Q2 2023 Yield10 Bioscience Inc Earnings Call

[music].

Welcome to the second quarter 2023 financial results and business update conference call for yield 10 bioscience during the call participants will be in a listen only mode.

The presenters will address questions from analysts today.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded I would now like to turn the conference over to your host yield 10, Vice President of planning and corporate Communications Lynne Brum.

Thank you Melissa and good afternoon, everyone welcome to the yield 10, Bioscience second quarter 2023 conference call.

Joining me on the call today are president and CEO , Dr. Olly peoples Vice.

Vice President of research and Chief Science Officer, Dr. Kristi, Snell, and Chief Accounting Officer, Chuck Hauser.

Earlier this afternoon yield 10 issued our second quarter 2023 financial results press.

Press release as well as slides to accompany today's presentation are available on the Investor Relations event section of our website at El pen five dot com.

Let's turn to slide two.

Please note that as part of our discussion today management will be making forward looking statements. These statements are not guarantees of future performance and therefore, you should not place undue reliance on them investors are also cautioned that statements are not strictly historical constitute forward looking statements such forward looking statements are subject to a number of risks and uncertainties that could cause the actual result.

Timna differ materially from those anticipated.

These risks include risks and uncertainties detailed in yield ten's filings with the SEC.

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.

The call over to Ali.

Thanks, a lot and good afternoon, everyone and thanks for joining our call.

Turning to slide three.

I'm pleased to report that we are making solid progress across the business as we operationalize our commercial plans to launch Camelina as a platform crop with a focus on biofuel feedstock markets and high value market for all of them against the odds.

Today, we will provide an update on our business, including recent accomplishments the market opportunity and trends driving the biofuel market.

Our progress developing herbicide tolerant varieties.

Our plants are scale EPA Omega three camelina.

At present, the second quarter financials, and summarize key milestones.

We will then open the call to questions.

Let's turn to slide four for progress on our key 2023 business goals.

You can go in 2023 used to establish and demonstrate the value chain from iOS 10 seats commercial all state products. Please.

Pleased to report that based on recent activities in the business. We are right on track executing against this goal.

Bobby you changed for Camelina in the Biofuels market starts with seed genetics and quality seed production.

SAP is building relationships with doors and to target growing regions and signing up to grow with family not under contract.

The third step is to line up green offtake customers to buy the camera and the green the crushing and biofuel operations.

We have no demonstrated each of the steps in this value chain, starting with the winter Camelina, we contracted last year, we signed contracts, some guy to divorce or planting and harvest.

Farm located in the southern Alberta, we directed delivery as the harvest is kind of a lean up to original biofuel partner, but the first question of the family and the greatest of the cart the conduction the biofuel is evident.

The photos on the right side of the Slide show now show the harvest of Winter Camelina Gordon I don't know about and the delivery of the time, we did agree to an off take customer.

It represents a key milestone for Europe that is demonstrating the full value chain.

On the business development side, our team continues to engage with potential supply chain partners, including ongoing discussions with marathon petroleum Mitsubishi for investment in offtake agreements for Camelina production specified growing regions.

Outside of the scope of these discussions we have continued to respond to additional inbound inquiries from energy company partner prospects with the goal of creating the auction to establish a network of alliance used to supply the family feedstock oil to the biofuel market.

Let's now turn to slide five.

Camelina as a platform crop.

Our business plan is based on leveraging camelina as a platform called for producing oil meal and specialty products.

We believe that by leveraging the demand created by Biofuels and advanced technology capabilities, we can transition camelina from a niche crop into a major crop well have taken more than 30 million acres here in North America.

This won't be achieved overnight.

But there are key activities I believe that that could drive the ramp up in acres. For example, I believe it can be blocked it's harvested stored and processed on existing equipment on farm and that the processors.

Next another big driver of adoption is that we are bringing forward normally sprinkling varieties, but whats the varieties of Cavalier.

Our winter varieties are proving to be extremely cold tolerant and drug resistant.

With time winter Camelina has potential for seamless integration and the crop rotation, let's call. It I'm sorry.

Yeah, we will plant camelina as a winter cover crop in the fall after corn harvest and harvest late spring before planting soybeans.

I'll mention that in June the USDA has stepped up and indicated they are called spring crop insurance for kind of a leader in many states.

Let's now turn to slide six the business model in markets, where camelina oil and meal.

