Biotalys NV (BTLS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Biotalys Half Year 2023 Financial Results and Business Highlights Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Patrice Selles. Please go ahead.

Thank you, Nadia, and good morning, good afternoon, everybody. Thank you for joining us for this half year results presentation. And I'm very glad to be here today for the first time with Douglas Minder as our CFO since the 1st of July to present to you the results for Biotalys, of course, that we will review together the corporate updates and some financials that will be covered by Douglas at the end of this presentation. If we first look at the crop protection market, in the first half of 2023, we can see that after a successful year 2022, the majors that are called as BASF, Bayer, Corteva, FMC and UPL in this summary are now being hit by a correction that is going not only on the volumes, but on the revenue from 15% to 30% on the volumes to 10% to 30% on the revenue side in terms of the market challenge. This is linked to the production that has changed the volume, the inventory that have, of course, driven their results really down. When we look at the biological side of the companies, we've seen some impact as well in this first year, notably for smaller companies, the like of GreenLight delisting from the U.S. NASDAQ, but also some investment that is still ongoing while being more selective than it used to be in the past. As a consequence, we can certainly say that Biotalys has been able through the delivery, the support from our external shareholders to build and continue to build the resilience in this market. That is for this first half of the year quite challenging. At the same time, we see that the need and the demand for safe and sustainable agricultural products remains very high, and a number of companies continue to be very active in that space. When we position Biotalys beyond the mainstream products that we know that exist today on the market, the like of microbials, plant extracts and pheromone, we are coming with this innovation and get closer to the market acceptance that will allow us to become mainstream and to enter into these markets with a higher potential because of the value that products like Evoca will bring into the hands of the growers. So we are very excited about what's coming ahead of us. If we look at Evoca, to start with, we have shared a number of good news. You know that Evoca is our first biofungicide coming from our platform, and we have demonstrated, of course, the performance on par with the chemical pesticides. The fact that we have shared also over the last 18 months that this is a new mode of action that is complementing the tool kits of the growers highly demanded, especially in the area of botrytis and powdery mildew application [indiscernible] amount of resistance that is significantly impacting the growers. The convenience of these type of products that is basically fitting the requirements from the growers and at the same time, enhancing the safety for the growers, the applicants in the crops that we are going to look into, which are crop fruits and vegetables, mostly strawberries, wine and table grapes but also expanding into tomatoes, cucurbits and others. We have also demonstrated some results that goes beyond being just on par with chemical pesticides. And I'm very, very glad to look at these results that we obtained in botrytis control in grapes where we demonstrated that we can replace not only products that are being used at the end of the season to limit the amount of chemicals that are being used as we come closer to harvest, but also that we can replace effectively with Evoca, the very first chemical spray that is being used at flowering that contains 2 chemical active ingredients and outperform this chemical approach with the use of Evoca in the first instance. This is pretty much unseen in the context of the biocontrol segment, and this is allowing us to position our product very competitively into the hands of the growers as soon as we get the registration for Evoca. Beyond the strength of the field trial results, we are also expanding, as we mentioned before, into other crops, the like of hemp and blueberries. We are preparing the market calibration in the U.S. together with our partners, BioBest, Beck Ag. And from a production perspective, we have also demonstrated, again, the ability for us to increase the rate of production of Evoca decreasing de facto the cost of application, the cost for the growers and at the same time, increasing the ability for us to get higher margins in the future. At the same time, as you know, we continue to work with partners, including the one like Novozymes, to continue to demonstrate and to reach cost-effective methods to the manufacturing process and better processes overall to get these products to the market with the highest possible return for Biotalys. On the regulatory process, we have been able to continue the discussion with the EPA. And while the EPA has changed their operating procedures in terms of the times that they are providing to the applicants, the like of Biotalys, we continuously work with them to be able to fulfill any requirement that they may have in these final steps of the process. We are also working with other U.S. agencies, the like of the CDPR, the California equivalent of the EPA, with whom we are also developing the registration for Evoca, and we are here on track as well, and that will work, of course, just after we obtain the EPA approval. We basically are focusing right now on putting all the efforts to get the market calibration ready for the course of 2024 when we can get into the hands of the growers with our product as soon as the EPA has validated the approval for Evoca. All in all, this doesn't change the target for the commercial launch of Evoca that is coming into 2026 that we are expecting both in Europe and in the U.S. at the same time. In Europe, we continue to have, again, a positive engagement with the regulators. We also have been able to receive a very interesting