Yield10 Bioscience, Inc.
Q3 2020 Earnings Call Transcript

Published: 12 Nov 2020

[Operator:]

Welcome to the Third Quarter 2020 Financial Results and Business Update Conference Call for Yield10 Bioscience. During the call participants will be in 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, Jessi and good afternoon, everyone. Welcome to Yield10 Bioscience third quarter 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.

[Oliver Peoples:]

Thanks, Lynne. Good afternoon, everyone, and thanks for joining our call. Today we will provide an update on the strong progress we have made toward achieving our 2020 R&D and business objectives, including our collaboration with Rothamsted Research Technology, enabling production of DHA EPA Omega-3 oils for use in agriculture. Kristi will then highlight our recent R&D activities. I'll then review the financials and summarize our key milestones for 2020 and beyond. We’ll then open the call to questions from analysts. Now let's turn to Slide 3, our business profile. Yield10 is an agricultural bioscience company focused on developing innovations for sustainable food security. We bring a new approach to trade discovery or platform the Trait Factory leverages 30 years of investment and innovation in synthetic biology to enable efficient identification and validation of genetic changes with productivity traits to increase performance and productivity of crops. We have four world leaders and major crops developing nucleation their seeds and that their cost of risk on the research license agreements. Our Camelina oilseed program is not only core to our trait discovery process, but crop of high potential and its own right. We’re developing commercial Camelina varieties as a platform crop for our specialty products business, focused on nutritional oils and PHA biomaterials. We also continue to increase our patent position with a strong leadership team and have operations in Woburn, Massachusetts and Saskatoon, Canada. Now let’s turn to Slide 4 our market opportunity, we see a compelling market opportunity for our business based on our focus on crop traits driven by four key global trends.

[Kristi Snell:]

Thanks, Oli. Hello, everyone. The research team has been focused on execution of field tests and on trait discovery and development over the last several months. In addition, we’re excited about the collaboration with Professor Johnathan Napier and his team as it represents a strategic expansion of our technology platform into DHA and EPA Omega-3 oils. Their research program is impressive, and I’m looking forward to further progress and success in the months ahead. Let's now turn to Slide 11. Throughout 2020, we have made steady progress toward achieving milestones in our R&D programs. We completed harvesting for our 2020 field test programs at sites in the U.S. and Canada in the third quarter.

[Oliver Peoples:]

Thanks, Kristi. Please turn to Slide 12 and let's cover a few financial highlights. We ended the third quarter with $11.8 million in cash, cash equivalents and short-term investments. This includes net proceeds of $5.3 million we received from completing offerings of common stock in August. We have no debt in our balance sheet. Our net operating cash usage is $2.1 million for the third quarter and $6.3 million from the first nine months of 2020. We expect our cash on hand together with expected revenues from our current government will support our operations into the end of 2021. Based on our financial results year-to-date, we remain on track with our estimate of net operating cash usage for the full-year 2020 within the range of $8.5 million to $9 million, we’re directing this investment towards executing our business plan. Let's now review the third quarter operating results. The company reported a net loss of $2.2 million for the third quarter of 2020, compared to a net loss of $2 million for the third quarter of 2019.

[Lynne Brum:]

Thanks, Oli. Jessi, you can now pull out analysts for questions.

[Operator:]

Our first question comes from the line of Sameer Joshi with H.C. Wainwright. Please proceed with your question.

[Sameer Joshi:]

Thanks. Thanks for taking my question. The first question is about this Rothamsted relationship. What exactly would you be working on, is it increasing the yield or oil content or any other characteristics? And then what is the endpoint? Are you measuring the oil content of the fish that is that feeds fish or other further clinical studies in humans that will be the endpoint?

[Kristi Snell:]

Thanks, Sameer. Thanks to your question. I'll turn it over to Oli. Oli?

[Oliver Peoples:]

Hi, Sameer. Good to talk to you, Sameer. Yes, in reality, Rothamsted has already progressed, it's not extensively, they've not only demonstrated the production of Omega-3 oils with good levels of EPA DHA in Camelina. They've actually carried out field trials, we've carried out recovery processes to purify the oil and they've done extensive fish feeding trials at the number of locations, so what they're really going to do and focus on is really optimizing the trait. That's a program that's been going on for several years under Johnathan Napier’s stewardship. And obviously, they are the world experts in Omega-3 oil production oilseeds. So we're delighted to have the collaboration. In regard to what Yield10 is doing, in addition to supporting the Rothamsted Research program financially, we have an exclusive option to an exclusive license to the technology of choice. And more importantly, we are developing advanced lines of Camelina increasingly looking at herbicide tolerance, disease resistance, and obviously you're well aware of the oil plates you already have. And given that the Omega-3 oil business EPA, the DHA, EPA oils business is really about the value of the oil from the seed. Obviously, increasing seed oil content is a key financial driver as increasing overall seed, we're really continuing to do the work, we were doing anyway. It's just that as Rothamsted further enhances the DHA, EPA oil trait, we’re building a platform which we’ll be able to deploy that in the future. The second thing Yield10 is doing is really looking very extensively at near-term commercial, commercialization based on potential opportunities in South America, we have still have a fair amount of diligence to do in that location. But we are well aware that Chile is about 30% of global salmon production itself. Obviously, there's a market in South America for these types of products, on a strong divert towards using more sustainable feed in aquaculture in general. So we're very pleased with this relationship. Very excited about it. The synthetic biology program that Johnathan has actually carried out over the last decade is remarkable and very successful one. So we’re delighted to be involved with them and have the option to secure exclusive license.

