© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Welcome to the Second Quarter 2023 Financial Results and Business Update Conference Call for Yield10 Bioscience. During the call, participants will be in a listen-only mode. The presenters will address questions from analysts today. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the conference call over to your host, Yield10 Vice President of Planning and Corporate Communications, Lynne Brum.
Thank you, Maria, and good afternoon, everyone. Welcome to the Yield10 Bioscience second quarter 2023 conference call. Joining me on the call today are President and CEO, Dr. Oli Peoples; Vice President of Research and Chief Science Officer, Dr. Kristi Snell; and Chief Accounting Officer, Chuck Haaser. Earlier this afternoon, Yield10 issued our second quarter 2023 financial results. This press release as well as slides that accompany today's presentation are available on the Investor Relations Events section of our website at yield10bio.com.
Let's turn to Slide 2. 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 actual results to differ materially from those anticipated. These risks include risks and uncertainties detailed in Yield10'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.
I'll turn the call over to Oli.
Thanks, Lynne. Good afternoon everyone and thanks for joining our call. Let's turn to Slide 3. I'm pleased to report that we are making solid progress across the business as we operationalize our commercial plan to launch Camelina as a platform crop with a focus on biofuel feedstock markets and high value market for omega-3 oils. Today we'll provide an update in our business, including recent accomplishments, the market opportunity and trends driving the biofuel market, our progress developing herbicide tolerant Camelina varieties. Our plan to scale up EPA omega-3 Camelina will present second quarter financials and summarize key milestones. We will then open the call to questions.
Let's turn to Slide 4 for progress on key 2023 business goals. Our main goal in 2023 is to establish and demonstrate the value chain from Yield10 seed to commercial offtake products. I'm pleased to report that based on recent activities in the business, we are right on track executing against this goal. The value chain for Camelina in the biofuels market starts with seed genetics and quality seed production. The next step is building relationships with growers in the target growing regions and signing up to grow Camelina under contract. The third step is to line up grain offtake customers to buy the Camelina grain for their crushing and biofuel operations. We have now demonstrated each of the steps in this value chain starting with the winter Camelina we contracted last year. We signed contracts and guided the growers through planting and harvest for one farm located in southern Alberta. We direct the delivery of the harvested Camelina to our regional biofuel partner where the first crush of the Camelina grain has occurred and conversion to biofuel is imminent. The photos on the right side of the slideshow showed the harvest of winter Camelina growing in southern Alberta and the delivery of the Camelina grain to an offtake customer. This represents a key milestone for Yield10 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 and Mitsubishi for investment and offtake agreements for Camelina production in 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 option to establish a network of alliances to supply Camelina feedstock oil to the biofield market.
Let's now turn to Slide 5, Camelina as a platform crop. Our business plan is based on leveraging Camelina as a platform crop for producing oil, meal and specialty products. We believe that by leveraging the demand created by biofuels and our advanced technology capabilities, we can transition Camelina from a niche crop into a major crop planting in more than 30 million acres a year in North America. This won't be achieved overnight, but there are key attributes of Camelina that could drive the ramp up in acres. For example, Camelina can be planted, harvested, stored, and processed on existing equipment on farm and at the processors.
Next, another big driver adoption is that we are bringing forward not only spring varieties but winter varieties of Camelina. Our winter varieties are proving to be extremely cold tolerant and drought resistant with tying winter Camelina has potential for seamless integration into crop rotations with corn and soy. Here we would plant Camelina as a winter cover crop in the fall after corn harvest and harvest late spring before planting soybean. I'll mention that in June, the USDA stepped up and indicated that they are offering crop insurance for Camelina in many states.
Let's now turn to Slide 6, the business model and markets for Camelina oil and meal. We are using a closed loop contracted grain production model to produce Camelina oil for the biofuel market. The Camelina grain is comprised of about 35% to 40% oil and the protein meal over 55% for the rest of the seed. This is the co-product for oil extraction. Camelina oil has captured the attention of the renewable energy space because of its attractive composition and profile. It is a very low carbon index and its fatty acid profile is well suited for making renewable diesel and SAF. Camelina protein meal is approved for use in animal feed representing an essential market and revenue stream again.
Now let's turn to Slide 7, the biofuel opportunity. There is tremendous opportunity in the biofield market where vegetable oil is processed into sustainable aviation fuel, SAF, and renewable diesels. New demand is being generated as new refineries are coming online and as new environmental commitments are being made to utilize these cleaner fuels across the globe. Biofuel players face two major sources of risk, volatility and pricing and availability of feedstock oils and volatility in the regulatory environment, which among other things can impact the incentives for biofuel adoption. For example, we are already seeing states like Illinois based limits on the amount of soybean oil that can be used for SAF above which the tax breaks no longer apply. Camelina cultivation could address key aspects of risk for biofuel producers by expanding the overall supply of feedstock oil, especially using winter Camelina. Growing Camelina on otherwise file a land either winter or summer can increase both feedstock oil for fuel and brings with it a new source of high protein meal.
