Yield10 Bioscience, Inc.
Q1 2021 Earnings Call Transcript

Published: 11 May 2021

[Operator:]

Welcome to the First Quarter 2021 Financial Results and Business Update Conference Call for Yield10 Bioscience. During the call, participants will be in a listen-only mode. The presenters will address questions from analysts today. As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Yield10 Vice President of Planning and Corporate Communications, Lynne Brum.

[Lynne Brum:]

Thank you, Paul, and good afternoon, everyone. Welcome to the Yield10 Bioscience first quarter 2021 conference call. Joining me on the call today are President and CEO, Dr. Oliver Peoples; Vice President of Research and Chief Science Officer, Dr. Kristi Snell; and Chief Accounting Officer, Chuck Haaser. Earlier this afternoon, Yield10 issued our first quarter 2021 financial results. This press release as well as slides that accompany today's presentation are available on the Investor Relations Events section of our website at yield10bio.com.

[Oliver Peoples:]

Thanks, Lynne. Good afternoon, everyone, and thanks for joining our call. Since the start of 2021, we have made strong progress advancing Yield10’s business. Today, I’ll provide an update on how our business plans are progressing, Kristi will highlight our recent R&D accomplishments, after which I'll review the first quarter financials and summarize our key milestones for 2021 and beyond, then we will open the call for questions. Let's turn to Slide 3. I will focus here on several key accomplishments that set us on the path to crystallize our strategic vision for Yield10. We're utilizing Camelina as a platform crop to produce fuel, food and PHA bioplastics. Earlier this year, we reported achieving our key proof-of-concept milestone for producing PHA bioplastic in field grown Camelina. We’re scaling up the two best PHA Camelina lines up to 6% PHA by seed weight in our 2021 field test program. We plan to use seed from this for a larger scale planting in 2022 and initial PHA product prototyping. We engaged our leading U.S. seed company to perform see scale up over CRISPR edited E3902 oil content line, spring doubled haploid line, and the disease-resistant elite Camelina line. This cycle of seed scale up was enabled by plantings within California over this past winter. With permitting substantially complete, we have begun planting for spring 2021 field trial program in the U.S. and Canada. In January, the first U.S. patent was granted to Rothamsted Research for co-producing DHA plus EPA omega-3 oil in Camelina. In April, USDA-APHIS confirmed that our new CRISPR edited C3007 Camelina lines are exempt from regulation under 7 CFR part 340 under the SECURE Rule, a new crop regulatory framework in the U.S. In the first quarter, a U.S. patent was granted to the University of Missouri covering modifications to C3007 genes to increase oil content in oilseed crops. We have an exclusive license to this technology. We also strengthened the balance sheet now in 2021, which we anticipate will support the achievement of value building milestones into 2023.

[Kristi Snell:]

Thanks Oli. Hello everyone, 2021 is off to a good start. Our research team has made good progress with activities supporting regulatory permitting, field trial contracting, and the startup planning of our 2021 field testing program. We have also made progress on seed skill up for our lead Camelina line. With the spring program moving ahead, we are also taking in the steps needed to secure additional field testing and seed scale-up in contra seasons locations for fall 2021. Now let's turn to Slide 13. As the Camelina products business opportunity became clearer. We began working to deploy herbicide tolerance and disease resistant traits to create elite varieties as we develop the crop for commercialization. These are now our high priority as they are important for large scale adoption and provide value-add for the farmer in terms of cost, convenience, yield protection and farm revenue. Based on discussions with regulatory authorities and experts we believe that we can take advantage of the new more favorable regulatory environment in North America. Here we are working to rapidly deploy well-known herbicide tolerance gene traits, previously approved in other crops with a long history of safe use and approval. As you know we are also progressing in number of performance traits aimed at increasing seed yield and oil content. These will provide benefits for farm revenue, oil and meal cost of goods sold and the lower the carbon intensity score of the oil for renewable diesel. Given the potential for disconnect in vegetable oil supply and demand. Our oil content traits may become increasing interest to third-parties. These traits include the E3902 line currently being scaled as well as C3007 and C3020 new oil trait from the green platform.

[Oliver Peoples:]