approval for the commercialization of cucumbers that are raised in glasshouses and that are being protected with Evoca that can be used in a commercial environment. This is quite exciting for us because at the same time, where the CTGB -- our authorization -- authority in the Netherlands, is looking at our full dossiers, they are also allowing us to use Evoca under commercial instances, and this is very positive for us to be able to apply these products with growers and to see the difference that it can make in their hands. We still expect in Europe to get the approval in the course of 2025. Beyond Evoca, we have also entered into a partnership with Syngenta a little bit earlier this year, which has been an extraordinary validation for the scope and for the application of the technology, the AGROBODY technology that we have in our hands. It allows us to go beyond what we have been able to do and of course, to be on the shoulder of an organization that has got a means to develop and to enter into the market in a different way than Biotalys has. We are working with them together on their proprietary targets in the insecticide segment, and we expect to be able to accelerate the ability for us to bring these type of technologies into the hands of the growers, where in the insecticide segment as well, we see a lot of challenges with existing products in terms of their potential negative effects, but also in the resistance, the growing resistance that is having an impact on the revenues from the growers, but are also on our ability to grow the food that we need on annual basis. And that's where the management of this resistance is quite critical and new technologies, the like of what Biotalys can offer to Syngenta and to other players, hopefully, as we move forward, will help get to more sustainability in the approach that we have in agriculture. When we look now at our pipeline, we are looking at a number of programs that we still have in hand. We have discussed about Evoca, the application of Evoca as a market calibration segment coming as rapidly as we get the EPA approval and then in 2026 as the commercial product. And we have also the progress that is taking place with the BioFun-6 program, where we have -- we are reaching, as we mentioned to you previously, the development phase and betting on a broader spectrum still for the high-value fruits and vegetables. We are sharing with you in this recent press release that we have decided to pause the BioBac program. We want to be able to focus on the fungicide and the insecticide program in the current terms to manage our investments, but also to be able to allocate our resources where we believe it creates the most value for Biotalys. On the BioFun-4, we have initiated at the beginning of 2023. This is one of the latest program. The target for the profile is now in place, and the teams are working into the first steps of this program. And at the same time, the program with the Gates Foundation, which is called the BioFun-7, continues as planned, and we are at an exciting step of the lead identification stage where the team start to see the first impact and what they can deliver there. The bioinsecticides, the first one that we had in our hands is we are looking there around the validation of potential binders to insect targets. And the second one that we just mentioned around the partnerships with Syngenta is being initiated as we talk. Now another key success that is very important for Biotalys is the ability for us to demonstrate that from a manufacturing and a platform optimization perspective, we can make these products available and not only affordable, but also effective and available for the growers. When we started with Evoca in 2021, we mentioned the production costs were not fit to meet the growers demand and the market demand, generally speaking, as well as the intermediate players such as the distributors. Since then, through a number of internal and external activities, we have been able to demonstrate the production efficiency, optimizing the processes that are being used that are food-grade processes for the production of Evoca and at the same time, with strain engineering, protein expression, being able to improve the level as we have shared with you in press releases, helping us to decrease significantly the amount of the cost of production. The economy of scale also with partners has allowed us to look at different run level and also a different model to be able to get us into further cost reduction. And then the other aspect of the platform is the ability for us to select for more effective proteins, not just for Evoca but for the future as we move forward, being able to reduce the rate that will be required for the application of these type of products. All of that has brought us today with the ability to have a product in 2023 that is fit for purpose for the high-value fruit and vegetable market. And as we move forward, we see that further efforts, again, with the key partnerships that we put in place and the capabilities that we have established on our platform, the ability for us to reach broader market segments that are required for programs, the like of the one we have in our pipeline, including the partnerships program that we have with the Gates Foundation and with Syngenta. On the corporate side, you have certainly seen that we have raised an additional EUR 7 million in the pipe in June, and linked to that, of course, the appointments, the recent appointment of Patrik Haesen, the CEO of AIF, as a new Director from yesterday -- sorry, from Monday. And among many of the roles that Patrik has into the ecosystem in a number of a AgTech companies, he will be able to support further and to bring some additional know-how into our Board of Directors. And also today, I'm glad to have with us Douglas Minder, who, as you know, has been with us for many years already, but was promoted as CFO at the beginning of July as we saw Wim going on retirement, and I'm very excited now to leave him the next few slides to share with you the financials around the Biotalys.

