcome all of our investors and analysts in this conference call. This is our first results call since our listing on NASDAQ in March earlier this year. Listing on NASDAQ was an important milestone for us with MeaTech becoming the first cultured meat company to be publicly traded in the United States. This was an important step in towards achieving our goal by owning the cultured meat revolution that is gathering momentum globally. It will be a long but very exciting journey, and we believe this is the only way forward long-term if we're saving our planet. We're confident in our ability to lead, deliver, and ultimately achieve our goals. I would like to focus on the overall progress we have made so far in the first-half of 2021 and then discuss our goals of the second-half of 2021 and beyond. Our vision is to create the technology for cultured meat production for a range of products, including 3D bioprinted tissue. Within this growing competitive sector, MeaTech is positioning itself as the leading company to the best of our knowledge being the only company developing an in-house high-throughput 3D bioprinting system for industrial scale manufacturing by developing -- is focusing in three main areas. First, developing our capabilities to produce cultured meat ingredients such as chicken, beef, and pork; second is to enhance our 3D bioprinting technology for turnkey production of multi-species premium product; and third, full-size development for a non-printed hybrid product, which are composed of both plants and cultured meat ingredients in these products we see hitting the market first. We're also working towards regulatory approval in selected markets. For those of you who actively follow us, see that we have had a busy 2021, we have delighted -- that we are delighted with our progress today. The key strategic events to date were broadening our portfolio of cultured beef to cultured chicken and pork. The year started with our acquisition of Belgium-based Peace of Meat in February 2021, bringing more advanced cultured avian technology such as cultured chicken fat production. It also provided us with a launch bed of key European markets. MeaTech also commenced development activities on hybrid foods, representing a key step towards the commercialization cultured products. In May 2021, we announced our plan to establish a pilot manufacturing plant in Belgium in 2022. This will enable us to scale up the production of cultured chicken fat to enter in front of our potential industrial collaboration. Further broadening of potential product portfolio in July 2021, after the first-half of the year ended, we initiated activities for cultured pork production. Pork is not only highly complementary to our existing beef and chicken sell lines, but it also significantly expands our potential addressable market. Today, pork is the most widely consumed meat across the globe. Last month, we announced the Israeli food retail and meat producing company, Tiv Ta'am, signed non-binding letter of intent with us to cooperate in the joint development and marketing of cultivated meat products. The goal for our cooperation or joint research establishing a cultivated meat production facility, as well as allocating distribution and marketing rights to Tiv Ta'am for the product in Israel or elsewhere in the world. Regarding our capital market activity, so as mentioned earlier, we had our NASDAQ IPO in March 2021, where we raised $28 billion mainly from U.S. investors, I would like to take this opportunity and thank to our new investors for their belief in our strategy and welcome them to our journey. In May 2021, we decided to voluntarily de-list from Tel Aviv Stock Exchange. Our shares were de-listed in early August leaving the NASDAQ as only a public listing. We believe this move will signal to the market our strategy of becoming an internationally-focused company. This allowed us a better position of our investors and public relations efforts on a global footing. In summary, we are thrilled with our progress to-date. We expanded our portfolio from beef to chicken sales, and initiate the development of cultured pork technologies, all of which expand our total addressable market in a significant way, with the associated strong increase in revenue potential. Additionally, establishing which will initially focus on hybrid foods gives foundation of productization of cultivated meat. Our near-term goal is to establish a pilot plant in Belgium during 2022, to commence cultured chicken fat production. We are also planning, and on track with important milestones of printing 100 grams of complex tissue this year, composed of both cell-based beef muscle and fat, using on our own proprietary 3D bioprinting technology. We will update you as soon as we meet our milestone. From a broader perspective, our goals include leading the current and future agricultural revolution by making tomorrow's meat day, abundance, sustainable and highly efficient to produce. Today, we continue to develop a broad range of cultured meat technologies, developing potential alternatives to conventional factory farming of beef, chicken, and pork. Our mission is to provide consumers with a comparable meat experience to eating livestock-farmed meat with a production method that is significantly more sustainable, efficient, and humane. I believe the steps we have already taken in 2021 brought us closer to the goal. We look forward to continually updating you as soon as we advance. This concludes my summary; over to you, Guy, for the financial.

[Guy Hefer:]