[Sameer Joshi:]

And so is there any kind of monetary commitment for this program? Or is it going to be off of your regular R&D budget?

[Oliver Peoples:]

Excited to be included in our projections. It's actually included in our projections for costs, costs are sort of estimated cash use for next year, we haven't given clear guidance on that. But we don't see building the overall run rate, yes we’re allocating resources to this judiciously.

[Sameer Joshi:]

Understood, and then moving onto partnerships, you have partnership with Bayer, GDM, and Forage and Simplot, any other license in collaboration to be expected in the remainder of this year? And are there other traits that these companies actually are working with the same company?

[Oliver Peoples:]

Well, so yes, in fact, in the GDM situation, we haven't disclosed what traits are working on here. That's not their request. But in addition to the fact that we’re looking for potential partners with Canola and Corn for our traits, we really have been looking pretty extensively at potential partners, two partners in the Camelina business, there's obviously a growing demand for increasing vegetable oil per acre of land in North America to supply, I would say, the emerging interest in what we call renewable diesel commodity for the California market. It's not something that we’re pursuing ourselves. But certainly, we see opportunities in terms of the products that we intend to make potential agreements. When we move into the PHA biomaterials, which we didn't speak, talk very much about today, that program is moving right ahead, obviously, producing PHA biomaterials or maybe address several markets including water treatment applications, feed applications, and bioplastics applications, which has enormous potential. Hopefully later this year, our next report the data we have generated from this use PHA biomaterials. But again, when you look at the potential number of partners in those areas, it's a multiple of what's possible, when you talk about traits just for the major crops.

[Sameer Joshi:]

Understood, you referred to the 2020 field test data, is there any preliminary data, high level information that you could share at this time, or should we just wait for you to get published?

[Oliver Peoples:]

I think it's too early. Yes, it's too early to provide any kind of guidance on that Sameer, I think obviously, we'll just wait for data and then we can provide a very clear picture as that.

[Sameer Joshi:]

Okay, one last one on cash usage of $8.5 million to $9 million. Does that include any one-time cash usage that you may have incurred, for example, for the capital raise or some other activity?

[Oliver Peoples:]

Yes, that's basically the total all-in, I think that's where we are. So I think, with respect to where we’re in net cash usage is pretty much on the money with respect to what we expect to spend this year. It's been a little from last year, but that's actually related to some proceedings related to essentially a real estate situation, we'll be able to take advantage of a sublease to reduce our costs and some other minor savings. But generally speaking we have capped for R&D program on alter the COVID situation, so we've continued to spend as we planned on the R&D programs, but we have saved some cash on real estate related issues.

[Sameer Joshi:]

Understood, thanks a lot, Oli.

[Oliver Peoples:]

You’re welcome.

[Lynne Brum:]

Thank you. Next question?

[Operator:]

Our next question comes from the line of Robert LeBoyer with Ladenburg Thalmann. Please proceed with your question.

[Robert LeBoyer:]

Hi, I had a question about the Rothamsted agreement. And if I'm understanding this, it sounds as if they've been doing this work with Omega-3s in Camelina. And you have licensed some of your technology that they will use going forward. And you will have the option to take your license to commercialize this. Am I right so far?

[Oliver Peoples:]

Robert, no not quite. So let me just be quite clear about this, what we've done is we've agreed to fund to just financially support the ongoing research program, which as you pointed out has been ongoing at Rothamsted for a number of years. In exchange for that financial support that we're providing to the research program that they're guiding and developing on their own, we get an exclusive option to an exclusive license to the technology. Obviously, that's why we did it. So really what they are doing is continuing the program that we had ongoing with Yield10’s activity to support the financial. And what we get is a tremendous opportunity for our Camelina platform.

[Robert LeBoyer:]

So you would be using their discoveries in your Camelina?

[Oliver Peoples:]

Correct, it would ultimately be the same as for example, we have a license an exclusive license to the C3007 say from the University of Missouri, which we obviously have achieved approval from USDA, first of all genome edited Camelina and genome edited canola lines this last year. Similarly, we would have an exclusive license to be the commercial partner for Rothamsted Omega-3 oil technology.

