Q1 2022 Calyxt Inc Earnings Call

[music].

Good afternoon, ladies and gentlemen, thank you for standing by welcome to Calix first quarter 2022 earnings result conference call and webcast. During today's presentation. All parties will be in a listen only mode. Following the presentation. The conference will be opened for questions.

You have a question. Please press the star key followed by the one key on your Touchtone phone. If you would like to withdraw your question. Please press the star key followed by the two key if youre using a speak if you are using speaker equipment. Please lift the handset before making your selections.

This conference is being recorded today may five 2022 at this time I would like to turn the conference over to Bill Co Shack Calix Chief Financial Officer. Please go ahead.

Thank you and good afternoon. This is bill <unk>, our Chief financial Officer of Calix, I would like to thank you for taking time to join US for Calix first quarter 2022 earnings results conference call and webcast.

With me today is Michael <unk>, our President and Chief Executive Officer.

A press release detailing these results crossed the wire after today's market close and is available on our company's website <unk> dot com.

Before we begin the formal presentation I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects.

Our forward looking and maybe subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the Companys SEC filings for a list of associated risks.

This presentation also includes a discussion of adjusted net loss and adjusted net loss per share both are non-GAAP financial measures.

And in <unk> press release, and SEC filings each of which was posted on the Companys website at <unk> Dot Com you will find additional disclosures regarding these non-GAAP financial measures references to decent non-GAAP financial measures should be considered in addition to GAAP financial measures and should not be considered a substitute for results that are presented in accord.

With GAAP.

Lastly, this conference call is being webcast. The webcast link is available in the Investor Relations section of Calix Dot com at.

At this time I would like to turn the call over to Michael for his opening remarks Michael.

Thank you Bill and thank you for joining us on <unk> earnings call to date.

Those of you who may be getting up to speed with our story following our October 2021 announcement, which we repositioned two weeks.

At this moment to remind you we are a plant based synthetic biology company committed to bringing the bio manufacturing capabilities of plants to innovative companies within our targeted end markets because of the political nutraceutical and pharmaceutical industries, our technology platform.

Production capability and financial model are differentiated from others synthetic biology companies.

I'm pleased to report we are moving full speed ahead into the growth scaling phases of our organization's development with important expected milestones in 2022, which we will discuss on today's call.

As a quick review of our technology platform.

Why we are convinced that the future of a number of industries depends on the sustainable production of Chemistries that are plant based.

Spring is our technology platform and is built on our significant experience engineered plant metabolism.

We deliver innovations through an efficient development process from the laboratory to pilot these.

These plants screen derived compounds are then produced through our proprietary bio factory.

The bio factory harnesses, a potential plant sells multi cellular matrix structure, our proprietary plant. So matrices pcm's. The pcm's are combined with growth media for production within a bioreactor or bio factory.

The bio factories plant based foundation the use of our PCM.

<unk> ability to produce complex plant based chemistries, it's modular nature and geographic flexibility differentiates the bio factory from other production systems used in the sym bio based industries today.

We believe the modular nature of our biocide enables it to be scale close to the customer in many instances driving a more stable supply chain for our customers and potentially saving transportation costs as well.

We also apply AI and ml capabilities across plat spring development about frac.

Reproduction and driving efficiencies and the shortening of development timelines.

Accordingly, we believe the company is positioned to be a supplier of unique chemistries that we believe are likely unable to be produced in more traditional synthetic biology production processes.

These capabilities positions the company well, considering key industry trends, including more than 20%. The world's largest 2000 companies are committed to carbon neutrality. We believe that in order to achieve this goal. These companies will need to incorporate plant based solutions into their businesses.

Since the beginning of the year, we have made important commercial progress and achieved a number of important technical plat spring bio factory and.

No milestones with <unk> well positioned for future success, we are focused on advancing discussions and relationships with new potential customers in the cosmos political nutraceutical pharmaceutical industries, all large and innovative industries with customers that have current business needs to source sustainable and finite plant based chemistries are.

