Calyxt, Inc. (CLXT) on Q3 2021 Results - Earnings Call Transcript
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Calyxt Third Quarter 2021 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 opened for questions. This conference is being recorded today, November 4, 2021. At this time, I would like to turn the conference over to Bill Koschak, Calyxt’s Chief Financial Officer. Please go ahead, sir.
Bill Koschak: Thank you and good afternoon. This is Bill Koschak, the Chief Financial Officer of Calyxt. I would like to thank you all for taking the time to join us for Calyxt’s third quarter 2021 earnings results conference call and webcast. Presenting with me today is Michael A. Carr, our President and Chief Executive Officer. Dr. Travis Frey, our Chief Technology Officer will be joining Michael and I for a Q&A after our prepared remarks. Press release detailing these results crossed the wire after today’s market close, and is available on the 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 gross profit, adjusted gross profit percentage and adjusted EBITDA, all are non-GAAP financial measures. In Calyxt’s press release and its filings with the SEC, each of which is posted on the company’s website at Calyxt.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. Finally, this conference call is being webcast. The webcast link is available in the Investor Relations section of Calyxt.com. At this time, I’d like to turn the call over to Michael for his opening remarks. Michael?
Michael Carr: Thank you, Bill. And thank you for joining us on our call today. I’m pleased to report important progress in my first 3 months with Calyxt. I know many of you participated in our business update call last month. On that call, we announced our strategic initiative to expand our business offerings to provide innovative high-value and sustainably produced plant-based solutions to a wider group of end markets and a diversified base of customers. By virtue of these new offerings, we by definition, are a plant-based synthetic biology company. This initiative marks a significant new opportunity for the company, predicated on customer-demand-driven needs and the integration of our proprietary PlantSpring Technology Platform, coupled with our BioFactory production system. You may recall PlantSpring is built on our company’s experience of more than a decade of engineering plant metabolism, our proprietary systems, our tools and technologies, our deep portfolio of intellectual property and an expanding set of artificial intelligence and machine learning or AIML capabilities. This licensable platform delivers innovation through an efficient process from laboratory to pilot, enabling Calyxt to take a customer’s plant-based chemistry need through our design, engineering and verification development process. Then also complete pilot-level production within an expected 36-month period. In many cases, Calyxt expects to work with our customers through this 36-month timeframe to concurrently develop regulatory submissions in an effort to expedite any necessary clearances for their end-products. These PlantSpring derived compounds are then produced through our proprietary BioFactory, a synthetic biology, bioreactor production system. The BioFactory production system harnesses the potential of plant cells in a multicellular matrix structure, combined with nutrient media for its production, and leverages multiple cell types without the use of fermentation. These multicellular matrix structures enable the processing the plant-based chemistries of increased complexity, relative to those possible using traditional fermentation systems or single cell plant culture methods. In addition, the speed of multicellular matrix growth over time is expected to accelerate the production of a compound at scale. Together, PlantSpring and the BioFactory enable Calyxt to help our customers produce consumer and industrial products, incorporating plant-based chemistries to meet their corporate sustainability targets and financial goals. Our process, which I’ll be speaking to in more detail shortly, is capable of unlocking the power of plants to produce complex plant-based chemistries that are finite, difficult to source sustainably, and that may not be able to be produced using other production methods. These are all important points of differentiation as we market our offerings to a broad base of target customers. In these highly productive past few months, we also announced a research collaboration with a leading global food ingredient manufacturer based in Asia. This collaboration is to develop an improved soybean capable of producing an oil, a sustainable commercial alternative to palm oil. As part of this research collaboration, Calyxt expects to receive cash payments in each of the two years of its term. And as of today, the initial payment has been made and the development work has begun. This collaboration agreement also includes a commercial option for the global food ingredient manufacturer. I’m also pleased to report that we have nearly completed the sale of our inventory of 2020 grain to ADM. As of today, we have fully paid all growers. Their grain has all been delivered to Calyxt. We are down to the last several trucks that are in transit to ADM. This series of transactions, which began in the third quarter of 2020 has generated $35.7 million in total cash proceeds. And as a result, we are on track to complete this activity as soon as the end of the month, when we receive final payment from ADM. We ended the third quarter with cash and cash equivalents and restricted cash of $14.9 million. Bill will provide a financial update later on this call. We also recently appointed