[Robert LeBoyer:]

Okay, so just the same way that you would license traits in from universities before you’re licensing the Omega-3 from Rothamsted, is that?

[Oliver Peoples:]

Yes, and I think the difference is as regards the technology from Rothamsted, it's obviously at a pretty advanced level, they've already developed an Omega-3 oil trait and they’re working on far improvements to it, obviously their belief is that they can ultimately get to what would be the goal standard of the industry, which is a drop in land based sustainable replacement for the Southern Hemisphere fish oil. And the reason is the goal standard is because of the levels of EPA and DHA in Southern Hemisphere fish oil, which comes from guess from is the highest that you can actually obtain from that. So, that would be a tremendous position to have and then our view based on the papers we've read, the other research we've done it's pretty clear, they have the best answer to this so far.

[Robert LeBoyer:]

Okay, and it sounds if the end product is going to be producing Omega-3 in Camelina?

[Oliver Peoples:]

Correct. They’re basically, yes essentially what it will be is, it'll be the second of our oil, nutritional oil product. The first nutritional oil is Camelina oil, as it is today. And they're the markets human nutrition, but also as useful as a supplement in an aquaculture feed, because it contains one Omega-3 fatty acid called ALA Linolenic and that can be converted by some species into small amounts of EPA and DHA. So it's better, it's a better solution than feeding soybean oil, for example. But it's not, really the solution that's required, which is the plant based oil that's high in both EPA and DHA fatty acids at similar levels to some of the fish oil.

[Robert LeBoyer:]

So, this would be feed for agriculture, but not actually changing the salmon themselves, or the fish being raised in agriculture, this is just you’re making a plant that will be either used to extract the oil for humans or fed to the fish?

[Oliver Peoples:]

Correct. Exactly, exactly. So this would be well, it would be a nutritional oil product. It's just going to promote agriculture feed usage. But inevitably, I believe it will end-up also being used in the chicken and other feed systems.

[Robert LeBoyer:]

Okay, and in the previous question, you mentioned that there are no signing fees. Is that right? And it would just be part of your normal research budget?

[Oliver Peoples:]

At this stage it’s just part of our normal research. If we execute a commercial license in the future, that would be a fairly typical commercial license.

[Robert LeBoyer:]

Okay, on the topic of commercial licenses, is there anything foreseeable in the coming year?

[Oliver Peoples:]

I think the guidance we’ve provided in that sort of late 2021 to 2022. In the event that any of our potential partners Bayer, GDM, Simplot or Forage Genetics will really see value in the traits of their test.

[Robert LeBoyer:]

Okay, great. Thank you very much.

[Oliver Peoples:]

You're very welcome.

[Operator:]

Thank you. Our next question comes from the line of Matt Bullock with Maxim Group. Please proceed with your question.

[Matt Bullock:]

Hi, this is Matt Bullock on for Anthony Vendetti. Thanks for taking my question. My question relates to the report data for the Camelina and Canola that you plan on reporting in the fourth quarter, or early 2021. What do you feel are some of the most important aspects of this data readout? And if the results are positive, what are the next steps and what could those results mean?

[Oliver Peoples:]

Yes, so obviously, our work is primarily focused on Camelina. It's primarily focused on Camelina for oil content using genome edited traits, C3007 and E3902. And we're also testing for the first time, I remember the second time, the C3004 trait and part of which would actually be a regulation trait under the GM field. So that's what we're testing. And what we're looking for is how well did the go in the field. Do we see things that are indicative of increased performance? But ultimately, it comes down to the oil place, do we see higher oil per acre and in the field, obviously, we see higher oil.

[Matt Bullock:]

Okay, thanks. That's very helpful. I'll hop back in the queue.

[Operator:]

Thank you. It appears, we have no additional questions at this time. So I'd like to pass the floor back over to Lynne for any additional closings.

[Lynne Brum:]

Thanks, Jessi. And I'll turn the call back to Oli for closing remarks.

[Oliver Peoples:]

Okay, so we've made strong measured progress across several crucial areas this year, most recently signing a research license with GDM for soybean, signing a collaboration with Rothamsted, advancing a pipeline of traits and strengthening our balance sheet. In addition, over the course of 2020 the outlines of our business plan for Camelina has come together. We believe the green platform can be used to address a wide range of traits in a broad array of food and feed crops, and enable the development of advanced Camelina varieties for large scale production of proprietary specialty products. We’re currently pursuing three distinct revenue opportunities, licensing of our yield and performance traits for use in major crops, product sales based on our Camelina platform for producing nutritional oils and PHA biomaterials and strategic industry collaborations and R&D revenues. I'd like to personally thank all of you for joining us on the call tonight, and especially our shareholders for your continued support. And I want to thank everyone at Yield10 for setting us on track to reach our goals in 2020. Have a nice evening.

[Operator:]

Ladies and gentlemen, you may now disconnect.