In order to be fast adopters of innovation and are actively seeking to reduce carbon footprints. As you recall, we were using a customer demand driven approach to compound development and applying our filtering criteria, our target product profile or TPP to list of compounds that are of interest to our potential customers there.

So the way April Calix is evaluated 28 molecules identified by potential customers for development within our <unk> platform and for production in our bio factory.

That amount does not include another 58, such molecules that did not meet our TPP criteria and were not evaluated further.

This group of 28 customer molecules include several molecules that were identified by the potential customer is having been unsuccessfully attempted by others synthetic biology companies.

As a reminder, we are targeting two to four customer demand driven compounds for development by year end.

In January we reported that our pilot biocide reproduction system became operational in late 2021.

Element occurred on schedule in March an important first step toward achieving at scale commercial production.

We have completed multiple rooms in this pilot factory focusing on ensuring the system is operating as planned our plant saw matrices performed as expected and the data has been captured properly as a driver of future.

<unk> advances.

The pilot bio factory is modular in design to be able to continuing as we produce plant based chemistries. While also producing multiple compounds at once these capabilities provide us with flexibility when producing chemistries for multiple customers at the same time, we intend to scale. This pilot production system to enable full production runs of compounds.

Similar to those demanded for commercial production.

We've also begun to deploy additional AI ml capabilities to both plant spring and the pilot biotech.

Calix currently uses AI ml to assist in the identification of gene targets the plant screen development process.

During the past quarter, we integrated.

<unk> capabilities into our lab scale reactors, enabling the continual capture and analysis of data leading into optimization of performance, we intend to advance these labs.

<unk> into our pilot scale reactor later this year.

This deployment drives future decision and improves tough cycles with the goal of shortening development timelines.

Late last year Calix reported considerable progress in discovery and development of sustainable plant based molecules and it's about victory.

Results from our medical Omics analysis indicated more than 15000 chemical signatures, including both known and as yet Uncharacterized molecules in building block precursors. These signatures are chemical compounds involved in chemical reactions that produce other compounds.

These chemical signatures that had been identified format baseline library that enables us to quickly identify NSS customers targets with the potential to drive accelerated development timelines from this library, we have based on interest expressed by potential customers produce Rosemarie MC asset compound.

Anti oxidant.

Inflammatory and anti microbial properties and that is used broadly in cosmic <unk> and nutraceuticals.

<unk> also identified additional compounds of interest for prospective customers.

It tends to move Rosemary <unk> acid into the pilot bio factory to further advance its capabilities and scale.

Using data we have accumulated from our land based activities and our lab scale bio reactors.

Alex can demonstrated at least a 35 fold increase in yield from land based production to a lab scale bioreactor.

Leveraging these results we project a further yield increase as we move production to pilot scale.

Taken together with the land base to lab results with further advancement to pilot scale could drive an aggregate increase in yields of as much as 130 fold from land based production to the pilot Biofact.

These results underpin the company's scalability and sustainability benefits of the bio factory production system.

We have continued to make targeted new hires who are key to the growth and scale of our business. Just last month, we announced the hires of two directors further deepening our expertise and knowledge and supporting our strategy and business model.

So in boot joined as a business development director with more than 20 years of valuable business development experience to calix.

Her role she will focus on facilitating potential partnerships deal structures valuation models and subsequent transaction execution and alliance management.

We also welcomed Elizabeth Tiguan as manufacturing director Liz brings over 15 years of chemistry, and purification expertise of calix and will be responsible for pilot to commercial scale production of the company's customer demand driven compounds.

Along with an R&D leader verify stage of product development.

And as you may recall in February we on boarded our new SVP of business development, Jerry New logo.

He brings more than 30 years of experience in the specialty chemicals, and biotechnology industries and diverse experience building multimillion dollar income streams and the Kosmos pseudo close end market, including personal care and home care.

Finally in February Calix successfully closed a successful financing providing the company with net proceeds of approximately $10 million. This was a challenging time for many companies, particularly in the biotechnology industry to raise capital.

We did this as a testament to our strategy and focus.

