Calyxt, Inc.

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Calix's 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 open for questions. If 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 you're using speaker equipment, please lift the handset before making your selections. This conference is being recorded today, May 5, 2022. At this time, I would like to turn the conference over to Bill Koschak, Calix Chief Financial Officer. Please go ahead.

Thank you, and good afternoon. This is Bill Koschak, the 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. Presenting with me today is Michael Acar, our President and Chief Executive Officer. Press release detailing these results crossed the wire after today's market close and is available on our company's website, calyxt.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, are forward-looking and may be 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 company's 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 Calix press release in its SEC filings, each of which was posted on the company's website at calix.com, you will find additional disclosure regarding these non-GAAP financial measures. References 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.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 Call today. For those of you who may be getting up to speed with our story following our October 2021 announcement in which we repositioned Calix, I'll take this moment to remind you we are a plant-based synthetic biology company committed to bringing the biomanufacturing capabilities of plants to innovative companies within our target end markets, the cosmeceutical, nutraceutical, and pharmaceutical industries. Our technology platform, unique production capability, and financial model are differentiated from other synthetic biology companies. I'm pleased to report we are moving full speed ahead into the growth and 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 and why we are convinced that the future of a number of industries depends on the sustainable production of chemistries that are plant-based, PlantSpring is our technology platform and is built on our significant experience engineering plant metabolism. We deliver innovations through an efficient development process from laboratory to pilot. These PlantSpring derived compounds are then produced through our proprietary bio factory. The biofactory harnesses the potential of plant cells in a multicellular matrix structure or proprietary plant cell matrices or PCMs. The PCMs are combined with growth media for production within a bioreactor or biofactory. The biofactory's plant-based foundation, the use of our PCMs, its ability to produce complex plant-based chemistries, its modular nature and geographic flexibility, differentiates the biofactory from other production systems used in the syn-bio and plant-based industries today. We believe the modular nature of our biofactory enables it to be scaled 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 AIML capabilities across Plattspring development and biofactory production in 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 that more than 20% of the world's largest 2,000 companies have 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, biofactory, and AIML milestones, that have Calix well-positioned for future success. We are focused on advancing discussions and relationships with new potential customers in the cosmeceutical, nutraceutical, pharmaceutical industries. All large and innovative industries 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 carbon footprints. As you recall, we are using a customer demand-driven approach to compound development and applying our filtering criteria, our target product profile, or TPP, to lists of compounds that are of interest to our potential customers. As of late April, Calix has evaluated 28 molecules identified by potential customers for development within our Plattspring platform and for production in our biofactory. 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 includes several molecules that were identified by the potential customer as having been unsuccessfully attempted by other 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 biofactory production system became operational in late 2021. This development occurred on schedule and marks an important first step toward achieving at-scale commercial production. We have completed multiple runs in this pilot biofactory, focusing on ensuring the system is operating as planned, our plant cell matrices perform as expected, and that data is being captured properly as it is a driver of future AIML advancements. The pilot bio factory is modular and designed to be able to continually reproduce 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 bio factory. Calix currently uses AI-ML to assist in the identification of gene targets in the plant spring development process. During the past quarter, we integrated AI-ML capabilities into our lab-scale reactors, enabling the continual capture and analysis of data leading to optimization of performance. We intend to advance these lab-scale AI-ML capabilities into our pilot-scale reactor later this year. This deployment drives future decision and improves test cycles with the goal of shortening development timelines. Late last year, Kalich reported considerable progress in discovery and development of sustainable plant-based molecules in its biofactory. Results from our metabolomics analysis indicated more than 15,000 chemical signatures, including both known and as yet uncharacterized molecules and building block precursors. These signatures are chemical compounds involved in chemical reactions that produce other compounds. These chemical signatures that have been identified form a baseline library that enables us to quickly identify and assess customers' targets with the potential to drive accelerated development timelines. From this library, we have, based on interest expressed by potential customers, produced rosmarinic acid, a compound with antioxidant, anti-inflammatory, in antimicrobial properties, and that is used broadly in cosmeceuticals and nutraceuticals. Calix has also identified six additional compounds of interest for prospective customers. Calix intends to move rosmarinic acid into the pilot biofactory to further advance its capabilities and scale. Using data we have accumulated from our land-based activities and our lab-scale bioreactors, KLEGS can demonstrate 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-based to lab results, the further advancement to pilot scale could drive an aggregate increase in yield of as much as 130-fold from land-based production to the pilot biofactory. These results