Yield10 Bioscience, Inc.
Q4 2020 Earnings Call Transcript

Published: 16 Mar 2021

[Operator:]

Greetings, and welcome to the Fourth Quarter and Full Year 2020 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, Hector, and good afternoon, everyone. Welcome to the Yield10 Bioscience fourth quarter and full year 2020 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 fourth quarter and full year 2020 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. Throughout 2020, and into early 2021, we have made strong progress advancing Yield10’s business. Today, I will provide an update on this progress, Kristi will highlight our recent R&D accomplishments and activities planned for 2021. After which I'll review the financials and summarize our key milestones for 2020 and beyond. We will then open the call to questions. We've got a lot done in 2020, despite the uncertain outlook at this time last year due to COVID-19. Thanks to our team. We proceeded with purpose, adapting to the situation as it unfolded throughout the year. Now let's turn to Slide 3, advancing Yield10’s business. I'll focus here on several key accomplishments that set us up on the path to crystallize our strategic vision for Yield10 and to find our targets for product development aimed at markets with significant revenue potential. We diversified the Board of Directors with the addition of ag industry veterans Sherri Brown. We significantly strengthened our balance sheet to extend the cash runway to achieve value building milestones. We raised $5.3 million offerings completed on August, 2020. We ended federal year 2020 with $9.7 million in cash. This was followed in January by $12 million raised in public offering, which included investments by institutions, retail investors and Jack Schuler. There was also a $3.9 million in warrant exercises in early 2021. We engaged our first major ag player based in South America, assigning a research license with GDM for testing traits in soybean. We advanced Camelina business by securing exclusive commercialization rights through signing a collaboration agreement with Rothamsted Research for development of DHA plus EPA omega-3 oil technology. The technology in the sustainable agriculture feed is well advanced with multiple years of field trials and salmon feeding studies completed. This platform provides further differentiation for Yield10 and Camelina has high product revenue potential, filling a gap in our product portfolio between current Camelina seed products and our PHA bioplastic platform currently in development.

[Kristi Snell:]

Thanks, Oli, and hello everyone. Our research team made good progress with testing and deploying our traits in 2020 with our objective of using Camelina as a platform crop for the production of oils and omega fatty acids and PHA biopolymers. Now let's turn to Slide 7. In the 2020 season, we planted Camelina plants containing genes to produce PHA in seeds. This work is based on technology we developed and filed for patents in 2019. In January, we announced that we achieved a proof of concept milestone for producing PHA and field grown Camelina plants. We indicated that our engineered Camelina lines produced up to 6% PHA and seed. We have selected our two best PHA Camelina lines for scale-up in the field in 2021. After harvest, we plan to extract PHA from the seed for product prototyping. Our team views the production of 6% PHA and seeds is a very exciting result. We will continue our R&D efforts to increase PHA yields in the seed. We'd like to achieve 10% and over time, get to 20%. On a technical basis, we believe this will be achievable. In our 2020 field work, we conducted seed scale-up for our CRISPR triple edit E3902 Camelina line designed to increase seed oil production. In the spring of 2020, we planted E3902 at a site in the U.S. Midwest. We harvested the seed and use some of it to conduct a second cycle of seed scale up in California over the winter. We have analyzed the seed from the spring planning and see oil content increases of 5% consistent with prior tests. We were planning additional seed scale up this – with this line in spring 2021. In 2020, we also focused on developing our elite Camelina germplasm and identified the agronomic trade stack we want to build into our collection. Development is underway to deploy herbicide tolerance and disease resistance in our Camelina varieties to enable large acreage deployment.

[Oliver Peoples:]

Thanks, Kristi. Please turn to Slide 12 and let's cover a few financial highlights. We ended 2020 with $9.7 million in cash, cash equivalents and short-term investments. In addition, during first quarter of 2021, we raised net proceeds of $12 million from a public offering of common stock and $3.9 million from the exercise of warrants. On a pro forma basis, we started 2021 with approximately $25.6 million, which we currently asked mate will take us into 2023, providing a two-year runway. This accomplishment better aligns our balance sheet with our business strategy. We have no debt in our balance sheet. Our net operating cash usage was $2.3 million for the fourth quarter and $8.7 million for the full year 2020, consistent with our guidance provided in 2020. We expect our cash on hand together with 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 2021 will be within the range of $10 million to $11 million. This includes potential hires in seed operations, business development, and regulatory affairs as we direct this investment towards executing our business plan.

