Q4 2019 Earnings Call

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Welcome to the fourth quarter for Q2 thousand like Chief financial results in business update conference call for yield trend Biossance.

During the call participants will be in listen only mode.

Presenters will address questions from analysts today.

If I mean, what's your operator systems during the conference. Please press Star Zero on your telephone keypad. As a reminder, that's helped US is being recorded I would now but just from the converts over to your hosts you'll tend vice president of planning a corporate communications Liberal.

Thank you Devin and good afternoon, everyone and welcome to yield pen Biocides fourth quarter and full year 2019 conference call. Joining me on the call today, our president CEO Dr. all the people Vice President of research and Chief Science Officer, Dr., Christy Snow and Chief Accounting Officer, Chuck has or.

Earlier. This afternoon, you'll 10 released our 2019 field test results as well as our 2019th financial results. These releases as well its slides that accompany today's presentation are available on the Investor Relations event section of our website at yield 10 bio dot com.

Turning to slide you.

Please note this part of our discussion today management with making forward looking statements. These statements are not guarantees of future performance and therefore, you should not place undue reliance on that.

Investors are also caution that statements are not strictly historical constitute forward looking statements such forward looking statements are subject to a number of risks uncertainties that could cause the actual results to differ materially from that was anticipated. These risks include risks uncertainties detailed aneel pens filings with the FCC.

The company undertakes no obligation to update any forward looking statements in order to reflect events or circumstances that may arise. After the date of this conference call I'm trying to call over to Holly.

Thanks.

Good afternoon, everyone and thanks for joining our call.

Today, I will provide an overview of the old town are piling up traits.

And their view of recent accomplishments.

Christie will present, a summary of the results are not 2019 field tests and then obviously on the recent R&D activities.

Which I will review the financials and summarize our key milestones were 2020 before opening the call for questions.

Now, let's turn to slide three your business profile.

You will send us an agricultural by Science company focused on developing performance trades for me just wouldn't be crops and building a past, especially cropped product revenue based on her camelina oilseed platform.

Since we became you'll tend in January 27 thing, we have delivered a number of technology proof points expanded their IP position establish relationships are three major see players and have a number of additional milestones coming up this year.

The strong leadership team and operations at Woburn, Massachusetts, and soft in Canada.

Let's turn to slide for the summary of our recent key accomplishment.

It's funny 19, nearly 2020, we've made considerable progress executing against our deposit executing against our business strategy and I will highlight some of them.

We expanded our agreement with their for an improved version of our C. 3004, you'll pay gene we signed a new research agreement with Simplot substrates, including see 3003 and see if he thought was important potato. We also launched a program to progress or lead yield traits in core.

Raised 12.8 million net proceeds based on to fund raising events with 2.6 million in March and 10.2 million in November.

We progress there early faced by generating additional data and greenhouse and growth Tempur studies and by executing a series of field trials and heavily not an all up.

Moving forward into 2020, we are delighted that Dr. show you Brown Formans I wanted to executive joined our board of directors and look forward to generating additional proof points, forming alliances and for the progressing or business blonde camelina based products.

Now, let's turn to slide five or business strategy in past revenue.

You will tighten strange factory is made up of the Green treat you discovery block four followed by genetic modifications of the create gene targets in Catalina and fast field testing to generate performance data.

This enables us to establish research license agreements with major seed companies, that's improved camelina as a crawford producing specialty products.

We currently have three distinct revenue opportunities from the trade factory.

R&D fee for service revenue for access to a grain platform.

Okay targets crops are products, you'll tend is not directly pursuing the second does licensing able to yield and performance straight for use in major row crops corn soybean gondola, another crops, creating option value for outreach and the most important global food and feed crops.

Three product sales based on our Camelina block far for producing nutritional oils and near term.

Are you buying materials in the future.

We don't know to slide six review the trade some development.

Finally, I'm a strong pipeline of novel face within six which would be rest of the field stage testing stage by yield than an eight new early stage, yielding oil concentrates identified by Evergreen Park.

