Q2 2022 Calyxt Inc Earnings Call
Filings with the SEC each of which is posted on our website at <unk> Dot Com you will find additional disclosures regarding these non-GAAP financial measures.
Francis to these 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 accordance with GAAP.
Lastly, this conference call is being webcast. The webcast link is available in the Investor Relations section of Calix Dot com at this time I'd like to turn the call over to Michael for his opening remarks Michael.
Thank you Bill and thank you for joining us on Calix earnings and corporate update call today.
Throughout the second quarter of 2022, the calix team tangible your brands each area of the business, including progressing our development and sale of customer demand driven plant based chemistries the procurement of infrastructure partners to greatly expand our manufacturing capabilities and technology and plant trait licensing.
Throughout the quarter <unk> continued to work on scaling and standardize and production in its pilot Biofact pre system and building out related capabilities and I'm proud of the significant progress. We have made in a short period of time is a testament to our new strategic direction being on track.
Today, I will specifically walk you through our progress over the past few months and then have bill will provide a financial update.
We are focused on advancing discussions and relationships with new customers in the cosmos suitable nutraceutical and pharmaceutical industries.
All our large and innovative industries with customers that have current business needs to source sustainable and finite plant based chemistries.
Potential customers are also known to be fast adopters of innovation that are actively seeking to reduce their carbon footprints.
In the second quarter Calix received nine new chemistries from potential customers for evaluation, bringing the total number of Chemistries cumulatively evaluated for development with our plat spring platform and for production in our bio factory to 95.
Of these 95, Chemistries 31 have met calix target product profile or TPP criteria, we plan to further evaluate and discuss these chemistries with the potential customers.
Importantly, the evaluated Chemistries include several that were identified by potential customers as having been unsuccessfully attempted by others in the synthetic biology industry. This speaks to the unique technology and approach of Calix engineer plant metabolism to produce innovative and high value based chemistries.
For use in customers' materials and products.
Leveraging the 31 customer demand driven chemistries that are past our TPP criteria Calix is currently negotiating term sheets with several potential customers for the development of a select number of those plant based chemistries.
As a reminder, we are targeting two to four customer demand driven compounds for development by year end.
We are also pleased to share that calix is performing a pilot project for potential high value chemistry for a large global consumer packaged goods company, we expect to deliver an engineered solution in early 2023.
This could form the basis, where potential engagement to complete development and produced the chemistry for that company.
Other companies in our space May also be interested in this chemistry.
In the second quarter, we also initiated conversations with multiple potential infrastructure partners I am pleased to report that we have exchanged a term sheet with one of them and are advancing discussions with others. These potential infrastructure partners offer a global footprint and capabilities to enable calix to increase speed to scale they have capacities from pile.
But to commercial scale production.
These potential partnerships have the potential to enable the development and production of Chemistries at industrial scale for customers in our key end markets importantly, our progress with these infrastructure partners not only supports future deals, but also brings value to ongoing customer conversations.
Of note I can report that genuine interest of these potential infrastructure partners and working with calix and that they understand and appreciate that we are going after hard to solve high value and potentially high margin chemistries.
This asset light approach enables the deployment of our capital to the development of a robust customer base and accelerates the speed at which we can bring chemistries to potential customers instead of deploying that capital on large scale manufacturing.
In addition to our focus on our plant spring driven product development for bio factory production. We're also canvassing a wide range of potential licensees, where both our technology and our historically developed plant trades and we have made important progress on this front.
Since we refocused our licensing business in late 2021, including the strategic hire of Peep ball, our technology licensing leader, we have developed our strategy for maximizing potential revenue from the licensing of our technology and our plant treats as announced last quarter.
In a few months, we have successfully procured term sheets for the licensing of our patents and for license of our plant trades for <unk>, specifically, there's been significant interest in calix is high fiber wheat trade for breads pastas and other wheat applications as well as calix second generation high oleic, soybean trade or heart healthy oil applications.
These term sheet discussions with potential licensees are continuing to advance.
I attribute to substantial progress to the right team the right technology and at an opportune time.
Our potential licensees, who see the value in our offerings, especially in these times of global supply chain issues and food insecurity.
