Landec Corporation

Good afternoon, and thank you for joining Landex Fiscal 2022 Fourth Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, I will provide instructions on how to ask a question. Now, I would like to turn the call over to Jeff Sonick, Investor Relations at ICR. Thank you, sir. You may begin.

Good afternoon, and thank you for joining us to discuss Landec Corporation's fourth quarter fiscal 2022 earnings results. In connection with today's announcement, I'd also like to draw your attention to the investor presentation on Landec's investor relations website, as well as a separate press release concerning the corporate transition to LifeCorp that is now underway. In connection with that announcement, Jim Hall has been named CEO of Landec and elected to the board of directors. Jim will lead today's call alongside John Moorberg, Landex Chief Financial Officer. Before we begin, we'd like to remind everyone of the safe harbor statement. Certain statements made in the course of this call may contain forward-looking statements. It is important to note that the company's actual results could differ materially from those projected in such forward-looking statements. Additional information concerning risk factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the company's filings with the SEC, including but not limited to the company's Form 10-K for fiscal year 2022. Copies of these filings may be obtained from the company's website. And with that, I'd like to turn the call over to Jim.

Thank you, Jeff. Good afternoon, everyone, and thank you for joining us today. I'd like to start by recognizing today's press release announcement that was posted in parallel with our earnings results that signaled our formal intent to transition the focus of the company to the LifeCorps business going forward. This is an exciting milestone for the company and has been years in the making following the efforts by Dr. Al Bowles to simplify and turn around the curation foods business via our Project SWIFT framework. Al and his team have made significant progress in that regard, which to date has resulted in proceeds of $112 million that we've used to pay down debt and establish a healthier capital structure for the Go Forward organization. I'd like to extend a personal thank you to Al for his individual contributions Having stepped into the CEO role from his board seat in 2019, he quickly established a value creation plan and then executed on that plan so we could get to this position today, announcing the corporate transition to LifeCore Biomedical. In connection with this announcement, we announced our intent to change our corporate name from Landec Corporation to LifeCore Biomedical and change our ticker symbol to LFCR in the coming months. In addition, effective today, the board has also made several leadership changes to align our company and board to the new go-forward strategy. These include Dr. Boll stepping down as CEO and board member of parent Landec Corporation and into the role of president of Curation Foods to oversee the remaining disposition of the curation foods assets. In addition, I have transitioned from my role as president of LifeCore Biomedical to serve as the CEO and on the board of Landec going forward. I am humbled by this opportunity to serve the company in this new capacity, and I am truly excited by what the future holds for this company going forward. In addition, John Moorberg will continue as our CFO, creating valuable continuity during this transition. I believe John's continued financial leadership at LifeCorp will greatly benefit the company as we continue to build out our capabilities. Finally, as it pertains to the board of directors, we also announced the anticipated realignment of our board with Deborah Carosella, Tonya Pankoff, Andrew Powell, and Catherine Sohn, each having indicated that they intend to either step down from the board of directors or not stand for reelection at our next annual meeting, which is scheduled for October of this year. We believe these changes will create a more focused board of directors with experience and expertise that will help us accelerate growth at LifeCorps and generate shareholder value. I'd like to recognize Ms. Carosella, Pankoff, and Sohn, and Mr. Powell for their many contributions to the company over the years. Naturally, there are sure to be many questions surrounding the transition, such as timing, costs, proceeds, and long-term opportunities. While we are prepared to answer some of those questions here today, Many others will be addressed in due course as we get closer to some of the approaching milestones. You have our commitment that will we make this as clear and simple as possible. But the primary message we'd like you to take away from today's call is that we are a life sciences focused business with a leadership team and a board to support our growth ambitions. Our teams are moving as fast as possible through the various processes with our remaining curation foods assets. But as we hope you can appreciate, the shifting macroeconomic environment has added new complexity that has slowed things down to a degree. We look forward to updating the market on those developments in the future as appropriate. With that, I'll shift to the review of our fiscal fourth quarter results. and focus my commentary on Life Corps' results and accomplishments. John will then take you through a deeper dive on the financials, as well as introduce our fiscal 2023 outlook before opening the call to your questions. Life Corps finished fiscal 2022 on a high note, delivering a strong fiscal fourth quarter that helped us exceed our guidance. achieving full year revenue growth over 11% to 109.3 million and adjusted EBITDA growth of 18% to 28.9 million. Our business remains very well positioned as a fully integrated CDMO with highly differentiated capabilities for the development, fill and finish of complex sterile injectable grade pharmaceutical products. These capabilities were born from over 35 years of technical experience building a premier pharmaceutical injectable grade HA manufacturing platform with a focus on complex and highly regulated products. Couple our unique experience with ongoing industry trends towards outsourcing of new drug development, LifeCorps is ideally positioned to participate as a CDMO partner with new injectable drug applications that are utilizing these capabilities. In fact, approximately 55% of all new drug applications are injectables, and pre-filled syringe demand is growing at a 13% compound annual rate. Given the industry's limited injectable drug manufacturing capacity, we intend to take full advantage of this incredible opportunity to fill unmet demand with our existing capacity that we've been investing in over the past few years. Our development portfolio of active projects continues to be very strong, supported by the initiation of new projects and advancement of existing projects. In fiscal fourth quarter, we initiated work on three new development programs with three new customers. One of these is in the preclinical phase of