Biotalys NV (BTLS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Biotalys Full Year 2022 Results Call and Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to hand over to your speaker, Mr. Patrice Selles, CEO. Please go ahead, sir.

Thank you, Ravi. Good afternoon, good morning, everybody, and welcome to the 2022 financial results and business highlights of Biotalys. Today, it's my pleasure, Patrice Ellis to drive you through the slides together with my colleague and CFO of Batali motor -- on the agenda, you can see that we will drive you through an introduction about the current situation in our industry. The full year highlights that you may have seen in the press release that was issued this morning around Evoca, the pipeline and some corporate news. We will talk about the regulatory updates that we have shared with you as well and the financials for 2022, helping us to see the outlook and the future development of the organization as we move forward. We will also be supporting that call with Toon Musschoot, who is our Head of IR, and we'll take your questions in the next stage of this presentation. The crop protection market has grown around 6% in 2022. This is an unexpected growth level, especially in the context of the industry in 2022, the War in Ukraine, the different climate situation that we have seen all over the countries. And there is a balance between this growth in terms of volume, but also the growth in terms of, let's say, exchange rates, the impact on the exchange rate and, of course, the impact on pricing, which is yet to be determined. But this brings the industry at a level of the total crop reduction industry at a level of EUR 70 billion for the year of 2022, which is not only benefiting for the usual chemical segment, but also for the biological segment. And we see the growth during the course of the next few years. with a CAGR that is outperforming the chemical business and bringing the overall biological segment at around EUR 7.7 billion by 2025. This is, of course, driven by the demand from the industry from the consumers, the current situation in terms of the regulatory and the ability to go faster to the market with biologicals, the safety elements, of course. And what we see, which is quite interesting for Biotalys as we continue to develop is that the fruit and the vegetable segment is not only attractive for biological but it's also a driving force where the demand for biological is the most important were Biotalys with its pipeline continue to play -- hope to play a key role in the future. Another element in our industry to take into account is the maturity level towards novel opportunity and consolidation space. We have seen with multiple reports. In that case, you can see the Verdant reports on M&A in 2022. The fact that companies have been very active in the -- in our segments to get access either to market shares, the like of what Corteva has done through the acquisition of [indiscernible] Stoller in different regions or technology access like what has done together with Bio Ferro in terms of fair hormone technology access. And we see that both in the time technology side as well as the biological side where we play a role as Biotalys which is positioning the technology that we offer in terms of sustainable, highly efficient biological as a very exciting, let's say, positioning for the future of our industry. Within this context, we have continued to make significant progress around the development of our first biofungicide, Evoca -- we have done more than 600 field trials over the last few years, mostly to demonstrate in multiple regions, multiple crops, the continued performance on par with the senate chemicals that we have been able to bring in integrated pest management program with this biofungicides. This product is, as you may know, focusing on contact activity against arthritis and [indiscernible] just are 2 key diseases in the field of fruits and vegetables, especially around strawberries, grapes, tomatoes, cucurbit, et cetera. And this is where we will start and initiate the market calibration around this product as soon as we have the regulatory approval, both in the U.S. and in Europe, which are currently ongoing, I will come back to that in a few minutes. In 2022, we have obtained a novel classification by the frac around the mode of action for Evoca. This is really exciting because over the last 10 years, all industry has been able to obtain only around 3 novel motor factions in 10 years. This ability for us to get this new classification only board demonstrate the potential of the platform and the ability to identify novel modes of action to complement or to replace the one that exists today. And this is critical for the growers to get access to new tools to fight against resistance and help to protect the crop better than we can today. We know that Evoca is also convenient and reliable for the growers. They don't need to use anything else that they are using today, which is helping them to basically use Evoca in a very complete manner, the same way they would use their former chemical pesticides. We have also demonstrated the continuous effort and impact on such a product, which is a biological biodegradable in terms of being able to reduce the amount of chemical residues that really consumers will find on our fruits and vegetables as we are applying these type of products. The significant progress is also driven by the efficacy and the uniqueness of the product. I will come back to that on the next slide to show you how unique Evoca is as compared as other biologicals. We have been able to come with strategic partnerships, being able to work with Alon in Italy for the manufacturing of our product, Evoca as we come closer to the market calibration, but also with [ Kuidagro ] for the formulation and the packaging of the product as we get to that turning point of getting this product into the hands of the growers in the short term. We have also worked with Novozymes. We have announced that in the course of last year for a feasibility study, demonstrating that some technology that is currently available to Novozymes allows to accelerate cost-effective ways to