[Lynne Brum:]

Thanks, Oli. Hi, Hector, we are ready for questions.

[Operator:]

Thank you. Your first question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.

[Anthony Vendetti:]

Thanks. I was wondering if you could talk a little bit more about the Rothamsted collaboration, just if you, Oli, if you could just give us a little more background on the progress there and then any type of milestones we should be looking for in 2021?

[Oliver Peoples:]

Yes. So, we are very fortunate to have secured the commercialization rights to that technology. That technology has really been developed by what we believe is the world's scientific leader in the field of omega-3 production in crops. And he has actually developed Camelina to produce high levels of both EPA and DHA, two essential omega-3 fatty acids. That's pretty unique in the crop space. And so he has filed patents on that. He has executed four years of field trials in three different geographies. They've done extensive obviously product testing both in agriculture feed, but also in human clinical studies with very interesting results. So there's still a lot of upside in what he is doing and Yield10 is supporting that ongoing research as he looks to father improve technology targeting essentially gold standard of fish oil, which is Southern Hemisphere fish oil. There we are targeting achieving somewhere around 30% of the total oil being EPN and DHA fatty acids, split roughly 15% each, and hopefully he'll make good progress on that. But as we see Camelina today, we look at it is really the gold standard potentially of vegan aquaculture feed for increasing salmon production globally. So we're very excited about this platform and we're very fortunate that Professor Napier, the scientist behind this also joined our scientific advisory board. On milestones going forward this year, and what's going on, there is a significant ramp-up in business development activity particularly a reach in South America where we see Chile as a likely initial market. It's about 30% of global farm salmon production today. It has a goal to expand that further. And they've also got a goal to essentially replace harvested fish oil and meal with essentially a sustainable renewable replacement. In the field Camelina is just tremendously well positioned for that. And so we're very busy on the business development side. The scientists at Rothamsted said you're still dealing with some issues because they are just North of London and the U.K. So they've had some challenges beyond what we've had, but we couldn't be more excited to be working with a great team though, and the great leader, and it's a very exciting platform for us.

[Anthony Vendetti:]

Okay, great. And then just on the PHA bio-plastics what should we be looking for in 2021 on that front?

[Oliver Peoples:]

Yes. Same thing; I mean, basically now that we've, Kristi and the team has just done a tremendous job of getting to that kind of first key step down the commercialization path with the first successful field trial with the new technology, obviously beginning the process of scaling out that seat with the best lines we have available, will allow us to not only scale even farther in the subsequent year, but also to begin doing some product prototyping. Unlike the sort of space for traits for commodity crops where you're really dealing with two or three major companies. When you look at the whole bio-plastic space, you look at the water treatment space and the areas where Camelina based PHA bio-plastics could be incredibly valuable. The number of prospective partners or collaborators in terms of the business is magnified by hundredfold. So we're very excited about it. It's a great result by the science team. And as you know, Yield10 has a very deep history in PHAs, including the entire value chain. We're certainly well aware of the tremendous investor interest out there driven by companies like Anomer Scientific and others who are really, have done very well and recently recent public market offerings. And so we're a little bit over the excitement, but we also have a tremendous history in this space and we feel that we've bought what will ultimately be a large-scale low-cost answer.

[Anthony Vendetti:]

Okay. Then lastly is just on the research licensed partners for corn or any of the other food ending up to be a feed or food products?

[Oliver Peoples:]

Yes. So that, I mean, our work is still ongoing with all of them. I mean, basically I would say the only I can probably provide you is that we are getting more interest I think is largely driven by, I think the – I think the industry is not being consolidated for two or three years. And what we're seeing is generally more than just in new gene targets for improving crop performance and productivity. So we have some conversations going on for access to other genes and we'll let's just talk to let the business development activity take its course, but certainly with a very clear vision for Camelina products business under Yield10's control. We are very open to providing access to our discovery pool and to treat genes we've identified in any of these crops under resource license agreements. It's the best way to capture value from that, allowing us to focus internal resources on the PHA Camelina products business.

[Anthony Vendetti:]

Okay, great. I'll hop back in the queue. Thanks very much.

[Kristi Snell:]

Thank you.