Our project with a large food ingredient manufacturer, who contracted with us to develop a soybean intended to produce a replacement for palm oil remains on track for completion in the first quarter of 2020 for this manufacturer is funding our development costs over the term of the agreement and holds an option for future development and commercialization.
Given world.
Events Calix has recently received inbound interest from other manufacturers and users of Palm oil and Incidentally Calix was included in a recent Wall Street Journal article about this very topic and the potential for calix to provide solutions.
We continue to anticipate the ongoing issues with global inflation in food and other products will drive further interest in additional palm oil alternatives. This includes our cosmos suitable end market and calix is particularly well suited to bring forward solutions based upon our proprietary technology and expertise in plant based synthetic.
Biology.
I'd like to now turn the call over to Bill who will cover our second quarter financial results Bill.
Thank you Michael earlier today, we issued a press release, describing our second quarter 2022 result, we also filed our Form 10-Q for the quarter. This afternoon.
Our cash cash equivalents and restricted cash of $11 9 million as of June 32022.
Revenue was nominal in the second quarter of 2020 compared to $11 9 million in the second quarter of 2021. The decrease in revenue was driven by the late 2021 completion of the wind down of the <unk> product line.
Revenue in the second quarter of 2022 was primarily associated with our agreement with a food ingredient manufacturer to develop alternative and as previously reported we.
We expect revenues to decline meaningfully from 2021 level because of the wind down of our soybean product line.
Total operating expenses were $6 8 million in the second quarter of 2022 compared to $6 3 million in the second quarter of 2020, while the increase was primarily driven by the adoption of the lease accounting standard which shifted amounts previously reported in interest now to operating expenses.
Net loss was $2 5 million in the second quarter or <unk> <unk> per share compared to $4 8 million or <unk> 13 per share in the prior year period.
The improvement in net loss was driven by non operating income and expenses, including the mark to market of our common warrants liability, which declined in value due to a decline in stock price in 2022.
Partially offset by the gain realized on the forgiveness of the payroll protection program loan in the second quarter of 2021.
Movement 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 of $6 $7 million in the second quarter or <unk> 14 per share compared to $7 8 million or <unk> 21 per share in the prior year period.
The improvement in adjusted net loss and adjusted net loss per share was driven by the improvement in net loss and year over year increase in weighted average shares outstanding.
As previously reported we are also pleased to have received $10 million in net proceeds from the offering we completed in February in spite of difficult capital market conditions and from a well respected institutional investor.
This has enhanced our balance sheet and positioned for future success.
We anticipate the proceeds from that offering along with our disciplined use of cash to support the continued targeted growth and scaling of our biotech business model. This plan continues to resonate with investors.
As a result of our discretionary spending and based on our current business plan that Michael mentioned, we continue to expect cash run rate to reach early 2023 inclusive of planned spending to support the targeted growth in scaling of our biopharm business model that runway includes only committed customer payments for licensing and product development activities.
As of today.
And as a result, any customer cash flows from new deals with serve to extend our cash runway further.
For additional details about our financials for the second quarter of 2022, please refer to our press release, our filings with the SEC.
I'll now turn the call back to Michael for his closing remarks.
Thanks, Bill I'd like to reiterate that the second quarter of 2022 was a period of tangible advancement for calix, we've evaluated nine new customer demand driven plant based chemistries in the quarter, bringing cumulative chemistries are evaluated for development to 95, along with several term sheets currently under discussion.
Set to deliver an engineered solution for a high value molecule in early 2023 to a large global consumer packaged goods company.
We continue to progress with several potential infrastructure partners able to produce chemistries in various sizes of bioreactors from pilot to commercial scale.
We're also evaluating multiple term sheets for technology licensing and there is significant interest in the licensing of our plant trades as I said earlier I am very proud of the significant progress we have made in the past few months, our new strategic direction is on track and we continue our focused drive to realize value for our stakeholders.
Our recent progress is due in no small part to the tireless dedication of our employees who might want to think we look forward to providing you with updates in the coming months operator that concludes our prepared remarks. Please open the line for questions.
Thank you Sir we will now begin the question and answer session.
Reminder, if you would like to ask a question. Please press Star then one on their phone.
Is there isn't a speaker phone.
Please please open your handset before pressing the keys to withdraw your question. Please press star two.