further scale the manufacturing process, which is important for Biotalys as we are targeting to have a full commercial version of Evoca by 2026, both in U.S. as well as in Europe. At the same time, our team has been demonstrating significant in protein expressions of Evoca and I'm really proud about what we have been able to do to continue to develop our tool kit our platform, but also to prepare for the future generation of products that will come after Evoca. And last but not least, of course, Evoca has received the World BioProtection Award for 2022 for such an innovative product getting to the market. Just one example in terms of field trials. This has been originated in 2021, but has been replicated in 2020 on multiple locations. And it's about the ability for Evoca to control botrytis on bunch roads. You have an example of what it can look like on the slide on the left-hand side. And when we basically replace the first treatment in rated best management program for [indiscernible] rotation with Evoca, we have demonstrated that we can have an our rote as compared as the full chemical rotation. This is quite unique in the sense that usually biologicals are being used at the back end of the season and applied Evoca a flooring seems to provide growers with an absolutely clean starts at the foundation of the IPM program. This is really good because it demonstrates not only the potential and the power of the technology in terms of control, but also in terms of unique positioning as compared to other solutions that are today on the market. And we are very proud about the work that has been done to get us to that point. Further field trials are continuing as we get the products to the market during the course of the year, hopefully. But Evoca is only the first, as you know, from the pipeline. And as we move towards some of the key points in the existing programs, we're seeing some progress in the Biofene 6, which is the follow-up generation of Evoca addressing and targeting development stage in the course of the year with novel mode action that will again differentiate from what Evoca can do and how to use these 2 products in synergies. Our flagship program with the Belle Meade Foundation towards small holder growers is also progressing, has been initiated in 2022 and continue to be highly supported by the gate from the formation. We have started the Biofene 4 fully now with the project plan as very early in the course of 2023. And we continue to have the bio bactericides and the bioinsecticide helping to develop the platform around additional indication beyond fungicides. We've seen some progress in the 2 programs, and especially in the bioinsecticide with binders for insect targets. This overview of the innovative pipeline is quite exciting for us today as we see the development, and we continue to work with our partners in relation to novel programs that we are targeting various patent disease in different crops are being explored to complement this program today and to be able to continue to capture more value as we get through the market calibration with Evoca, generate the demand for this technology and allow us to really position in the best possible way the future generation of our product, both on the fungicide side, but also on other indications. From a corporate update perspective, I'm very happy to share that we have been able to strengthen our team, both on the board level as well as on the scientific leadership of our organization. Mr. Michiel van Lookeren Campagne was appointed as independent directors earlier during the course of 2022. And of course, with the executive team, we have been welcoming Carlos Boto as the Chief Scientific Officer for Biotalys since May 2022. And with this support as well, we have established reestablished a novel scientific area committee, bringing on board new capabilities, new scientific and technical capabilities to further support the development of Biotalys with the name of Claude Hans Jorgen and Janis, who joined this committee as per the press release that we had later in 2022. We have also received some news related to the regulatory time line for Evoca in the U.S., as you may remember, the dossier was submitted in December 2020. We have received the completeness check from the EPA. We have had a number of discussion with them and provided all the data and all the information that they have requested from Biotalys so far. The EPA has recently informed us that they need more time to review our dossier. And as a consequence, we now expect to have the EPA regulatory approval around Q3 2023. This is mostly driven by 2 key factors from the EPA. As per our understanding, the first one is related to the amount of those seals and the limited resource currently in the hands of the DPA. The second one is also because of the innovative nature of our technology and the willingness for the EPA to have a thorough review as the very first product, Evoca is paving the way, as you have seen for the future generation of products that are coming from our pipeline. Of course, this has no impact on the future financial projection for the organization and especially for the Evoca commercial generation that will come in the market by 2026, and we continue to have the same time line related to this next generation of Evoca and the value and financial impact that it will have for the organization. In Europe, we see also some challenges in terms of dossier, let's say, and timing of approval. The same applies is that the [indiscernible] in the hands of the different regulatory approval, and we are working at different levels in Europe, especially to make sure that we can accelerate as much as possible with the CTV that we are working with, which is our member state, but also with other instances at the European level that are helping us to bring this new technology into the hands of the growers, especially in the context of the Green deal. -- it here doesn't change again our plan for Evoca launching as a commercial product in the Europe as well in 2026. And then we reached the level of the financials. And for that, I will hand over to Wim Ottevaere, who will be much better at going after that.