underpin the company's scalability and sustainability benefits of the BioFact reproduction 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. Sue Ellen Boot joined as a business development director with more than 20 years of valuable business development experience to Calix. In her role, she will focus on facilitating potential partnerships, deal structures, valuation models, and subsequent transaction execution and alliance management. We also welcomed Elizabeth Teaglen as Manufacturing Director. Liz brings over 15 years of chemistry and purification expertise to Calix and will be responsible for pilot to commercial scale production of the company's customer demand-driven compounds, And along with an R&D leader, the Verify stage of product development. And as you may recall, in February, we onboarded our new SVP of business development, Jerry Nuobo. Jerry brings more than 30 years of experience in the specialty chemicals and biotechnology industries and diverse experience building multimillion-dollar income streams in the cosmeceuticals and 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. The fact that we did this is a testament to our strategy and focus. This raise strengthens Calix's financial position as we work to grow our business and realize its value. As a result, we now expect KALIS' cash runway to extend into early 2023. Our biofactory production system is differentiated from other production systems in use by synthetic biology companies today. Our biofactory is built around plants, which by their nature are complex, multicellular organisms. We believe this enables us to produce plant-based chemistries of greater complexity than many other production systems, including single cell fermentation-based systems. This certainly has been the feedback we have received from some of our prospective customers. We use a PCM as the biomass in our production system. The PCMs are stable because of their multicellular nature and can produce more than one plant-based chemistry at a time. As our PCMs grow and scale, they continuously produce the target chemistry. We use a growth media to bathe our PCM structures and provide nutrition. The bathing process is a portion of every hour and can be optimized using AI ML over time to maximize the productive capability of the PCM. Importantly, we have also aggressively pursued the expansion of our intellectual property portfolio. This enables us to carve out space for KX's proprietary technology, including our PCM and multicellular approach that is a critical foundation for the success of our company. Our production takes place within a bioreactor, our biofactory, 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 biofactory production system is modular, which means it can be structured to produce more than one plant-based chemistry at a time. This modular design also allows the biofactory to be placed almost anywhere and thus geographically independent in comparison to other large-scale production systems, which typically requires a large investment in a single facility. These differentiators enable K-Leaks to produce complex plant-based chemistries in a short period of time. In some instances, we believe that the chemistries that we are able to produce may not be amenable to production through other means. Two additional differentiators are our customer focus and business model. Unlike historical calyx, or frankly some others in synthetic biology, we are 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 commercializations if we are successful in developing the chemistry and scaling its 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 than other types of organisms. In many cases, these chemistries are far more complex than can be produced using a single cell organism. And in many cases, users of 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, we gain the diversity of cell types a full plant would have without producing the full plant. This enables greater variety of chemistries 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. The business model requires that we are selective upfront to drive good decisions for both Calix and our customer. This criteria is our TPP. The TPP includes several areas, including technical capability to produce the desired chemistry, the size of the customer's demand pool in both quantity and dollars of spend in aggregate and per unit, and 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 scarce in nature and difficult to produce compounds that are high value and low volume from a production standpoint. After we've applied the TPP and accomplished some other interim steps, including small production of the target chemistry, we agree with the customer as to the specifics of the compound to be produced. We intend to have a production handled by infrastructure partners on our behalf, with the customer purchasing the plant-based chemistry from Calix under a supply agreement. Majority of the value to Calix in this business model is in the scale of product to the customer at the end of the development and scale-up process. 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 will address any regulatory or formulation matters with regards to the chemistry we will produce. In summary, Calix Plant Springs technology and the biofactory production system are differentiated from our peers in synthetic biology in many ways, including our business model. Our business 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 cosmeceuticals, nutraceuticals, and pharmaceuticals. 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, the cosmeceutical ingredients market, which also includes personal care and 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 or provide ingredients for those brands. Even if Calix is able to secure a small fraction of these large end markets, it represents a substantial business opportunity. We believe our development cycle could offer an unprecedented time measured from contract signing to commercializations 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. As we have moved further into the customer acquisition process, we are now expecting to produce small quantities of product or 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 AIML throughout the stages of the Plattspring development cycle and in the biofactory production system, which is also intended to shorten our development cycle. For example, we plead to today that in some cases, the design engineer verify cycle can now be completed in as 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. Combined with the progression of our customer acquisition activity, we are excited by the prospects for Calix as we look forward for 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. Bill?