This raise strengthens calix financial position as we work to grow our business and realize its value as a result, we now expect <unk> cash runway to extend into early 2023.

Our biofact reproduction system is differentiated from other production systems in use by synthetic biology companies. Today are bio factory is built around plants, which by their nature are complex multi cellular organisms.

This enables us to produce plant based chemistries have greater complexity that many other production systems, including single cell fermentation based systems that certainly has been the feedback we have received from some of our prospective customers.

We use a PCM is the biomass in our production system. The pcm's are stable because of their multi cellular nature and can produce more than one plant based chemistry at a time.

Our pcm's grow in scale, they continuously produce the target chemistry.

We use a growth media to bathe our PCM structures provide nutrition abating process as a portion of every hour and can be optimized using AI ml overtime to maximize the productive capability of the PCM.

Importantly, we have also aggressively pursue the expansion of our intellectual property portfolio.

This enables us to carve out space for cases proprietary technology, including our PCM and multi sector approach that is a critical foundation for the success of our company.

Our production takes place within a bioreactor or bio factory. So it is protected from many of the adverse climate effects typically associated with traditional agricultural production systems as well as the scaling risks associated with other methods like fermentation.

Finally, our Biofact reproduction system is modular which means it could be structured to produce more than one plant based chemistry at a time.

This module design also allows the bio factory to be placed almost anywhere thus geographically independence in comparison to other large scale production systems, which typically requires a large investment in a single facility.

These differentiators enable colleagues to produce complex plant based chemistries in a short period of time in some instances, we believe that the chemistries that we were able to produce may not be amenable to production through other means.

Two additional differentiators are our customer focus and business model, Unlike historical calix, where frankly, some others in synthetic biology.

We're coming to market developing and producing only plant based chemistries, our customers' demand and need as developed through our target product profile.

This gives us greater certainty of commercialization if we are successful in developing the chemistry and scaling production.

Due to the application of our TPP criteria, we expect the success rate for Chemistries that we undertake development on to be very high.

As we have stated plants are a core of our technology, which we believe is a massive competitive advantage plants offer unmatched natural diversity and are capable of producing many more chemistries and other types of organisms.

Many cases these chemistries are far more complex that can be produced using a single cell organisms.

And in many cases users a single cell organisms are trying to replicate through their development process what plants do naturally.

When combining plants with our proprietary PCM structures in our bio factory <unk>.

The diversity of cell types of full plant would have without producing the full plant.

This enables greater variety of chemistry has to be produced at one time and generates a more stable scaling of the PCM biomass and target chemistry.

Our business model is also differentiated from others in synthetic biology.

Our business development team uses a customer focused demand driven approach to the identification of plant based chemistries, we could develop.

Our business model requires that we are selective upfront to drive good decisions for both <unk> and our customer.

This criteria is our TPP.

<unk> includes several areas, including technical capability to produce the desired chemistry, the size of the customers demand pool in both quantity and dollars of spend in aggregate and per unit.

What other opportunities exist in the future to market the chemistry to others.

We are targeting large demand pools product revenue opportunities with potential multi million dollar annual revenue opportunities per compound with a target gross profit margin in the middle double digits. This margin focus drives us towards the production of compounds skiers in nature and difficult to produce compounds that are high value and low vol.

From a production standpoint.

After we've applied the TPP and accomplish some other interim steps, including small production or the target chemistry, we agree with the customer as to the specifics of the compound to be produce into.

Tend to have a production handled but infrastructure partners on our behalf with the customer purchasing the plant based chemistry from calix under our supply agreement.

Majority of the value to Calix and this business model is and the scale of product to the customer at the end of the development and scale up process. They.

There will also be instances, depending upon the compound desired or end market, where the customer resides funds the development costs through the design engineer verify and pilot process. We expect the customer we will address any regulatory or formulation matters with regards to the chemistry, we will produce in.

In summary, Calix plant Springs technology, and the biotech preproduction system are differentiated from our peers and synthetic biology in many ways, including our business model.

Our.