Thank you, Patrice. So yes, let's briefly now analyze the '22 financial results. The top line operating income increased, as you can see, and this is essentially related to grant income from the Belle Meade Foundation that you already mentioned and also some R&D tax incentives. If you look then at the R&D increase 2 with nearly EUR 5 million, and this is mainly due to the production of Evoca the product and also, of course, the extension of our pipeline. GE increased very slightly, and the marketing expenses increased. Of course, I would say, in preparation for the anticipated launch of the market calibration for Evoca. And this -- all of this brings us, of course, to an operating loss of EUR 22.5 million. An important number of cars for a company like ours is the net cash outflow. So as a consequence of all the investments in our intercompany the cash burn in '22 increased EUR 22 million sold last year. At the end of '22, we had 35 EUR 32 million at the bank. And for us, this is a comfortable position, in fact, to continue, let's say, our development of the platform, but of course, also to initiate the market calibration of Evoca -- and then the next slide, we see the overview, an overview of what we plan to do in the first half of this year on investor events. As you can see, we will be in San Francisco. We will be in New York. We clearly want to meet their institutional investors, of course. But of course, on top of that, we set we will also continue to connect with the ad tech players in our field. That is also absolutely very important, as you probably understood from what Patrice has been saying. Besides this, of course, we have locally in get a number of events for the retail shareholders. And I would especially mention our shareholders' club, where we meet people in the offices, in the premises in Gent and that, again, will happen on May 11 this year. And with this, I hand over to Patrice for the final summary.

Thank you, Wim. As a summary, I would like to share with you that 2022 was a great year for Biotalys and we have achieved quite a number of key milestones for the company that have been fully in our control, and I'm very proud about what the team has been able to deliver both for the growth of the organization and also for the continued support that we have from our shareholders. Ahead of us, we have quite a number of key elements -- and of course, the approval of Avoca in the U.S. is paving the way for us to accelerate the development of the organization, as you have certainly understood, and we are eager to get to this regulation and continue to work very actively with the EPA to make sure that we will not -- we will get this approval as rapidly as possible. We want to initiate this market calibration, get as close as possible to the growers, ensure that the product Evoca is being tested in this uniqueness by the corresponding growers that we will select and work with. And of course, together with our partner, Biobase with helping us to enter the market in the first instance with Evoca. The next generation Evoca, you have seen both with Novozymes, certain work that is being done together with this company, but also with the work that we do internally. We want to make sure that we accelerate and continue to develop towards the commercialization. And finally, continuing to focus on the manufacturing cost reduction through internal capacity and key partnerships to accelerate our profitability access. On the pipeline, it's clear that we want to develop existing program and add new proof of concept for other programs beyond the Biofene VI and partners with the industry leaders as well to accelerate the biplane development. You've seen that a number of new opportunities have a reason for us. You remember that the foundry, the Aboody foundry can, of course, be leveraged to secure strategic crop protection R&D collaboration as we expect we will be able to deliver during the course of 2023, but also to expand beyond the current crop protection in food protection markets, post-Sare and the like to be able to work with the industry players in the downstream food value chain and support the fight against resistance and food waste and loss. At the same time, we continue to look at selective partnerships, acquisition and licensing of technology to complement our capabilities and create the scale and the value that Biotalys can reach in the next future with the full development of the technology and the support of the entire team. And with that, I would like to leave the stage now for the different questions that we will have. And I think we will hear from our colleagues to see how the questions will be brought to us both from the one written and the one that will come from the phone.

[Operator Instructions] We are now going to proceed with our first question and the questions come from the line of Christian Faitz from Kepler Cheuvreux.

Patrice and Wim, 2 questions actually, mostly financial because everything is straightforward on your pipeline and congrats on that. And I wish you all the best for the EPA approval of Evoca. But in terms of R&D expenses, what is your expectation level for this year versus last year? And then the second question, given that your financial runway lasts probably into mid-2024, as you flagged, would you consider an additional financing around at some point in the second half of this year? Or would that rather be an early 2024 event?