Our C 3000, Threeseven thousand, Florida see 3011, CTO page it'd be broadly applicable to major north American crops, but in control of soybean and corn, which accounted for 200 million acres harvested I'm just annually.

There's another 200 million acres of potential in South America.

The C Force I was a series of traits are based on plunging regulators in a model crop we have seen significant increases in for the sense and biomass yield that these genes were deploying these traits in camelina car.

Christie will describe a progress trust trades to increase seed oil content. The primary driver of volume normalcy crops. These traits could improve the volume camelina it'd be useful in condolence IP.

I will discuss the kind of lead opportunity to produce additional oils and piaget biomaterials later in this presentation.

In 2020 or are these resources are focused and progressing are paid development, some camelina and generating additional proof points across our portfolio phase.

If you know turning to slide seven I know, who is trade progression that major crops and our partner activities.

We're working through research license agreements with majors are using their resources and delete germplasm to accelerate the development of a traits and commodity crops.

There is working to see 3003, and our latest technology for SIFI thousand forward and soybean forage genetics is working with several of our treats and sorghum.

Last year, we signed a research agreement Simplot reevaluation of treats and putting see 3003 and see if we thought was important for table.

Deployment and testing, but trades and major crops takes more time than in Catalina Escobar, we're very pleased with the progress each company is making.

As our partners developed field data, we expect to enter into commercial license agreements, which would be expected student with upfront fees when executed on your minimums milestone payments and royalties from commercial sales.

In early 2019, we contracted a major I clear to deploy several of our traits and on the first phase of this work is now complete.

We recently signed an agreement with a third party for the next phase of development.

Using this approach Hilton is leveraging third party resources to create option value for our traits know what's important global crops I'll now hand, the call over to Christie.

Thanks, Ali and Hello, everyone.

Today, I will provide an update on our recent R&D activity.

Our grain platform is productive and as a result, we currently have a pipeline of approximately 15 novel trait.

Most of the surplus coupled multiple crops.

Today I'll focus on our progress with you.

Let's now turn to slide eight.

In 2019 field tests, our primary objective was to continue to generate agronomic key deal in oil content data for traits and Camelina in canola.

Sites and then you asked me field testing for the first time CRISPR genome editing camelina plants, having combinations of edits to breed gene.

3000, a day he 3000, any b and C 3009.

Yes, 10 previously received confirmation in 2018 U.S. The eighth this does not consider these lines to be regulated pursuant to seven CFR part 340.

The best genome editing camelina plants, exhibiting good agronomic, including germination and establishment in seed formation.

And our best performing edited line, which we have designated line E. Three nine owed to you we observed statistically significant increases of 11.8% in oil per individual scene.

An 8.7% increase in individual keep weight.

And a 4.7% increase in Seattle oil content as a percentage of bulk speedway.

The oil company position remained unchanged.

We plan to continue testing line Eathree nine or two in 2020 insight from U.S.

Generate additional performance data and to bulk up seed in preparation for larger 2021 field trials.

In the Canadian trials, our team ran extensive field tests with 3003 and see 3004 under very challenging weather conditions were severe drought cause variability complicating analysis of our data.

Despite these conditions, we continue to be encouraged by the activity of the trades in the field tests.

In 2019 in Canada, we tested for the first time, let's see 3000 portrayed in Camelina, which is believed to impact carbon partitioning to see.

[noise] prior greenhouse studies reported in 2018 as well as additional 20 nice can greenhouse study.

Expression of C 3004 in Camelina produced increased branching and significant increases in see deal.

During the 2019 trial yield and weather conditions at our sites in Canada pose a challenge with extreme drought conditions.

While there were clear indications that the C 3004 plants produce more seasoned wild type camelina controls.

Actual variability among the just lots under the severe conditions complicated the collection of statistically significant he deal data.

Importantly, photosynthetic measurements performed in the field showed significant increases in key photosynthetic parameters, suggesting that the activity in expression of the C 3000, or forestry can boost photosynthetic efficient.

We continue to be encouraged by the results. We are observing let's see 3004 and clan more extensive field tests for this trading camelina in 2020.

