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spk00: Welcome to the third quarter 2020 Financial Results and Business Update conference call for YIELD 10 Bioscience. During the call, participants will be in 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 call is being recorded. I would now like to turn the conference call over to your host, YIELD 10 Vice President of Planning and Corporate Communications, Lynn Brum.
spk02: Thank you, Jesse, and good afternoon, everyone. Welcome to the YIELD 10 Bioscience third quarter conference call. Joining me on the call today are President and CEO, Dr. Oliver Peoples, Vice President of Research and Chief Science Officer, Dr. Christy Snell, and Chief Accounting Officer, Chuck Hazzor. Earlier this afternoon, YIELD 10 issued our third quarter 2020 financial results press release. We also issued a press release announcing our collaboration with Rothamsted Research on omega-3 oils. These press releases, as well as slides that accompany today's presentation, are available on the investor relations events section of our website at EL10bio.com. Let's now turn to slide two. Please note, 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 cautioned that statements that 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 results to differ materially from those anticipated. These risks include risks and uncertainties detailed in Yield 10's filings with the SEC, including the company's most recent 10-K. 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 Ali.
spk06: Thanks, Lynn. Good afternoon, everyone, and thanks for joining our call. Today, we will provide an update on the strong progress we have made toward achieving our 2020 R&D and business objectives, including our collaboration with Rothenstead Research for Technology enabling production of DHA, EPA, omega-3 oils for use in agriculture. Christy will then highlight our recent R&D activities. I'll then review the financials and summarize our key milestones for 2020 and beyond. We will then open the call to questions from analysts. Now let's turn to slide three, our business profile. U10 is an agricultural bioscience company focused on developing innovations for sustainable food security. We bring a new approach to trade discovery, Our platform, the Trait Factory, leverages 30 years of investment and innovation in advanced synthetic biology to enable efficient identification and validation of genetic changes referred to as traits to increase performance and productivity of crops. We have four world leaders in major crops developing their traits and their seeds and at their cost and risk under research license agreements. Our Carolina oilseed program is not only core to our trait gene discovery process, but a crop with high potential in its own right. We are developing commercial camelina varieties as a platform crop for our specialty products business focused on nutritional oils and PHA biomaterials. We also continue to increase our patent position. We have a strong leadership team and have operations in Woburn, Massachusetts and Saskatoon, Canada. Now let's turn to slide four, our market opportunity. We see a compelling market opportunity for our business based on our focus on crop traits driven by four key global trends. These are global food security, with increasing overall demand and the rise in protein consumption, health and wellness, where consumers are seeking improved nutritional profiles, aquaculture as an increasingly important source of protein and essential omega-3 oils, and sustainable growth metrics, where value chain security and climate change impact are key, and which we believe can be monetized with cost-competitive products. Each of these trends are addressed by Yield 10 to position the company for growth and success. Now let's turn to slide five, our recent accomplishments. We've made considerable progress since our call in August. We strengthened our balance sheet with the raise of $5.7 million in gross proceeds in a public offering and concurrent private placement of common stock. We completed harvest of all sites in our 2020 field testing program. We are progressing our traits in corn and canola, building a package of data as a basis to seek research license partners for each. We also took additional steps to advance the camelina business plan. We completed harvest of 50 acres of wild-taught camelina in Montana. We began a field test of our winter camelina varieties in the US and Canada for the 2020-2021 winter season. And we signed a collaboration agreement with Rothamsted Research for the development of DHA and EPA omega-3 oil technology in camelina. Now let's turn to slide six for more detail on Rothamsted. Rothenstead is a world-leading nonprofit and is the premier longest-running agricultural research institute in the world. They are based in the UK, and they have made numerous contributions to modern agriculture. They're also home to a world-leading late-stage research program for producing omega-3 oils containing the fatty acids DHA and EPA sustainably in Camelina sativa, research championed by Professor Jonathan Napier. We have signed an exclusive research collaboration and a two-year option to a commercial license to this important technology. The collaboration will support ongoing research at Rothenstead. Yield 10 will continue to focus on development of elite camelida germplasm as a foundation for future potential oligotrie oils and PHA biomaterial commercial lines. We anticipate their work will include the continued improvement of oligotrie oil composition, field testing, and feeding studies in salmon. The key objective is to support Rothamsted's research as they continue to advance the DHA EPA omega-3 trait, optimized as a drop-in replacement