This model has resonated throughout our ongoing business development discussions with potential customers.

In the near term our customer activation efforts focus on end markets, where we believe our current capabilities give us the best opportunity to win.

Including cosmic <unk> Nutraceuticals and pharmaceuticals. These.

These industries represent large end markets with customers that have current business needs to source sustainable and finite plant based chemistries are known to be fast adopters of innovation and are actively seeking to reduce their carbon footprints. For example, kosmos political ingredients market, which also includes personal care in flavors and fragrances.

Is estimated to spend more than $60 billion annually based on information from markets and markets.

This ingredients markets includes large multinational cosmetic brands regional and specialty brands and flavor and fragrance houses, who manufacture product would provide ingredients for those brands.

Even if <unk> was able to secure a small fraction of these large end markets represents a substantial business opportunity.

We believe our development cycle could offer an unprecedented time measured from contract signing to commercialization to bring plant based compounds to the market. We have consistently held that our 36 month development cycle represented a competitive advantage to that of other synthetic biology peers, because we have moved further into the customer acquisition.

Process, we're now expecting to produce small quantities of product for evaluation by the customer early in the development process. As a result, we believe our development cycle may likely be shorter than 36 months.

We also expect to further apply AI ml throughout the stages of the Platt screen development cycle and in the Biopharma crop production system, which is also intended to shorten our development cycle. For example, we are pleased to say that in some cases the design engineer verify cycle can now be completed little.

As nine months.

In summary, we have an industry, leading product development cycle that is expected to continue to shorten enabling our path to product revenue to accelerate as well.

Behind with the progression of our customer acquisition activity. We are excited by the prospects for calix as we look forward.

This aspect of the business I'd like to now turn the call over to Bill who will cover our licensing technology, our recent financial results and key upcoming milestones built.

Thank you Michael in addition to our focus on the plant spring driven product development for bio factory production. We are also covering a wide range of potential licensees for both our technology and historically developed training.

In the first quarter of 2022, we finalized our strategy for optimizing potential revenue from the licensing of our technology and plant train.

The strategy is two pronged reflects both a broad outreach to companies in the plant gene editing biotechnology space for the licensing of our intellectual property assets and the monetization of the company's historically developed agricultural trade.

And tenants to monetize these trades through their license to counterparties, including seed companies processors and others.

We are offering licenses for the many gene editing and breeding technologies and our patent portfolio, including their talent patent distinct.

As it relates to the licensing of our agricultural trade active discussions are occurring on several including our soybean and wheat offerings.

We are targeting execution of licenses and both the technology and trait licensing category in 2022.

Finally, a brief update on our project for the large food ingredient manufacturer, who contracted with us to develop a soybean intended to produce an oil that could be servicing replacement for palm oil.

Project began in the fourth quarter of 2021 and remains on track for completion in the first quarter of 2020 for the food ingredient manufacturer is funding our development costs over the two year term of the agreement and holds an option for future development and commercialization.

On a related note you may have seen the news last week reporting that the government of Indonesia has been palm oil export.

These effort to control consumer prices of palm oil in that country.

A move which has the potential to exacerbate global inflation in food and many other products, including cosmic <unk>.

We believe this development May drive further interest in additional palm oil alternatives and that <unk> is particularly well suited to bring forward solutions based upon our proprietary technology and expertise in plant based synthetic biology.

Earlier today, we issued a press release, describing our first quarter 2022 results and we also filed our Form 10-Q for the quarter. This afternoon.

Our cash cash equivalents and restricted cash were $17 9 million as of March 31.

2022, including net proceeds of $10 million that was raised in mid February the SEC registered offering.

Now to the P&L revenue was nominal for the quarter compared to $4 4 million in the prior year period. The decrease in revenue was driven by the late 2021 completion of the wind down of Calix soybean product line.

Revenue in the first quarter of 2022 was associated with the agreement with a food ingredient manufacturer to develop a palm oil alternative and looking ahead, we expect revenues to decline meaningfully from 2021 levels because of the wind down of our soybean product line and the shift in the company's business to that of a synthetic biology company.