development and the other two are in phases one and two of development. We have also had three early phase projects exit our active project portfolio due to changes in their product design criteria, which is a common occurrence for products in the early phases of development. We remain in discussion regarding the potential redesign of these products, and when appropriate, they may reenter our portfolio again. So net, our project portfolio remains at 24 projects with 21 different customers. These projects are spread across early phase clinical development with five projects, phase one and two clinical development with 11 projects, and phase three clinical development and scale up commercial validation activity with eight projects. On a sequential basis relative to our fiscal third quarter results, We continue to make progress with advancing projects within our portfolio with one early phase project advancing to the phase one and two stage and one of our late phase scale up projects advancing the full commercial stage. As it pertains to our forecasted value of these projects, we believe that the 16 projects that comprise development revenue related activity are in the range of 50 to 80 million And for the second group of eight projects that comprise our silo of late stage phase three and scale up commercial validation work, we believe that commercial revenue value is in the range of 45 to 120 million. Taken together, we have a portfolio of existing projects that we are working on today that represent as much as 200 million of revenue opportunity in the coming years, and we expect this will continue to grow. In terms of our commercial strategy to convert new potential engagements, I am extremely pleased with the team we've assembled. This past fiscal year, we've made some targeted investments in new talent that brings expanded capabilities in sales, marketing, and development resources in an effort to broaden our reach with new customers. In particular, we've been focused on increasing our development services which allows us to open new sales channels that expand and complement our existing capabilities. There's no question this has had an immediate impact to the expansion of our prospective project pipeline of opportunities. As of the end of the fiscal fourth quarter, we had 51 projects in our prospect pipeline that we are in various stages of discussion. These opportunities span multiple end markets, multiple classes of drugs and medical devices, and with an assortment of companies, both large and small, which we believe speaks to the limited CDMO capabilities that exist in the market today, making LifeCore's expertise increasingly valuable. While the number of potential projects will shift over time as we convert some and dismiss others, We expect the trend line to increase over time based on our expanded commercial strategy. On the operational front, our organization continues to prepare for growth. During fiscal 2022, we expanded and modernized our quality control lab at our headquarters at Site 1. We received client approval of our quality control lab at Site 2 and our Site 3 warehouse that is utilized for product storage and distribution was also approved by customers. The expansion and subsequent approval of these labs enhances capacity and capabilities and improves workflows for both our team and products. Further, we also completed the implementation of our laboratory information management system in June. which automates manual processes for key internal monitoring for over 12,000 samples monthly. Together with our initiatives around human resources and talent development, which we call LifeCore University, we are building a team that we can leverage for more efficient operations and prepare for the growth that we see ahead in our pipeline. This is the sort of continuous operational improvement that drives LifeCorps and allows us to be more effective partners with our customers. Looking ahead to fiscal 2023, our growth continues to be driven by our robust development project portfolio, expansion of our prospect development pipeline, and conversion of these projects into our active development portfolio. We remain focused on driving towards a multi-year acceleration of annual revenue growth into the mid to high teens based upon current project portfolio characteristics and favorable industry tailwinds in the coming years. As I noted, it is imperative that we continue to push our organization forward with the implementation of best practices and new capabilities so we can efficiently accelerate our growth. This covers resource planning across our entire organization, so we are prepared to add new manufacturing lines and shifts and do so with an efficient workforce that we can introduce as capacity and demand requires. Additionally, we are modernizing systems and creating automation wherever possible. This is especially important heading into fiscal 2023 where we have line of sight to three new products with PDUFA dates before the end of calendar 2022. We are preparing for pre-approval inspections now and expect commercial launch for all three products in the coming year. Efficiency is also an important element of our capital planning. While we continue to focus on maximizing the revenue generating capacity within our current infrastructure, We are also balancing known future capacity requirements within our project portfolio with the multi-year lead times on specialized equipment that needs to be manufactured to our specifications and undergo rigorous testing, customer acceptance, and regulatory approval. So for fiscal 2023, we are introducing a CapEx budget in the range of $34 million to $38 million which is earmarked for two multi-use isolator fillers and the associated formulation and process support equipment, which will be ready for acceptance testing next summer. As a reminder, included in this estimate is approximately 3.4 million of CapEx carryover from fiscal 2022. This keeps us on track to expand our operational filling capacity from our current 10 million units to 22 million units and beyond to meet expected growth and capacity demand driven by projected growth in our base commercial business and commercialization of products in the late phases of development in our active project portfolio. In summary, we are very excited about the corporate transition that we announced today and the excellent position of our business within a robust CDMO industry supported by powerful fundamental tailwinds. Our expertise in complex and viscous materials and our world-class quality management system that supports drugs, biologics, medical devices and combination products enables us to stand out as a value-added and specialized leader in the CDMO industry. We continue to feel confident about delivering a multi-year acceleration in our revenue growth trajectory, which is supported by known projects within our existing project portfolio and will be further enhanced by new opportunities with prospective projects in our development pipeline. Now, I would like to turn the call to John for his financial review. Thank you, Jim.