Biotalys NV (BTLS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Biotalys Full Year 2023 Financial Figures and Business Highlights Call and Webcast. [Operator Instructions] This conference is being recorded. I would now like to turn the conference over to your first speaker, Toon Musschoot, Head of Investor Relations. Please go ahead, sir.

Thank you very much, Rezia, and welcome, ladies and gentlemen, to Biotalys webcast following our press release detailing 2023 year-end results, which was issued earlier this morning. I am joined today by our CEO, Kevin Helash; CFO, Douglas Minder; and CSO, Carlo Boutton. Our agenda today includes a review of 2023 operational and financial results by Kevin and Douglas, further insights into our AGROBODY 2.0 technology platform by Carlo, as well as the outlook for our goals in 2024. At the end of the presentation, we will be happy, of course, to take your questions. You can ask them both through the webcast to end the conference call. Let me just remind you of our disclaimer on Slide 4, which gives a standard part of our deck and which you can also consult in the tool of this webcast. Everything we say today is covered by these legal provisions. And with this, I would like to hand the call over to our CEO, Kevin Helash.

Thank you, Toon, and thank you to everyone joining us on the call today. If I had to sum up the strategic transformation we have undergone at Biotalys in one word, it would be focused. I want to acknowledge our team, including our Board, were bravely stepping back to evaluate our operations and resource allocation. This effort has enabled us to concentrate on the initiatives that promise the greatest returns for our customers, partners and shareholders. Our release today underscores the outcomes of this focus. As Douglas will elaborate shortly, we have made significant progress in extending our cash runway without compromising our ability to deliver upon core objectives. Now, let's dive into some key aspects of our business. Foremost among them is the pending regulatory approval of EVOCA in the United States and Europe. Our team continues to promptly respond to the ongoing information requests and participated in numerous scientific meetings with the various regulatory bodies in 2023. While it is difficult to predict the timing of a decision by the EPA on our submission, we are working towards a successful outcome this year. Additionally, we understand the competent regulatory authorities in California have completed an in-depth review of our dossier, which bodes well for potential use in one of the largest fruit and vegetable producing states pending federal approval by the EPA. As we progress our regulatory work in these critical jurisdictions, we're also gearing up for submissions in other key agricultural markets. We are confident that the experience and scientific groundwork laid by our regulatory team will expedite future launches of our platform portfolio in regions such as Latin America. Moving on, our submissions have been bolstered by third-party field trials conducted last year. These trials demonstrated EVOCA's efficacy as a viable alternative to traditional synthetic chemical products and controlling fungal diseases in grapes and strawberries. Armed with these compelling results, our focus and investments will pivot towards advancing our portfolio. We're committed to pushing forward with our pipeline candidates, including field trials of EVOCA NG and BioFun-6 this year, aimed at regulatory submission and eventual approval of two commercially viable biofungicides. Furthermore, we've made a material step in our R&D program, shifting our resources to focus upon the AGROBODY 2.0 platform as announced in November. Carlo will elaborate on this shortly, but we anticipate this upgraded platform will enable us to initiate work on at least one new fungicide with a novel mode of action annually. This upgrade isn't about theoretical concepts. It's about creating potent formulations that offer growers highly efficacious and cost-effective solutions to address their crop protection challenges. Achieving this requires us to manufacture our products at a low cost per hectare, ensuring a meaningful presence in the sector with broad market penetration. The transition to the AGRIBODY 2.0 platform is pivotal to our success and to dive deeper into this exciting new approach, I'd like to introduce our Chief Scientific Officer, Dr. Carlo Boutton. With over 20 years of experience in antibody research in biochemistry, Carlo has played a key role in developing human therapeutics from antibody-based discovery platforms throughout his career. We're extremely grateful to have Carlo spearhead our endeavors to deploy this amazing technology into the agriculture crop protection market here at Biotalys. Over to you, Carlo.