We are using a closed loop contracted green production water to produce kind of lead oils for the biofuel market.

It's not only the green is comprised of a 35% to 40% oil and the protein meal with a 55% basically the rest of the seat.

It is a core product for awhile extraction.

Yeah, well you know it has captured the attention of the renewable energy space because of its attractive composition that profile.

Just a very little carbon index and its fatty acid profile is well suited for making renewable diesel and actually yes.

I believe that protein meal is approved for use in Idaho feet, representing a central market and revenues okay.

Let's start to slide seven the buyer for the opportunity.

There's tremendous opportunity in the Biofuels market for vegetable wireless received processed into sustainable aviation fuel and renewable diesel.

New demand that's being generated unified news are coming online and this new environmental commitments are being made to utilize these cleaner fuels across the globe.

By a few players phase two major sources of risk.

Volatility in pricing and availability of feedstock oils and volatility in the regulatory environment, which amongst other things can impact the incentives for biofuel adoption.

For example, we are already seeing states like Illinois placed limits on the amount of soybean oil that couldn't be used her size.

I'll switch tax breaks no longer apply.

I believe in a cultivation could address key aspects of risks or biopsy, but just by expanding the overall supply of feedstock oil, especially using windows 10 later.

We're in kind of a lead on otherwise follow on either winter or summer can actually supposed to be stuck oil for fuel and brings with it a new source of high protein meal.

Let's now go on to slide eight establishing production early varieties.

He must develop spring and winter Camelina varieties that have enabled us to establish production in the value chain.

So if we go to the institutional in the center of the slide is a winter variety that's robust cold tolerance L.

<unk> three is an early maturing winter variety and between 902 is our genome editing spring variety.

The development of these three varieties enabled youll tend to begin the commercial launch with proprietary seed genetics.

We accelerated development of artifacts varieties with elite harvest their technology for commercial launch in the future.

Let's now turn to slide nine grain production in offtake.

Last fall beginning in September 'twenty, two be contract. He built dwarfs, the bottoms up mutation thought strategic start at 160 acres.

This contracting was done to set in motion the steps in the value chain from planting to harvest acquaint deliberate did all state customer.

The photos on this slide illustrate the steps up the value chain, we have up and running in Western Canada.

Our team contract as springtime green acres for blot cheese meat, and we expect harvest to be complete in the coming weeks.

In the third quarter, we are engaging with existing and new drawers I'm seeing good interest in contracting went through 'twenty three 'twenty four growing season.

Now I'll turn the call over to Christy for an update on the development of next generation seed genetics, particularly H T and stacks DHT can lead the varieties.

Thanks Ali and good afternoon, everyone, let's turn to slide 10.

There's need weed control to reduce competition for nutrients and increase the productivity of their crops.

Our vision is to provide farmers with high yielding elite camelina variety with herbicide tolerance traits that are compatible with farmers crop rotation.

Incorporation of herbicide tolerance traits in canola transformed it from a marginal crop to a major crop grown on millions of acres and we believe camelina and they follow a similar path.

Herbicide tolerant lines of winter Camelina are particularly intriguing and that they could provide growers with a new crop rotation I cover crops increases very rapidly needle protects soil health and reduces nutrient runoff all while producing a feedstock that can be used to produce a low ci oil for biofuels.

Yield 10 has also made progress in increasing the harvest value of Camelina with programs to engineer trade spend increase seed yield in oil content.

He used protein meals out you in future higher value seen products, such as a negative the oils and PHH.

Your knowledge development has resulted in a patent portfolio that includes 21 patent applications issued or pending.

Let's now turn to slide 11.

We have developed spring and winter lines of Camelina have tolerance to an over the top spray other broadleaf herbicide is routinely used on major food crops.

Chart on this slide shows progress towards achieving milestones to enable commercialization of our first herbicide tolerant camelina variety.

We are making great progress on late stage field trials and are waiting to hear back from USDA APHIS on regulatory filings or deregulated growths that the crop and from the environmental Protection Agency.

Lena.

Label.

We have also initiated field work in 'twenty 'twenty free to obtain samples for compositional analysis to support use of the feed meal for animal feed.

We're also scaling up seed for commercial planning and are on track for 2025 commercial launch of spring Camelina, let's tolerance to the broadleaf herbicide.

Let's now turn to slide 12.