We are increasing the emphasis on C 3004, because it isn't camelina gene and we may be able to develop he 3004 Camelina lines you ft. Ace is just not considered to be regulated pursuant to seven CFR part 340 accelerating commercial development.

We also test and see 3003 in canola insights in Canada.

And the 2018 growing season, our field testing and canola suggested that he 3003, an increase to deal by more than 10%.

In 2019 trials, we face the same challenges with RC 3003 field tests that I just described for C 3004.

In addition to our field work with the 3003 canola and 2019, we engineered approximately 15 additional commercial quality canola lines of C. 3003, it can be crossed into multiple elite germplasm canola.

In 2020, we plan to conduct seen bulk up for these new seems to be thousand three lines in canola to generate deal and grown seeds for future field tests and to support development of the straight for license.

Although conditions than the 20 night paint season, we're very challenging at many of our field site. He take away from the season are as follows.

One data from our 29 infield suggests that our novel genome editing traits targeting oil biosynthesis booth he'd oil content Encana Lena.

We will be bulking up seen from line Eathree now I know too in the field and 2020 for larger scale field trials in 2021.

At this stage of development line Eathree nine over to maybe on the path to becoming yield Pan first commercial camelina variety.

In two observations as C 3004, camelina plants in the field. So yes. These plants are making more speed in agreement with our prior greenhouse studies.

Additional measurements in our field studies showed that the activity and expression of trait seed 3004 can boost photosynthetic efficiency and camelina.

We plan to develop a version of the feet 3004 trading camelina potentially will not be considered regulated by U.S. If this pursuant to seven CFR part 340.

Let's now turn to slide nine, which outlines our R&D progress and plans for 2020 trait development.

Our R&D team is focused on continuing to innovate to bring forward novel performance tree.

Evaluate our traits in the greenhouse to generate proof points and to file IP on our discoveries.

And field testing.

In 2019, we identified and began the evaluation of eight new traits to increase speed yield and or oil content in camelina using our grading platform.

Work to investigate some of these new traits and Camelina is ongoing and supported in part ideally grants to Michigan State University with Neocon as a subcontractor.

For men permitting is currently underway for our 2020 field test program in the U.S. in Canada.

We plan to test the 3004, the C 3007, Chris or edited line.

Just for Triple edited line Athree, and I know two and RPH be trade some camelina at sites in the U.S. in Canada.

We will also be bulking up seed from the CRISPR Triple added in line Eathree nine to two in the field and 2020 or larger scale field trials in 2021.

You can ola we will perform fee bulk up for the C 3004, as well as for the approximately 15, new see 3003 commercial quality events at sites in Canada.

Overall this will be an extensive field test program.

The data from this program will help us generate proof points to advance our work in camelina and to provide licensing opportunities in canola and other major crops.

Let's now turn to slide 10.

Camelina is an attractive choice to meet growing demand for crops. It diversify the crop landscape of lower environmental footprint and have the potential to produce high value secondary products to open new opportunities for farmers.

It's fast growth cycle is particularly attractive in areas and the northwest U.S. and Canada that have shorter growing season, and it is naturally resistant to diseases that impact canola.

Camelina oil is rich in an Omega three fatty acid alway, which is creating demand for the oil and human nutrition that as a substitute for fish oil and agriculture.

It is readily engineered using genetic engineering tools and can be segregated from the major row crop, making it an ideal platform for producing novel crops like Tha bio materials.

Camelina has a high technology upside potential for improved and agronomic see Jill and he value that's very little breeding or genetic improvements have been made to the crop.

You will tenants been working with Camelina sense 2010, and currently uses as our asset yield testing platform.

We haven't had several proof points based on our work, which illustrate the high upside potential of crop.

This includes work with our C 3003, see 3004, and see 3006 yield trades as well as our seed oil content traits, including Camelina line Eastern United too.

We believe it may be possible the double camelina see deal based on some of the trait proof points that we have achieved to date in greenhouse study.

Our goal is to develop the camelina business to generate direct revenue from product sales. In addition to revenue from licensing and R&D services.

We see many more partner prospects along the value chain with the camelina product opportunity compared to the small handful of very large players who control that commodity seed sector.