Thanks Kristi. Please turn to Slide 15 and let's cover a few financial highlights. We ended first quarter 2021 with 22.7 million in cash, cash equivalents and investments. During first quarter of 2021, we raised net proceeds of 12 million from a public offering of common stock as well as 3.9 million from the exercise of warrants. That's we're aligning our balance sheet with our business strategy. We have no debt. Our net operating cost usage was 2.6 million for the first quarter of 2021. We expect our cash on hand together with the expected revenue from our current government grant to support our operations into early 2023. We estimate that our net operating cash usage for the full year of 2021 will be within the range of 10 million to 11 million. This includes estimates for our contracted and planned seats scale up activities, as well as on hires and other support in business development, regulatory affairs and seed operations, as we direct this in vast investment towards executing our business plan. Let's now review the first quarter 2021 operating results. The company reported a net loss of 2.6 million for the first quarter of 2021, compared to a net loss of 3.6 million for the first quarter of 2020. Total research grant revenues in the first quarter of 2021 were 196,000 versus 179,000 in the first quarter of 2020. In the first quarter of 2021 research and development expenses are 1.3 million compared to 1.5 million in the first quarter of 2020. General and admin expenses were 1.4 million this first quarter of 2021 level with G&A expenses in the first quarter of 2020. For more details on our financial results, please refer to the earnings release. Moving next on to slide 16 the upcoming milestones, in 2021 we will continue to focus on the following milestones, executing our 2021 field testing and seed scale-up program. Permitting a substantial complete and bonding underway we are on track. Continue to expand our lead Camelina germplasm collection, progressing the business plan for Camelina products which will include working to access year round or contra season seeds scale-up capabilities and obtaining the regulatory departments to transfer certain Camelina lines to South America. Advancing the commercial launch plan for Camelina omega-3 oils in South America, we are recently engaged to see service provider and business development support, broadening our capabilities, particularly in regulatory affairs, seed operations and business development either through hiring or other arrangements. Securing strategic industry collaborations to address market opportunities across the value chains enabled by our traits and products; and securing revenue based on generating commercial credit licensees, as we continued to expand our intellectual property portfolio, which is crucial for a small company and three recent patent grants are integral to this effort. With that, I'd like to turn the call back over to Lynne for questions.

[Lynne Brum:]

Thanks, Oli. Paul, we're now ready for questions.

[Operator:]

Thank you. We’ll now be conducting a question-and-answer session. Thank you. Our first question comes from Anthony Vendetti with Maxim Group. Please proceed with your question.

[Anthony Vendetti:]

Thanks. Oli, I was wondering if you could talk a little bit more about these Camelina lines, the CRISPR edited ones? And just talk about where you're at with that opportunity. You have exclusive license to this technology. What's the timeline, next steps? What could we look at in the next…

[Oliver Peoples:]

Yes. So basically there's a number of oil content traits that we’re working on, one is E3902, the one we're scaling up. That’s actually – that was all developed in-house by Kristi and her team. And it's actually already received approval from the USDA-APHIS, non-regulated or exempt from regulation depending on the particular words used by the regulatory authorities on any given day of the week. So the good thing is essentially it doesn't require to be treated as a regulatory product. So we have successfully scaled – done field trials with that for two years with a 5% oil increase. And when you begin to look at these markets, the growing demand for vegetable oil, obviously traits with increased oil content seed without impairing yield actually have considerable value. So that's one. The C3007 is in-licensed from the University of Missouri. It's a little complex because there's multiple copies of it. And what we're really doing is trying to optimize the combination of edits that are required to actually define that outcome. And then the third one that's progressing out of our GRAIN platform is an entirely new discovery. But again, Kristi and her team have actually engineered Camelina to overproduce this particular gene product and discovered that it actually increases oil by 10%. And a good way to think about Camelina, a 10% increase in oil given the higher value of oil is about the same value that’s up 10% increase in CGL. And obviously these are things that we think can be important, not only in Camelina, but potentially in other oil seed crops as well.

[Anthony Vendetti:]

Just as a follow-up though, so how will Yield10 monetize this within the next 12 to 24 months? How do you see the progression and the opportunities for Yield10?

[Oliver Peoples:]

Yes. So right now, I mean, I think, for the first time you'll see in our presentation, we talk and dedicate a whole slide to this whole renewable diesel driver. Now that's been coming for a while, but I think it's becoming much clearer. It's actually creating a significant supply demand disconnect. So obviously to meet that demand, the petroleum-based diesel companies are literally going to have to source low carbon intensity renewable feedstocks from now, primarily from vegetable oil. I think the story around using waistband and everything is kind of going to be used up. So this is all going to have to come from additional supply of vegetable oil, which opens the door to Camelina as a potential source of oil feed stock for that application. Now, keep in mind, the fuel spaces is very cost sensitive. And so, although, we are looking at this, the reason we're scaling up these seeds this year, and I plan to scale them up farther over the winter is to be able to plant much larger acreages as we move ahead, pending the execution of agreements for off-take with some other companies in that space. And so we're positioning ourselves to go forward and scale this up to generate revenue. But of course, we're not going to do this at risk on behalf of oil companies. That just doesn't make any sense to us.

[Anthony Vendetti:]

Sure. Yes. So in the interim – last question before I return it to the queue, are there any additional grants that you see here on the horizon in the next three to six months, or anything new that you're working on?

[Oliver Peoples:]

So I think we’re always working on new grant applications. And one thing that's really I think interesting with the new administration is suddenly you're seeing a much greater emphasis on carbon management, climate change, low carbon technologies, carbon sequestration, and ultimately, the importance of agriculture in that area is potentially very, very large. So we're well aware of what's going on. And we do routinely look for additional funding opportunities that we don't typically disclose what we've applied for until such times as we get feedback from the agencies. So we know that there's opportunities out there. And as we've done in the past, we plan to seek non-dilutive financing where we can get it.