We'll pause momentarily to assemble our roster.
And today's first question comes from Brian right.
Oh I apologize todays first question comes from Bobby Burleson.
Canaccord. Please go ahead.
Thanks, and so like I wonder at bingo or something.
No.
Yes, yes, Michael the first question first of all how how're you doing.
Doing well doing very well how are you today Bobby.
Good to hear at.
Same here still it's still healthy.
Yes, yes.
First question would be on.
On the large scale manufacturing.
Asset light approach, where you guys don't want and ask them that kind of production internally.
I'm curious like how much IP is involved.
Taking.
Hypothetical molecule from what you guys do in the bio factory.
Infrastructure partner might too.
Is there a lot of IP that infrastructure partner brings to the table.
Are you guys pretty much deliver most of it.
Before I hand offs.
Well there is certainly IP located there as we've discussed in the past we have our pilot <unk> in place and we continue to drive the scaling process there.
We continue to advance and apply our AML approach to it with the goal of not only becoming more efficient more productive.
And then there are certain steps that we've taken in terms of the media the nutrient media that we use which is proprietary and other steps that are important to the actual production within a bioreactor. So while there is that infrastructure component to it there is still some IP that is related to <unk>.
Okay great.
Then.
And maybe just on the term sheets that you guys are evaluating.
It is.
Are there are financial considerations largely that you guys are deliberating on now or.
Is it just in general kind of complexity in these types of contracts or what is it that.
<unk>.
One needs to kind of elaborate on that.
Is it new join the deliberation or the.
Hunter Party or just kind of curious any color on how that is progressing.
Sure as you can imagine we're pretty excited about it not only in the cumulative total of molecules that we receive it.
The various customers that have approached us the appreciation of our plant based and rather unique technology as it relates to synthetic biology, but I think you sort of touched on it Bob These are.
Longer term relationships.
<unk> noted publicly that our process is approximately 36 months in duration on the outset.
And that includes our development upfront with the <unk> platform and then another 24 months as it relates to the scaling within within the production.
As we've also mentioned before that's a very very competitive in comparison to other synthetic biology companies. So as you can imagine when those type of relationships and those type of development processes take a little bit time to become.
Agreed upon.
But overall again I think really pleased with where we are noting that our that our total here that we've outlined as two to four development deals by the end of the year and again, we feel pretty comfortable with where we stand today.
Okay and then just.
Maybe on once again on that.
Two to four development agreements.
Here I know initially.
You guys were maybe coming that you can get one of those done by the end of last year and it sounds like you still have.
And in 2023 target in your sites.
I'm curious if any other timelines.
The signing of these agreements might require.
Yes.
Some some type of change in perspective, where do you think.
Once these are signed subsequent.
Timelines are still kind of intact as you originally thought.
Yes, I think we feel pretty comfortable with the original timelines and then the 2% to four for the year for sure.
Okay great.
Bill one for you before I hand, it over.
Bob.
It sounds like you've got that cash runway through early Q3.
<unk> without any incremental.
Yes.
Yeah.
Cash flows from customers Besides what you already.
<unk> now are signs now.
Just curious how much discretion, there is or wiggle room.
Hands on spending regardless of that.
That cash runway is there a lane dialed down spending if you needed to or.
Are you guys kind of running at.
It's a bare bones level of spending you think is required to.
Address these opportunities.
So let me thanks for the question as we talked about in the call. We have $11 9 million of cash at the end of the quarter with a runway into early 2023.
We're really pleased with the offering that we did back in February that helped us.
Balance sheet out.
Investor enthusiasm that we saw when we raise the money back then and so with that said.
Mentioned in the projection includes only committed customer cash to the extent that we have confidence both in executing license agreements.
And two to four development agreements Michael talked about that would only serve to the extent they come with cash and we expect them to.
I would only serve to extend our runway we are very disciplined in our cash usage.
I wouldn't describe where we're at is bare bones at their bones could could really impair the business. If you think about the future growth prospects until we've been trying to balance out.
Things, but above all being very disciplined in terms of how we think about what we're doing.
Yes.
As we talked.
In the.
In the call we've got a.
