Biotalys NV (BTLS) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Biotalys Full Year 2021 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Patrice Selles. Please go ahead.

Thank you, Nadia. Good day. Good afternoon, everybody. Thank you for joining us for the very first full year financial results and business highlights for Biotalys. I am here today with Wim Ottevaere, the CFO of Biotalys, who is going to drive us through some numbers later in this presentation, and we are supported by Toon Musschoot, our IR manager that you can reach out after [ 2:00 ]. Today, we will present some highlights of the full year 2021. We will also give some updates on Evoca, the first biofungicide of Biotalys as well as our pipeline, and we will follow with corporate and financial updates before looking ahead about what's happening here for Biotalys in the year to come. With that, I would like to first share with you the business highlights, which has been a very successful year for Biotalys, of course, first, with the public listing that took place in July with a total raise of EUR 52.8 million, sorry. And then the follow-up announcement that we have made related to strengthening and expanding our executive team and Board of Directors, the continued development of Evoca, our lead biofungicide product. The fact that we've been able to connect with the Gates Foundation and get a multiyear award for a given program working together with them. And finally, the strategic partnerships that we have announced related to our go-to-market strategy together with Biobest and securing this go-to-market strategy with the appointment of both Olon and Kwizda, 2 key leaders in their field for the manufacturing and for the formulation of our Evoca product and the preparation of the market calibration about to come during the course of the year. We have also shared with the public, the breakthrough in protein expression that we have been able to reach, which is really supporting the bioactive for Evoca. And as you will see during this presentation, led us to some modification of our pipeline in order to adapt to these great news. The agricultural industry landscape has been quite shaky over the last couple of years. There has been a great resilience of our fields through the pandemic, through the pandemic over the last couple of years. However, we've seen recently that long-term stresses, the climate change have impacted and required that we have a more resilient agricultural system that we present and we transform the way we produce the food today. At the same time, very recently, of course, with the events that are taking place in Europe, there is an increased tension, political tension, putting quite a lot of pressure on both the agricultural inputs like the fertilizers, of course, the chemical pesticides and at the same time, putting a lot of pressure on the output, certain crops that are specifically raised out of the regions that are under war right now. So the sustainability and the innovation from our perspective remain at the heart of the transformation of our agricultural practice moving forward. And this is where Biotalys continues to play its role, focusing on minimizing our food waste on the food safety and the preservation of our agricultural land at a time, it is so important for us to get the maximum out of these lands to be able to feed our planet. Through the platform and the technology, we want to continue to offer differentiated and versatile biocontrol products that are designed to enter into multiple markets that will help the growers with innovative mode of actions to fight the resistance that they face in their fields and doing all of that with an increased reduction of the chemical pesticides, the dependence on oil-based pesticide, of course, and doing that as much as possible in a cost-effective manner to be able to tackle broad markets with the future pipeline of the organization. With that, I would like to talk first about Evoca, our first product. As a biofungicide, this is a step change in the biocontrol technology, the way Biotalys sees it, of course. Evoca is both [ petridicide ] and active also on [indiscernible]. It's a new mode of action that is coming into the hands of the grower by the end of the year, hopefully, pending the registration process that is currently ongoing. It's a control activity for preventive -- for preventing these molecules. And we expect the registration timeline by the end of 2022 in the US and 2024 in Europe. We have described the convenience, the level of efficacy of our product. And just to move on to the more details around these elements, you will see the progress that we have continued to do with the team on Evoca in 2021. The first generation of product, Evoca is on track from a development perspective and a regulatory perspective. As you know, we had submitted to the EPA in the US. And this year, in '21, the dossier pass boost the completeness check as well as the preliminary technical screening. In Europe, we submitted in March '21, and we have already received from the Ctgb, the [ development stage ] as well as the EFSA that the dossier will be admissible for review, which is currently ongoing. Finally, we have also shared with you a number of great news related to the strong performance of Evoca, the parity with the chemical pesticide in the integrated pest management programs that are being used by the growers on grapes, on strawberries. And we have also published in 2021, some strong results in extension trials, which are done by independent academic group, as you can see on the next slide, where we have had some tests being done on Evoca against, of course, the untreated check against the -- some of the existing microbial solutions that are on the market as well as in independent IPM programs. This is a strong message that not only when Biotalys is committing to doing these trials with CROs, but also when independent well-renowned public institutes in the US are looking at these slides, they define the performance at a high level than the other components of biocontrols that they have in their hands. So strong support for continuing to develop Evoca in the next stages. From a pipeline perspective, the first slide that I would like to use is the one again on Evoca, which is related to the manufacturing efficiency gain that we have shared with you. With a 500% increase in the manufacturing of Evoca active ingredients, we are now in the organization believing that we can reach the right level of cost of goods that we need to bring Evoca to the market instead of having Evoca just as a market calibration product in the future. That is also enabled by our collaboration that we mentioned with Kwizda for the formulation as well as with Olon for the manufacturing process, 2 well-renowned industry partners in our industry that are going to support the further development in the go-to-market as we move Evoca towards the hands of the growers. These changes have led us to reconsider our pipeline during the course of the last few months. And we have decided to change a few elements that I'm going to explain to you in some details. We