[Operator:]

Your next question comes from line of Amit Dayal with H.C. Wainwright. Please proceed with your question.

[Amit Dayal:]

Hi guys. Thank you for taking my questions. With respect to the 2020 – data from the 2020 field test program; was this data publicly shared in some fashion or if not, could you maybe give us some color on what kind of improvements were achieved?

[Oliver Peoples:]

You want to do it?

[Kristi Snell:]

So we publicly announced the PHA data of a 6% PHA in the field. For the other traits that we grew in the field last year, C3004, we saw nice increases statistically significant increases in photosynthesis. And we also saw a trend of increased yield in lines. One of the other traits that we trialed last year was our increased oil trait C3007, and there – this is a complex trait there are three genes that are components of this trait and we're working to figure out what the best combination is to implementing Camelina. But one thing we've been very encouraged about, there are third party university results that have demonstrated that knocking out C3007, and some combinations of C3007 really has a great increase on significantly increasing oil content and especially for novel oils. So that's pretty much a summary of what we obtained in the field last year.

[Oliver Peoples:]

Yes, I think the one final point would be that, I think the E3902, which is the first high oil line. We're seeing consistent performance as compared to last year, but we're also seeing the same oil content increase, which is very encouraging. So it's – and what are the thing you've learned is that the compositional changes are a lot easier to get data on statistically than a yield, which is obviously a very challenging trade subject to the variation of every growing season.

[Amit Dayal:]

Okay, understood. And with respect to further 2021 outlook, we were – really modest revenues mostly from the product side materializing this year. Do you think that's still possible or those potentially depend on how some of these efforts…

[Oliver Peoples:]

I think as you know, we haven't really provided much in the way of guidance on that. I mean, I think we've been pretty clear about what are our goals are, is to go down that path and to begin to start securing revenues in addition to the grant that we already have. But we haven't really provided additional guidance on that. I mean, I think we'll be – we'll have a lot more clarity in that as we ramp up the business development activities around the Camelina products where we're at with that. Right now, we are planning to scale up seeds for larger scale production, and obviously the intent there would be to sell that product from the seed. So, we're able – I think we'll be able to provide a lot more color on that as we go forward into Q2 and Q3. And we bound to.

[Amit Dayal:]

Understood. And then for the 2021 field trials, are we pursuing similar sort of metrics and improvement efforts, et cetera, as previously. Is there anything different you may be looking for with respect to the trials this year?

[Kristi Snell:]

We are scaling up some lines to larger acreage than we have before. We're scaling up the two PHA lines that we talked about that we've selected, and we're also scaling up E3902, and then another line that we're working on.

[Oliver Peoples:]

Yes. So I think this year, what we've got to do is we've got to, we have – we also have to manage our resources fairly carefully. So we've decided those things that are most crucial for the business to progress of the business strategy now. And so we're focusing in those initially. And we've also, I think, recognized as a company that ultimately for large acres deployment, we will need essentially to provide the farmer with convenience, which comes in the form of herbicide tolerance, right? So Kristi and her team have shifted resources to have a large focus on what we call elite germplasm, incorporating herbicide tolerance, disease resistance, in addition to our yield and oil content traits. So we've shifted the technology resource to meet the business goals that we're now pursuing in the product side.

[Amit Dayal:]

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

[Operator:]

Your next question comes from the line of Ben Klieve with Lake Street Capital Markets. Please proceed with your question.

[Oliver Peoples:]

Hi, Ben.

[Ben Klieve:]

Hi, Oli. Thanks for taking my questions, everybody. So got a few, the first one is in regards to the soybean research agreement with Monsanto. I want to make sure I'm reading that slide correctly. Does the 3003 agreement end in kind of mid-2021 or is that extended to 2022 kind of along the same timeframe as the 3004?

[Oliver Peoples:]

Yes, so we basically, when we initially got into relationship with what was then Monsanto now there, it was just for the C3003, and that would have ended essentially mid this year. However, as part of the C3003 research program, we discovered C3004 and we did obtain some interesting data in Camelina with C3004 and essentially based on that we were able to extend the relationship with Monsanto who then, of course wanted us both see which one obviously works better. And so, that's where – that they both grow into 2022 now. And I quite frankly, we're very pleased with the interaction we have with the folks there. And as I said, as part of the overall, obviously growing interest in the ag space, we are definitely hearing about interest in additional gene targets, but many companies not specifically there.