Let's now turn to Slide 8, establishing production under early varieties. Our team has developed spring and winter Camelina varieties that have enabled us to establish production in the value chain. WDH2 shown in the center of the slide is a winter variety with robust cold tolerance, WDH3 is an early maturing winter variety and E3902 is our genome-edited spring variety. The development of these three varieties enabled Yield10 to begin the commercial launch with proprietary seed genetics while we accelerated the development of our advanced varieties with elite herbicide technology for commercial launch in the future.
Let's now turn to Slide 9, green production offtake. Last fall, beginning in September 22, we contracted with growers to plant WDH2 plant plots ranging for 30 to 160 acres. This contracting was done to set in motion steps in the value chain from planting to harvest to grain delivery to an offtake customer. Photos on this slide illustrate the steps of the value chain we have up and running in Western Canada. Our team contract is spring Camelina acres which were planted in May, and we expect harvest to be completed in the coming weeks. In the third quarter, we are engaging with existing and new growers and seeing good interest in contracting winter acres in the 2023-2024 growing season.
I will now turn the call over to Kristi for an update on the development of next generation seed genetics, particularly HT and stacked HT Camelina varieties.
Thanks, Oli, and good afternoon everyone. Let's turn to Slide 10. Growers 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 varieties with herbicide tolerance traits that are compatible with farmers' crop rotations. 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 may follow a similar path. Herbicide tolerant lines of winter Camelina are particularly intriguing and that they could provide growers with a new crop rotation, a cover crop that increases grower revenue, protects soil health and reduces nutrient runoff all while producing a feedstock that can be used to produce a low CI oil for biofuels. Yield10 has also made progress in increasing the harvest value of Camelina with programs to engineer traits for increased seed yield and oil content, improved protein meal value and future higher value seed products such as omega-3 oils and PHAs. Yield10's technology development has resulted in a patent portfolio than includes 21 patent applications issued or pending.
Let's now turn to Slide 11. We have developed spring and winter lines of Camelina that have tolerance to an over the top spray of a broadleaf herbicide that is routinely used on major food crops. The chart on this slide shows progress towards achieving milestones to enable commercialization of our first herbicide tolerant Camelina variety. We are making good progress on late-stage field trials and are waiting to hear back from USDA-APHIS on regulatory filings for deregulated growth of the crop, and from the Environmental Protection Agency to add Camelina to the herbicide label. We have also initiated field work in 2023 to obtain seed samples for compositional analysis to support use of the seed meal for animal feed. We are also scaling up seed for commercial planning and are on track for 2025 commercial launch of spring Camelina with tolerance to the broadleaf herbicide.
Let’s now turn to Slide 12. We’re also making good progress with stacked herbicide tolerance, which is the combined traits of tolerance to over top applications of a broadleaf herbicide for weed control combined with tolerance to Group 2 soil residues to achieve broader acreage. We recently reported encouraging data out of our ongoing spring 2023 field trial. We demonstrated robust stacked herbicide tolerance in multiple events. The photos show examples of events with stacked herbicide tolerance with little or no growth of control plants without the trait. We have initiated regulatory work with these lines and have filed a regulatory status review or RSR with USDA-APHIS to deregulate the growth of Camelina with the stack trait.
Going forward, we will harvest the field trials, measure seed yield and seed oil content and choose the best lead and backup events to move forward in our pipeline. The lead event will be chosen based on robustness of the herbicide tolerance as well as seed yield, seed oil content and overall agronomics of the event. Seed from the lines will be scaled up in the winter 2023, 2024 contra-season. We believe that the stacked herbicide tolerance lines will be a win-win for growers and Yield10 since the trait will allow robust weed control for farmers increasing yield and revenue and tolerance to previously used Group 2 herbicides, allowing broad expansion of acres available for planting Camelina.
As I wrap up, I’d like to acknowledge the tremendous efforts of the Yield10 technology team that have enabled Yield10 to developed and employ cutting-edge technology to position 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 production of omega-3 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 alliance, as well as advancing the omega-3 oil technology platform and securing regulatory clearances for our elite Camelina products.
I’ll now hand the call back to Oli.
Thanks, Kristi. Now let’s turn to Slide 13 for an update in omega-3. The omega-3 oils containing EPA and DHA fatty acids represent a very exciting market opportunity. Unlike the biofuel market where we will sell grain to an optic 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 advanced Camelina varieties, including HT and operating foundation, established for biofuels to build their business in omega-3 oils.