Dr. Seth Dobrin, IBM’s Chief Global AI Officer to our Scientific Advisory Board. Seth is a visionary whose deep experience bringing AI-based business solutions to major global corporations will be invaluable as we refine our AIML data strategy and initiatives. This includes the continued development and augmentation of our team’s skillsets and our capabilities to improve the efficiency and scalability of our offerings. Calyxt has a unique opportunity to revolutionize how the world uses plants. Our focus is on innovating, where the consumption of finite resources and the sustainability of our planet intersect. The global economy today is not sustainable, evidenced by metrics such as carbon pollution, water scarcity and soil erosion. Increasingly, shareholders and their stakeholders demand that companies produce products differently and in a sustainable manner. And plant-based chemistries represent a differentiated and more sustainable alternative to many products and materials in use today. More than 20% of the world’s 2,000 largest public companies have committed to be carbon neutral. We believe that in order to achieve their goals, companies across industries will need to incorporate plant-based solutions into their businesses. Furthermore, consumers are demanding that companies across industries including cosmetics, personal care and wellness, food, advanced materials and chemicals produce their products with sustainable and environmentally friendly plant-based chemistries. The Boston Consulting Group recently estimated that nature-derived products such as those developed from plants will affect $30 trillion of the global economy over the next 30 years, driven by sustainability, decarbonization and carbon-neutral goals. This creates a massive opportunity for Calyxt to work with its customers, developing plant-based chemistries to satisfy end-customers’ demands. This powerful trend provides an opportunity for customers and other stakeholders to participate with Calyxt in the development and production of high-quality ingredients and materials that not only span the historical plant-based food and feed chain, but also transcend other industries and segments that increasingly seek to decarbonize and improve their environmental footprint. When we speak of synthetic biology, we are speaking to the design and engineering of biological organisms. Synthetic biology is built on knowledge gained from the last several decades of genomic research, which has led to its core principle that biology is fundamentally programmable, with cells not acting solely as information stores, but also as processors of information. In the same way that computers can be programmed by code, cells can be programmed using natural code, their own DNA. Importantly, synthetic biology can be used to program a cell to make applications that are physical, and plants represent a uniquely qualified platform to be leveraged. We rely on Calyxt’s deep understanding of metabolic pathways provided by plants and leveraging our expertise, and proprietary tools to drive efficiency gains. Calyxt is positioned to be a key driver in the sustainable biologically driven revolution. In a world seeking to evolve to more sustainable solutions, plants are uniquely capable of producing many chemistries that cannot be produced through other means, including microbial fermentation. Calyxt’s estimates are more than 80% of all known natural compounds are being produced by plants. These known natural compounds comprised over 170,000 chemistries today, and we believe plants have the potential to access many of the nearly 1 million estimated chemistries not yet discovered. Plants are uniquely capable of producing these chemistries and in comparison to single cell organisms are a better system for generating them. This is due to the fact that plants are natural producers of so many compounds, and plants do not require a programming a micro dose to produce the same compound. If it is even possible for the microbe to produce the complex chemistries that plants can produce. Calyxt’s scientists are experts at engineering plant metabolism, which includes enabling the plant cells to produce more or less of certain chemistries, or novel chemistries that may be unique to plants. Our scientific team has demonstrated this capability many times over across multiple plant species. This demonstrated expertise creates a unique perspective on the power of plants and how they can be used to shape our future and gives Calyxt’s an expertise advantage over others. Now, I’d like to turn to our PlantSpring technology platform, Calyxt is focusing on deploying PlantSpring to address customer-driven innovation needs, utilizing plants to produce high value products, and materials that may address customer sustainability targets and financial goals. We expect in light of current industry trends such needs will increasingly focus on replacing existing compounds with more sustainable alternatives. We leverage PlantSpring through the development process, enabling the reduction of cycle times and leveraging of knowledge gained when developing the next compound. In the design phase, Calyxt’s uses systems and insights to identify metabolic pathways, target genes controlling these pathways, develop strategies for optimized expression of the target genes and design the technical approach to achieve the targeted compound. In the engineering phase, Calyxt’s directs changes in the plant cells using a combination of tissue culture, gene editing capabilities and transformation. After the target has been designed and engineered, Calyxt’s rapid prototyping system can quickly produce compounds, which can be verified against customer specifications