We're also making good progress with actor besides tolerance, which is the combined tree tolerance to over the top applications every broadleaf herbicide for weed control.

Find with tolerance degree to the soil recipes to achieve broader acreage.

We recently reported encouraging data out of our ongoing spring 2023 field trial, we demonstrated robust stacked herbicide tolerance and multiple of that.

[laughter] photos show examples of that with factor besides tolerance with little or no growth, it's control plants without the tree.

We have initiated regulatory work with these lines and have filed a regulatory status review, our RSR with USDA to deregulate, the grosses of Camelina stacked trait.

Going forward, we will harvest for field trials measure seed yield in seed oil content and she was the best fleet and back up advantage to move forward in our pipeline.

The lead of that will be chosen based on robustness in the herbicide tolerance as well as he killed seed oil content and overall agronomics of vivat.

And from the lines will be scaled up in the winter of 2023 'twenty 'twenty four contract season.

We believe that the factor beside tolerance lines will be a win win for growers and yield 10 since the trade will allow robust weed control for farmers, increasing yield and revenue.

And tolerance to previously used script to herbicide, allowing broad expansion of acreage available for plants in camelina.

As I wrap up I'd like to acknowledge the tremendous efforts of the yield 10 technology team. It has enabled yield tend to develop and employ cutting edge technology.

It shouldn't camelina as a competitive crop for production of feedstock oils for Biofuels.

This technology package will also be used as the basis for the high level of production of Omega three oils and elite camelina backgrounds, and the production of PHA Bioplastics.

In the coming months ahead, we look forward to further field testing, our best commercial quality herbicide tolerant camelina lines as well as advancing the Omega three oil technology platform and securing regulatory clearances for our elite Camelina products I'll now hand, the call back to Holly Thanks Christy.

Now, let's turn to slide 13 for an update on the Omega three.

I guess, the oils containing EPA and DHA fatty acids represents a very exciting market opportunity.

Unlike the biofuel market trivial sell green to an off take customer. This is a place where it will be possible to market the oil directly to end users.

Our business strategy was set up to leverage the advantest camelina varieties, including H D and operating foundation established or Biofuels to build their business and they will get three oils we.

He believes that kind of a you know will be an ideal platform for making these omega three oils were conducting our work in Omega three oils and collaborators fishing with Rossum said research in the U K.

The team at Roth instead develop the E. P. A H camelina line that produces up to 490% E P and oil depending on the background of variety of Camelina used.

The Pea level in this oil is two to three times artificial island. So we believe this can be developed as a preferred buyer of all your source of purified EPA products, such as <unk> E. P. A.

Pharmaceutical and nutraceutical markets.

Also developed an extensively tested the D O T. One camelina line, which contains 10 per cent a P. A handset per cent DHA in the oil patch.

Bush of Aqua feed studies have shown that D. H, one oil and so there was a drop in replacement for fish oil.

Clinical studies also published showing this ought to be an effective alternative to fish oil and the human diet.

Next generation Camelina lines with further improvements soil composition are also being progressed by Ross upset with funding support for mealtime.

In July we filed a request for regulatory status for you and ISR was USD Avis is a key step in the regulatory path for Omega three EPA camelina.

We are currently developing a detailed plan for the commercial launch of this business.

Let's now turn to slide 14, the market opportunity for Omega three.

Both new challenges and drivers for new sources of Omega three fatty acids, EPA and DHA.

Essential for human health and wellness continued to a matrix.

Consumption of oily fish and salmon are the main sources of EPA and DHA fatty acids in the diet that is.

Tremendous pressure on the harvest of fish, such as answer lease because it is proving to be unsustainable as natural fish stocks are disappointing.

And in fact, we actually harvest in Peru was caseloads with 20th twenty-three superbowl fish stocks Rubin to actually be a concert or around 20% of global fish oil. So we expect this to have a significant additional impact on fish oil pricing do Ya com.

And in addition result in increased third party interest in Ocala to sources like the Camelina Omega three platform.

You know the regulatory hurdles are also being reduced Norway. The largest producer of farm salmon until recently has a moratorium on the use of GMO ingredients and accuracy.

But recently approved the use of a GM Omega three oil from Lucy.

They produce a DHA containing oil canola.

Using the RSR process for regulatory approval by USDA APHIS under the secured real we see a clear path to production of all my guess at least in the U S. Chuck over to you.

