Earnings Season – 5 Companies remain strong in wild 2020

Calyxt’s gene editing technology forhigh oleic soybeans moves into new commercialization program

In Minnesota, Calyxt, Inc., a plant-based technology company, has reported its financial results for the second quarter ended June 30, 2020. Some highlights:

• Focusing Go-to-Market Strategies to Optimize TALEN Technology Platform and Accelerate Trajectory to Positive Free Cash Flow
• Following Successful Proof of Concept, Advances Soybean Products to a Streamlined Business Model Focused on Seed Sales to Agricultural Processors
• 300,000 Bushels of Soybeans Sold to One of the World’s Largest Processors
• Cash Runway Extended into Fiscal Year 2022
• Dan Voytas To Lead New Scientific Advisory Board

“With our high oleic soybean product, we were the first company to successfully deliver a proof of concept for food developed with gene editing technology,” said Jim Blome, Calyxt CEO. “The success we achieved with this product has been amazing and represents a key milestone achievement for everyone at Calyxt. We quickly scaled up and within 15 months of our early 2019 launch are supplying some of the world’s largest companies in their respective industries. Having achieved proof of concept and pioneering regulatory success, we are now progressing into a new commercialization program seeking to supply Calyxt’s first product to large grain processors for their own soybean processing businesses. Moving upstream enables us to focus on developing and capturing greater value from high value innovations and plant-based solutions with substantial disruption potential,” continued Blome.

Summary of Soybean Processing Advancement, according to Calyxt:

• “Final 2020 planted acres were nearly 72,000, representing a doubling of acres from the total planted in 2019;
• In 2021, we intend to target seed sales to large grain processors, representing at least $3 million to $4 million in expected revenue as seed transactions will be revenue-generating under the new go-to-market strategy;
• One of the world’s largest processors has purchased 300,000 bushels of Calyxt soybeans, which represents a significant portion of June 30, 2020 inventory, and the processor will retain the rights to process and sell the resulting soybean oil, while Calyxt will purchase and market the resulting soybean meal;
• We similarly aim to sell our remaining grain inventories and grain that we are contracted to purchase from the 2020 crop year to large processors;
• We are eliminating positions related to soybean processing and product sales, resulting in aggregate cash charges of approximately $0.6 million for severance and other related payments, and we expect to record a $0.9 million recapture of non-cash stock compensation expense from forfeitures of un-vested awards;
• We expect to incur $0.5 million of additional cash charges over the next twelve months as we exit processing and transportation contracts;
• Contracted grain purchases and sales and the wind down of other contractual obligations are expected to take approximately 12 months;
• Contracted grain purchases of the 2020 crop are expected to be approximately 40 percent in the fourth quarter of 2020 and approximately 60 percent over the course of the first and second quarters of 2021;
• Including the sale of an expected percentage of grain that we are contracted to purchase in the fourth quarter, our base case 2020 revenue expectation is between $17 million and $19 million, and our cash usage for 2020 is expected to range between $43 million and $45 million, which includes an investment in accounts receivable and inventory of between $15 million and $17 million;
• Our target is to convert the year-end 2020 investment in inventory and accounts receivable of between $15 million and $17 million to cash in the first 60 days of 2021;
• Based on the grain purchase plan described in the preceding three bullets, our grain revenue for 2021 is expected to be between $22 million and $24 million, with seed revenue incremental to that amount;
• If we are able to complete the sale of all grain we are contracted to purchase in the fourth quarter of 2020, our revenue would increase to between $23 million and $25 million, with a corresponding decrease in expected 2021 grain revenue, and if we collected all of the related receivables, our expected cash usage in 2020 would be in the range of between $32 million and $34 million; and
• Effective execution of our go-to-market soybean strategy decreases cash used by our soybean product line by over $45 million through 2022.”

Focusing Go-to-Market Strategies to Accelerate Trajectory to Positive Free Cash Flow

“Calyxt was created with a mission to deliver disruptive plant-based innovations with an initial focus on food and agriculture,” said Blome. “Today, our innovations have applications across a broad spectrum of industries. To drive value for our TALEN® technology platform, our strategic focus is on traits with higher-margin, downstream benefits for end users, differentiating us from others who are focused on traits developed to provide distinct benefits to the farmer. Our commercial proof of concept, our strong intellectual property portfolio, and our position as a leader in gene editing has led us to extensive talks with top companies across several industries, including food, pharmaceutical, energy, and agriculture. We plan to develop projects with partners that leverage our strength in trait development and gene editing and our partners’ product commercialization expertise. Discussions with potential partners have focused on our development of plant-based input solutions for specific downstream issues, including consumer preferences, sustainability, cost, quality, and regulatory compliance. By leveraging our partners’ commercialization capabilities, this model will reduce our cash needs and enable efficient market penetration of Calyxt’s traits.

“We are well positioned to establish licensing arrangements based on our TALEN technology, expertise in trait development, and leading know-how in the gene editing field. Strategic licensing arrangements provide an opportunity for broad market penetration of our technology while we are able to achieve milestone or royalty payments through our licensees’ commercialization efforts. For product development activities, our specific entry point into the value chain may vary by crop, depending upon a number of factors.  In crops like soybeans and wheat, we expect that the sale of seed to processors or other supply chain participants will provide the highest available margins and best path to delivering positive cash flow. For certain traits, we expect licensing arrangements to provide an efficient path to non-dilutive financing and potential revenue generation,” added Blome.