Total operating expenses were $6 $1 million in the quarter compared to $7 3 million in the prior year period.

The decrease was primarily driven by the recapture of noncash stock compensation expense and the forfeiture of Unvested stock awards in the first quarter of 2022.

Our operating expenses.

Net loss was $5 6 million in the first quarter or <unk> 13 per share compared to $10 million or 27 per share in the prior year period.

Improvement in net loss was driven by the completion of the wind down of the soybean product line, which drove an improvement in gross margin and lower operating expenses and the improvement in net loss per share was driven by the improvement in net loss and a year over year increase in weighted average shares outstanding.

Adjusted net loss was $6 million in the first quarter or <unk> 14 per share compared to $8 8 million or <unk> 24 per share in the prior year period and.

The improvement in adjusted net loss and adjusted net loss per share was driven by the improvement in net loss in the year over year increase in weighted average shares outstanding.

As Michael mentioned, our business plans have been supported by the $10 million of net proceeds.

We received from the offering we completed in February .

<unk>, our balance sheet and positioning us for future success.

We are extremely proud of this financing, which was accomplished in spite of difficult capital market conditions, and with a well respected institutional investor.

We intend to continue to be disciplined in our uses of cash and anticipate the proceeds from the offering will be used to support the continued growth in scaling of our bio factory business model and selective hiring to support progression and expansion of our AI ml capabilities.

This growth plan is resonating with investors.

As a result of the successful offering of our common stock and warrants and based on our current business plan. We now expect helix cash runway to extend to early 2023.

Crucifer planned spending to support the growth and scale of our <unk> business model.

That run rate only includes committed customer payments for licensing and product development as of today.

And as a result, any customer cash flows from new deals, which serve to extend our cash runway even further.

For additional details about our financials for the first quarter of 2022, please refer to our press release, our filings with the SEC.

As part of Calix ongoing validation of its platform technology. We are on track to realize several important milestone targets across plant spring in the bio factory first within planned spring and building on our current gene targeting capability to have.

AI and ml capabilities for the identification of pathways in the design phase of development by midyear 2022.

Second building on our lab scale reactor Anl rollout.

AI ml capabilities fully functioning within the pilot manufacturing by mid year 2022.

Third to design additional pcm's using plant spring for our production in the bio factory.

TCM structures provide the foundational precursors to developing chemistries and molecules that are of interest to a broad range of customers within our target end markets.

And finally for commercial scale production to have one infrastructure partner engaged by the end of 2022.

We also continue to make great progress toward our commercial milestones, which include having three to four customer demand driven compounds under development and we are targeting the execution multiple licenses in both technology and trait licensing by the end of 2022.

I'll now turn the call back to Michael for his closing remarks.

Thanks, Bill I'd like to reiterate that the first quarter of 2022 was a period of instrumental advancement for calix.

We have evaluated 28 molecules from potential customers, including several others, where the potential customer has been unsuccessful with other synthetic biology companies.

We completed multiple test runs of the pilot bulk factory and added AI ml capabilities into its lab scale reactors, enabling pilot scale implementation of the AI ml capability later this year.

<unk> targeted medical Omics analysis that identifies more than 15000 chemical signatures, including based on interest from potential customers Rosemarie Nick acid identified six other compounds of interest for prospective customers.

Demonstrated at least a 35 fold increase in yield from land based production to lab scale bioreactor leveraging these results projecting further increases as production moves to pilot scale potentially driving an increase in yield as much as 130 fold over land based production.

We continue to hire for key roles supporting our strategy and business model.

Significantly we.

We are capitalized to support our business into early 2023 and potentially beyond dependent on our success with our licensing and product development agreements and related cash flows in 2022.

On track to achieve several upcoming milestone targets, both in the lab and on the commercial front.

We look forward to maintaining our pace and momentum and to providing you with updates on our accomplishments in the future operator that concludes our prepared remarks. Please open the line for questions.

Thank you Sir we will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.

Okay.

Okay.