Yes, Ken has made important strides in the discovery and development of novel crop trade. Since we started just three years ago.

For our traits and field testing our team really stepped up to work through the weather challenges at the 2019 yield to us and conducting the permitting and logistics for our 2020 field test program.

In 2020, our team is focused on generating technology proof points for our lead trades and planning the next steps in the development of the tree.

I would like to thank our R&D team for their tremendous effort or give their continued productivity.

Going back to you.

Thanks, Chris the onto the entire R&D team their passion dedication and ingenuity and inspiring and so I was a constant driver for me as we pursue are common goal.

So I'm excited about a prospects for continuing advancement of yield transmission look forward to ongoing developments in the years ahead.

Let's now turn to slide 11, I will review some of the product targets from Camelina.

Harvested camelina seed is typically call crush to produce oil and protein meal, and you'll find and plans to participate directly in the salaries and products oil has historically been used in food is currently consider grass in the U.S. and is approved for Simon feed in Canada.

Residual protein meal is also approved for use in some feed applications in both countries.

Hey, good three fatty acids from fish oil of insurance to help prevent heart disease and stroke.

Help control lupus, XOMA, rheumatoid arthritis, and meaningfully protective roles in concert and other conditions.

Camelina oil like Flaxseed oil is written the Omega three fatty acid the Ali.

On recent clinical studies have shown that probably oil for food Cedar Enlivant profiles enough patients. The study published in 2018 in the journal of molecular nutrition Good research.

Indicative of heart health benefits.

Hi, Ken content or the Omega three alpha linen Lynn leming acid lead makes it a preferred oil recent agriculture feet as compared to soybean oil.

These attributes of Camelina, some really exciting crawl for addressing the global macro trends of health and wellness and sustainability.

Near term Yeltsin is well positioned the becoming leading player in camelina books than producing nutritional oils without having to compete head to head for acres with commodity crops.

In the longer term our vision is to produce not trophy achieved by Immaterialist as a third product oh processes processing engineered camelina seat.

We achieved biofuels, our natural microbial high molecular we polyesters can be process using plastics process equipment and applications in a wide range of markets, including animal nutrition wastewater treatment and the replacement of petroleum plastics.

2019, you'll tend filed the U.S. patent applications for new technology, potentially enabling low cost production Apache biomaterials indices of Camelina.

Our longer term goal is to be able to produce be achieved biomaterials from camelina and the cost range edible oils. The enabled the broad market adoption on a very large scale.

As we progressed the development of our P.J. trades, we plan to focus on animal nutrition and water treatment applications and find partners for the plus six replacement opportunity.

We believe camelina engineered to produce be achieved biomaterials will be an attractive cash cover crop for farmers improving farm income on the sustainability of food and feed production by enabling the production of exciting new agricultural products are large markets.

They start to slide 12, and let's cover a few financial highlights.

Our net operating cash usage was 3.2 million for the fourth quarter. How do we ended 2019 was 11.1 million in cash cash equivalents short term investments.

Our net operating cash usage of 8.7 million for 2019 was right in line with our guidance range of 8.5 to 9 million for 2019.

Or 2020, we anticipate net operating cash usage of nights, a 9.5 million eastern plants.

We are directing this investment towards generating proof points, including field trials working on full operations and advancing discovery and development of performance strange.

We continue to have no doubt in their balance sheet.

In early 2020 received an additional 1.6 million the capital based on warrant exercises.

We expect for cash on hand, together with expected revenue from our current government grant to support our operations through several technology proof points into the second quarter of 2021.

Let's now review the fourth quarter and full year operating results.

The reported a net operating loss from operations of 2.4 million for the fourth quarter of pending 90 compared to a net operating loss of $1.9 billion for the fourth quarter two on 80.

Increases due primarily to expenses related to employee compensation and benefit expense, including the company's you to end the accrual for funny 90 performance policies.

Total research grant revenues in the fourth quarter of 2019 were 140000 barrels his arms in 35004th quarter 2018.