Thanks Ali and good afternoon, everyone, let's turn to slide 15.

We ended the second quarter of 2023 with $2 3 million in cash and cash equivalents.

In Q2, we added a million dollars to our cash position as a result of issuing a senior unsecured convertible notes to marathon petroleum. This was in connection with the LOI, we signed with them.

We raised an additional $2 7 million in net proceeds from a registered direct offering in may and.

In addition, last week, we priced a $3 $7 million public offering of units consisting of common shares and warrants.

Our cash on hand, including proceeds from these offerings will support our operations into the fourth quarter of this year.

Our net operating cash used for operating activities was $3 2 million for the second quarter of 2023 as compared to $2 5 million the second quarter of 2022.

For the full year of 2023, we continue to expect total net cash usage in the range of 12, and a half to $13 million to fund our operations, including payments to growers are our first camelina grain harvest.

During our third and fourth quarters of 2023, we also expect to report our first camelina product revenues from Camelina grain.

And sales to our biofuel offtake customers.

I'll review, the second quarter and year to date 2023 operating results.

But the second quarter of 2022, either company reported a net loss of $3 7 million or 64 cents per share.

<unk> to a net loss of $3 4 million or 70 cents a share for the second quarter of the previous year.

As expected.

<unk> of our department of Energy Grant during our first quarter of 2023, we did not report grant revenue for the second quarter of this year.

We reported.

Zero 1 million in grant revenue in the second quarter of last year.

R&D expenses during the second quarter of 2023, and 2022 were consistent at 2 million and G&A expenses were $1 7 million and $1 5 million respectively.

For the six months ended June 32023, the company reported a net loss of $7 5 million, a $1 39 per share compared to a net loss of $6 8 million or dollars 38 per share during the six months.

And at June 32022.

Year to date grant revenue from the completed deal, we grant where zero 1 million 3 million respectively.

Research and development expenses were $4 2 million and $3 8 million. During the six months ended June 30th 2023, and June 32022, respectively, and general and administrative expenses were $3 4 million and $3 two 2 million for each of those periods.

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

I'll get back to you. Thanks.

Thanks, Chuck let's now turn to slide 16 for upcoming milestones.

Before getting into the upcoming milestones I'd like to comment on the tremendous progress made by the <unk> team is here in Massachusetts and in Canada. It's.

It's not easy for a small organization to make the transition from an R&D focus to commercial activities.

With the added pressure of needing to demonstrate compelling capabilities on both to prospective strategic partners.

No surprise, then that I am extremely proud of the <unk> team and what we have accomplished already this year.

Well I have to go partner agreements progressing with marathon petroleum and Mitsubishi.

Additional biofuel partnership discussions ongoing with other oil majors original energy players.

Which are camelina gain production the contract didn't fall of 2022 and close to fully harvested some already delivered toward off take partner.

Spring Camelina production complicated with harvest coming shortly.

You have the regulatory approval for Omega three tablet in the light EPA eight and achieving key milestones are developing HD and very recently stacked HD camera.

<unk> trials.

Building on these accomplishments we are working towards a number of key milestones in the second half of 'twenty and into the first half of 'twenty 'twenty four including.

For screen product revenue, a big milestone for us working with Martin and Mitsubishi to finalize investment in offtake agreements.

But they need to progress partnerships with undisclosed third party partner prospects interested in biofuel feedstocks.

What's our camelina production with doors for planting this fall as we continue to make progress introducing the benefits of growing heavily nice winter crop and expand our growing network.

Building. So you didn't move she had a car in HD.

Stacked HD varieties for future growth contracts.

Developing and progressing the commercial launch and Omega three oils.

<unk> business development outreach to prospective partners across the six product areas with a goal of executing strategic industry collaborations.

We will continue to work on expanding our intellectual property portfolio.

With that I'd like to turn the call back over to London for questions.

Thanks Ali.

Lisa we're ready for questions.

Thank you if you'd like to ask a question. Please press star one on your telephone keypad.

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

Thank you.

Yeah.

Wanted to get an update first on the agreement I know the LOI with marathon Petroleum and then the M O us with Mitsubishi and American Airlines I was just wondering.

Where those are at in terms of moving.

Moving to definitive agreements.

And then I have some follow up questions. Thanks.