[Anthony Vendetti:]

Sure. Okay, great. I will turn it back over to the queue. Thank you very much.

[Lynne Brum:]

Thanks, Anthony.

[Operator:]

Thank you. Our next question comes from Amit Dayal with H.C. Wainwright. Please proceed with your question.

[Amit Dayal:]

Thank you. Hi, guys. With respect to the field trials occurring, what are the targets or results we are aiming for? Any color on kind of improvements we might be looking for?

[Oliver Peoples:]

So there's – obviously, there's a number of things going on in these field trials this year. Obviously first and foremost we're scaling up some of these new lines, C3902, DH12 on a disease resistant Camelina line. The goal there is to secure large amounts of essentially high quality seats for subsequent further scale-up in planting. That's going to be one outcome. The second outcome is we continue to look at the performance of our oil content traits on the C3004 trait in particular. We have mix impact on photosynthesis and plant figure, potentially yield. And then of course we are progressing scale up of the two best PHA Camelina lines. Now, I think we've been very clear with the investor community that we see the PHA, the PHA Camelina obviously is having enormous potential value, but we've also been pretty clear that it will be the third product launch after the omega-3-3 oil. So we know we've got work to do to develop commercial quality lines, but in the meantime we're scaling it up for a couple of reasons. One is to enable even larger planting in 2022, and that's really to support for product development work. We do plan to do some basic analysis and extraction PHA from the lines end of this year, assuming successful scale up. But the goal is to really begin to develop the system, to enable this to be commercialized at very large scale. And the sooner we can begin to generate data on the PHA Camelina processing a PHA Camelina, but also to begin the regulatory analysis associated with getting it approved, provide a lot of skill planting obviously the sooner we get that started the better.

[Amit Dayal:]

Okay understood. With respect to your efforts in South America, is there a specific reason why you chose Argentina and Chile for the initial commercialization?

[Oliver Peoples:]

I'll give you, yeah. The omega-3-3 oil is a really exciting product and obviously Europe has a kind of an odd moratorium on the use of GM feed ingredients in farm salmon, the Norwegians were some dubious reason, prefer to harvest polluted fish from the ocean and extract oil and meal from that and then feed it to salmon. That's completely not sustainable and it's actually devastating native caches around Africa from South America. So that's really something that's going to have to stop. But in South America and Chile in particular, they have a mandate to begin to move away from harvest to fish and that drive is making the industry down there, very interested in dropping replacement alternatives to the harvest these fish. And so we really see as a sort of way to launch this outside of the North America, where there's still an intellectual property challenge, but also to address the second largest market in the world with the same feed companies that actually are the main suppliers in Norway, which is if you like the large production area with about 60% market share, Chile has around 30%. The other area we believe we'll be addressing in 2025 is really North America because of the growth of inland agriculture, where you're seeing people farming salmon in Florida, California, Maine, Indiana, New York state. Something I never thought I'd ever see, but it's actually growing considerably with very large investments going in to create what they call a closed loop aquaculture systems for salmon production.

[Amit Dayal:]

Great. Understood, that's interesting. Thank you for that. Just last one from me, with respect to the feedstock opportunity that the renewable diesel side of things. Have you started having any discussions with any of these companies that you highlighted in the slides are, just names of some leaders that are looking into the RD business? Just wanted to get a sense of where you are with those discussions.

[Oliver Peoples:]

Yeah, it's obviously I would say there's been outreach to Yield10 and I will be responding to it. And that's really how this has sort of begun to manifest itself, Amit. So we will provide additional color as we go forward here. But what we do see is we see these investments going in, the law in California, now Oregon, Washington State, Canada and Europe is requiring them to do this. And so a certain amount of their diesel fuel they sell has to be based on low-carbon intensity feedstocks. And so this is something they more or less have to do, which is why the capital investments are going in. But when you look at these oil companies and you look at the scale of this globally, and obviously securing supplies of feedstock for those opportunities are going to become really, really important to these companies.

[Amit Dayal:]

Understood. That's a long way. Thank you so much.

[Oliver Peoples:]

Thank you.

[Lynne Brum:]

Thanks a lot.

[Operator:]

Thank you. There are no further questions at this time. I would like to turn the call back over to Lynne Brum to – for any closing comments.

[Lynne Brum:]

Yeah, thanks Toll. And I'd now turned the call to Oli for his closing remarks.

[Oliver Peoples:]

I'd like to personally thank all of you for joining us on the call tonight. And especially our shareholders for your continued support, 2021 is off to a good start with the field trial and seed scale-up activities are well underway. We are focusing on promising market opportunities for oil and meal from our elite Camelina as well as in the Rothamsted omega-3-3 technology as a sustainable drop-in replacement for fish oil. I want to thank everyone at Yield10 for setting us on track to reach your goals in 2021. Have a nice evening.

[Operator:]

This concludes today’s conference.

[Lynne Brum:]

Thank you everybody.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.