Biotalys NV (BTLS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Biotalys Full Year 2024 Financial Figures and Business Highlights 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, Toon Musschoot, Head of Investor Relations. Please go ahead.

Thank you very much, Sandra, and welcome, ladies and gentlemen, to the Biotalys' webcast following our press release detailing our results for the full year 2024 earlier issued this morning. I am joined today by our CEO, Kevin Helash; and CFO, Douglas Minder. And to kick off our conference call today, we wanted to share with you the recording of a video that we have produced in conjunction with our 2024 annual results of which a more concise version was released on our LinkedIn accounts earlier this morning. And in the video, both Kevin and Douglas provide a summary of 2024 key achievements and they will follow that on the call today with comments on the outlook for '25. At the end of the presentation, we will, of course, be happy to take your questions. You can ask them both through the webcast tool and the conference call. Let me just remind you of our disclaimer on this Slide #3, which is a standard part of our deck and which you can also consult in the tool of the webcast. Everything we say today is covered by these legal provisions. Now let me present the recording of the 2024 highlights. Please go ahead, Sandra. [Presentation]

Over the past year, we've made significant progress with Evoca. We've secured patents for its active ingredient in both Europe and the U.S., a testament to the innovation behind our technology and the confidence regulators have in it. And we received approval from the Dutch regulator, CTGB, to conduct large-scale demonstration trials on cucumbers, tomatoes and strawberries. What makes these trials unique is twofold. First, they span a massive 70 hectares, far exceeding the scale of typical efficacy trials. And secondly, unlike most trials for unapproved products, the produce will not need to be destroyed and can be sold for consumption. Looking ahead, obtaining regulatory approval for Evoca in both Europe and the U.S. remains a top priority for 2025. With CTGB's recommendations for approval in Europe, we are confident we're on the right path towards registration in both jurisdictions. Turning to our pipeline. We've made material progress in the expansion of our portfolio. We launched our first field trials of BioFun-6 for control of botrytis and powdery mildew in both Europe and the U.S. The early results on tomatoes, cucumbers and grapes look quite promising. We'll continue our field trial program in 2025 to validate these findings. Additionally, we formed key partnerships with academic institutions to support our R&D efforts. These collaborations will help us develop a protein-based solution for BioFun-4 to combat Oomycetes in fruit, vegetables and potatoes and for BioFun-7 to address leafspot disease in cowpeas. We've also expanded our pipeline with BioFun-8 targeting Alternaria, a major fungal disease affecting fruits, vegetables and specialty crops globally. At Biotalys, we're committed to launching at least one new R&D program each year, either by targeting new pathogens or by improving efficacy of existing products. Once multiple active ingredients are on the market, we can explore new combinations potentially creating powerful super molecules with different modes of action. We also strengthened our leadership team. Laura Meyer brings deep industry experience to the Board and Audit Committee while Kamal El Mernissi's extensive experience in ag biologicals and commercialization will be invaluable in his role as Chief Business Development Officer. [Presentation]

On the financial front, our EUR 15 million capital raise was a significant achievement, particularly in today's challenging financial climate. This demonstrates strong confidence for our investors, both new and existing. More importantly, it provides us the resources needed to advance our pipeline, support field trials and continue the registration process for Evoca in both Europe and the U.S. [Presentation]

We're also proud to have received a number of industry awards, including the sustainable crop protection of the year award and the My Green Lab certification for our eco-friendly practices in laboratories and operations. At Biotalys, our mission is clear. We aim to develop sustainable crop protection solutions that can be used in combination with conventional products. This will enable farmers to continue to grow safe, healthy and affordable food with a much softer environmental footprint. The urgency of our mission is evident as the market for biologicals grows. With increasing resistance to traditional fungicides and pesticide along with tightening regulations and rising consumer demand biological solutions that meet growers' needs are no longer just a nice-to-have, they're essential. With our innovative effective crop protection technology platform, Biotalys is perfectly positioned to meet this demand going forward.

So those were the highlights of '24, and I will now turn the call over to our CEO, Kevin Helash.