Thank you, Omri. It is important to note that right now we are an early stage company developing noble and radical new technology, that at this time we are in the active investment stage and did not currently generate revenue. Also, it is worth mentioning that we concluded the acquisition of our Belgian subsidiary, Peace of Meat in February 2021. And the results have been consolidated since that day. Looking at our operating expenses for the first-half of 2021, R&D expenses for the first-half, totaled $2.1 million, compared to $0.9 million in the same period in 2020. The increase reflects our expansion of investments in our research and development capabilities. Operating loss in the first-half of 2021 was $6.8 million, compared to $13 million in the same period in 2020. I note that in 2020, we had $10.1 million in a public listing expense in connection with MeaTech's reverse merger into TASE-listed shell company. Within our operating expenses, non-cash share-based compensation totaled $2.3 million, compared to $1.6 million in the same period in 2020. Total comprehensive loss for the first-half of 2021 was $7.7 million, or $0.06 per ordinary shares. This is compared to $13.2 million or $0.26 per ordinary share in the same period in 2020. Cash and equivalent at June end 2021 increased to $30.6 million, compared to $13.6 million at year-end 2020. The increase is driven mainly by the NASDAQ IPO in March 2021. Cash flow from operating activities was a negative $5 million, compared to negative $1.5 million in the same period in 2020. Non-current assets increased to $14.1 million as of June end 2021, up from $3.6 million at year-end 2020, driven mainly by the consolidation of Peace of Meat. Total assets increased to $46 million as of June end, up from $17.5 million at the year-end 2020. Total capital reached $43.8 million as of June end 2021, up from $15.6 million at year-end 2020. That ends the financial summary of this results call. The entire MeaTech's team would like to turn it back over to the operator now to begin the Q&A session. Operator?

[Operator:]

Thank you. The first question is from Mike -- sorry, . Please go ahead.

[Unidentified Analyst:]

Yes, thank you for the opportunity. My name is Joe Sal. I'm really interested in your company. I've been in the culinary business for years and years, and I see a future for this kind of technology. My question is, is there any interest to have any technology brought to United States and having a big production or building more factories, this way people can see, I guess, some more advertising of what's going on in the future with the food industry? That's my question.

[Omri Schanin:]

Thank you for your question. I'll address the answer to Simon Fried, the Head of Business.

[Simon Fried:]

Hello, Sal, thanks for the question. I think it's absolutely the kind of future that we aspire to seeing for this industry and certainly on behalf of MeaTech. When we look at the U.S., it's clearly the major market that we are focusing on. The others of course that we're looking at, but as the company is currently in R&D stage, and we're building out the technology with that first pilot plant, which is being planned to be built out next year in Belgium. We would certainly expect to see as the technology matures, and proximity to market increases, the space would also be .

[Unidentified Analyst:]

Okay, thank you.

[Simon Fried:]

Thank you.

[Operator:]

The next question would be by Michael Shlisky from D. A. Davidson.

[Michael Shlisky:]

Hello, guys. Can you hear me okay?

[Omri Schanin:]

Yes.

[Michael Shlisky:]

All right, great. Guys, thanks for doing this call and taking my questions, I guess first, I want to just quickly ask about the Peace of Meat acquisition. I wasn't sure how this was going to work. Was your company already involved in avian protein before you bought them? And maybe secondly, their effort and their products have anything to offer to the other types of protein? Could their technology work elsewhere, are you finding ways to integrate with -- like what they're doing on the avian side to what you're doing with other protein types?

[Omri Schanin:]

Thanks. And I'll let Simon answer that as well.

[Simon Fried:]

Yes, hello, thank you for the question. So, certainly, the acquisition was as just mentioned, it was an opportunity for us to upgrade our technology on the avian cell side. We have previously announced activities under the name of chicken tech. And those have been folded into our activities now in Belgium, under the banner of Peace of Meat. And so, that's very much a continuation of that earlier work that we'd been doing here in Israel. And certainly, we would very much like to see the ability to bring those technologies to bear not just in the core focus that we have in Peace of Meat, which is the production of cell-based chicken fat, but certainly down the road, we plan to be looking at ways in which avian-derived cells, whether they be fat or muscle, may be something that would be well-suited also to the bioprinting activities that we have under development here in Israel.

[Sharon Fima:]

And I will add to that, the systems that we are developing regarding the 3D bioprinting systems are, we will eventually be able to print variety of species. So, not only beef, this is why also the development in Peace of Meat can be complementary to our 3D printing development.

[Michael Shlisky:]

Okay, got it. I also want to ask secondly about the cash burn situation, I mean, it looks like Guy, you'd mentioned I think you said over above $40 million of capital, if not a little more than that. If I'm wrong, correct me there. But can you give us any kind of view as to what the cash burn might be in the back-half of the year just kind of broadly speaking?

[Omri Schanin:]

Okay. So, I will let Guy answer that question. Guy?

[Guy Hefer:]

Thank you, Omri. So, looking at our first six months, the cash from operating activities, we used roughly $5 million or an average of 850, 1000s per month. Going forward, we expect the cash burn from operations to double on average reaching $1.8 million per month on the group level. And so, that's roughly the cash burn we expect.

[Michael Shlisky:]

And the first six months of the year, that included Peace of Meat, is that all combined, or is that just a part of the year is gone so far?

[Guy Hefer:]

Yes, as we mentioned, the financial statements now include Peace of Meat starting from March 1, which is the consolidation date of Peace of Meat.

[Michael Shlisky:]

Got it, thank you so much, appreciate it.

[Guy Hefer:]

Yes, thank you.

[Operator:]

The next question is from Robert Moskow from Credit Suisse. Please go ahead.

[Robert Moskow:]

Hi, there. Forgive me if you've jumped into this already, but I was hoping you would give a little more detail on FDA regulation in the U.S., and what kind of process you're in the midst of to try to get approvals. And is it tougher in the U.S. Senate than in other countries, or at what stage are you at, in each of the countries that you want to launch them?