Thank you, Kevin, and good morning or afternoon to all of you joining this webcast. When I joined Biotalys the company mainly worked with a so-called shotgun approach. And this method uses whole organisms or parts of the whole organism or the target path for disease in the discovery process. The targeted method on the contrary uses the specific target's antigen on the molecular level to generate our agribody bioactives. And we know that this approach works. It has been tested and proven in the pharmaceutical industry for more than two decades. And that's why I was keen to introduce it at Biotalys as well upon my arrival. We believe and we know that this target approach will change the curve on the accuracy and speed with which we can identify new product candidates, and it is expected to shorten the time it takes to bring them to the market. Fundamentally, this next-generation platform is expected to deliver on several fronts: one, by increasing the potency and efficacy of our bioactive agents, very important. Second, by creating multiple modes of actions to increase efficacy while lowering the potential for disease or insect resistance to develop. And third, by lowering the cost of goods per hectare, which sets the stage for a broader and more rapid rate of market penetration of our products. We have already been applying this targeted approach to our pipeline programs. So specifically, and you see it on the slide for BioFun-4, which was initiated last year using AGROBODY 2.0 methods. So BioFun-4 is designed to tackle water mold that causes late blight or potato blight, which is a serious disease that particularly affects food and vegetable crops with also potatoes. The target's addressable market for this new program is estimated to be around USD 680 million at the end-user level if you combine North America and Europe. We're also applying the targeted approach to BioFun-7, which is our biofungicide program to develop a biocontrol against leaf-spot disease in cowpeas and other legumes. While this project is aimed at helping growth in Africa, we will take the learnings to develop future products for growth in other world regions that face leaf-spot disease on the crops such as in Europe and North America. We are also applying the target approach for BioIns-2, our bioinsecticide program aimed at targeting key pests. And this year, we want to initiate at least one new R&D program using the target approach further strengthening our portfolio in biofungicides. So, if I can summarize, I'm very proud to be able to make my experience in developing the Nanobody platform to discover new human medicines and now focused on developing the same technology for agricultural purposes. My family has been active in agriculture and horticulture, and so I've always had a strong personal connection with farming and the work in the field. And here at Biotalys I can apply that knowledge and expertise in the antibody space to develop agrobody biocontrols that will help growers fight pests and diseases and protect their crops. And I now would like to hand the call back to Kevin.

Thank you, Carlo. In my experience, one of the most important roles of an R&D organization is to continuously separate the interesting from the valuable. At Biotalys, we've embraced this philosophy and remain committed to pursuing projects that offer the highest NPV for our key stakeholders, including our shareholders and our grower customers. Now let me shift to our third area of emphasis, establishing a strong network of partnerships to accelerate the development of our pipeline and successfully commercialize our portfolio. At Biotalys, we embrace continuous learning and actively seek collaborations that enhance the efficiency of our research and development efforts. As previously announced, we have forged several significant partnerships, including our commercial agreement with Biobest and our R&D collaborations with Syngenta and the Gates Foundation. Most recently, we've unveiled three new academic collaborations aimed at advancing both our platform and key program candidates like BioFun-4 and BioFun-7, which target fungal diseases in fruits and vegetables. Behind the scenes, we are engaged in ongoing discussions with various potential partners that can play a key role in bringing our products to market through manufacturing and commercial agreements. It's imperative we drive forward on multiple fronts to ensure a successful commercial launch of EVOCA NG, as well as the next product candidates from our platform. Lastly, the decisions we made as a team to streamline our operations have reinforced our commitment to being prudent stewards of our spending and cash resources. Douglas will delve into our financials shortly, but it's worth noting that the result of our work reflects an approximately 8% reduction in R&D and SG&A spending for fiscal year 2023. Striking a balance between adequately funding growth while prudently managing expenses is paramount. As a group, I believe we're effectively achieving both goals, ensuring we deliver the optimal value to our shareholders while progressing a commercialization of our biocontrol platform. As we navigate through 2024, our focus remains consistent with the objectives we outlined at the end of 2023. We are dedicated to working with the various regulatory bodies to obtain approval of EVOCA, securing cost-effective manufacturing and distribution agreements for EVOCA NG and the development of a robust portfolio of new, efficacious products that offer industry-leading returns to our stakeholders while judiciously funding growth. I would like to close by saying we see EVOCA as the first generation product from what we believe is a potentially game-changing platform for the crop protection industry. As a team, we have embraced and are executing upon a new direction that will support our mission to help growers continue to produce safe, healthy, affordable food for a growing population with a softer environmental footprint. Now I'll pass the call over to Douglas for our financial review and then open the call to questions. Douglas?

Thank you, Kevin, and thanks to everyone joining us today. As CFO, I would underscore Kevin's emphasis on focus. Until such time as we're fully commercial, the task at hand is to carefully control costs while maintaining an appropriate level of funding to ensure future product launches and longer-term growth. Our 2023 financial results reflect the start of that focus, particularly in spending and uses of cash. As Kevin referenced, overall spending, including both R&D and SG&A, declined nearly 8% in '23 from the prior year spending levels. The majority of that decrease came from reduction in spending on EVOCA as we are now moving our attention to the development of our next candidates. This savings was somewhat offset by higher onetime costs associated with the reorganization. As we look forward to '24, we expect operating expenses to be roughly 10% less than our run rate in '23 as we fully realize the operating efficiencies of our actions put in place last year. While we saw a small benefit on the financial income line, our expense levels were the primary contributors to the smaller loss in '23, EUR 20.5 million(sic) [ EUR 22.454 million ] compared with a loss of EUR 22.7 million(sic) [ EUR 22.769 million ] in the prior year. Our cash and cash equivalents of EUR 21.6 million(sic) [ EUR 21.570 million ] at the end of '23 was stronger than our earlier projections. We expect our cash burn in '24 to be lower than that in '23. And as a result, we expect our financial runway to extend until the end of April '25. Management is currently reviewing options to further extend our runway, either through grants or additional funding, while also prudently managing our controllable costs. Financially, we ended '23 in a solid position. and expect to carry that same discipline and focus into '24 in support of the company's strategic direction and plans for growth. We're happy to take your questions on this, and I'll turn the call back over to Toon.

