Biotalys NV (BTLS) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to this webcast today following our press release earlier this morning. I'm here today at our headquarters in Ghent, together with our CEO, Kevin Helash, who joined us in early October; CFO, Douglas Minder; and our Chief Scientific Officer, Carlo Boutton. Let me remind you of our disclaimer on this slide, which is a standard part of our deck, which you can also consult in the tool of this webcast. Everything we say today is covered by these legal provisions. The agenda of today is our AGROBODY Foundry 2.0, a next generation technology platform, an aligned pipeline of product candidates, an update on the regulatory review of Evoca, a leadership and organization fit for purpose and cost management and adjusted cash burn guidance for the year. At the end of the presentation, we'll be happy to take your questions. And as I said, you can ask them both through the webcast tool and the conference call. And with this, I would like to hand over to our CEO, Kevin.

Thank you, Toon. And thank you to everyone for joining us on the call today. For those of you that I have not met, please let me provide a bit of an introduction. If you would refer to Slide 4, I'd like to give you a view of why I joined Biotalys, and why I think this company represents such an exciting opportunity to make a material difference in the global crop protection sector. For my childhood growing up on our family farm in Canada to the latest endeavor at Biotalys, my commitment and passion for building a strong, sustainable agricultural industry has been a constant throughout my personal journey and a 30-plus year career. We all know the world is changing rapidly, and there is a growing and pressing need to provide safe, healthy and affordable food to a growing population, while improving our regenerative practices. Growers all over the world are constantly seeking new solutions to address this need without negatively impacting their profitability. However, this is no small task. In my discussions with members of the Biotalys team, what stood out most was the culture of collaboration. Together, we believe we're working on a solution that has the potential to provide a completely new crop protection products with multiple modes of action that have a significantly [Audio Gap] footprint. [Audio Gap] have had a chance to have in-depth conversations with people from all regions and departments within the company, and I feel privileged to have been chosen to lead this remarkable team into its next phase of growth. The announcements that we have made today are a function of that collaboration and discussion. Working with our team and our Board, we reaffirmed our commitment to developing the AGROBODY platform. Furthermore, we have evaluated our strengths and capabilities and emerged with a step change in our targeted approach towards our discovery and development methodology and a streamlined organization. This change will amplify the power of our research and development efforts, while allowing us to focus on core capabilities and conserve cash as we work with the regulatory agencies to gain approval on Evoca, our first-generation biofungicide. Turning to Slide 5, I'd like to further expand on our technology platform. As we have announced today, we're very excited about the transition in our protocol from our prior shotgun method to a targeted approach in a discovery and development of new biocontrol products. This change in methodology simply put, changes the curve on the accuracy and speed with which we can identify new product candidates, and is expected to shorten the time to bring them to market. I have worked with and led numerous R&D organizations over the course of my career. This is the first time I've seen the opportunity to fundamentally change the discovery process being driven so passionately by both our internal organization as well as our collaboration partners. As we also announced today, Carlo Boutton, our Chief Science Officer, will have all research and development activities consolidated with his team to help expedite this process. Carlo, who is with me on the call today, is a real subject matter expert on our platform, and I look forward to working with him and his team going forward. Turning to Slide 6, this provides a basic overview of our enhanced approach to discovery and development. Fundamentally, this next-generation technology is expected to deliver on several fronts. One, by increasing the potency and efficacy of our bioactive agents; two, by creating multiple modes of actions to increase efficacy while lowering the potential for disease or insect resistance to develop; and three, by lowering the cost of goods per hector, which sets the stage for a broader and more rapid rate of market penetration of our portfolio. Most importantly, we know this approach works. It has been tested and proven in the pharmaceutical industry for more than 2 decades. We're very fortunate in that Carlo brings more than 15 years of VHH knowledge and know-how in that field. He was instrumental in validating the VHH technology during his time at Ablynx, where he held various scientific leadership roles, and therefore, is uniquely qualified to lead the streamlined research and early development team. In short, today's announcement is not a promise, it's a reality happening in our labs as we speak. This change in our discovery approach does not mean that we have abandoned our first-generation Evoca products. As the chart on Slide 7 illustrates, the Evoca biofungicide for use in fruits and vegetables are the foundation of our program, and our work with Evoca has created the basis for the move to the new technology platform. The results we've seen in our extensive field trial program of our first product candidate are compelling. Initial results show that Evoca can maintain or improve yields by safely protecting crops from potentially devastating fungal diseases such as gray mold and powdery mildew. We're still compiling this year's results and look forward to sharing that information with you in the near future. Before we provide a regulatory update for Evoca, let me give you further insight into our pipeline of product candidates. If you would turn to Slide 8, I'd also like to give Carlo and his team credit for helping to make some tough decisions. One of the hardest parts of our leading a research and development organization is to continuously separate the valuable from the interesting. Our focus is to use our AGROBODY 2.0 approach to advance the products with the greatest ROI for our customers, our partners and our company. To that end, we will continue with 4 programs, 3 biofungicides for use in fruits, vegetables and legumes and 1 bioinsecticide. We will do so through a combination of our internal development program as well as in conjunction with key partners like the Gates Foundation and Syngenta. Further to our commitment to focusing upon near-term value creation, we're discontinuing 3 programs that do not meet our stringent criteria. If you would turn to Slide 9, the elephant in the room is the ongoing regulatory review of Evoca and the time that it is taking. In reality, this process is rightfully extensive. And based on my experience, the time frame is in line with recent expectations for new products in our industry and especially for new modes of action like Evoca. That said, there is an expected back and forth through regulatory agencies and we're in the midst of responding in a timely and appropriate manner through any and all requests for more information supporting the current reviews in process in the United States and Europe. The Dutch regulatory authority, Ctgb has concluded its first review, and we're responding to their questions. If our package is accepted, the file is then passed on for a second review by the European Food Safety Authority and the EU member states. The expected registration of the first generation of Evoca will be a key milestone for the company. This is not only because it will be our first approved product from our platform, but also because it is expected to be the first critical step in obtaining follow-on registration for next-generation Evoca, which will be our first commercial revenue-generating product. We believe that once we've overcome these hurdles, our products have the potential to make an enormous impact in the industry and for our company and will be well worth the time and effort. As we fully devote our energy to moving Evoca forward and revamping our R&D approach, we must carefully manage our costs and resources as a small pre-commercial company. We will focus on activities that create the highest value for all our key stakeholders, including our grower customers, our channel partners and our shareholders. That brings us to our new leadership overview on Slide 10. As we announced today, the roles of the Chief Operating Officer and Chief Business Officer will be amalgamated into the new senior leadership team of the company, which is now comprised of Douglas Minder, our CFO; Dr. Carlo Boutton, our Chief Science Officer; and it's completed by Dr. Eva Van Hende, who will lead Regulatory and Field Development; Sophie snijders, Head of Human Resources; and with me Toon Musschoot, Head of Investor Relations and Communications. I'm particularly pleased that our senior leadership team is now more diverse and inclusive and better reflects our corporate values. As you can see on Slide 11, our organizational changes and annualized cost savings will lead to an approximate 10% reduction in operating expenses going forward. We now have 65 employees, all very focused on delivering on our new strategic direction. In addition, in order to drive execution upon our objectives, management will carefully steward the business going forward to prudently concentrate our resources on our core functions. Therefore, we're reducing our guidance for cash burn by approximately EUR 2 million in fiscal year 2023. This is a bit of a tightrope walk. We have to be able to adequately fund our regulatory and field development efforts and maintain a robust research and development program, while recognizing we're in pre-commercial mode. I believe the review we have just completed maintains the right balance between funding opportunities and a judicious use of cash. If you would go to Slide 12, I want to emphasize that I'm incredibly excited about what the future holds for Biotalys. We have a lot of work ahead of us, but we have a great team in place to deliver on our objectives. We also have strong business partners supporting us, and they share our excitement about the prospects for the company. In closing, we believe the future is very bright for Biotalys and that our platform has the potential to bring a completely new portfolio of efficacious crop protection products to the market with multiple modes of action that will support the agricultural sector in the years to come. With that, I'll turn the call back over to Toon.