Good runway and the opportunity to extend it the opportunities to do other things. If we have to have some combination of things I mentioned, along with other third party funding, whether public or private better equity and those types of things. Some combination there those are all things we talk about as well.
Great.
Alright, Thanks, Michael Thanks Bill.
Thanks Robby.
And our next question today comes from Amit Dayal with H C. Wainwright. Please go ahead.
Thank you and good afternoon, everyone.
With respect to the <unk>.
Yeah.
The capacity it infrastructure partners.
When would you broaden them versus using your <unk> plans being biased Nike infrastructure that you have.
Would you needed because you may be running multiple compounds at the same day or is there. Another reason why you would go to.
The infrastructure.
Brian It's Steve.
Yeah. Thanks, Amit for the question good good good question.
Early on outlined the importance of infrastructure partners, particularly as it relates to an asset light approach and being able to.
Use those dollars elsewhere in development.
We did put the pilot bio factory in place and commission didn't late last year.
Continue to go through the scaling process, it's a 200 liter system.
One thing that's important for us as we've seen with the great interest in what we're doing evidenced by the number of molecules that come in and as the aspect of speed to scale. So in addition to leveraging an asset light approach on the capital side. There is also being able to have a relationship with infrastructure partners that further.
Speed to scale and then what I mean by that is is really going from pilot sizes to commercial.
Scale and of course, that's a fee.
Function also then of the <unk>.
Capacity required by the customer some of the molecules that we're looking at in general are much higher value more difficult and in some cases.
Defines by lower volumes, but there are other molecules that have those same characteristics that have bigger requirements are more of a commercial scale and thats also where infrastructure partners can play where capacity is something that could be of importance.
Thank you.
And then.
You highlighted that.
Some of some customers are coming to you with requests for development work that those were not successful in executing.
Does this imply you potentially have an opportunity to charge much higher prices of our premiums.
Prices.
So the work you do is.
You are successful in delivering what the customer is looking for.
That possibility certainly exists as we mentioned in the call earlier, we are definitely going over challenging going after challenging molecules typically higher value higher margin.
We've pointed out.
Since we've made our move into these end markets that our technology and using a multi cellular plan approach in comparison to the single cell Microbe for example.
It can handle more complex molecules in more difficult challenges. So would you outlined here is certainly possible sort of speaks to our unique technology in our model.
Okay.
Yes, that's the last one I will take my questions offline. Thanks, so much.
Great. Thank you Matt.
And ladies and gentlemen, as a reminder, if you wanted to.
To ask a question. Please press Star then one.
Next question today comes from Brian Roth Capital Partners. Please go ahead.
Thanks, Good afternoon.
It was worse in <unk>.
About with 31.
Compounds being evaluated.
Sure.
They meet the TPP.
In terms sheet negotiation like is there a way to think about could are you waiting for are you prioritizing as far as highest.
<unk>.
Impact is the first one to sign and then after that.
Could it be a cascade thing once you get the first one you could get all or pretty quickly after or.
Number one and then number two.
Is there any capacity constraints, Ken since there are 31 that are being.
Your criteria.
Could you do stick not to say that you've only said two to four but is there anything preventing you if the terms were.
Attractive.
Thanks, Brian .
Good questions I mean, the one thing that we've been really disciplined on and I am pleased with the team has done is taken those 90.
95 molecules that come in and run it through our TPP that target product profile, which is really designed for to simply describe it simply here is twofold and that is one of the technical feasibility or technology to ensure the highest degree of success for our customers and then secondarily the economic feasibility of it.
So that sort of speaks to your question in that we want to be able to for the shareholders drive the greatest value, which would be the the molecules that are able to provide the best economic return.
In terms of capacity something that we're definitely managing I think bill has pointed out here today and we've said this several times.
I think very good stewards of capital if you look at what we've done over the last couple of years and certainly how we manage it with.
Our new business model.
Our strategic direction.
But we are also designed to be able to scale. So we're committed to the two to four molecules, but certainly we are positioned and looking ahead to be able to do more as it makes sense for the shareholders.
Great. Thank you.
And ladies and gentlemen, this concludes today's.
A question and answer session.
I will turn the call back over to Michael <unk> for closing remarks.
Thanks 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.
Relations firm Argot partners, we'd be happy to help you operator.
Thank you. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.