believe that, first, it's important for us to move 2 new programs into development, which are the second generation and the third generation of Evoca, as you will see, that are each time going to help us to go a step forward in terms of the cost reduction. The first element is about the second generation of Evoca that contains exactly the same protein bioactive as Evoca with enhanced manufacturing and formulation is going to move rapidly to replace Evoca as rapidly as possible both on the market in the US and in Europe by 2024. The idea here is to reduce our investments that is required to produce this molecule and make a first step change. And then the third generation, which will fully benefit from the manufacturing efficiency that we have announced, containing again, still the same protein bioactive, but with optimized manufacturing conditions and formulation will then be expected to run into the market by 2026 and to provide commercial value for our organization at that time, which is the step changes compared to what we had before and the way we had our pipeline aligned. Behind them, we have decided to remove the BioFun-5 program, because we believe that the third generation of Evoca will be able to fulfill what we were trying to achieve with BioFun-5. And we have integrated all the knowledge, the molecules that we have identified, the processes from the BioFun-5 into the BioFun-6 allowing us to focus for BioFun-6, on the throughput, the acceleration of the selection capacity to get as rapidly as possible with novel mode of actions that will complement what we want to offer to the growers at the cost that will be required to generate substantial margins for Biotalys moving forward. The other programs are progressing as per the stage gate plan, and it is also fair to mention for the team that there was a strong focus on generating and continue to generating the IP baseline for Biotalys that has been done with 7 additional patent families granted in 2021. With that, you can see the summary of this pipeline as it looks like now on the next slide where the Evoca branch will then have 3 different products moving forward. The first one that you know, which is the market calibration with the expectation of the US market entry together with Biobest in 2022. And then the next one that I have mentioned, the second generation by 24 and the third generation with a full commercial potential by 2026. BioFun-6, Bio-insects, Bio-Bac are following up in the pipeline. And as I've informed you about the BioFun-5 now being fully merged within the BioFun-6 program. The BioFun-2 and BioFun-4 remain very exciting projects that we are currently discussing and continue to explore with partners in our industry as they represent unique opportunity as well to compensate for the loss of certain chemical pesticides that are coming our way, especially in Europe within the next decade. And finally, the BioFun-7 program, which has been initiated with the Bill and Melinda Gates Foundation, and I can tell a little bit more on this one on the next slide. As you -- as we shared with you and with the public a little bit earlier in October last year, we have been awarded a multi-year grant by the Gates Foundation. The willingness from us to work together with them is, of course, to raise our sustainability standards and to be able to support not only the commercial approach, but also to demonstrate that our technology has a broader span of potential activities such as being able to support small orders, growers in Africa who are trying to combat certain disease like cercospora in cowpeas. And we believe that the technology is a real match for this type of challenge. So during this first phase of the program with the Bill and Melinda Gates Foundation, we will receive in 4 years, a non-dilutive funding of around $6 million, and we will demonstrate the POC that will allow us, hopefully, to move into the next phase of engagement with the Gates Foundation later. It is important to notice that, of course, the small over growers are impacted by the cercospora disease, but it's widely spread in our industry today and Biotalys will have the opportunity to leverage wherever possible these products, this program for other applications that -- than the one that will be supported by the Gates Foundation. A few words about the corporate update before leaving the word to Wim for other elements. We have had an incredible change in the Executive Committee and the Board over the last year. It's really important for us that Simon Moroney, Catherine Moukheibir and Markus Heldt joined us in the Board. We have seen a step change in terms of our approach to the level of discussion. And I'm very glad to that we announced today that Michiel van Lookeren Campagne coming currently from the CSIRO in Australia will also -- is being proposed, sorry, to be appointed by the general assembly meeting a little bit later this year and join the Board as well. Not as well to -- without mentioning that Pat McDonnell has joined us in October as well as the Chief Business Officer for Biotalys is based in North Carolina and is overseeing all the late-stage development and of course, the current go-to-market and the market calibration for Evoca. This change is coming also with a bigger approach within Biotalys in terms of the partnerships. We -- you have realized certainly along the course of 2021 that we put a lot of energy in partnerships collaboration. There is an approach for us, which is all about derisking, accelerating and growing through these strategic partnerships. Of course, we have announced Biobest. We have announced Kwizda as well as Olon. But we just wanted to mention that this is our strategy, it's all about the strategic partnerships being able to build around us a network that will allow us to accelerate our path to market and the value creation for our organization. We also continue to seek for potential applications and partnerships not only in the crop protection segment. Of course, you have seen with Biobest that we are entering into the covered crop segment with a long-term partnership with them, but we continue to explore with different partners, the potential application of the technology from the very early stage of the seed in the ground to the plate of the consumers as we believe that we are a food protection company, and thus, we can expand our technology across these different segments. Finally, a few words in recognition that have been quite important during the course of the year, we have received the -- we have earned the recognition from the Fast Company's World Changing Ideas in 2021 as a finalist. We have also been a finalist for the scale-up of the year in '21, the Ernst & Young, one that was really a great event to see these incredible companies where we could line up with that was really fantastic. And finally, we have received the SEAL Awards recognizing the sustainable environmental leadership of Biotalys where we won the award in the category of sustainable innovation. With that in mind, I would now like to leave the place to Wim Ottevaere for some further discussion around the financial figures.