In the fourth quarter Funny 19 research and development expenses were 1.2 million Gionee expenses were 1.4 million. This compares to 1.1 million of research and development expenses.

1 million of June expenses in the fourth quarter of 2018.

For the full year Funny 19, you alternative 40 grant revenues of 806000, R&D expenses of 4.8 million a June expenses of 4.6 million, resulting in a net operating loss of <unk> point Sixmillion.

Our net loss includes a 13 million noncash loss, resulting from the valuation of warrants issued in November offering partially offset by a 9.5 million noncash gain for the change in fair value of these wants it to you ramp.

For more details on our financial results. Please refer to the earnings release.

Let's now go to slide 13 to discuss our upcoming milestones.

In 2020, we will continue to make progress and the following.

Preparing for a 2020 field testing program, including completing the permitting process and planting in Q2 for the develop into business sponsor Camelina platform for specialty products generally the agronomic and Youll data for C 3003, camelina and advancing to treat and control and corn advancing oil boosting creates using Christopher genome editing, including Seifi.

The seven we continue testing or triple that it can lead appliance and U.S. field studies.

Port progress with our C 4000 series traits support beer forage genetics and simplifying the evaluation of our traits new crop targets identify additional high value yield the performance straight continued to build our intellectual property portfolio communicator scientific innovations and technical presentation papers.

Without I'd like to turn the call back to lend for questions. Thanks Ali.

Seven can you know poll for questions.

Absolutely. If you will look does question. Please press star one on your telephone keypad a confirmation so indicate your line is in the question Q.

Chris start to fuel, let your move your question the Q.

For participants using speaker equipment and may be necessary to pick up a heads up before person Starkey one moment. Please as we call for questions.

Our first question comes on line of Ben Clark with National Securities. Please proceed with your question.

Alright. Thank you first I apologize I had a jump for a few minutes. So if I am asking you anything that you covered in your prepared remarks, I am I am sorry to make you repeat yourself.

First question I have on kind of topically hour.

There is there any impact your operations either in your R&D facilities or any expected.

Headaches that your but your.

Anticipating now.

On field trials regarding regarding current a virus.

Yes, so it'll be obviously, we've been paying attention to kuroda virus since since early January and obviously had adjusting.

Strategy plans on priorities going forward with an emphasis on safety number one and business continuity as the key goals here. So we've been working on this now for several several weeks on we're making I think we've made the right plans were executing against those blondes on our goal is to be execute.

Going to field trials as we've stated.

Okay got it.

And then.

Christy I'm, hoping you can help me understand the canola field trials a bit better it it sounds to me like like you anticipate kind of the big step change in these trials to come in 2021, when you introduce all those new lines.

But in the can you help me understand really kind of what the what the step is going to be from from last year to 2020.

In these trials is there going to be immaterial different than the trials compared to last year or are you going to basically just have to replicate last year's trial I'm, just hoping mother nature cooperates. This time.

No.

Yes, we'll both be doing that track redoing the trials that we did last year, but also importantly, we're.

Bringing forward those 15 commercial quality events and the reason. These are so important is that it can be crossed into basically any commercial germplasm.

For our partners.

So therefore at a much bigger is a much bigger trial.

Yeah.

Okay. So I guess then.

Sorry go ahead.

Yes, you'll notice in our expenditures that you'll see a CR sort of eight and a half the nine as nine to know the half is our guidance, obviously thats reflective of increased field trials.

Okay. So I guess, maybe I misunderstood than in the prepared comments so that.

The those 15, new lines are going to be in field trials in 2020, that's not a they're not going to be in the lab. In 2024 2021 field trial, then is that that correct.

We are going to being seen bulk up phase. So basically we really make tirasemtiv in field trials and then they'll be.

Yeah, and more extensive yield trial the following year.

Okay.

All right got it.

The.

Let's see.

The kind of regarding your partners field trials I know you can't comment on anything specific but can you do you have any any sense of.

If if those partners were impacted to the same degree you were or were these trials may be more geographically diverse or further south and as such they were able to get statistically significant data, whereas whereas.

You guys are just on able to as a function of the weather.

Well I'll take that one so so about basically we know that the whole industry. It was impacted by this across the board.