[Ben Klieve:]

Got it. Okay. Thanks. That's helpful. Next question on the trials from 2020 that Kristi, you just commented on outside of the PHA biomaterial, I'm specifically wondering about the canola trials. It sounds like you're not looking to provide specific numbers, but I'm wondering if directionally, you can compare the trials from 2020 versus the trials from 2018. Did the results see improvement? Did they decline? Were they in line? Can you give us a bit of clarity there?

[Oliver Peoples:]

So, Ben on that issue, we weren't actually trialing the C3004 canola, we were just scaling them up for trials next year to get sufficient fuel growing seed. However, as part of our focusing our resources on Camelina products going forward. We are essentially started to look for partners for canola. We decided that it's a more productive use of our resources to invest in Camelina where we have full control of the business. And we also recognize that we need partners with stronger capabilities in canola than we have. So we are looking for partners in canola.

[Ben Klieve:]

Okay, got it. Yes. Right. And I take that point for sure. Last question for me on the omega-3 Camelina initiative and specifically incorporating herbicide tolerance. Are you looking to – are you looking to incorporate tolerance to glyphosate glufosinate or is this something else and in doing so, are you going to be able to maintain a non-GMO structure or is that going to require GMO designation?

[Oliver Peoples:]

It's already a GMO trait, so the way we do things, I think to be perfectly clear. First of all, I think the whole question around GMO, given that we're all getting GMO and using a COVID-19 vaccine, whether it's in the form of transient messenger, RNA expression from Moderna and others or through a genetically engineered virus in the case of AstraZeneca and J&J, quite frankly what we are seeing is that think there's a general change in thinking around the whole use of genetic engineering technologies. Now we will have to see how that plays out, but the big issue and an aquafeed is really two things. One a dwindling supply of feed to support the growing demand for high quality omega-3 oils. And of course that's having tremendous negative repercussions all around the coast of Africa, Peru, all the way through Asia as well, and essentially where you've got these massive factory operations, literally harvesting every fish in the ocean. Unfortunately, along with harvesting all the fish, harvesting tremendous amounts of mercury PCBs, and now increasingly plastic, microparticles of all things. Because basically, society has been using the ocean as a dumping ground. So when you look at farm salmon and if you measure the mercury levels, you'll find there luckily one third of the mercury levels present in the essentially harvested salmon fish. So, clearly a tremendous drivers that are, I think the big driver is health and wellness. We believe that the society as a whole is more interested in sustainability and health and wellness benefits, which is what's going to come from what we see as our omega-3 basis for what will ultimately be a dedicated aquafeed supply system based on engineered Camelina. So it's going to be GMO and because it's going to be GMO, you're going to take all the advantages of all the other GMO technologies to enable the farmer to adopt this rapidly and get the best productivity with the lowest carbon footprint possible.

[Ben Klieve:]

Got it. And I guess, let me ask you one quick up question and then I'll get back in line. My question on that was, was in the context of come from a regulatory timeframe. So, I guess, as a follow-up, then integrating herbicide tolerance into this crop, do you think this is going to have a meaningful push to the right here from a regulatory perspective, or because these traits are, do exist in the regulatory manner, are going to be able to stack them in relatively efficiently?

[Oliver Peoples:]

I think, our current view is that we've done and based on conversations with the regulatory folks, belief that if we use things that are well known well understood, have been approved in other crops that the path forward for those maybe a lot simpler, depending on the geography you're in. Obviously, we don't plan to grow this in France. But I think in North America and South America with us.

[Ben Klieve:]

Got it. Okay. Very good. Well, I appreciate you all taking my questions and I'll jump back in queue.

[Kristi Snell:]

Thanks Ben. Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn call back to Lynne Brum.

[Lynne Brum:]

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

[Oliver Peoples:]

So I’d like to personally thank all of you for joining us on the call tonight and especially our shareholders for your continued support. With the agreement in place with Rothamsted for the omega-3 oils technology and promising first field data on the PHC bioplastics Camelina and try to progress on our green platform. We're very excited about the prospects of our business. I want to thank everyone at Yield10 for setting is on track to reach our goals in 2021. Have a nice evening, everyone.

[Operator:]

Ladies and gentlemen, thank you for your participation. You may now disconnect.