Thank you, Patrice. And you will not be surprised to see this kind of financial overview, which is really typical, I would say, for a biotech company, not yet really sales, of course, the operation, operating income is related to grants. And of course, as you know, we expense a lot in research, that's clear. And the increase versus last year of EUR 2.4 million is, of course, related to the progress we make in our pipeline and also for the preparation, of course, of Evoca. G&A is, of course, linked to our R&D, let's say, departments. But of course, this year, last year, we had, let's say a step-up in the, let's say ascending of the management team, as you just have seen. And also, of course, we have some expenses related to the IPO which brings us, in fact, to a net cash used in the operations of EUR 16.7 million. So of course, I would say, an increase versus last year, obviously. Important, of course, to mention here on this slide is that at the bottom, of course, the cash and cash equivalents are at a comfortable EUR 56 million at the end of last year. And with this, I would like to move to the next slide, where you can see that, in fact, Biotalys is participating or will participate in a lot of events in the next months to come in the first half of this year. As you will see, I will not go into the details, of course. But as you will see, we will be present in London, in San Francisco, in New York. We will also be in Europe, of course, present and certainly also quite a number of virtual conferences. And on top of that, we also have a number of retail events because you know that, the retail market is an important market also for liquidity, I would say. And in fact, we have also a shareholders' club that we organize here at our premises in May. This should -- will certainly increase the visibility of the company, of course. And with this, I hand over back to Patrice.

Thanks a lot, Wim. I would like to finish with the outlook for 2022 and share with you what our expectations are in terms of the year to come. On the product side, of course, the first and the highest priority for Biotalys at this stage is to focus all the efforts towards the registration, the obtention of the registration of Evoca, which is expected before the end of the year to help us and pave the way for the regulatory process for the entire pipeline that will come after that. We -- the initiation of the market calibration also with our partners at Biobest is well underway for the highest fruit and vegetable market segment. And the expansion of the AGROBODY foundry platform towards adjacent markets is also an area that we are progressing in at this level. On the operations level, we are really focusing, as you have seen by putting these 2 new programs into development on the manufacturing cost reduction. And we do that not only internally, but we have quite a number of collaborations out there that should provide additional progress on that front. We also focus on the pipeline progression to ensure that we continue to have our different programs aligned with the stage-gate plan that we have currently in place. On the partnerships, we are looking at securing a strategic R&D collaborations, sorry, and creating additional value. As you've seen, we are discussing around certain programs that exist already in our pipeline in the BioFun-2 and the BioFun-4, but we are also exploring together with partners what other programs we could look into exactly like we did with the Gates Foundation. We are also looking at selective partnerships and in-licensing of technologies that will complement our capabilities, create scale, speed and enhance the value, a lot of things are happening in the technological space, and we would like to capture that as well on that front. On the people side, as you know, we have announced the recruitment of a CTO or a CSO and globally continue to consolidate the team, both from a science side as well as from a go-to-market approach and the business development to ensure that the company is ready for the next stage of its growth. And finally, as you have seen in one of the previous slides, we are also proposing to further strengthen the Board of Directors with the proposed appointment of Michiel van Lookeren Campagne. With that, I would like to now stop speaking and listening. Maybe would you have any questions?