Yeah regarding regardless I mean, obviously with Marlin I mean, there's a there's a timeline associated with that LOI, which basically I think expires in.

From the point of view of certain provisions and basically August 25th I believe it is and.

So although it doesn't mean that you know conversations door by that not spend though exclusivity that's run on it. So obviously, we've been working very closely with Boston over the last three months basically to structure of the agreement. So it would be basically and agreement which are ready to find most of the parameters I can't disclose those are not public.

It would basically involve two agreements one of them it would be an investment agreement and the second would be an off take agreement.

Regarding Mitsubishi.

We've made great progress with Mitsubishi and their partner any us with just the five major refinery the largest provider in Japan.

Also progressing pretty much along along similar lines, we again haven't disclose the specifics of that but certainly.

We also anticipate two similar agreements basically an investment agreement.

Strategic off take agreement for Cambodia oil for the biofuel market and so you know it was familiar with American Airlines, that's really more of a collaboration.

American as an airline and obviously when you look at the potential demand for SaaS.

$3 billion by 'twenty 375 billion gallons in the U S for soft by 2050, and then you look internationally the $13 6 billion gallons from Europe , and another 6 million gallons for Biogen.

And certainly the airlines, who are really going to be plenty of as much dependent on SaaS as a major source of reducing their carbon emissions.

SAP is obviously very strategic to them and so we continue to work with the American Airlines as they help to support us to help develop that this value chain, but you know Martha.

Yeah, essentially American airlines, there's not going to be an offtake partner already refiner essentially we have a strategic interest in seeing this industry expanded, particularly the availability of low Ci feedstocks.

Okay, Yeah, no. That's that's helpful al.

And then.

So, but just to just to clarify a marathon petroleum.

They have until August 25th.

So 11 days from now and make the decision or the exclusivity with them lapses and you could strike a deal with another company. If you. So desire is that correct.

Well, let's be clear I'm, not going to get into that specifically what I can say is that we are working very closely with Microsoft to bring this to a positive conclusion.

Within the constraints of the milestone agreement, we are in discussions with other parties, including Mitsubishi and some others.

In areas that are not constrained by five out agreement, but I'm not going to provide any specifics on that.

Okay.

Makes sense okay.

So you did say, though by the end of this year.

You'll you'll you'll be producing revenues from the Camelina green.

Can you.

Correct.

Correct correct Okay.

Can you talk about where you're at with the commercialization process for herbicide tolerant camelina and the interest from the farmers.

You know I think Tom So I can talk to you about the interest from the farmers, especially specifically and then obviously on the technology front.

Howard from Christie's excellent presentation.

Great job by that team, obviously, not only progressing the herbicide tolerance for weed control, but the very rapid development and demonstration in field trials of our stacked herbicide.

Apologies and you can talk to the Americas.

Both of those.

So fundamentally what we hear from growers is we're very interested in this trough, we see tremendous potential for it.

What are you going to do about weed control, because we need to have weak controlling owners to seamlessly integrate this into a cropper stations. So that we can draw this without having any negative impact on the other crops. We grow so that's number one.

Number two is and all of these areas, particularly in the Pacific Northwest all will be done through Kansas down into Texas, you know they use a lot of these groups to herbicides and so the industry is this thing called a planned back date. So if you've used the group to herbicide on on various plot, so yolanda or sections of your lives as they call it.

Basically there are restrictions on what you can plan in Atlanta.

Soon thereafter.

<unk> two is always can be you know a few months to as much as a year or even longer and so that has a major.

What it does is it reduces the number of acres each door has available potentially planting, which our camelina or even spring camelina for that matter. So by having the stock H T has told us to those residues. In addition to that we control. We're just quite frankly, we were making this idiot proof for the drawer adult piece and the very large scale.

Certainly the conversations with hybrid course indicate that they're very excited about that.

Okay, great. Thank you so much I'll hop back in the queue I appreciate it.

Okay.

Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad will pause a moment to allow for any other questions.

Okay.

Okay.

Yeah.

At this time I'm seeing no other questions Ms. Brum, I will turn the floor back to you for any final comments.

Great. Thanks, Melissa and I will turn the call back to Ali.

So I'd like to personally.

Personally. Thank all of you for joining us on the call Tonight, and especially our shareholders for your continued support I want to thank everyone at yield 10 for contributions that are keeping us on track to future commercial and product development goals have a nice evening everyone.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.