Thank you, Michael. In addition to our focus on the plant spring driven product development for biofactory production, we are also canvassing a wide range of potential licensees for both our technology and historically developed traits. In the first quarter of 2022, we finalized our strategy for optimizing potential revenue from the licensing of our technology and plant traits. The strategy is two-pronged. It reflects both a broad outreach to companies in the plant gene editing and biotechnology space for their licensing of our intellectual property assets and the monetization of the company's historically developed agricultural traits. Calix intends to monetize these traits through their license to counterparties, including seed companies, processors, and others. We are offering licenses for the many gene editing and breeding technologies in our patent portfolio, including our Talon patent estate. As it relates to the licensing of our agricultural traits, Active discussions are occurring on several, including our soybean and wheat offerings. We are targeting the execution of licenses in both the technology and trade licensing categories in 2022. Finally, a brief update on a project for the large food ingredient manufacturer who contracted with us to develop a soybean intended to produce an oil that could serve as a replacement for palm oils. The project began in the fourth quarter of 2021. and remains on track for completion in the first quarter of 2024. The food and green 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 banned palm oil exports in an 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 cosmeceuticals. We believe this development may drive further interest in additional palm oil alternatives, and that Calix 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. First, our 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 from 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 lines. All 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 non-cash stock compensation expense from the forfeiture of unvested stock awards in the first quarter of 2022 and lower operating expenses. Net loss was $5.6 million in the first quarter, or 13 cents per share, compared to $10 million, or 27 cents per share, in the prior year period. The 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 14 cents per share, compared to $8.8 million, or 24 cents 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 a year-over-year increase in weighted average shares outstanding. As Michael and I mentioned, our business plans have been supported by the $10 million of net proceeds we received from the offering we completed in February, enhancing 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 and scaling of our biofactory business model and selective hiring to support progression and expansion of our AIML 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 Calix cash runway to extend to early 2023. inclusive of planned spending to support the growth and scale of our Biofactor business model. That runway only includes committed customer payments for licensing and product development as of today. And as a result, any customer cash flows from new deals would 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 or filings with the SEC. As part of CALIC's ongoing validation of its platform technology, we are on track to realize several important milestone targets across PlantSpring and the BioFactory. First, within PlantSpring and building on our current gene targeting capability to have AIML capabilities for the identification of pathways in the design phase of development by mid-year 2022. Second, building on our lab scale reactor AIML rollout to have AIML capabilities fully functioning within the pilot biofactory by mid-year 2022. Third, to design additional PCMs using PlantSpring for production in the biofactory. These PCM 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 two to four customer demand-driven compounds under development, and we're targeting the execution of multiple licenses in both technology and trade 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 have completed multiple test runs of the pilot biofactory and added AI ML capabilities into its lab-scale reactors, enabling pilot-scale implementation of the AI ML capability later this year. We progressed targeted metabolomics analysis that identifies more than 15,000 chemical signatures including based on interest from potential customers, rosmarinic acid, and identified six other compounds of interest for prospective customers. We have 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 of as much as 130-fold over land-based production. We continue to hire for key roles supporting our strategy and business model. Significantly, we are capitalized to support our business into early 2023 and potentially beyond, depending on our success with our licensing and product development agreements and related cash flows in 2022. We are 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 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time we will pause momentarily to assemble our roster. Our first question comes from Bobby Burleson with Canaccord. Please go ahead.