using natural product chemistry metabolomics, genomics and gene expression tools. This system and these analytic tools can quickly ensure the exact plant-based chemistry desired by the customer has been produced in speeds new product development and delivery, all while collecting data and learning, and reapplying these learnings in future product offerings. Calyxt has developed early-stage AIML capabilities in PlantSpring enabling knowledge gained from past activity to be combined with predictive analytics to rapidly prototype and provide feedback. As I mentioned, with the onboarding of Dr. Seth Dobrin to our Scientific Advisory Board, we expect to make continued progress further developing and refining our AIML across all elements of PlantSpring and the BioFactory, which I will address in a moment. These capabilities leverage Calyxt’s deep scientific experience, the vast amounts of data that has accumulated or its history, including the large proprietary database and genomic information across numerous plant species will also integrate publicly available in other data. As a result, Calyxt believes it can develop engineered biomolecules in plants for customers at faster speeds than its competitors in the synthetic biology industry. Fundamentally, the BioFactory production system will enable Calyxt to expand our production methods from outdoor agriculture systems to include controlled environment, bioreactor-based production systems. We consider the BioFactory to be a natural evolution of how PlantSpring is applied. BioFactory harnesses the potential of plant cells in a multicellular matrixed structure and utilizes nutrient media for its production. The BioFactory also leverages multiple cell types, and the multicellular matrix structures enabled controlled replication and processing of compounds with a replication accelerating exponentially over time. The BioFactory is driven by the output from our PlantSpring platform. In combination, the BioFactory and PlantSpring are capable of producing high value compounds for use in a wide range of sectors at greater speed compared to other approaches. We also believe the BioFactory has the potential to be one of the most sustainable production systems across industries, because of its production methodology. It does not use fermentation, and there are fewer of the sustainability challenges associated with other controlled environment production systems, including lower levels of off gases, reduced water demands, and lower energy requirements. The BioFactory is also expected to have limited downtime between production cycles, because it produces these plant-based chemistries year round in a controlled environment bioreactor. The system is protected from many of the adverse climate effects typically associated with agricultural production. And we complete the verify phase of product development for our customers, production in the BioFactory begins. We have been running lab-scale bioreactors for almost 6 months now, we commissioned our first pilot scale bioreactor, and is on track to be online by the end of this calendar year. The initial pilot bioreactor is scalable up to nearly 200 liters. And we expect to further expand the scope of our pilot facilities based on customer demand ramping up to commercial level production using the range of vessel sizes. For our commercial production, our current plan is to use third parties, which we refer to as infrastructure partners for at scale BioFactory production. We have targeted a number of companies, who are prospective infrastructure partners and will begin to advance those discussions after our pilot bioreactor comes online. In this way, we can operate the BioFactory’s to mitigate the risk of achieving production at scale. These are both key elements of our business model and strategy for commercializing the BioFactory. I’d like to take you quickly through a couple of examples that serves as proof-of-concept for our PlantSpring platform and BioFactory working in combination. The first was a plant-derived protein called ovalbumin that is similar to protein and egg whites that can be used in several end markets included as a protein replacement. The second, which is leverage what has learned to produce ovalbumin proof-of-concept, was betanin. Betanin is a natural antioxidant and red colorant, normally produced through pH extraction of field grown beets. Betanin has potential for use in the cosmeceutical, nutraceutical, flavoring, and ingredients end markets and likely others. Commercially available beet-derived betanin is water soluble and degrades quickly under medium to high temperature, ultraviolet light and pH changes limiting its market acceptance. Calyxt’s betanin proof-of-concept can overcome the challenges associated with beet-derived betanin. We may seek our partner to fund further development and commercialize the compound. What is important with these first 2 compounds, both of which are proofs of concept that they were able to move through the PlantSpring design engineer and verify phases of development in a matter of months. This work demonstrates the power of PlantSpring to produce plant-based chemistries at high efficiency and as Calyxt continues to scale. We intend to pursue numerous opportunities among an expanded group of end markets and a diversified base of customers. In summary, Calyxt’s PlantSpring platform and its BioFactory production system are emerging force in plant-based synthetic biology based on their unique combined capabilities, their plant-based foundation, and the speed and cost at which Calyxt intends to bring more sustainable compounds to its end markets. This is a strong new technology that exemplifies the innovation