for suburban hemisphere fish oil. This is a competitive space, so it's no surprise that the pattern of landscape and fish oil replacements from oilseeds is complex in North America. Going forward, we will provide more details on the competitive landscape, even as we reach out to other parties in the space. In our communications going forward, we will provide more detail on the competitive landscape. Rothenstead recently published a review of the growing need and potential of this opportunity. In the near term, we will focus our business developments in South America. The DHEA and EPA Omega-3 technology developed at Rothenstead based on advanced metabolic engineering and synthetic biology matches our R&D expertise and our Camelina business plan. I'm going to look forward to having a productive and successful collaboration and bringing forward land-based sustainable production of DHA, EPA, omega-3 oils for use in agriculture. Now let's turn to slide seven, and the market opportunities for DHA, EPA, omega-3s in farmed salmon. The Rotherstad technology could play a significant role in salmon farming as a sustainable source of DHA, EPA, omega-3 oil. The chart on the left shows the growth of harvest-free salmon over the last decade. In the most recent years, farmed salmon represents about two-thirds of the harvest, Overall, salmon represents about 2% of global protein consumption, and it's a key source of DHA, EPA, omega-3s, and essential human nutrients. Salmon production and consumption is poised to grow considerably in years to come. One reason for this, as you can see in the chart on the right, salmon has good feed conversion efficiency, that is, pounds of feed needed to produce a pound of meat. This will be a key driver as the need for protein sources rises with increasing global demand. Another driver is that the industry has acknowledged that harvesting small fish in the ocean as a source of fish oil omega-3s is unsustainable, and overfishing is already a problem. Therefore, developing land-based, plant-based sources of DHA, EPA, omega-3s is a critical need, and camelina is very well suited as a platform crop for the production of this oil. One of our near-term market opportunities for camelina oil, based on the high level of the omega-3 fatty acid ALA, is as a supplement for fish oil and aquafeed. YOTEN is developing this as a basis for establishing commercial operations, basically phase one for building our Camelina business, and a useful interim solution with a drop in replacement fish oil being phase two. Now let's turn to slide eight, a timeline of the Rothamsted Omega-3 program. Over the last several years, the Rothamsted team has advanced the DEHEA EPA Omega-3 program to a high technology readiness level. From 2017 to 2019, based on genetic work started in 2012, the team field tested numerous events deployed in Camelina in good-sized pilot trials and demonstrated production of DHA and EPA omega-3s in the seed oil. Further, the team tested the oil in several feeding studies, including salmon, sea bass, and trout, to demonstrate that the metabolism of plant-produced oil product closely mimics harvested fish oil. This work was conducted and, in some cases, published with academic collaborators having links to the agriculture industry. In 2020, Rothenstead conducted additional field tests of DHA, EPA, Omega-3, Camelina wine, which have been harvested and data is currently being evaluated. The team plan to conduct feeding trials on salmon and trout this year, but the start of the studies has been postponed due to COVID. This foundational work has positioned the program in the late stage of research, and the activities planned under the collaboration with yield time are intended to position it for commercial development. Here, the objective will be to further optimize the omega-3 oil composition to achieve DHA, EPA, fatty acid levels to mimic southern hemisphere fish oil for future commercialization, including obtaining regulatory approval for the plant and the plant product. Now, let's turn to slide nine on the sequential launch of the Catalina products business. The DHA EPA Omega-3 technology fits neatly into our camelina business plan. We're developing camelina as a platform crop, developing advanced camelina traits, and elite camelina germplasm. The general business is focused on natural camelina oil for a range of uses, edible oil, agriculture, and animal feed. The DHA EPA Omega-3 technology opens up the market opportunity for a sustainable, highly differentiated product for growers and feed producers. We are leveraging all of this technology as we work on technology development for producing PHA, bio-materials, and cavalier. Taken together, we see a progression of the technology with the market opportunities. Now let's turn to slide 10, trade progression in major crops. The best way for Yield10 to capture value from our trades in the large acre of commercial crops like soybean, corn, and canola is through licensing to leading seed companies who dominate the space. YIELD-10 has executed four non-exclusive research license agreements with ag majors to progress their trade to specific crops, with the option to negotiate a commercial license. The arrows in this slide indicate the term of the research license agreement. We highlighted the new license of GDM in our August call. The work is underway to deploy our trade to NIRN germplasm, and ongoing work is progressing by Bayer, Forrest, Genetics, and Simplot. We are currently progressing key trades in corn and canola, But we plan to identify partners for these important North American commercial crops as we focus our internal resources in trait discovery and camelida development. I'll now turn the call over to Christy.