Thank you, Douglas. So Rezia, we are now ready to take questions from the participants.

We are now going to proceed with our first question. The question comes from the line of Christian Faitz from Kepler Cheuvreux.

Yes. Two questions, please. First of all, given your comments on the EVOCA approval, is it fair to assume that market introduction could be for 2025, with full market availability in '26? And then also on -- second question on EVOCA NextGen, can you give us an idea of how much more efficient from a production point of view, EVOCA NextGen will be?

Thank you, good afternoon, Christian. Thank you for your questions. Good to talk to you again. Christian, in terms of when we will see EVOCA in the marketplace, I mean, obviously, we have been preparing for that entry for quite some time. And I think we are -- we're well prepared to move forward with both EVOCA and EVOCA NG pending regulatory approval, both in the U.S. and Europe, which I mentioned in my statement. So yes, maybe I'll just leave it there. And then in terms of our EVOCA NG, we certainly are anticipating that EVOCA NG will be our first commercially viable product in the marketplace, which will generate profit margins for all of our -- all the stakeholders, including our company as well as our distribution partners as well as to growers. So we haven't disclosed that we haven't quite buttoned down all the details around EVOCA NG production, Christian. But certainly, our anticipation is that, that will be a revenue-generating and profit-generating product when it comes to the market.

We are now going to take our next question, and it comes from the line of Guy Sips from KBC Securities.

A question on the production yield. So during the IPO process, and we have half of that we were focusing on the production yield as well and how is that improved? Or how is that evolving over the last 6, 12 months?

Yes. Thank you, Guy, it's Kevin again. I'm going to turn that one over to Carlo.

Thank you, Kevin, and thank you, Guy, for the question. So in terms of increase in production yields, I can say that we made significant improvement. So it's more than incremental improvements. So we made a lot of progress there. That's one. On the other hand, I also want to emphasize the value of Platform 1.0 and the learnings we take from Platform 1.0 and the further we can employ to better select candidates with a high likelihood of being better producers. So that are the two main differences or the two biggest progressions we have made over the last year -- over the last 12 months.

And is it -- can you quantify that a little bit in times, whatever is it times 6 compared to a year ago? Or is that too hard to say?

Well, Guy, I appreciate your eagerness for numbers. Let me say that it's a significant improvement, so better than an incremental increase.

[Operator Instructions] We are now going to proceed with our next question, and it comes from the line of Thomas Vranken from KBC Securities.

Two from my side, actually. The first one is with regards to EVOCA, somewhere in the slides, it was mentioned that you're also considering additional geographies. Can you give a bit more granularity on how you look at those, what would be interesting markets according to you? And what could the potential route to market look like? And the second one is similar, but for EVOCA NG, could you give a bit more of your view on how you look at potential time lines there?

Hi, Thomas, it's Kevin. So Thomas, just maybe building on Christian's question as well to answer yours. We never envisioned EVOCA as being a commercially viable product. So I want to make that clear. That EVOCA is our first-generation product coming out of our platform. that we always were anticipating would be our first entry into the marketplace to obtain regulatory approval and proof of concept at the field level. So we are already moving forward -- let me be clear. We obviously are working diligently with the EPA and the European regulatory authorities to obtain registration of EVOCA, which we anticipate we will have a successful outcome there. And then we're now moving forward, as I mentioned, towards securing production capacity and distribution of EVOCA NG, which we see as our first commercial and profit-generating product. So I just wanted to be clear there in terms of how we see those two together. So when we're thinking about expanding outside of -- what we've been talking about previously, the United States and Europe, we are not believing that the U.S., for example, is a start and finish for this company. And we are looking to expanding to some of the broader or bigger agriculture markets around the world, for example, in Latin America. We see lots of potential down there. Brazil, Argentina, Chile, as an example. We are also seeing some opportunities in Africa. And certainly, we have been thinking as well about Asia. But we're going to tackle the world one step at a time. And then you asked a question about how do we go there. We are certainly looking to enter into these markets with a partner, a commercial partner. And these are the things we've been working on over the last four months or so as to where do we go from here. So I think -- well, if you will, see the regulatory submissions of this company continue to expand in conjunction with our commercial partners' interest. Hopefully, that answers your question, Thomas.

And any insights on potential time lines for EVOKA NG, then?

EVOCA NG we're making great progress. We haven't come to the point where we're prepared to make a public announcement of next steps here, but I can say that I'm very happy with the progress we're making on multiple fronts, both from the production side as well as the distribution side of EVOCA NG.

We have no further questions at this time, I will now hand back the call to Toon Musschoot for closing remarks.

Thank you, Rezia. I don't see any other questions here in the queue either. So I think everything was loud and clear. So thank you all, ladies and gentlemen, for joining this call. Of course, we look forward to an exciting time ahead in 2024. And of course, we'll keep you informed on our progress. In the meantime, feel free to reach out to me via e-mail, for instance, at [email protected], and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now all disconnect your lines. Thank you.