Thank you. I was worried there for a second that my question didn't go through. So I guess probably the first one is just understanding the palm oil alternative. The agreement that you have in place right now where you're you know, I guess funded through the next couple of years and there's an option for commercialization with that partner, does that preclude you or prevent you from inking other agreements on that particular plant trade?

You know, Bobby, it's a great question. One, it's certainly interesting, and time is related and driven by, I think, that change by Indonesia, but the challenge around palm oil I mean, at Calix, 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 and the history of IP development, and it really speaks to this deal. But to specifically answer your question, no, it does not. And so it will be interesting to see the implications that we're going to unfold as it relates to palm oil and the global supply around the world.

Great. And then with your – Your production scale partner, I guess you want to have one of those in place by the end of the year, it sounds like. Would this be a one-stop shop for you, or would you need to have additional partners based on the molecules or the compounds that you ultimately plan on ramping?

As you know, we commissioned our pilot-scale 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 more. Our business model is really fundamentally driven by our customers. As a result, it's 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'll be really driven by our customer needs first and foremost.

Okay, great. And then just the last one for me, and then I'll jump back into the queue. But just understanding, see, there are several, I guess, molecules that were identified by some prospective customers where their synthetic biology, you know, development partner was unable to 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 Calix is better positioned to have success with those molecules? Is it something fundamentally, you know, with your different approach that will allow you to have success there?

Yeah, 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 that evaluation on an additional 28. What's interesting about those molecules, those 28 molecules, they come from 12 different chemical classes in five different 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, this really is what we've laid out when we made our transition in October of last year. As a plant-based synthetic biology company, we're differentiated in the sense that we're using multicellular approach. And this is through our proprietary plant cell 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 produced. So we've been very excited about our positioning and our capabilities as it relates to complexity of compounds. And what we're seeing is that's really proven out by communications with these customers.

Great. Thank you.

You bet.

Now our second question will come from Amit Dayal with HC Wainwright. Please go ahead.

Thank you. I appreciate you taking my question. With respect to these 28 molecules, the press release said that other attempts by other providers were not successful. Are efforts based on the technology, is that what differentiates us? I'm just trying to understand what kind of solutions or approaches were being applied by these other providers versus what we are doing.

We don't know the real specifics as to the other solutions. Typically, what you'll find in synthetic biology is a microbial-based approach in fermentation. And what we're focused on is, again, our plant spring platform in BioFactory, which uses a plant-based approach, a natural approach where we're using the multicellular structures. And again, really the heart 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 a given customer that has more than one compound need, but we can address multiple customers potentially at the same time. So there's several different ways that we're differentiated. Also, when you compare our approach to fermentation, for example, we bathe our plant cell matrix with our nutrient media, our proprietary media, as opposed to submerge it, which you will find in fermentation. So there are several different aspects that differentiates and separates us from other Symbio approaches, which we think lend to a lot of the discussions that we've not only had with customers now, but potentially customers in the future.

Understood. Thank you for that. And has work started on any of these, or are you still sort of negotiating with potential customers on, you know, which molecules to look at?

Yeah, you know, what's interesting is late last year, we did a run in our borough factory and did a metabolomics analysis and came up with over 15,000 chemical signatures. And within one of those chemical signatures, we've shown that this rosmarinic acid was present, and that had been surfaced several different times by customers as a potential interest. Now, we don't have a sign development agreement as it relates to that individual compound, but we are using that within our pilot biofactory to further advance its capabilities and scale while we are simultaneously having those discussions with the potential customers now with regards to those 28 molecules. And obviously we're continuing to have additional customer conversations as we look out forward.

And this last one, in terms of the AI ML part of the approach, are we completely ready with what we need to help move the process faster with the help of these tools? Are we still developing some of these tools?