Our first question comes from Bobby Burleson with Canaccord. Please go ahead.

Thank you. So I was worried there for a second question in industrial.

So, yes, I guess, probably the first one is just.

Understanding the.

Hum.

Palm oil alternatives.

Yes.

The agreement that you have in place right now.

Where you are.

I guess funded through next couple of years, there is an option for commercialization with that partner does that preclude you or prevent you from.

Other agreements with.

That particular.

Yes.

That's right.

Bob It's a great question. One that is certainly an interesting time is really driven by I think that change, but Indonesia, but.

The challenge around Palm oil.

One thing we are focused on certainly is driving value in all aspects of our business and one of that is really leveraging our IP portfolio in the history of IP development and it really speaks to the steel but to specifically answer your question no. It does not and so it'll be interesting to see the applications that we're going to going to unfold as it relates to palm oil.

And the global supply around the world.

Great and then with your production.

Production scale partner I guess, you want to have one of those in place by the end of the year it sounds like.

Is there a.

Would this be a one stop shop for you or would you need to have additional partners.

Just on the molecules that are the compounds that you.

Ultimately plan on ramping.

As you know we commissioned our pilots go bioreactor here at the end of Q4 last year and the goal is as you state to have one infrastructure partner by the end of the year, if not if not more.

Our business model is really fundamentally driven by our customers as a result of sort of demand driven and that will go a lot into not only identifying and cementing infrastructure partners, but also to your question.

The variability of those partners and the number of partners. So it will be really driven by our customer needs first and foremost.

Okay, Great and then just last one for me and then I'll jump back into the queue.

But just understanding C. There are several I guess molecules that were identified.

By some prospective customers.

Their synthetic biology.

Development partner was unable to really.

Scale or figure out a way to produce successfully.

Does that give you do you have insights as to why that was the case and how <unk> is better positioned to have success with those molecules has something fundamentally.

Yes that was.

Or a different approach that will allow you to have success there.

Yes, great Great question, obviously, we're very excited about the commercial success, we've had that we've shared today with being able to review over 58 molecules from customers and continuing in that evaluation of an additional 28, what's interesting about those molecules was 28 molecules. They come from 12 different chemical classes and five differ.

Functional areas, so think of antimicrobial anti inflammatory areas and they originate from eight different potential customers. So real diversity there.

As it relates to our positioning in this really is what we've laid out.

Made our transition in October of last year as a plant based synthetic biology company, where we're differentiated in the sense that we're using multi cellular approach and this is through our proprietary plant so matrix and in comparison to other synthetic biology approaches primarily microbes, which are single cell and then utilize.

Fermentation.

Some cases unable to address the complexities of compounds that need to be produce so we've been very excited about our positioning and our capabilities as it relates to the complexity of compounds and what we're seeing is that it's really proving out by communications with these customers.

Great. Thank you.

You bet.

Yes.

Our second question will come from Amit Dayal with H C. Wainwright. Please go ahead.

Thank you good afternoon guys.

Thank you taking my question.

With respect to these 28 and <unk>.

The press release said that other EMS providers.

Not successful.

Our efforts.

Based on the technology and that would differentiate us I'm just trying to understand what kind of.

<unk> solutions are approaches were being applied by these other providers versus what.

<unk>.

We don't know the real specifics as to the other solutions typically what you'll find in synthetic biology is on microbial based approach in fermentation and where we're focused on is again, our plants' spring platform and bio factory, which uses a plant based approach a natural approach, where we're using the multi cellular structures and again really the <unk>.

Part of that is the proprietary plant cell matrix and for US what's exciting about that is the modularity nature of it meaning that it produces multiple chemistries at the same time, so not only can we address.

Given customer that has more than one compound need but we can address multiple customers potentially at the same time. So there are several different ways that we're differentiated also when you compare our approach to fermentation for example.

We base our plans so matrix with our nutrient media and our proprietary media as opposed to submerge, which will which we will try and fermentation. So there are several different aspects the differentiation separates us from other <unk> approaches, which we think go into a lot of the discussions that we've not only had with customers now but potentially customers in.