necessary to meet a significant unmet and accelerating need for differentiated and sustainable ingredients and inputs. After the target has been designed and engineered, Calyxt’s rapid prototyping system can quickly produce compounds, which can be verified against customer specifications using natural product chemistry, metabolomics, genomics and gene expression tools. This system and these analytic tools, then quickly ensure the exact plant-based chemistry desired by the customer has been produced and speeds new product development and delivery, all while collecting data and learning and reapplying these learnings in future product offerings. Our good addressable markets for Calyxt’s PlantSpring platform and BioFactory production system are valuable and diverse, since plant-based synthetic biology can be used to produce compounds and products more quickly, less expensively and more sustainably. Broadly speaking, we believe that potential end markets for plant-based sustainable solutions are vast. In the near-term, we intend to focus our customer observation and development activities. In a narrow market segmentation, where we believe our current capabilities gives us the best opportunities to win. These end markets include the nutraceutical, cosmeceutical, pharmaceutical, advanced materials and chemical industries. These end markets contain strong potential customers for innovation, as they all have current business needs to reduce their carbon footprint. Prior to our announcement in early October, we had initiated numerous discussions with potential customers, and the 4 weeks since the number of inbound queries for potential customers have been significant. Despite the recency of our announcement, we are engaged in discussions to develop products to be produced in our BioFactory with 6 of The Wall Street Journal’s top 100 most sustainable companies, along with several others. Feedback from these potential customers have been very positive, we are already currently evaluating 9 compounds for potential development using our focus of criteria that Bill will speak to in a moment. We believe we have a compelling offering for our target customers, and we are working to secure our first contracts for the BioFactory. I’ll now turn it over to Bill to discuss our business model and financial updates. Bill?
Bill Koschak: Thanks, Michael. Historically, Calyxt supplied its technology platform to opportunities it identified, primarily focused on outdoor agriculture end market. Our cost to develop a product several million dollars and the timeline to commercialization was 5 to 6 years or more. Our approach to the BioFactory business model will be customer focused and demand driven. We are aware of the market dynamics and synthetic biology in terms of how we approach compound economics. And we have developed a set of criteria by which we will evaluate opportunities and drive focus for our development efforts that includes consideration of factors such as the nature of the customer’s need, the size of the market or markets served, the speed of adoption, or BioFactory capabilities and financial returns. We call this our Target Product Profile, or TPP. We use this approach to ensure we select the compounds from customers that drive the best potential for success at this stage of the business. When combining PlantSpring with the BioFactory, our costs to develop a compound are expected to decline significantly as associated development cycle times. As we continue overtime to leverage PlantSpring and expand our AIML capabilities. We expect our customers to work with us to fund development of their target compound in PlantSpring with the funding sufficient to enable us to make a margin on that development activity. Those payments should begin upfront and run over the 36-month development cycle. The amounts will vary depending upon how the customer intends to fund regulatory costs. We are targeting customer agreements for the development of up to 2 to 4 compounds by the end of 2022, and are also targeting similar agreements to bring 2 to 4 new compounds per year into development thereafter. As the business evolves, those amounts could accelerate. Customers are expected to purchase the compounds from Calyxt pursuant to a supply agreement. Our production will be handled by infrastructure partners, who will be paid a fee to produce the compound for us. Based on our selection criteria, we are targeting the compounds we developed for customers to have at least $1 million of revenue within the first 12 months of launch, and scale rapidly over the next 4 years. We believe that growth rates of 100% or more per year over that period could be possible, with actual revenue and growth driven by the size of the end markets being pursued by the customers and various other factors. Once we scale production and optimize costs, we are targeting a gross profit in the mid-double-digits for product related revenue from the BioFactory. This is largely driven by the end markets we are targeting or compounds can sell for hundreds and even into the 1,000s of dollars per gram. This is in contrast to our prior business where we were selling our products for $0.01 per pound. Together, these reduce development cycle times and potential development revenues, product revenues and profit margins represent significant advancements of Calyxt’s business and financial models. We also believe we can mitigate 2 key risks to this business model by focusing on customer demand as the selection criteria in our application of our TPP and using infrastructure partners for at scale production. We also expect to continue to license our technology and develop new products for agricultural partners based