[Operator Instructions] We have the questions, come from the line of Daan Vandenberk from Kepler Cheuvreux.

First question is maybe on the cash burn. You said you expected cash burn between EUR 27 million and EUR 29 million for this year. Can you give a bit of a split towards the investments that you plan to make?

Yes. Well, we do not give a split, let's say, in detail on what exactly is the money going to. But it's clear, of course, that it's the progress, let's put it like this. We make with the pipeline. And as we just have been highlighting, let's say, the different programs, of course, the money will go to these programs, of course, and including, of course, the manufacturing requirements for the launch of Evoca, let's say, at the end of the year, but of course, especially, let's say, in next year, but we have to build up, of course, inventory for that. So that is in a high level, let's say, what we can say at this point.

Okay. And then maybe a second question. Regarding the consolidation of BioFun-5 with BioFun-6, are there any investments in BioFun-5 that you will need to write-off or can you transfer all these investments through the combined program?

I think all the learnings there, I'm looking at that from a structural perspective, all the learning will be applicable in the BioFun-6. And I do not think there is any investment that will have to be write-off from this one. It's a great question. Wim?

Yes. Just to add, let's say, IFRS wise, everything goes into the costs anyway and the expenses. So we do not, let's say, have anything on our balance sheet. So everything goes directly to the P&L.

[Operator Instructions] Dear speakers, I just wanted to let you know that at this moment, there are no questions on the webcast or not on the phones at this moment.

Okay.

Just give us a moment. So we have one person, would like to ask a question with the phone, but fortunately, we do not know the name. Just give us a moment, please. We're just obtaining the name.

Hello.

Yes.

Hello, can you hear me?

We can hear you.

This is Sebastian Bray of Berenberg Bank speaking. Apologies for dialing in a little late. I had 2, please. The first is, can you give any guidance of the type of OpEx inflation that you would be expecting for the year 2022? I'm referring to general and admin and R&D costs, what is baked into the EUR 27 million to EUR 29 million guidance? And the second question is on the [indiscernible], the level of cost savings that could be involved in rolling in the BioFun-6 and Evoca products together? In particular, BioFun-5, apologies, if I've named the wrong one, has anything fundamental changed about the level of cost that you see in bringing this product to the market? Or how exactly should we think about this? Effectively, the asset sales of the 2 products together and at a lower cost, that type of question.

I'm going to take the second one, Sebastian to leave some time for the first one. The roll-up of the BioFun-5 into the BioFun-6 is at the R&D level will help us to accelerate the BioFun-6 as I said, and to go faster towards the targets and the new mode of action that we are looking for. We believe now that this -- the third generation of Evoca will basically have the potential that we originally outlined for the BioFun-5, Sebastian which means that the program that we have pushed into development, which is called second, third generation of Evoca, sorry, will be the replacement of the BioFun-5 in terms of the potential. And that's one angle of your question. The second angle is that, if you think about the costs, I wouldn't say the cost savings, but the cost that we can transfer is that, would we have promoted BioFun-5, the way we have with our lead candidate today, we would have had to go through the entire process of regulatory, and that's, that would have been another hurdle in terms of the cost moving forward from today to 2026, 2027. By pushing BioFun, the BioFun-1 or the Evoca third generation into the pipeline, we can rely on an existing process for the regulation, which will be much faster and much cost effective in terms of bringing these products to replace the original [ dose ] BioFun-5. So that's -- on that angle, they are the cost of regulation mostly that will be supporting the second and the third generation of Evoca instead of the BioFun-5.

Yes. So on the first question, just help me if I didn't 100% understood the question. But -- so the burn, of course, the burn rate will be, as I said before, related to, of course, the extension of our pipeline, the progress of the pipeline. The bulk of it, of course, will be, let's say, concentrated on Evoca-1 and the first -- the second generation, the third generation. Of course, the salary and cost will absolutely increase because we have increased our number of people in '21. And of course, now we have the full impact of the increase of these teams. And of course, the manufacturing, again, for Evoca, that's what we can say about, let's say, more details on the cash burn. I don't know if this is...

