Yield10 Bioscience, Inc.

Welcome to the first quarter 2021 financial results and business update conference call for Yield 10 Bioscience. During the call, participants will be in a listen-only mode. The presenters will address questions from analysts today. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference 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.

Thank you, Paul, and good afternoon, everyone. Welcome to the YIELD 10 Bioscience First Quarter 2021 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 Hazzard. Earlier this afternoon, YIELD 10 issued our First Quarter 2021 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 yelpennbio.com. Let's turn to slide two. Please note that as part of our discussion today, management will be making forward-looking statements. These statements are not guarantees of future performance, and therefore you should not place undue reliance on them. Investors are also cautioned that statements 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 certainties detailed in YieldTen'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. Now I turn the call over to Ali.

Thanks, Lynn. Good afternoon, everyone, and thanks for joining our call. Since the start of 2021, we have made strong progress advancing YieldTen's business. Today I'll provide an update on how our business plans are progressing. Christy will highlight our recent R&D accomplishments, after which I'll review the first quarter financials and summarize our key milestones for 2021 and beyond. Then we will open the call for questions. Let's turn to slide three. I will focus here on several key accomplishments that set us on the path to crystallize our strategic vision for Yield 10, utilizing camelina as a platform crop to produce fuel, food, and PHA bioplastic. Earlier this year, we reported achieving a key proof of concept milestone for producing PHA bioplastic in field-grown camelina. We are scaling up the two best PHA camelina lines with up to 6% PHA by seed weight in our 2021 field test program. We plan to use seed from this for larger scale planting in 2022 and initial PHA product prototyping. We engaged a leading US seed company to perform seed scale-up of our CRISPR-edited E3902 oil content line, spring double haploid line, and a disease-resistant elite camelina line. This cycle of seed scale-up was enabled by plantings we conducted in California over this past winter. With permitting substantially complete, we've begun planting for spring 2021 field tire program in the U.S. and Canada. In January, the first U.S. patent was granted to Rothamsted Research for co-producing DHA plus EPA omega-3 oil in Camelina. In April, USDA has confirmed that our new CRISPR-edited C3007 Camelina lines are exempt from regulation under 7 CFR Part 340 under the SECURE rule, a new crop regulatory framework in the U.S., In the first quarter, a U.S. patent was granted to the University of Missouri, covering modifications to C3007 genes to increase olive content and oilseed crops. We have an exclusive license to this technology. We also strengthened the balance sheet in early 2021, which we anticipate will support the achievement of value-building milestones into 2023. Let's start with slide four. This slide illustrates how we are translating science innovation to revenue growth. Using our technology platform, the Trade Factory, we've discovered and evaluated multiple genes for increasing crop seed yield, seed oil content, and for making new oil seed products. As a result, we now have 21 patent families in prosecution and two new recently issued U.S. patents. Our technology success enables two distinct revenue opportunities, improved camelina varieties for our camelina products business and trade licensing to major seed companies for use in other crops. Let's turn to slide five. Let me share with you why we're excited about the oil set Camelina and our product targets. Camelina seed has a good oil and protein composition and has been used for human food production for over 100 years. This crop can be used as a rotation crop in the northwest of Canada, and its fast 90 to 100 day growth cycle makes it attractive as a relay or cover crop in the Midwest for double cropping with corn and soybeans, another way to increase farm revenues vegetable oil, and food production. With our ability to accelerate its development by genetically reprogramming the seed to improve its field performance and produce higher value products, we believe there is tremendous upside for camelina as a major crop. Let's start to slide six. We plan the sequential launch of products from our camelina platform, each enabling increased farm and product revenue per acre, which we expect to drive farmer adoption. We estimate that our two differentiated proprietary products, Omega-3 oils and PHA bioplastics, have the potential to drive 2030 annual revenue product potential of up to $4.2 billion. However, in order to get there, we plan to establish the operating foundation of the business, starting with Elite Camelina, followed by the higher value Omega-3 Camelina to drive revenue, margins, and cash flow. Today, we will focus on these two activities. In parallel, we will continue the development work of the commercial PHA Camelina lines. Our internal projections indicate that we should then be able to commercialize the PHA Camelina based on cash flow from the business. For elite Camelina used to produce oil and meal, we see the potential for $300 to $500 in product revenue per acre as yields and oil content are improved, and a market in the hundreds of millions by 2030. We expect the markets for oil and meal will be supplied in the future using co-products from PHA camelina based on its higher overall value. For omega-3 camelina, based on the higher value for aquaculture and nutraceutical markets, we see a potential for doubling the product value per acre to about $600 to $900. This is a high-value opportunity requiring a limited acreage. We estimate 300,000 to 700,000 acres of omega-3 camulina production would enable revenue in the range of 180 to 630 million, a strong foundation for yield-tenance growth. For PHA bioplastic, we would aim to produce a higher-value product mix of PHA bioplastics, oil, and meal. Given the magnitude of the plastics replacement