on their need. With respect to technology licensing this activity spans Calyxt’s vast intellectual property library built over 10 years as a leading plant-based biotechnology company, including multiple gene editing platforms, plant breeding, and other capabilities. This activity also includes the licensing of historically developed product candidates such as improved digestibility alfalfa, high oleic low linolenic, soybeans, and product candidates derived from our hemp advancements. But, we will pursue licensing opportunities for these product candidates; we expect there will be limited investment in further development until the licensee customers are identified. As demonstrated by the recent announcement of a new product to be developed for our partner in soybean, Calyxt will continue to opportunistically develop products for partners focused on traditional agriculture, managed priority prioritization of resources and to drive returns on its investment, Calyxt has developed a set of criteria by which all opportunities are evaluated, which include the size of the overall opportunity, the nature of the product to be developed, and the amount of cash to be received by Calyxt’s both upfront and overtime. We believe that the technology licensing and opportunistic product development agriculture each have the potential to generate revenue streams for Calyxt throughout project inception, development and commercialization. Today, we issued a press release describing our third quarter 2021 results, and we also filed our Form 10-Q for the third quarter this afternoon. Revenue was $7.8 million in the third quarter of 2021, an increase of $2.5 million, or 48%, from the third quarter of 2020. The increase was driven by the volume and mix of product sold in the quarter, as the company sold grain in the third quarter of 2021 as compared to the third quarter of 2020, when it was primarily selling oil and meal. Gross profit was negative $0.5 million or negative 7% of revenue in the third quarter of 2021, compared to negative $1.8 million, or negative 35% of revenue in the third quarter of 2020. This increase of $1.3 million, or 71% from the third quarter of 2020 was primarily driven by the benefits resulting from the move to sell grain compared to selling primarily oil and meal as well as a $2.1 million year-over-year benefit from unrealized commodity derivative gains entered into to convert fixed price grain inventories and fixed price forward purchase contracts to floating prices, consistent with how the grain was sold. Adjusted gross profit. a non-GAAP measure was negative $2.7 million, or negative 35% of revenue in the third quarter of 2021, compared to negative $1.3 million, or negative 24% of revenue in the third quarter of 2020. The decrease in adjusted gross profit percentage was driven by the net prices paid for grain sold in the third quarter of 2021, compared to the mix of products sold and related profit margins realized in the third quarter of 2020. Total operating expenses were $6.4 million in the third quarter of 2021, a decrease of $0.8 million, or 11% from $7.2 million in the third quarter of 2020. The decrease was driven by lower personnel expenses as a result of cost reductions following the move to sell grain compared to selling oil and meal, other reductions in operating expenses and restructuring costs recognized in the third quarter of 2020. We are on track to achieve our 2021 target for cash operating expenses of $25 million or lower, inclusive of any BioFactory related spending in the fourth quarter. Net loss was $7.3 million in the third quarter of 2021, an improvement of $2.2 million dollars or 23% in the third quarter of 2020. The improvement in net loss was driven by improved gross profits and reduced operating expenses. adjusted EBITDA loss was $6.9 million in the third quarter of 2021, essentially flat compared to the third quarter of 2020. Net Cash used by operating activities was $3.4 million in the third quarter of 2021, an improvement of $1.8 million in the third quarter of 2020. This cash performance was driven by collections from the sale of grain to ADM, continued declines in the company’s working capital investment associated with the wind-down of that grain sales activity, and strong management of cash expenditures. Over the past 9 months, we realized a $16.2 million year-over-year improvement in cash flow from operations for similar reasons for the 3 month period ended September 30, 2021. On September 21, 2021, we launched a $50 million ATM share issuance program. As of today, Calyxt had issued approximately 1.2 million shares of common stock under the ATM facility and received proceeds of $3.7 million net of commissions and payments for other share issuance costs. Calyxt’s operating plans reflect a modest level of payments from customers from commercial activities in 2022, which when combined with plant spending and the current balance of cash and cash equivalents make it likely that it will require additional liquidity to continue operations under this business plan over the next 12 months. Absent payments from customers, in excess of Calyxt’s operating plans or the ability to raise capital, management believes that we can implement various cost reduction and other measures in order to manage liquidity for the next 12 months. Our earnings materials which are posted on our website provide important context about the non-GAAP measures we report, include reconciliations of these measures to the most comparable GAAP measure. For year-to-date financials for the first 9 months of 2021, please refer to our press release or filings with the SEC. I’ll now turn the call back over to Michael for his concluding remarks.