Thank you, Toon. As a team, we can take great pride in our accomplishments in 2024 as highlighted in the recording. We successfully evolved from a single product focus to a broader pipeline strategy, building a robust portfolio and establishing a clear path towards future commercialization. Looking ahead to 2025, our priorities remain aligned with the progress we made last year. We will focus on 4 key initiatives, those being securing regulatory approvals, expanding our pipeline, commercializing our portfolio and maintaining strict financial discipline. Let me elaborate further. Our top priority remains securing Evoca's approval in both Europe and the United States, followed by finalizing regulatory submissions for Evoca NG. With regard to the United States, while the regulatory landscape is evolving, I'm pleased to say we have recently received clarifying guidance from the EPA on the additional data required to progress the dossiers evaluation. We expect to complete this work in the second quarter which we believe will position Evoca for a potential registration thereafter. In Europe, the outlook is promising. As announced in January, we were extremely pleased to report that the Dutch regulatory authority provided Biotalys with its draft assessment report for Evoca whereby they are recommending the approval of Evoca's active ingredient throughout the European Union. This is a significant milestone in the regulatory journey for our first biocontrol candidate. And while there's still more work to be done, we believe this recommendation provides substantial confidence in our technology and further validates the potential of our innovation platform to create novel biocontrol solutions for our grower customers. This draft assessment report follows the Dutch Authority's decision in September of last year to grant us authority to conduct large-scale demonstration trials in the Netherlands on tomatoes, cucumbers and strawberries, while allowing the produce from these trials to be consumed, a rare achievement for an unregistered product and a strong indicator of regulatory confidence in Evoca's safety. Our regulatory advancements have been further strengthened by the granting of 20-year patents in the United States, Europe and Brazil. Notably, Brazil, one of the leading adopters of biological solutions approved our patent through an accelerated process which recognized the positive environmental profile. This milestone highlights the growing global acceptance of biologicals as a safe, viable alternative to conventional crop protection products and lays the foundation for future expansion of our portfolio in key agricultural markets worldwide. Our second strategic focus is the advancement of our product pipeline, particularly BioFun-6. As we announced last week, our first field trials of BioFun-6 demonstrated effective fungal control in grapes at significantly lower dosage rates while maintaining performance levels comparable to Evoca and standard fungicides in its spray rotation program. Our goal is to develop crop protection products that fully replicate the performance of synthetic chemistry in both efficacy and cost effectiveness, critical factors for grower adoption. We're excited to see that BioFun-6 is shaping up to be a significant improvement over Evoca further validating our technology platform. Beyond BioFun-6, we are advancing 4 additional R&D projects, both independently and through collaborations. One example is BioFun-8, which targets Alternaria, a leafspot fungal disease with a global market of more than $1 billion at the grower level. Due to its potential ability to control food spoilage during storage BioFun-8 represents a very interesting opportunity for the company in both pre- and post-harvest applications. Our third initiative is focused upon monetizing our portfolio. We continue to collaborate with key strategic partners to establish the most efficient manufacturing and distribution model to ensure our financial success while meeting the needs of our key stakeholders. Let me remind you of our key objectives: one, to produce highly efficacious products; two, to produce our products at scale with a commercially viable cost profile, and three, to deliver a compelling ROI for our producers, distribution partners and growers. We've made strong progress at Novonesys and Evoca NG achieving significant advancements in strain engineering over the past year. Novonesys remains a valued partner, and we are now working with them to determine the optimal manufacturing approach. At the same time, we are actively engaging with potential distribution partners in our core geographies to ensure we have a clear path to market. Ultimately, our focus remains on creating highly efficacious products that maximize value and drive commercial success on the farm. Based on my 30 years of experience in agriculture, these are the most important things we can do to give growers the solutions they want. Finally, we remain committed to using our resources wisely by maximizing the impact of our time, equipment, investments in cash to support our most critical initiatives. Douglas will provide further details on our financial results in a moment. I want to recognize the team for maintaining a disciplined financial approach without compromising our ambitious growth objectives. Reflecting on 2024, we made significant strides towards regulatory approvals in both Europe and the United States, strengthened our platform and pipeline and made excellent progress towards commercializing our portfolio. As we move deeper into 2025, we aim to build on this momentum by finalizing regulatory work on Evoca advancing our pipeline and solidifying our go-to-market strategy for the broader product portfolio. Now I'll turn the call over to Douglas for a financial update.