In fact, most people lost most of the field trials.

One.

The read on particular.

Had had access to some water, but you saw the one and a half kilometer pipeline to be able to get it and so Scott you and so they were able to execute their trials, whereas we had to actually trucking water.

Essentially by tank or so you know this was just a really really grim year for field trials are really not a lot we can say about it.

But I will look by respect or on the on.

Unlike you know I think.

Unlike these other companies we actually have.

Essentially.

Our exposure I think because we don't have yet to south American sites.

So we can do to cycle so yes.

So I think Youre obviously.

Okay.

And then last one from me when you talk about the cash burn for this year can you help us kind of understand the cash burn.

That you're looking at it and in terms of.

Kind of the early stage initiatives that you have within your Camelina pipeline that are.

You know that are that are really really just ramping up versus.

Versus what investments, you're making kind of the more more established initiatives.

Well I can see 3003 is that it can can you can you help us kind of characterize.

Really what your focus is on.

Yes. So most of the focus is on actually progressing see 3003, SIFI thousand four on the oil traits oil content straight CV thousand <unk>.

<unk> Eathree on nine line basically on the new CCOH 3007 lines you know the work we're doing in the early stage is actually is mostly 40 supported by a department of energy Grant.

To Michigan State University, where we are several awardee. So that's on a much smaller level of activity.

And driving forward with the the performance straight to series that was really for seven on the triple editorial content.

Got it okay perfect.

All right I think that doesn't leave for now all I'll jump back in queue. Thanks for taking my questions.

Thanks, Ken.

Once again, if you will access question. Please press star one on your telephone keypad once again, a fuel or just a question. Please press star one on your telephone keypad. Our next question comes on line of Robert Leboyer with Ladenburg. Please proceed with your question.

Good afternoon I.

In the three 902 trials and you'd mentioned that they were there would be going into the field in 2021.

Any idea how long it would take or.

What the progress milestones would be going forward.

Hey, Robert Yes, Thanks for that question Christie all the today. So regarding the you know our expectation is too is deploying those on a number of sites basically by Q2.

The harvesting them around.

[laughter] weather weather permitting as I should call by everything by weather permitting we harvested goes in the fall in analyzing I'll analyzing those aren't run that type. These trials will be carried out in the U.S.

Caused the our genome editing because the lines that were using have already been classified as non regulated by the U.S. thesis under the I My regulatory process.

So they are actually.

Something that we're quite excited about particularly line easier you see United or too.

In fact become our first.

I believe the variety so.

You know, we're pretty excited about it.

Yeah that that sounds pretty exciting to me to the idea that this would be the first commercial variety any idea how long that might take from today.

Licensing or introduction.

I feel introduction you know I'm part of what we're doing this year is actually are also doing see bulk up to make more seed for planting.

Many acres next year I can give you the exact number but basically the you know the path. We're odyssey essentially just gastar scaling it up and make sure that we have sufficient seats to do it too so I really drive that process forward.

In 2021, and play 22 to the point, where it's basically they're all going well will become a commercial variety.

Okay great.

Right. Thank you very much.

Thanks Robert.

There seems to be no further questions at this time and I will let you turn the call back over and then brown for any closing comments.

Thanks, Devin and I will hold I'll turn the call back to all the first closing remarks.

In summary, we believe the Glenn Greene from can be used to address a wide range of traits and abroad Ria crops and we currently have approximately 15 traits and the pipeline our trade factory enables three distinct revenue opportunities R&D fee for service revenues licensing ever yield and performance trades for use in major row crops and product sales based on our Camelina platform for produced.

Thing edible oils ha biomaterials I'd like to personally. Thank all of you for joining us on the call today, and especially our shareholders for you continue to support like everyone else. We're dealing with the challenges are uncovered 19 with an emphasis on safety business continuity as I, particularly want to thank our employees for their diligent efforts at this time.

Onto the government it yields on for setting us up on attract to reach a goal feature goals and 2020 and I look forward to providing further updates this year have a nice evening everyone.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation have a wonderful day.

Thanks Devin.

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