Michael Carr: Thanks, Bill. I’m very pleased by the pace of progress we have made in my first 3 months since joining Calyxt. We are setting Calyxt on course to be an important driver of plant-based synthetic biology solutions, and a partner of choice for our customers as they strive to meet their sustainability and financial targets. Plants are a compelling source of complex chemistries. And with our PlantSpring platform, combined with our proprietary BioFactory production system, we are poised to take advantage of a massive market opportunity. Being plant-based differentiates Calyxt. We are actively marketing our proprietary PlantSpring Technology Platform and our pilot BioFactory to new potential customers, including 6 of the top 100 sustainable companies as identified by The Wall Street Journal. These and other initial target customers represent industries such as nutraceuticals, cosmeceuticals, personal care and pharmaceuticals, as well as companies that manufacture advanced materials and chemicals. We’ve made other strides in the third quarter, announcing the research collaboration with a leading global food ingredient manufacturer, based in Asia, and welcoming Dr. Seth Dobrin to our Scientific Advisory Board, where he will advise us on our AIML strategy and other matters. Altogether, I’m excited about our future and confident that our expertise, skill, technology, and knowhow has the potential to deliver compelling financial returns for our shareholders. I look forward to providing you with updates on our progress in the future. Operator, that concludes our prepared remarks. Please open the line for questions.
Operator: Thank you, sir. We will now begin the question-and-answer session. Today’s first question comes from Bobby Burleson at Canaccord. Please go ahead.
Bobby Burleson: Hi, thanks for taking my questions. So, I guess the first one is, when we think about the – when we think about the regulatory issues around plant trait development versus the BioFactory products that you guys are going to be delivering, can you just contrast for us how onerous or timely or costly the ag efforts are from a regulatory perspective versus what you’re doing with the BioFactory?
Michael Carr: Yeah, thanks, Bobby. Thanks for the question. As we’ve looked to these new end-markets, which we originally announced on October 5, they’re much less so from a regulatory requirement standpoint, not only in costs, but in scrutiny. So if you look at the cosmetics industry, certainly nutraceuticals, obviously, the chemicals industry have a lower bar when it comes to regulatory. And so, we expect those expenses to be less overall in comparison.
Bobby Burleson: Okay, great. And then, you talked about expecting about a million in the first year of launch, for one of the BioFactory products. Is that from the time of the development announcement or is that from a later date when you guys are actually producing some volumes?
Michael Carr: Yeah, so under our model, we expect to be compensated for our development efforts. And the approach is probably over a time base. So it’ll be a periodic payment as a result of the efforts that we undergo during development.
Bobby Burleson: Okay, so that included in that $1 million then essentially?
Michael Carr: Correct, yes.
Bill Koschak: No, let me clarify, Bobby. This is Bill. So, we expect to get paid during the development process, as Michael said. And then, once we start to sell product to our customers, whether that be before they’ve got clearance or not, right, because they could be buying product from us to get through any regulatory efforts that are necessary. We expect in that first 12 months to have product revenue, in addition to the development revenue of $1 million or more in that first 12 months, and then that product revenue would scale from there.
Bobby Burleson: Okay, great. And then, just on the liquidity comments, you guys talked about 12 months. Bill, you talked about 12 months of runway here. Does that include the $3.7 million you guys just took in?