Well, that's what's exciting about AIML is that it's one data-driven and two builds upon itself, no different than a snowball. And so we have 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. 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 that 36-month development cycle will continue to be decreased over time. And, of course, with the utilization of AIML and as we incorporate it to a further degree, not only in Plattspring, which is a development, but also in the biofactory industry, 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, no matter what industry, is hugely important. And how we use our data incorporated into our process, again, tied into that differentiation in terms of the other synthetic biology companies, we think uniquely positions us. That's it. That's all I have, guys.

Thank you so much.

Thank you.

Thank you. Again, if you have a question, please press star, then 1. Our next question will come from Brian Wright with Roth Capital Partners. Please go ahead.

Thanks. Good afternoon. Just trying to dig in here a little deeper on the situation with rosmarinic acid and the six other compounds. And I just want to make sure I'm understanding kind of what you all said, so I apologize. But it sounds like you've identified this compound as potentially, you know, being able to be developed in the biofactory, 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 at the lab scale now, and then you're, you know, the question is bumping it up to the pilots. Is that generally kind of the gist of the situation thus far?

Yeah, Brian, I think you said it well. I mean, we were able to identify it in that test run late last year, and simultaneously some customers had expressed interest in it. While we don't have that definitive signed deal for that specific molecule, we know it is of interest. So as we, in parallel... have conversations with these customers that we've outlined about these specific demand-driven molecules. I mean, it's a great utilization of it to be able to assist in the development of the capabilities and the scaling of the pilot biofactory.

And then I just can't help but ask, are those potential customers aware that there's more than one person looking at that kind of, you know, so somebody needs the, you know... somebody, you know, there's multiple shoppers at the house kind of thing?

Well, you certainly surfaced it for sure with the comments here today. But, you know, 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, yeah, there certainly could be some specific interest drawn out of the conversation here.

Okay. And then if I could just, you know, follow up on one more question. The additional such other compounds, is that a similar situation where they've been identified by customers, you have identified them in those 15,000 initial signatures, you've produced it at the lab scale and now it's further discussions and you're producing it and you're starting the production in the lab scale and these are kind of where you're getting these yield kind of numbers that you're talking about as well?

The other six were identified on our part. They haven't necessarily been serviced by customers, but the potential for that is certainly there as they fall really into the same classifications. As I mentioned earlier with those molecules, we've only seen that the 28 from the customers have been provided 12 chemical classes. Those other six are a similar vein. So the potential is there. but not at the same level we're seeing right now with rosemary because they're at a different pace.

Okay, got it. And there's other compounds beyond these six as well that I imagine because you've got enough capacity to work on identification of a lot more. Is that safe to say?

Exactly. That's why that discovery process where we went through the metabolomics analysis and found those 15,000 different chemistries provided those 28 customer molecules that we talked with that we came from customers. But when you go back to that 15,000 chemical signatures, it creates a library for us to work off and then develop other stuff for our customers.

Yeah, I think, Brian, it's Bill. One other thing that's important in all of this, right, is we've evaluated 86 molecules that have come from customers beyond Rosmarinic and the six that were in the 15,000 signatures that we identified. So from our perspective, we're really pleased with the intake of the molecules that we're evaluating, and there are 28 of that 86 that we are pursuing further with both discussing with customers as well as evaluating from a science perspective where we go with those. So again, trying to get to the two to four that we want to have in development by the end of the year, that's part of that funnel that progresses us to that two to four.

Good point. There's really two separate topics there, right? The customer demand driven, which has been presented to us, and then the others that we've identified through our own discovery process. Where we're primarily focused on is those 28 customer molecules currently that are in process.

Perfect. Great. That's super helpful. There's so much more I want to dig in, but I don't want to take up the whole call. So at another time, that would be great. Thank you.

This concludes our question and answer session. I would now like to turn the call back over to Michael Carr.

Thank you to everyone for joining us on our call today. If you're not able to address all your questions on today's call, please feel free to contact us or our investor relations firm, Argo Partners. We'd be happy to help you.

Operator, back to you. This concludes today's conference call. Thank you all for your participation.