We believe that Camelina will be an ideal platform crop for making these omega-3 oils. We are conducting our work in omega-3 oils in collaboration with Rothamsted Research in the UK. The team at Rothamsted developed the EPA8 Camelina line that produces up to 29% EPA in oil, depending on the background variety of Camelina used. The EPA level in this oil is two times to three times out of fish oil, so we believe this can be developed as a preferred higher value source of purified EPA product, such as ethyl [ph] EPA for the pharmaceutical and nutraceutical markets. They have also developed and extensively tested the DHA1 Camelina line, which contains 10% EPA and 10% DHA in the oil.
Published aquafeed studies have shown that the DHA 1 oil can serve as a drop in replacement for fish oil. Clinical studies also published have shown this oil to be an effective alternative to fish oil in the human diet. Next generation Camelina lines with further improvements to oil composition are also being progressed by Rothamsted with funding support from Yield10. In July, we filed a request for regulatory status for you and RSR with USDA-APHIS as a key step in the regulatory path for omega-3 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-3. Both new challenges and drivers for new sources of the omega-3 fatty acids, EPA and DHA both essential for human health and wellness continue to emerge. Consumption of oily fish and salmon are the main sources of EPA and DHA fatty acids in the diet. There is tremendous pressure on harvest of fish such as anchovies because it is proving to be unsustainable as natural fish stocks are dwindling. In fact, the anchovy harvest in Peru was canceled in 2023 due to low fish stocks. Peruvian anchovy count are around 20% of global fish oil, so we expect this to have a significant additional impact on fish oil pricing near term and in addition, result in increased third party interest in North Canada sources like the Camelina omega-3 platform.
We 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 in aquafeed, but recently approved use of a GMO omega-3 oil from Nuseed. They produce a DHA containing oil in canola, using the RSR process for regulatory approval by USDA-APHIS under the secure rule; we see a clear fast to production of omega-3 in the U.S. Chuck, over to you.
Thanks, Oli, 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. During Q2, we added a $1 million to our cash position as a result of issuing a senior unsecured convertible note to Marathon Petroleum, this was in connection with the LOI we signed with them, and we raised an additional $2.7 million in net proceeds from a registered direct offering in May. In addition, last week, we priced a $3.7 million public offering of units assisting of common shares and warrants. We expect that 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 for the second quarter of 2022 and for the full year of 2023, we continue to expect total net cash usage in the range of $12.5 million to $13 million to fund our operations, including payments to growers for 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 off-take customers.
Let’s now review the second quarter and year-to-date 2023 operating results. For the second quarter of 2023, the company reported a net loss of $3.7 million or $0.64 per share as compared to a net loss of $3.4 million or $0.70 a share for the second quarter of the previous year. As expected due to the completion 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 $0.1 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. So the six months ended June 30, 2023, the company reported a net loss of $7.5 million or $1.39 per share compared to a net loss of $6.8 million or $1.38 per share during the six months of ended June 30, 2022. Year-to-date grant revenue from the completed DOE grant were $0.1 million and $0.3 million respectively.
Research and development expenses were $4.2 million and $3.8 million during the six months ended June 30, 2023 and June 30, 2022 respectively, and general and administrative expenses were $3.4 million and $3.2 million during each of those periods.
For more details on our financial results, please refer to our earnings release. Oli, back to you.
Thanks, Chuck. Let’s now turn to Slide 16 for upcoming milestones. But before getting into the upcoming milestones, I’d like to comment on the tremendous progress made by the Yield10 teams here in Massachusetts and in Canada. 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. We’re surprised then that I’m extremely proud of the Yield10 team and what we have accomplished already this year.
Biofuel partner agreements progressing with Marathon Petroleum and Mitsubishi, additional biofuel partnership discussions ongoing with other oil majors and regional energy players. Winter Camelina, again production in contract in fall of 2022 and close to fully harvested with some already delivered to an update partner. Spring Camelina production completed with harvest coming shortly. Finally have the regulatory approval for omega-3 Camelina line EPA 8 and achieving key milestones developing HT and very recently stacked HT Camelina in field trials.
Building on these accomplishments, we are working towards a number of key milestones in the second half of 2023 and into the first half of 2024, including first grain product revenue, a big milestone for us working with Marathon and the Mitsubishi to finalize investment and offtake agreements. Continue to progress partnerships with undisclosed third-party partner prospects interested in biofuel feed stocks, contracting winter Camelina production with growers for planting this fall as we continue to make progress, introducing the benefits of growing Camelina as a winter crop and expand our grow network.
Building seed inventory of corn and HT and stacked HT varieties for future growth contracts. Developing and progressing the commercial launch of Camelina omega-3 oils and continuing business development outreach to prospective partners across their seed product areas with the goal of executing strategic industry collaborations and we’ll continue to work on expanding our intellectual property portfolio.