Bill Koschak: Yes, it does.
Bobby Burleson: Okay. And then, this is kind of maybe a little bit of a tangent, but curious if you guys been following the COP26 or COP26 event in Scotland. And, they’re talking about things like managing forests and managing the land as part of achieving these climate targets. And I know you’ve got this partnership with a global food manufacturer to kind of come up with an alternative to palm oil. Have you guys noticed anything from that conference that you think kind of reflects well, on what you’re doing in that area?
Michael Carr: Yeah, absolutely. In fact, I think there is an announcement this morning about the amount of capital that investors are devoting to what amounts to sustainability and environment-friendly investments. And so, to us, it really sort of drives home the point that we were pleased about securing that deal with the company, they’re located in Asia, to address what amounts to palm oil and the sustainability or lack of the sustainability of palm oil. So, the announcements coming out of that conference, I think bode well for what we’re doing here with our new initiative.
Bobby Burleson: Okay, fantastic. Thanks.
Operator: And our next question today comes from Brian Wright at Roth Capital Partners. Please go ahead.
Brian Wright: Thanks. Good afternoon. Just wanted to get a clarification on the coming. You said, 6 of the top 10 most sustainable by The Wall Street Journal. And a lot of those were inbound calls. So, yeah, just wanted to get a little more color on that.
Michael Carr: Sure, Brian. This is, I think, one of the things we’re most excited about. So prior to our announcement on October 5, for our new initiative, we had some confidential discussions with potential customers. And there is a tremendous amount of excitement. Once we made the announcement, we’ve undertaken not only a push, where our business development team is out talking to potential customers in the end-markets we’ve discussed. But there is also been a little bit of a pull. We’ve had inbound calls, literally from press releases, announcing our initiative, what we’re focused on as a plant-based synthetic biology company. So we’re getting both not only from our business development team, but we’re getting inquiries also inbound.
Brian Wright: Yeah. That’s great. One just big picture one. On the BCS stat, on the $30 trillion, and I know this might be a tough one. But if we were to think about like, what percentage of that would be like more complex molecules and proteins that are better suited in the plant matrix?
Michael Carr: I’m sure. Could you repeat your question?
Brian Wright: Yeah. So of that overall TAM, the $30 trillion from the Boston Consulting Group, is there a center – is there a way to think about like what percentage of that would be more suited towards the multicellular plant matrices, because of the complexity?
Michael Carr: Yeah. We have Travis, our CTO in here. I’m going to have him, pull in here in a second. But there, if you look at on Slide 6 of our presentation, talks about the differences between fungi and bacteria based chemistries, and then what plants are able to do. And during our conversation earlier or our presentation earlier, we talked about roughly 170-odd-thousand known compounds. But the vast majority of them or 80% are derived from plants. Travis, can you jump in and explain a little bit of the difference, of what those are like?
Travis Frey: Yeah, I think if you take a step back and just think about it, as Michael is describing, is the known compounds. So we believe plants produce about 80% of the known. We made reference to over a million that are unknown. And I’m guessing a lot of – I don’t know the full specifics to the Boston Consulting Group and how they came up with their TAM. But ideally, what they’re probably looking at is existing chemistries that could be replaced. And then, I’m sure there is a quite a bit of chemistry that are produced in plants that are unknown at this point. We estimate this probably close to $1 million. So to know exactly or to give you a definite number that was in that TAM, I couldn’t do that at this point. But we do know that there are a large, large number that are produced in plants and even in greater number that we’re unaware of even at this point.
Brian Wright: Big picture to think about or maybe more thematically and sorry, about a specific number. But it would seem that given the nascent stages of synthetic biology that this more, that this plant multicellular matrix should more open a much larger segment of the segments, and it could be done by microbes. Is that a fair way to think about it?