spk01: Thanks, Olly. Hello, everyone. The research team has been focused on execution of field tests and on trait discovery and development over the last several months. In addition, we are excited about the collaboration with Professor Jonathan Napier and his team as it represents a strategic extension of our technology platform into DHA and EPA omega-3 oils. Their research program is impressive, and I am looking forward to further progress and success in the months ahead. Let's now turn to slide 11. Throughout 2020, we have made steady progress toward achieving milestones in our R&D programs. We completed harvesting for our 2020 field test programs at sites in the U.S. and Canada in the third quarter. These trials are evaluating several novel seed yield and oil traits in camelina and canola. Data analysis is currently underway, and we plan to begin reporting data in the fourth quarter or early 2021. We are evaluating seed yield, seed oil content, PHA content, and agronomics, depending on the trait, which will provide us with important data and inform our R&D priorities for 2021. We continue to evaluate and progress other earlier stage traits in our camelina pipeline, and we have intensified efforts in 2020 to develop advanced commercial camelina varieties, those optimized for yield, oil content, herbicide tolerance, and disease resistance. This work will produce camelina platform varieties for production of nutritional oils, including the DHA and EPA omega-3 oil and PHA traits. We will also work on the development of commercial PHA camelina events. Throughout 2020, we have continued to advance our yield and or oil traits in canola and corn, where our plan is to identify partners for research licenses. In the major commercial crops, we are supporting partners in their ongoing evaluation of our traits. This includes GDM, who has begun working with our traits after signing a research license in August, as well as Bayer, Simplot, and Forage Genetics. I would like to thank our team for staying focused on our objectives for 2020 and positioning us to generate a range of data and proof points in the coming months to further develop our Camelina technology for specialty products. Ali, back to you.
spk06: Thanks, Christy. Please turn to slide 12 and let's cover a few financial highlights. We ended the third quarter with $11.8 million in cash, cash equivalents, and short-term investments. This includes net proceeds of $5.3 million we received from completing offerings of common stock in August. We have no debt in our balance sheet. Our net operating cash usage is $2.1 million for the third quarter and $6.3 million for the first nine months of 2020. We expect our cash on hand together with the expected revenue from our current government grant will support our operations into the end of 2021. Based on our financial results here today, we remain on track with our estimate of net operating cash usage for the full year 2020 within the range of 8.5 to 9 million. We are directing this investment towards executing our business plan. Let's now review the third quarter operating results. The company reported a net loss of 2.2 million for the third quarter of 2020. compared to a net loss of $2 million in the third quarter of 2019. Total research grant revenues in the third quarter of 2020 were $204,000 versus $224,000 in the third quarter of 2019. Our ability to conduct research under the DOE grant was not affected in a significant way in the third quarter and we expect to be able to conduct the research as planned in the months ahead. In the third quarter of 2020, research and development expenses were $1.3 million and general admin expenses were $1.1 million. This compares to 1.2 million in research and development expenses and 1 million in general added admin expenses in the third quarter of 2019. For more details on our financial results, please refer to the earnings release under third quarter 10Q. Let's now turn to slide 13, upcoming milestones. In 2020, we will continue to focus on the following milestones. Completing our 2020 field testing program to generate agronomic and yield data for C3004 in California. Advanced genome-edited oil-boosting traits, including our E3902 line and our C3007 Camelina lines, cleared by USD APHIS. Report results from the study staff in the Q4 2020, Q1 2021, and communicating our field test plans for 2021. Progressing the Camelina products business plan. Here we'll be talking about developing advanced commercial Camelina varieties with agronomic traits, including pesticide tolerance, disease resistance, and oil and yield traits. Developing the commercial launch plan for Camelunga oils, establishing agreements for logistics and total seed crushing to provide samples of Camelunga oil and meal to prospective commercial uptake partners. Developing relationships with growers to enable larger seed bulk up and acreage expansion in the 2021 growing season, pending success in business development. Securing strategic industry collaborations and revenue generating commercial crate licenses. Progressing updates in corn and canola oil, seeking to secure partners, and supporting BRGDL for genetics and Simplot in the evaluation of traits in the respective crops, and underpinning all of this expanding our intellectual property portfolio. With that, I'd like to turn the call back over to Lynn for a few questions.