Thank you for these questions. I probably put it you're expecting to answer these questions, of course. So the R&D, in fact, it's a very good question, and you have seen in the press release that we have said that our burn rate of EUR 22 million for '22, that in 23 million, that will be slightly higher. So we do not give an exact number, but it should be slightly higher. So that's what we, let's say, can say about that. And this is, of course, if you look at the cash position at the end of EUR 22 million, EUR 24 million. And if you then know that the burn rate will be slightly higher, let's say, slightly higher than 22%. So you understand indeed that we have a cash runway until the first half of '24. Coming back then to your second question. Well, you know I've been in the industry for more than 30 years now. So I know that a company like ours should raise money, of course, you don't really need it. And if there is, let's say, a, let me call it, an event where you can do it. So as soon as we can, I would say we will not hesitate to raise money. And so probably that will be on the back of, let's say, a catalyst event as we call it. But of course, I cannot more be more precise than that at this point.

We are now going to proceed with our next question and the questions come from the line of Alycia Samsudin from Berenberg.

I've got a question about your commercial relationship with Alon. I'm wondering how the diffs from that between you and Novozymes given both our experts and fermentation.

Alycia, thank you so much for your question. We have engaged with Alon in Italy for a long time, and they are a privileged partner for us, but it's based on a nonexclusive basis. So we are, of course, working with them to have access to both capacity and capabilities that we needed in order to be able to bring Evoca to the first stage of the market calibration. Since then, of course, we have developed a relationship with Novozymes that are for now exploratory relationship. We are working with them on the feasibility study first. And we have been successful last year. And now we are working on more development studies in terms of fully exploring the potential of their technology and their willingness to work with us also in the future because of their presence in the agricultural sector. So the 2 relationships are quite different and offers Biotalys different options. We are very glad to be working today with Alon. And we believe that, indeed, in the future, for the future generation of products, Novozymes may become a partner of choice. But again, the exclusivity has never been in play together with one or the other. So we continue to work with both of them. I hope that answers your question.

[Operator Instructions] And the questions comes from the line of Christian Orquera from First Berlin.

I have 2 questions, if I may. The first question regards the time that evokes the longer time that Evoca has taken to -- for the U.S. agency to have the product approved. Is there some more information that you've received from them regarding some background why they are taking them longer or it's just really an issue that it takes them just long to review the whole this year? And the second question is you mentioned that this has no impact on the launch of the second-generation product in 2026. So would it be then right to assume that you are expecting that the agency will be so familiar with the product that in the second-generation product, they won't meet that much time to review it.

Thank you. So much for your question. These are excellent questions. So as I mentioned previously and as we outlined, the additional time that is requested by the U.S. EPA is mostly driven by 2 aspects. The first one is the challenge in terms of the resources that the EPA has to look at many, many doses that they have currently. And then as a consequence, this is an entire industry challenge. It is not Biotalys or a book. It is a full industry challenge to basically push to get more resources into the hands of the EPA and the Star, by the way, for them to be able to review the required dose. On the other hand, as you alluded into the second question, Evoca being quite an innovative product, the EPA wants to do a thorough review. And while the -- we plan to follow the, let's say, the guidelines that are given by the EPA on registration, they require a bit more time to review the dossier in its, let's say, full view. They have not asked us any additional questions so far, so we are confident. And as a consequence, with these 2 elements in place, we believe indeed that once this technology will be known to the EPA and to the EBA while it may not fully accelerate and of course, depending on the resources allocation in the future for these government entities, we expect that the first product will basically pave the way for the future duration and make that easier, but maybe not faster for the next generation to come. What we see, of course, is that, as you know, the next generation of commercial products, which is the Avoca commercial is also based on the same active ingredient. And as a consequence, we expect that it's not a full registration that would be required at that time, but getting the equivalent with the former obtained registration level up. I hope that helps.

Yes, we have one question on the webcast from Sips from KBC Securities. I'll read out the other question. At the moment of the IPO, it was expected that Biotalys would bring 2 new pipeline products per year into the discovery phase from 2023. Is this time line is still valid.

Thank you, Toon, for bringing this question to us. I think, yes, this time is still valid. We have seen in the evolution of the pipeline that we have started initiated by von4, which is an all-meat product in the course of 2023. And we expect and we are working on other programs and during -- for start during the course of 2023 with partners as well as with our own resources there. So this is still the time line that we have in mind. And of course, not everything is planned to be successful, but that is the plan at least to start 2 program per year to be able to feed this innovative pipeline and to maintain the development of the platform as per the plan that we have.

Any further questions from either the phone or the lines that you have to.

We have no further questions from the phone lines or the webcast.

Okay. So without any further questions, I would like to thank you all again for listening to the Biotalys webinar today. Wish you a very good day, and look forward to meeting again during the course of the year. Thank you.

This does conclude today's conference call. Thank you for participating. You may now disconnect your lines. Thank you.