Thank you very much, Patrice. And happy to be here with you as well. I'd like to give you some insights into the financial statements that we've had for the first half of the year. We continue to take benefit from several different grants that we have from the Gates Foundation, VLAIO and others and are also splitting this other income with different R&D tax credits that we are able to access here in Belgium from the research environment that we are in. For the R&D costs, we continue to invest heavily in this area. We're focusing our efforts on our pipeline development and also our platform development as we go towards the future, wanting to look to better data in the future and better products. And we're spending a little bit more this year than we had last year, but that is definitely the focus of our investments in the company. When you look down towards the bottom, you can see the net cash that we used. And this period, it was only EUR 2.2 million. So if you look back to where we were at the beginning of the year, we had EUR 34 million in the bank, and we still have just under EUR 32 million today. So we had a net cash outflow, thanks to the impact of the EUR 7 million pipe that Patrice mentioned just a slide before. So thanks to that, we only had spent EUR 2.2 million. So we're financing most of the efforts for the first half through that extra investment in the pipe. Okay. So that gives us a good funding throughout the rest of the time for the calibration of Evoca and the continued development of the pipeline. As we look towards the upcoming investor events and where you can find us, we continue to work quite well with our banks and other partners as we go forward, making sure we have plenty of opportunities to meet with investors in a variety of settings. As you can see here, we're everywhere from London to New York to here in Ghent and Paris, also in a digital format, meeting in different kinds of environments. So we want to try to meet with investors as much as we can. And we're really focusing our outreach efforts on the food and AgTech meetings and making sure that we can see the types of investors that are really looking to join us on our track for the future. And with that, I hand back to you, Patrice.

Thank you, Douglas. To finish this call, I would like to look a little bit at the outlook and the summary of what we are focusing on. As you've seen, we continue to create value with some of the activities that we are doing in the organization, our pipeline, our platform, our partnerships. And when we look at the key steps ahead of us that are getting closer, we look at Evoca, of course, the obtention of the approval in the U.S. to move on with the market calibration we are currently planning; at the same time, the progress with the commercial generation of Evoca that will really make a difference and transform Biotalys into a commercial organization as soon as 2026; having -- being able to leverage whatever we will be able to do between now and then in terms of creating the demand and the excitement around the product in the market; and of course, the key points that we work on, the continued manufacturing cost reduction because more cost reduction in that -- in these couple of years ahead of us means more margins and more value creation for Biotalys as we move forward. On the pipeline, you have seen we are progressing quite well. We have decided to be more selective and focused on the highest value program on one hand while trying to accelerate with the resources necessary on the other hand, the other program, and of course, BioFun-6 coming into play to replace what we have done with Evoca as Evoca is coming into the commercial phase. It's not only about what we do internally, but it's also about how we can leverage our foundry platform. The example of Syngenta is really critical for Biotalys to create value. We want to leverage our platform and to secure further strategic R&D collaboration because it is the validation and it is what the industry need as well to be able to answer the demand from the growers and from the consumers in terms of safer and more sustainable alternatives. We want to upgrade our platform capabilities as well and be able to come with products that will be more efficient and more competitive with the existing chemical solutions in the future. That is our main focus and being able to leverage, let's say, more strategic partnerships as well, looking at what can we in-license in terms of technology to complement not only our capabilities, to create a larger scale for Biotalys, revenues and, of course, increasing the value that we can look at. And with that, I would like to stop this presentation and look at the question and the answers that you may require after the discussion that we just had with you.

[Operator Instructions] And the question comes from the line of Christian Faitz from Kepler Cheuvreux.

Welcome, Douglas, in your new role. Two questions, if I may. First of all, can I ask what has led to the pausing of the work on the biobactericide? Is it the current lack of resources you have and as you mentioned, your full focus on the fungicides and insecticides? Or is it also early trial results that were not that promising? And my second question would just be in terms of modeling, how can we model the year 2025 for Evoca? I know that market calibration is happening in 2024, if and when it is approved, and then the commercial launch in 2026, but will there be a bigger ramp in 2025?