Thank you, Kevin. Operator, so we're now ready to take questions from the participants.

[Operator Instructions] We will take our first question. And your first question comes from the line of Guy Sips from KBC Securities.

Yes. I have 2 questions. First is on the pipeline. You've stated that you expect to initiate at least 1 new program per year on the AGROBODY Platform 2.0, from what year on is that expected? Is that still starting from 2030 or is that expected to be earlier? That's the first question. And the second question is financially related to that, you were indicating the cash burn for 2023, which will be less than EUR 20 million. But can you give us some insight in the cash burn for next year? So yes, and what will be then the end of year cash position, end of 2023, end of 2024?

Guy. It's Kevin here. Good to talk to you again. So I have Carlo and Douglas here with me, so I'm going to take a first shot at your questions and then hand over there some more color. So in terms of the pipeline, as we mentioned, in our press release and in my opening remarks, we have already started with the 2.0 platform and the targeted approach. And so our objective is to bring new products to the market or at least new candidates forward every year going forward from now. And then I'll ask Carlos to comment on that in a few seconds. And then in terms of our finance, what I will say is that, yes, we're projecting to come in lower this year than we had originally indicated. And I would say that we foresee our cash runway putting us out into 2025 at this time. So with that, Carlo, I'll hand it over to you, and then Douglas, if you want some comments on the finance side, please add.

Thanks, Kevin. So I do not have much more to add, just to say that we're indeed optimizing our processes. We start at least 1 project a year from indeed 2024 onwards to build a strong pipeline with high-value products.

And Douglas?