Future.

Understood. Thank you for that and has work started on any of these.

Are you still sort of negotiating with.

Potential customers.

Rich molecules.

Okay.

What's interesting is late last year, we did a running our borrow factory in determinate metabolic analysis and came up with over 15000 chemical signatures and within one of those chemical signatures.

We've shown that Rosemary <unk> acid was president and that had been surfaced several different times by customers as a potential interest and we don't have a signed a development agreement as it relates to that individual compound, but we are using that.

Within our pilot bio factory to further advance its capabilities and scale, while we are simultaneously, having those discussions with potential customers now with regards to those 28 molecules and obviously were continuing to have additional customer conversations as we look out forward.

Okay.

Last one in terms of the AI ml part of the approach.

I'll leave.

Completely ready with what we need to.

To help move the process.

Faster with the help of these tools are used in developing some of these tools.

Well, that's what's exciting about AML is that it's one data driven and to build upon itself no no different than as a snowball and so we had been using it primarily in our gene targeting we're now establishing it as we look at pathways and actually the engineering of the compounds were.

We're building into our lab scale reactors, which are very very very iterative. They move rather quickly and then that continues to drive data and drive information. So as we mentioned during our opening remarks, we feel that the 36 month development cycle will continue to be decreased over time and of course with the Utah.

<unk> have AI ml and as we incorporate it to a further degree not only in Platts spring, which is the development, but also in the bio factory, we expect those cycles to be further compressed. So it's definitely one of the areas that we're really excited about within our business clearly data and no matter what industry is hugely important.

And how we use our data and incorporate it into our process again tied into that differentiation in terms of the other synthetic biology companies, we think uniquely positions us.

That's all I have thank you so much.

Thank you. Thank you.

Again, if you have a question. Please press Star then one.

Our next question will come from Brian Wright with Roth Capital Partners. Please go ahead.

Thanks, Good afternoon.

It.

<unk> taken here a little keep her on.

Situation with Rosemary <unk> asset and the six other compounds.

And I just want to make sure I'm understanding kind of what you all said so apologize.

But it sounds like.

You've identified this compound because potentially DNA.

Being able to be developed and bio factory and you've also had multiple customers come with this compound and saying Hey, This is something we would be interested in having you produce.

You've done it.

Well, you certainly surface fit for sure with the comments here today.

But again to our model, we're very focused on demand driven and very focused on the individual customers and what their specific needs are but yes. There is certainly could be some specific interest drawn out of the conversation here.

Okay, and then if I could just follow.

Follow up on one more.

Additional states other compounds.

Is that a similar situation where they are.

It's been identified.

Founded by customers.

And find them in those 15000 initial signatures.

And at the lab scale.

And now with further discussions and youre producing that.

And the.

Starting with production in the in the lab scale and these are kind of where you are getting these these yield kind of numbers that youre talking about as well.

The other six that were identified on our part they haven't necessarily been serviced by <unk>.

Customers, but the potential for that is certainly there as they may fall really into the same classifications as I mentioned earlier with those molecules. We've only seen at the 28 from the customers have been provided 12 chemical classes. Those other six are.

On a similar vein so the potential is there but not at the same level, we're seeing right now with Rosemary <unk> or the <unk>.

<unk> pace.

Okay got it.

There are other compounds beyond these sections as well that I imagine because you've got enough capacity.

Work on it is a lot more.

Sure.

Exactly that's why that discovery process, where we went through the medical Omics analysis and found those 15000 different chemistries.

Provided those 28 customer molecules that we've talked with where we came from customers, but when you go back to that 15000 chemical signatures. It creates a library for us to work off of and develop other stuff.

For our customers.

Yes, I think Brian It's bill one other thing Thats important.

All of this right.

[noise] well, thank you to everyone for joining us on our call today.

If you were not able to address all your questions on today's call. Please feel free to contact us or our Investor relations firm <unk> partners would be happy to help you operator back to you.

This concludes today's conference call. Thank you all for your participation.

Sure.