spk02: Thanks, Ollie. Jessie, you can now poll our analysts for questions.
spk00: Great. Ladies and gentlemen, if you would like to ask a question at this time, please press star 1 on your telephone keypad. The confirmation chart will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Samir Joshi with HC Wainwright. Please proceed with your question.
spk05: Thanks. Thanks for taking my question. The first question is about the relationship what exactly would you be working on? Is it increasing the yield or oil content or any other characteristics? And then what is the endpoint? Are you measuring the oil content of the fish that feeds off this? Or are there further clinical studies in humans that will be the endpoint? Thanks, Samir.
spk02: Thanks for your question. I'll turn that over to Ali.
spk06: Hi, Samir. Good to talk to you, Samir. In reality, Rothamsted has already progressed this very extensively. They've not only demonstrated the production of omega-3 oils with good levels of EPA and DHA in camelina, they've actually carried out field trials, they've carried out recovery processes to purify the oil, and they've done extensive fish feeding trials. at a number of locations. So what they're really going to do and focus on is really optimizing the trait. That's a program that's been going on for several years under Jonathan Napier's stewardship. And obviously, they are the world experts in omega-3 oil production and oilseeds. So we're delighted to have the collaboration. In regard to what Yield 10 is doing, in addition to supporting the Rothamsted Research Program financially, We have an exclusive option to an exclusive license to the technology at our choice. And more importantly, we are developing advanced lines of Camelina, increasingly looking at herbicide tolerance, disease resistance. And obviously, you're well aware of the oil traits we already have. And given that the Omega-3 oil business, the EPA, the DHA EPA oils business, is really about the value of the oil from the seed, obviously increasing seed oil content is a key financial driver as is increasing overall CGO. So we're really continuing to do the work we were doing anyway. It's just that, as Rothen said, further enhances the DHA EPA oil trade. We are building a platform in which we'll be able to deploy that in the future. The second thing Yield 10 is doing is really looking very extensively at near-term commercialization based on potential opportunities in South America. We still have a fair amount of diligence to do in that location, But we are well aware that Chile is about 30% of global salmon production. So obviously there's a market in South America for these types of products. And a strong diver towards using more sustainable feed in agriculture in general. So we're very pleased with this relationship, very excited about it. The synthetic biology program that Jonathan has actually carried out over the last decade is remarkable and it's been very successful. So we're delighted to be involved with them and have the option to secure exclusive rights to this.
spk05: And so is there any kind of monetary commitment for this program or is it going to be off of your regular R&D budget?
spk06: It's actually included in our projections. It's actually included in our projections for costs, you know, our sort of estimated gas fees for next year. We haven't given clear guidance on that, but we don't see, you know, building the overall burn rate. We are allocating resources to this in a very judicious way.
spk05: Understood. And then moving on to partnerships, I mean, you have the partnerships with Bayer and TDM forage. and Simplot, are there any other licensing collaborations to be expected in the remainder of this year? And are there other trades that these companies, that you are working with these same companies?