With that, I’d like to turn the call back over to Lynne for questions.
Thanks Oli. Melissa, we’re ready for questions.
Thank you. [Operator Instructions] Our first question comes from the line of Anthony Vendetti with Maxim Group. Please proceed with your question.
Thank you. Yes, I just, wanted to get an update first on the agreements. I know the LOI with Marathon Petroleum and then the MOUs with Mitsubishi and American Airlines. I’m just wondering where those are at in terms of moving to definitive agreements? And then I have some follow up questions. Thanks.
Yes, regarding, I mean obviously with Marathon – I mean, there’s a timeline associated with that LOI, which basically I think expires from the point of view of certain provisions in basically August 25, I believe it is. And so, although it doesn’t mean that, conversation with do [ph] by then, that’s when their exclusivity does run out. So obviously we’ve been working very closely with Marathon over the last three months basically to structure the agreements. It be basically an agreement, which already defined most of the parameters. I can’t disclose those as they’re not public, but would basically involve two agreements. One would be an investment agreement; the second would be an offtake agreement.
Regarding Mitsubishi. We’ve made great progress with Mitsubishi and their partner ENEOS, which is the refine – major refinery, largest refinery in Japan. They’re also progressing pretty much along similar lines. We again, haven’t disclosed the specifics of that, but certainly we also anticipate two similar agreements, basically an investment agreement and a strategic offtake agreement for Camelina oil for the biofuel market.
And so, with American Airlines, that’s really more of a collaboration, American as an airline and obviously when you look at the potential demand for SAF, 3 billion gallons by 2030 and 35 billion gallons in the U.S. for SAF by 2050. And then you look internationally, the 13.6 billion gallons from Europe and another 6 billion gallons demand from Japan. And certainly the airlines who are really going to be pretty much dependent on SAF as a major source of reducing their carbon emissions, SAF is obviously very strategic to them, and so we continue to work with American Airlines as they help to support us to help develop this value chain. But Marathon’s – not Marathon, essentially American Airlines is not going to be an off-take partner or a refiner, essentially, we have a strategic interest in seeing this industry expanded, particularly the availability of low CI non-food feed stocks.
Okay. Yes, no, that’s helpful, Oli. And then so, but just to clarify, a Marathon Petroleum, they have until August 25th, so 11 days from now to make a 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, or I can say is that we are working very closely with Marathon to bring this to a positive conclusion. And within the constraints of the Marathon agreement, we are in discussions with other parties, including Mitsubishi and some others in areas that are not constrained by that agreement. But I’m not going to provide any specifics on that.
Okay. That makes sense. Okay. So you did say though by the end of this year, you’ll be producing revenues from the Camelina Green. Can you?
That’s correct.
Correct? Okay, can you talk about the where you’re at with the commercialization process for the herbicide tolerant Camelina and the interest from the farmers?
I think, so I can talk to you about the interest from the farmers very specifically and then obviously on the technology front. You’ve heard from Kristi’s excellent presentation that and, great job by that team. Obviously not only progressing the herbicide tolerance for weed control, but the very rapid development and demonstration and field trials of the stacked herbicide technology and we can talk to the merits of both of those. Now so fundamentally what we hear from growers is, we’re very interested in this crop. We see tremendous potential for it. What are you going to do about weed control, because, we need to have weed control in order to seamlessly integrate this into our crop rotations, so that we can grow this without having any negative impact on the other crops we grow. So that’s number one.
Number two is in all of these areas, particularly in the Pacific Northwest, all the way down through Kansas, down into Texas, they use a lot of these Group 2 herbicides and so the industry has this thing called a plant backdate. So if you’ve used a Group 2 herbicide on, various plots of your land or sections of your land as they call it, basically there are restrictions from what you can plant on that land, soon thereafter. And sometimes for Group 2s, those can be, 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 grower has available. Potentially planting winter Camelina or even spring Camelina for that matter.
So by having this stacked HT that has tolerance to those residues in addition to the weed control, we are just, quite frankly, we are making this idiot proof for the grower to adopt these and the very large scale. And certainly the conversations we’ve had with growers indicate that they’re very excited about that.
Okay, great. Thank you so much. I’ll hop back in the queue. Appreciate it.
Thank you. [Operator Instructions] At this time, I’m seeing no other questions, Ms. Brum, I’ll turn the floor back to you for any final comments.
Great, thanks Melissa. And I’ll turn the call back to Oli.
So I’d like to thank, personally thank all of you for joining us, our call tonight and especially our shareholders for your continuous support. I want to thank everyone at Yield10 for contributions that are keeping us on track future to our 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.