Travis Frey: Yeah, that’s a very fair assessment. Generally, when you look at what our PCM, the plant cell matrix can produce in comparison to a lot of the single cell systems, whether it’d be microbials or even some of the single cell plant-based systems. They’re very specific to molecules that a lot of times are more commodity-based or even you find in large quantities, the more complex materials take on a much larger, I would say, finite percentage in the plants. And really, when you harvest a plant that the percentages of those complex materials that can’t be produced anywhere else, those are specific to plants. And so, we have the ability because of the precursors to so many chemistries are inherent in plants. They’re preexisting with our metabolic engineering capability, we actually can then up-regulate, down-regulate, and then pull from different precursors to then create or produce more through our PCM of those unique chemistries. So, I think, that’s really what we’re looking at as an advantage here that 80% that you can’t produce anywhere else, you can only get from plants, we have access not only to change the percentages of those inherent, but also with our PCM capability to produce it in a very productive way within the bioreactor.
Brian Wright: Great. Thank you.
Operator: Today’s next question comes from Sameer Joshi with H.C. Wainwright. Please go ahead.
Sameer Joshi: Hey, Michael, Bill, Travis, thanks for taking my questions. You mentioned 2 proof-of-concept compounds and molecules that you are worked on in the plant-based egg protein in the natural antioxidant. Are targets identified by you or was this because of one of the parties that you have been engaged with one of the 6 top 100 sustainable companies?
Michael Carr: I’m sorry, I couldn’t hear you. Could you repeat, could you please, Sameer?
Sameer Joshi: Oh, yeah, the 2 molecules that are proof-of-concept candidates, are those because of organic development? Or is it because of the customers came to you and asked for you to make those?
Michael Carr: Yeah, there was organic development, I mean, the goal with both of those were two-fold. On the ovalbumin was to be able to show the complexity in the power of the PlantSpring platform, and that you have a plant producing the protein. And then the betanin was really being able to show the pace and the ability to move quickly, and developing a compound. We set a target as you heard earlier, 36 months in order to bring a product from need to really pilot stage. And we were able to do the betanin in less than 3 months. And so that’s why their proof-of-concept is really showing the capabilities of the system.
Sameer Joshi: Okay. And just a clarification at one point you mentioned 200 liters, maybe I misheard, but is that the capacity of the bioreactor by BioFactory?
Michael Carr: Yes.
Sameer Joshi: Okay. And just a clarification another one, the collaboration in Asia, that has nothing to do with the new PlantSpring and the BioFactory technologies, right, it’s from your legacy existing business and technology?
Michael Carr: Correct. But there is all based on the same, as I think we’ve mentioned on a couple occasions, the foundation of the PlantSpring platform is really based on the 10 years of work and development that Calyxt has done, and it’s just continuation of that process.
Sameer Joshi: Understood. Just 2 housekeeping questions, what remains of the 2020 crop to be sold, is it in the single-digit-millions, or just a few hundred thousand?
Michael Carr: Yeah, Bill?
Bill Koschak: Yeah, I’ll take that one. Sameer, from 2020 crop, we are down to the very end of the quantity that needs to be delivered at this point, as Michael said, we’re down to the last few trucks that need to make their way to ADM, and so it’s in the fourth quarter will be in the hundreds of thousands of bushels that get delivered below hundreds of thousands of bushels that gets delivered from a revenue perspective.
Sameer Joshi: Got it. And then, for 2022, do you expect the OpEx, the cash OpEx to be $25 million, lower than $25 million, higher than $25 million?
Bill Koschak: Great question. From our perspective, our target for next year is to be similar to where the target was for this year. Knowing that this year, we expect to be under that target, so we’ll see a small increase year-over-year as we think about the cash OpEx.
Sameer Joshi: And so the expense that you may incur for any BioFactory or any development is offset by the reduction in cost that you have incorporated thus far. Is that a fair way of looking at it?
Bill Koschak: Yes.
Sameer Joshi: Got it. Okay. Thanks a lot for the taking my question.
Bill Koschak: Yeah. You bet. Thank you.
Operator: And then, ladies and gentlemen, this concludes our question-and-answer session. I’d like to turn the conference back over to Michael Carr for closing remarks.
Michael Carr: Thanks, everyone, for joining us today. If you were not able to address all your questions on today’s call, please feel free to contact us or our Investor Relations firm, Argot Partners, who would be happy to help you. Operator?
Operator: This concludes today’s conference call. Thank you for your participation. Have a wonderful day.