Thank you, Christian, for the questions. To address the first one around BioBac, I think it was -- it is very clear for us that if you look at the potential value around BioBac today from a market perspective, it was more of, let's say, an orphan market that we wanted to go after because there are no solutions there. But it is more challenging. It's a space that is definitely more challenging and requires more resources to be able to be successful. Hence, for now, we are pausing in the context of being able to reinitiate that once we would, for example, Christian, have partnerships around that, that could really augment our capacity to deliver in that space. And at the same time, as I explained previously, we need the resources to be able to deliver the most, let's say, exciting programs that we are working on and the most valuable programs that we are looking into. So that's the drive around pausing the BioBac right now. On the modeling side, I think you have to understand that the market calibration is just not 1 year and then we stop everything. We have -- we know how to produce Evoca. And in our minds, this is -- there is a continuum between the very first stage in 2024, where we're going to start the market calibration, up to the time where we're going to get to the 2026 approval for the new program. And that will be the entire market calibration. So there is no 2025 as an independent year. In that context, there are a lot of things that will happen. We know Europe is one of them. But at the same time, we expect to have a continuity in the U.S. in terms of serving the growers and helping them to demonstrate in view of the commercial launch, the impacts that we can have with Evoca on their own activities.

[Operator Instructions] And the question comes from the line of Guy Sips from KBC Securities.

My question is on the expected news flow. What kind of news flow can we expect in the coming 6 to 12 months? And now with Evoca's, let's say, delay or uncertainty around that, what other kind of news flow can we expect from Biotalys?

Thanks for the question, Guy. As I mentioned to you, so the EPA, on that radar for 6 to 12 months. The EPA approval remains from our perspective on that radar. Of course, it's just that without further guidance from the EPA, we won't give an exact date. But we are strongly pushing and doing as much as we can together with them to get to that window. We discussed about the pipeline progress, Guy, and BioFun-6 in that aspect. I think this is also, for us, another key validation as you can imagine, for the platform to be able to have the second product coming into play. That's really an important one. We have -- we are looking at further partnerships. As we discussed already, we have the ones that are linked to the platform, the R&D deals, the one that we -- that you know well, we have done with Syngenta. And we are in discussion with other organization with whom we expect within this frame of 6 to 18 months to be able to get to further implication. The EPA approval will also be a positive catalyst around that in that context. And the other aspect is on the manufacturing side, in fact, where we look at partnerships. You know we are working with certain partners. We are looking at others to be able to, let's say, supplement what we are doing. So there is an area there. And there is the commercial aspect also as we come closer to 2026. At the end of the day, we will need to make a call in terms of our true commercial partner globally. That's another element that we are looking into, Guy, and potentially, expansion of the product into some other regions as well as we get to know better what we will be able to do with Evoca. So quite a number of elements that are coming to create the value inflection points there. That hopefully will maintain what this organization has done since its IPO is to be, let's say, delivering with its technology into the market, but more, of course, on to the commercial side.

And on the R&D collaboration, let's say, news flow, what -- where is the priority? Is that on new products, new -- for the existing products, new partners? Where is the priority in the R&D collaboration?

It's a great question, Guy. When we look at the pipeline, as you can outline, we have multiple options in terms of creating value from the platform. The first one is what we've done with Syngenta. When, as you said, it's a new partner for a new program, and that's really what we believe we can look for. Because at the end of the day, if another organization is coming to us with the challenge that they have, where they believe that our technology can address that, this is what we are looking for, Guy, because it creates a momentum around what this organization needs specifically. So that's one way to go. But also in terms of, let's say, working together on our existing pipeline with partners out there is also an option that we are looking at. And that can be new partners, that can be existing partners, Guy. And that's also something that we would be able to monetize and for which we would be able to create value and revenue for our organization before we do from the product themselves. So this -- both of these ones are quite exciting for us as we move forward.

Thank you. Dear, speakers, there are no further questions. I would now like to hand the conference over to Patrice Selles for any closing remarks.

Very good. Thank you, Nadia. Thank you also to all the participants that were with us today, to Douglas and to Toon, who has been our IR manager, who has been behind the scene helping us to set up that conference call. In case you would have any further call, we stay and we remain, as you've seen, present with our bank partners and our investors in the next few months. And we look forward to the next call with you in the near future. Thank you very much. Enjoy the rest of your day.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.