spk06: Well, so yes. In fact, in the GDM situation, we haven't disclosed what trades are working. That's at their request. But in addition to the fact that we are looking for potential partners with canola and corn for our trade, we really have been looking pretty extensively at potential downstream partners in the Camelina business. There's obviously a growing demand for increasing vegetable oil per acre of land in North America to supply these. I would say the emerging interest in what they call renewable diesel, primarily for the California market. It's not something that we are pursuing ourselves, but certainly we see opportunities in terms of the products that we intend to make for potential agreements. When you move into the PHA biomaterials, which we didn't talk very much about today, that program is moving right ahead. Obviously, producing PHA biomaterials will enable us to address several markets, including water treatment applications, feed applications, and bioplastics applications, which has enormous potential. Hopefully later this year, we'll actually report the data we have generated from this year's field trials with the PHA biomaterials. But again, when you look at the potential number of partners in those areas, it's a multiple of what's possible when you talk about traits just for the major crops.
spk05: Understood. You referred to the 2020 field test data. Is there any preliminary data, high-level information that you could share at this time, or should we just wait for you to tabulate and publish?
spk06: I think it's too early. Yeah, it's too early to provide any kind of guidance on that, Samir. I think, obviously, we'll just wait until we've got all the data, and then we can provide a very clear picture as to where we're at.
spk05: Okay. One last one. On cash usage of $8.5 to $9 million, Does that include any one-time cash usage that you may have incurred, for example, for the capital raise or some other activity?
spk06: Yeah, that's basically the total all-in. I think that's where we are. So I think with respect to where we are, that cash usage is pretty much on the money with respect to what we expect to spend this year. It's down a little from last year, but that's actually related to some savings related to essentially a real estate situation where we were able to take advantage of a sub-lease to reduce our costs and some other minor savings. But generally speaking, we've kept the full R&D program ongoing all through the COVID situation. So we've continued to spend as we planned on the R&D programs, but we have saved some cash on real estate-related issues.
spk05: Thanks a lot, Ali.
spk00: You're welcome. Thank you. Our next question comes from the line of Robert LaVoyer with Leidenberg-Solomon. Pleased to speak with your question.
spk04: Hi. I had a question about the Rothamsted agreement. And if I'm understanding this, it sounds as if they've been doing this work with Omega-3s in Camelina, and you have licensed some of your technology that they will use going forward, and you will have the option to take a license to commercialize this. Am I right so far?
spk06: Robert, no, not quite. So let me just be quite clear about this. What we've done is we've agreed to fund, to financially support the ongoing research program, which as you pointed out, has been ongoing at Rothenstead now for a number of years. In exchange for that financial support that we're providing to the research program that they're guiding and developing on their own, we get an exclusive option to an exclusive license to the technology. Obviously, that's why we did it. And so, you know, really what they're doing is continuing the program that we had ongoing that Yield 10 has stepped in to support the financial. And what we get is a tremendous opportunity or a camelina platform.
spk04: So you would be using their discoveries in your camelina? Correct.
spk06: It would ultimately be the same as, for example, we have an exclusive license to the C3007 trade from the University of Missouri, which we obviously have achieved approval from USDA for both genome-edited camelina and genome-edited canola lines this last year. Similarly, we would have an exclusive license to be the commercial partner for Rothamsted's Omega-3 oil technology.
spk04: Okay, so just the same way that you had licensed traits in from universities before, here you're licensing the Omega-3 from Rothamsted.
spk06: I think the difference is in regards... The technology from Roth instead, it's obviously at a pretty advanced level in that they've already developed an omega-3 oil trait and they're working on further improvements to it. Obviously, their belief is that they can ultimately get to what would be the gold standard of the industry, which is a drop in land-based sustainable replacement for the southern hemisphere fish oil. And the reason it's the gold standard is because the levels of EPA and DHA in the southern hemisphere, which comes from, I guess, from sardines and poachers and things, is that it's the highest that you can actually obtain from nature. So, you know, that would be a tremendous position to have. And in our view, based on the papers we've read and the other research we've done, it's pretty clear they have the best answer to this so far.