Okay. And Guy, as far as to your question on the cash burn, yes, the EUR 20 million guidance for this year is obviously excluding the pipe that we had earlier this year, the EUR 7 million. We haven't provided guidance for the year '24 at this stage. We're going to do that as part of our earnings release in February. So I hope you can wait that long for that, Guy, and that we would also be, as Kevin said, extending the cash runway out into '25 at this stage, which is significant improvement from where we were at the beginning of this year. And that's been achieved through a lot of cost savings other than the changes we announced today, which is changes in the programs we're targeting and being very efficient in the R&D spend as we're approaching it overall.

And I have got 1 follow-up, and that's on the partnerships. And so you have partnerships expanding the validation in the scope of the technology. You have the Bill & Melinda Gates Foundation, you have the partnership with Syngenta. Is there something more in the pipeline? Or is there something that we can expect in the next 6 to 12 months in that area?

Yes, Guy. So we're certainly not of the mindset that everything needs to be developed, discovered and enhanced here in our shop. We're a learning organization. We're a collaborative organization. And so when I think about that statement, we have multiple collaboration partners in the U.S., throughout Europe, both private and public. And so we continue to work with them. We expect that they will be major contributors to enhancing our pipeline. And at this point, we don't have anything that we would announce as a major partnership. But certainly, I'm happy to say that we're talking to a lot of, I would say, key players in the industry about how we can work together.

We will take our next question. You next question comes from the line of Christian Faitz from Kepler Cheuvreux.

Yes. Two questions, please. First of all, can you share with us the rationale for the decision to discontinue some of the -- discontinue with some of the pipeline products? I would take it that other than the bacteria side, the biofung products that are now discontinued have very similar target crops and efficacy profiles versus the remaining products. Is that a correct observation? And then the second question would be, can you remind us of the kind of milestones that are in place with Novozymes and also with Syngenta?

Thank you, Christian. So in terms of the pipeline, as I mentioned in my opening remarks, we will have a stringent and strict go, no-go decision-making process in this company in terms of what do we work on? Because as we know, we all know we have a finite number of resources, people, time and money. And so what you can expect from us going forward is that we will be focusing on filling up our pipeline at the top of the -- if you imagine a funnel, we want the funnel to be full at the top and then we will stringently screen products to see what comes out at the bottom and that we advance through our discovery and development process. And so upon review and thinking about where we should be spending our time and energy, we've made a decision to discontinue a number of products. But we're not slowing down or in any way lessening our pipeline or weakening our pipeline, we're just changing our focus on to what we believe are bigger and better projects to focus upon. In terms of the milestones, let me just say that any milestones that we agree upon with our partners are come to in a collaborative manner. We believe they're reasonable and achievable, and we're working through them. But we haven't announced anything at this point in terms of more details around those milestones. Oh, sorry Carlo -- he has a comment? My apologies.

If I just can add on Syngenta, we're just planning to proceed according to plan there. Maybe just -- that's the only thing I want to add.

We're progressing according to expectations.

Absolutely.

There seems to be no further questions from the telephone lines. I would like to turn back to Toon Musschoot for any webcast questions.

Yes. There are 2 questions on the webcast currently. The first 1 is what is your view on the reaction of the market?

So in terms of -- let me say this, the focus for me and my team and everybody here is to continue to work with the EPA and the European Union on registration of Evoca. We're working on bringing forth Evoca next generation to the marketplace right behind Evoca. We're working on the rest of our product platform to bring, as I said, efficacious products to the marketplace. We're working on a rapid and successful transition over to the 2.0 platform, which, to me, is the most exciting thing I've seen in my career in the R&D sector. The ability to create multiple modes of action for a single fungicide or insect is groundbreaking -- truly groundbreaking to me. And I couldn't be more excited about working on that. And that's what we're going to focus on, and we believe that as we deliver on our objectives and our commitments, we will continually create shareholder value. So that's where we -- that's where our head is at right now. But thank you for the question.

And then we had a second question through the tool. When do you expect to obtain registration?

Yes. I think again, of course, that is a big focus for us. What I can say about registration of Evoca or any of our other products that are coming -- that will be coming to the market is that we fully respect the registration process. We think it's necessary and it should be thorough and extensive. And as we bring new modes of action to the marketplace like Evoca and our VHH platform, we fully realize that there's going to be an in-depth review. The good news about the registration process is that anybody coming in behind us is going to have to go through exactly the same steps, and we also see it as a bit of a barrier to entry, which we like, right? It gives us a bit of a head start in terms of our portfolio. But again, what are we doing right now? We're working diligently with both regulatory bodies, both in the U.S. and in Europe. We feel we're making positive progress, and we look forward to a successful outcome at the end of the day for both Europe and the United States.

Thank you, Kevin. We have a third question in the webcast on the discontinuation of BioIns-1. Was this decision made by Biotalys or Syngenta?

Yes. I'll pass it on over to you, Carlo.

In short, it was a -- it is a decision taken by Biotalys.

Very good. Thank you very much. There are no further questions in the webcast currently. Operator?

Thank you. I will hand back to you for any closing remarks.

Well, thank you, everybody, for listening in. We look forward to engaging with you in the near future. Thanks.