I was moving -- I appreciate you may not be able to guide specifically for this, but how much do you think general and admin? And how much do you think R&D costs are going to be up in the year?

Well, yes, I would say it's -- I would say it's spread, it's essentially -- the biggest important jump, of course, if you look at the increase is, of course, in the R&D. The most important part will be in R&D. And of course, there will be a limited increase in the G&A because, of course, in the G&A, we had also the IPO costs, of course, in '21.

That's understood. Just for the quick last question then. Am I right in saying that the only revenues you would be expecting are substantive ones for 2022? Is it a $1.5 million or $2 million of the black -- black-eyed peas products being developed with the Bill and Melinda Gates Foundation? Is that literally just put $1.5 million or $2 million in the model? Is that right? Or...

Well, we do not give, let's say, details per project, very sorry, because, of course, if we -- yes, if we would start doing this, of course, then we have to give a lot of details, let's say, on where the expense in the pipeline is going to.

What I can say, Sebastian, is that we continue to seek for non-dilutive funding with different European opportunities with different local opportunities as we know. So it's also another approach from our side to be able to capture some additional non-dilutive funding from these elements.

Perhaps if I might rephrase the question. Will the sale leaving aside this grant revenue from research projects. Is there any reason to assume that sales might be a non-zero number in 2022?

Sales, on Evoca, you mean.

No, the sales of Biotalys as a group.

Well, the sales of Biotalys as a group, we will launch Evoca as a market calibration product, let's say, at the end of '22 at the end of this year. So the impact this year, of course, will be, yes, let's say...

So we have a number of questions on the webcast as well. I'm going to read them and to -- and so that everybody can follow. There is one question from Guy, around the product pipeline with the breakthrough increase in production level of Evoca's active ingredients and the type of cost reduction that is necessary and do you see for BioFun-6 as compared to BioFun-5. It's a great question, Guy. So remember that the breakthrough that has been achieved is achieved in the current model, which is the [ pikia ] model, as we communicated, which is the yeast fermentation that is ongoing. For the BioFun-6, we expect to be able to leverage another type of platform that we are currently exploring both internally and with partners that will allow us to go to, let's say, an additional level of production mechanisms than the one we can achieve with [ pikia ]. So that's going to be above and beyond. Today, I would not give any specifics there, but we expect to be able to play in a different manufacturing platform. There is another question from [ Andrea Gelone ]. Considering the recent market [ turmoil ] fertilizers, et cetera, do you see more potential and/or partners interest in Biotalys products going forward? It's a great question. It's very recent. Of course, we see the fertilizer and the chemical pesticide as well as the oil price going up. Everything that is oil based moving forward is going to be hardly impacted for the, let's say, the foreseeable future. And of course, any products that is obtained by fermentation has the potential, even though they will be -- we will be impacted as well to a certain extent, has the opportunity to become more attractive as we move into that market indeed. It's very early to fully answer this question, but it's a good question for the future. The question from Guy on -- as I mentioned, the Evoca 3.0, thank you for shortening that up for me Guy, replacing the BioFun-5. Yes, it is absolutely true. The -- I'm reading the question. If you compare your current view on Evoca 3.0 versus BioFun-5, at the moment, we did the IPO, how much more efficient, cost efficient, lower cost to produce it? Is Evoca 3.0 compared to what you projected for BioFun-5? It's better. That's what I'm going to say today. The projection are getting to a point in terms of time that is better than what we anticipated for BioFun-5, but it still needs to be proven at large scale, Guy. So that requires another, let's say, a couple of months for us to feel purely comfortable about the market potential. And that's what we are working on right now to really assess the market potential of the Evoca 3.0, as you mentioned, as compared as the BioFun-5. It's a great question, Guy.

And the last question, Guy. Well, I think we already gave the answer, even, the question from Sebastian was, in fact, related to the same topic. And as we said, of course, the bulk, of course, is related to related to Evoca, the 3 generations. But more than that, we cannot give -- sorry.

Nadia, are there any more questions on the line?

There are no further questions over the phone at this moment. [Operator Instructions]

Okay, Nadia, if no further questions, we're going to finish at this stage. And I would like to thank all the participants for joining us this afternoon, and I'm looking forward to becoming better at doing this exercise as we grow the company in the next years. Thank you very much. Enjoy the rest of your day and your weekend.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day. Take care of yourself.

Bye.