spk04: Okay, and it sounds as if the end product is going to be producing omega-3 in camelina. Correct.
spk06: It'll be basically... Yeah, essentially what it will be is it'll be the second of our oil, you know, the nutritional oil product. The first nutritional oil is camelina oil as it is today. And there the markets are human nutrition products But also it's useful as a supplement in aquaculture feed because it contains one omega-3 fatty acid called ALA, apolinolenic, and that can be converted by some species into small amounts of EPA and DHA. So it's a better solution than feeding them soybean oil, for example, but it's not really the solution that's required, which is the omega-3. plant-based oil that's high in both EPA and DHA fatty acids at similar levels to some of MSU fish oil.
spk04: Oh, I see. So this would be feed for aquaculture, but not actually changing the salmon themselves or the fish being raised in aquaculture. This is just... You're making a plant that will be either used to extract the oil for humans or fed to the fish.
spk06: Correct. Exactly, exactly. So this would be a nutritional oil product. It's just going into pomali, into agricultural feed juices. But inevitably, I believe it will end up also being used in chicken and other feed systems.
spk04: Okay. And in the previous question, you mentioned that there are no signing fees. Is that right? And it would just be part of your normal research budget?
spk06: At this stage, it's just part of our normal research. If we execute a commercial license in the future, then we would be entering a fairly typical commercial license eventually. Okay.
spk04: On the topic of commercial licenses, is there anything foreseeable in the coming year?
spk06: I think the guidance we've provided in that is sort of late 21 to 22 in the event that any of our potential partners, Bayer, GDM, Simplot, or Forage Genetics, you know, really see value in the traits of their testing.
spk04: Okay, great. Thank you very much. You're very welcome.
spk00: Thank you. Our next question comes from the line of Nat Bullock with Maxim Group. Pleased to see with your question.
spk03: Hi, this is Matt Bullock on Fransity Vendetti. Thanks for taking my question. My question relates to the report data for the camelina and canola that you're planning on reporting in the fourth quarter or early 21. What do you feel are some of the most important aspects of this data readout and if the results are positive, what are the next steps and what could those results mean?
spk06: Yeah, so obviously the work is primarily focused on camelina. It's primarily focused on camelina for oil content using genome-edited traits, C3007 and E3902. We're also testing for the first time, or rather the second time, the C3004 trait, the current version of it, which would actually be a regulated trait under the GMO regs. So that's what we're testing, and what we're looking for is how well did the plants grow in the field, Do we see things that are indicative of increased performance? But ultimately, it comes down to with oil trades. Do we see higher oil per acre? And in the field, obviously, do we see higher CGO per acre?
spk03: Okay, thanks. That's very helpful. I'll hop back in the queue.
spk00: Thank you. It appears we have no additional questions at this time, so I'd like to pass the floor back over to Lynn for any additional closings.
spk02: Thanks, Jesse. And I'll turn the call back to Ollie for a closing remark.
spk06: Okay. So, you know, we've made strong measure of progress across several crucial areas this year, most recently signing a research license with GDM for soybean, signing a collaboration with Rockensted, advancing a pipeline of traits and strengthening our balance sheet. In addition, over the course of 2020, the outlines of our business plan for CanMolina have come together. We believe the grain platform can be used to address a wide range of traits in a broad array of food and feed crops, and enable the development of advanced camelina varieties for large-scale production of proprietary specialty products. We are currently pursuing three distinct revenue opportunities, licensing of our yield and performance traits for use in major crops, product sales based on our camelina platform for producing nutritional oils and PHA bio-materials, and strategic industry collaborations in R&D revenues. I'd like to personally thank all of you for joining us on the call tonight, and especially our shareholders for your continued support. And I want to thank everyone at Yield 10 for setting us on track to reach our goals in 2020. Have a nice evening.
spk00: Ladies and gentlemen, you may now disconnect.
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