[Omri Schanin:]

Thank you. Simon, you can address that please?

[Simon Fried:]

Yes, hi. So, the regulatory landscape is one that's unfolding, because very few regulators have given detailed guidance as to the exact process. So, from MeaTech's perspective, we are working with consultants, and we're hearing the taxability of various regulations or assistance in order to make sure that we are positioned well as and when go to market. With regard to the U.S. in particular, the United States has a slightly different landscape when it comes to the regulation of cell-based meat than other jurisdictions have, and that it is regulated both by the FDA and the USDA. So, the FDA regulating up to the point of harvesting cells, and the USDA regulating, you could call, downstream process or out of bioreactor processes. And these are not fully-divulged in terms of the exact processes that the FDA and USDA will be requiring folks to go through. So, at the moment, it's just a matter of preparing accordingly as best we can and waiting when finer details of guidance are available.

[Robert Moskow:]

So, if you are waiting for more details to be available, are you assured that there are, I guess, subdivisions within each of those agencies that are actively working on this to give you more guidance? Is it a priority, or is it not a priority of those agencies?

[Simon Fried:]

Our impression is that it's very much a priority. And this holds for the EU as well as several Asian markets as well. It's now commonly known that Singapore, for example, is the first jurisdiction that has given regulatory approval for the sale and consumption of cell based meat products. And that was back in September last year. Our impression from the interactions we've had both with the regulators in Europe and in discussions with regulators in the states is that the regulatory stances is generally speaking very positive one, that this is a matter of urgency, and that the mission-based sustainability-based aspects of this industry as a whole are both compelling and something that are getting due attention.

[Robert Moskow:]

Great. Okay, thank you.

[Operator:]

There are no further questions at this time. Before I ask -- Sorry, we have one more question. The next question is by . Please go ahead.

[Unidentified Analyst:]

Yes, very excited about this company, I was talking to my wife now. And just a simple question, she just asked why, why? And nothing disrespectful, just asking why do this? Thank you.

[Simon Fried:]

Thanks. So, when we look at the growing population today to the world and we look at the meat producers we have today, when the standard -- there is a delta over the next few years with meat suppliers that meat consumption will rise. People at the end are craving for meat. We are born that way. We smell our neighbor's barbeque from far away because the oxidized fat is something that gives us the craving for me. We understand that producing alternatives that are not similar to meat; not have the texture to smell, the taste of real meat is not the real solution for that. We have to feed the world. And we know that we will have to have better products and better alternatives to what we have today to raising cattle, to raising livestock today, actually cost us a lot in terms of for the environment and to sustain our errors at the end. So, MeaTech has the vision of supplying real experience of a real need, and this we believe will take us forward in supplying the demand for protein that comes from the real meat, the real tissue, and this is why we're doing that. Basically we're doing that so our children and our grandsons can live on this earth without harming it too much. And this is the vision of the company.

[Unidentified Analyst:]

Thank you for that. One last question, is there any company's fast food or restaurants that you have -- any meat, 3D meat in them as we speak -- …

[Simon Fried:]

Yes. So, the situation at the moment is that because this particular approach to making meat, which is very exciting from the sustainability and supply capability aspects that have yet to be given regulatory approval, it's not yet the case of that being. So, partly for regulatory reasons, partly because this is still a relatively immature market, and I think fast food is a very mass market proposition, we'd expect to see these kinds of products come to market, probably initially at the more premium end of the food market space, and over time to work their way also to the wider more mass, whether that be supermarket or fast food type franchise.

[Unidentified Analyst:]

Yes, I foresee that as well in the future. I mean, like you said, there is need for it, and there's more people. So, I think it's a good company to invest in. Good luck to you.

[Simon Fried:]

Thank you. Yes, it's certainly when we look carefully at the plant-based market, there was some very premium plant-based products out there that have made tremendous inroads, and also caught the attention of investors over the last few years. And we certainly expect that the cultured meat space is likely to evolve in ways that are not dissimilar to the premium plant-based plant.

[Unidentified Analyst:]

Well, by vertical farming, I assume you say.

[Simon Fried:]

Alongside other sustainability production, I think this is very much you could liken it to what vertical farming perhaps offers agriculture, cell-based meat production can do for protein production.

[Unidentified Analyst:]

Good luck. I hope you guys do well and then make a lot of money. Good luck.

[Simon Fried:]

Thank you.

[Sharon Fima:]

Thank you.

[Operator:]

There are no further questions at this time. Before I ask Mr. Sharon to go ahead with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on MeaTech's Web site, www.meatech3d.com. Mr. Sharon, would you like to make your concluding statement?

[Sharon Fima:]

Yes, thank you. So, on behalf of MeaTech, I would like to thank you who are interested in our business. We look forward to speaking with you again in our annual results call and updating you on our progress. And in the meantime, if anyone would like to speak with us, please reach out to our IR team, and we will be happy to speak to you. So, thank you, and good day.

[Operator:]

Thank you. This concludes MeaTech's second quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.