opportunity, success with this product is expected to drive tens of millions of acres of adoption. And we projected by 2030, we could have two to four million acres with revenue potential up to $3.6 billion. Let's start to slide seven. Here, our strategic goal is to establish the Cameluna products business operations and develop elite varieties for the future deployment of the omega-3 and PHA traits. This effort will require us to make new hires in the areas of seed operations, regulatory affairs, and business development. We are executing multi-acre seed scale-up of the E3902, DH12, and disease-resistant lines, as well as engaging contractors with seed scale-up planned for the fall-winter 2021 season for planting in 2022. For guidance purposes, each acre of seed produced for planting can enable the planting of 100 to 250 acres of camelina for production. In business development, we are reaching out to growers, crushers, and oil and meal end-users These include renewable diesel companies, as well as salmon feed and farming players in North and South America. Renewable diesel may provide some tailwinds for this activity. Let's turn to slide eight. Low carbon fuel standards are driving an emerging opportunity for the use of oil from elite camelina in the renewable fuel space. Let me be clear, we will not be buying or subsidizing acres on behalf of energy companies, and we'll look to secure offtake agreements prior to moving to larger acreage production. According to a recent report in Biodiesel Magazine, there may be as much as 5.5 billion gallons of new or potential capacity in the U.S., which would translate to approximately 45 billion pounds of vegetable oil feedstock demand. It's worth noting the oil company names and the list of participants in this activity. These may be potential partners for Yuletan. This new demand will face headwinds from the food, beef, fuel debate as a disconnect between U.S. vegetable oil supply and demand grows. And this is where we may be able to take advantage of the short growth cycle of camelina and its potential for double cropping with soybean. The oil from soybean plus the oil from camelina in the same 12-month period could bring oil production per acre above 1,100 pounds per acre, more than double the oil from soybean alone. Co-products from soybean and camelina seed crushing are protein meal for feed and food. It's early days for yield 10 in this space and we plan to provide updates as we make progress. Let's turn to slide nine. Omega-3 camelina opportunity is the first and furthest along of our two high-value sustainable products. The omega-3 fatty acids, EP and DHE, are essential in human diets for development, health, and wellness, and come primarily from fish. Farmed salmon, an excellent source of omega-3s, is currently growing at 7% per year and accounts for over 75% of salmon consumed. Aquaculture feed currently relies on a dwindling supply of omega-3 fish oil produced from ocean-harvested fish. New new to surrogate markets for omega-3s are adding pressure for this scarce resource, creating a fish oil supply-demand disconnect. We believe we can serve this market based on the agreement with the Rothamsted Institute for the EPA plus DHA omega-3 chemoline oil technology signed late last year. Our longer-term vision is to establish Camelina as the gold standard sustainable vegan aqua feed source for farm salmon production, including essential EPA, DHA, omega-3 oils, high-quality protein, and other feed ingredients. Let's turn to slide 10. We are positioning this technology to enable revenue and margin growth between the launch of our LEET and PHA Camelina lines. This technology is at a high resident readiness level and provides a significant market opportunity to bring a land-based drop-in replacement for fish oil to the aquaculture market with additional potential in nutraceuticals. The technology developed by Rothamsted with 20% EPA plus DHA fatty acid in oil already exceeds the profile of Northern Hemisphere fish oil. Professor Napier and his collaborators have conducted multiple years of field trials and fish feeding studies. Furthermore, clinical studies with the Camelina EPA DHA oil have shown it to be equivalent to fish oil from the human diet, and oddly enough, without the fishy taste, which opens up additional opportunities in nutraceuticals with a very low cost basis. Let's turn to slide 11. We've been focused on developing the commercialization strategy for omega-3 oil in South America for the salmon feed market in Chile. Outreach to prospective value chain partners and end users is underway in both Argentina and Chile, and we are charting a regulatory path forward to enable the commercialization of oil and meal. The Rothamsted team also continues to make progress. A U.S. patent was granted to Rothamsted earlier this year covering the coal production of DHA and EPA in Camelina. The Rothamsted team plans to further scale off of the LEAP omega-3 Camelina line in 2021. And later this week, Professor Napier is presenting a paper at the American Oil Chemist's annual meeting, providing an overview of the development of omega-3 technology. In addition, one of his collaborators is presenting a poster on the human studies. We look forward to keeping you posted as we progress along the path toward commercialization of this exciting technology. Let's turn to slide 12. We currently have four non-exclusive research license agreements in place with ag majors, each evaluating our traits and our target crop. with the option to negotiate a commercial license. The arrows in the slide indicate the term of the research license agreements. In reviewing our priorities for 2021, we decided to defer further internal trade development work in corn and plan to seek partners for development of performance traits in these crops. Related to the grain platform, we are seeing higher interest from the ag sector in new crop traits. This may be driven in part by higher commodity prices and their unique technology approach. We also believe there's a growing recognition that although CRISPR genome editing and the improved regulatory environment are very positive drivers for ag biotech, the major challenge remains the efficient identification of high-value gene traits. I will now turn the call over to Christy.