Thank you, Kevin, and a good day to everyone on the call. As Kevin mentioned, in 2024, we realized the continuing benefits from our 2023 reorganization, trimming costs and focusing our spending on projects with the highest potential return. Our financial results validate the hard work we've done this past year. We reduced departmental operating expenses by 29% year-over-year, which is an amazing achievement given the reductions we had already made in 2023. This was done without hampering our ability to deliver on our aggressive growth objectives. We also increased other operating income contributing to a reduction of just over 35% in both our operating loss and net loss for the year. A key factor supporting our ongoing operations was a EUR 15 million capital raise, which ensures our financial runway into 2026. I would like to personally thank our 2 existing shareholders, Ackermans & van Haaren and the Agri Investment Fund for their ongoing support and welcome the Dutch Asset Management firm, ASR Vermogensbeheer. Additionally, our cash burn decreased from EUR 19.5 million in 2023 to EUR 13.4 million in 2024, a reduction of 31% year-over-year, net of the capital raises. Our cash balance at the end of 2024 stood at EUR 22.6 million, a EUR 1 million increase from the start of the year. In 2025, looking forward, we will maintain our discipline to control spending, prioritizing resources to advance the pipeline, support ongoing field trials and continue the Evoca registration process, both in Europe and the U.S. However, expenses will increase as we expand our R&D activities, conducting more development work and broadening our field trial program. Costs will also reflect ongoing regulatory reviews, general inflation, and the annualized impact of employee expenses for the people that were hired in 2024. As a result, we anticipate a mid-teen percent increase in spending with the corresponding increase in net cash used in operating activities. As I mentioned, our capital raise ensures we have adequate cash into May 2026, absent any additional fundraising, I would like to note that a capital raise of some type remains a consideration for this year as we advance our R&D projects, potentially receive approvals and secure commercialization agreements. Now, I'll turn the call back to Kevin.

Thank you, Douglas. I can't thank the team enough for their dedication to effectively managing our capital resources. Achieving a 29% reduction in our operating expenses is no small feat, especially as we continue to pursue our ambitious growth objectives. In closing, with growing demand from farmers and consumers for safe, innovative crop protection solutions that match or exceed the performance of existing products while offering a softer environmental footprint, I believe we are on the right -- we are in the right sector at the right time. Backed by a truly transformative platform, we have the potential to deliver much-needed solutions to growers for many years to come. Now I'll turn the call over to Toon to begin our Q&A session.

Thank you, Kevin, and thank you, Douglas. So Sandra, we are now ready to take questions from the participants.

[Operator Instructions] We will now take the first question from the line of Christian Faitz from Kepler Cheuvreux.

Congrats on a successful '24 and hopefully more -- even more successful '25. I have 2 questions, please. Can you please elucidate a bit which additional data the EPA is looking for pertaining to the Evoca next-generation registration? I know it's a new product for them, et cetera. Any updated view on timing of the registration, particularly in the U.S. And in your view, and that's still part of the first question, sorry, has or will the new U.S. administration put in additional hurdles into the registration process. The second question would be in your news release from this morning, you talked about discussing with Novonesys the "optimal path forward" for scaling the commercial production and distribution of Evoca. When you talk about the involvement of third parties, does it mean you have higher hopes in terms of production volumes?

Great. Thanks, Christian. Good to talk to you again. So I think I actually have 4 questions in there. So I'll try to get to them each and if I miss something, please come back.

Sorry.

No, no, no, that's fine. Totally fine. I mean they're all -- I mean, very relevant and great questions. But I said, if I miss something, please come back. So let me start with the EPA. So as in past years, there's ongoing dialogue with the EPA between our team and theirs. I can tell you that the conversations are -- have been excellent. We really are working well together in our opinion and it's standard practice for the agency to request additional data just as they have now. In this instance, they're looking for some information that was not in our original submission, but the good news is the list is not overly burdensome, and we don't expect the data to be overly difficult to obtain. So Christian, all going well. We expect to respond in Q2 and continue to progress the dossier. So it's just -- I would say, to answer your question, I mean it's just -- it's more technical information that you're looking for on a, I'd say, a relatively small group of subjects. So that, to me, is, I think, going well. In terms of registration timing, Christian, I would say that predicting the time line in any environment is a challenge. I mean, there's a lot of factors that go into the start to finish in the evaluation of the dossier by the EPA. But you raised the question in your first question about the impact of the U.S. administration. And I would say that in talking with industry experts and consultants, the general consensus today would be that the time line and the predictability of a time line with the EPA is now more unclear than ever. I mean they are truly going through a restructuring in the federal government at all levels, including the EPA. So what we're focused on, Christian, is to continue to work with the team, answer all their questions as quickly as we can and expeditiously as we can to move the dossier forward and certainly make sure that we are not in any way a roadblock to the progression of Evoca with the EPA. Okay. Maybe I'll just stop there. Is there anything, Christian, you have around the EPA?

No, that was -- no, great. All covered.

Okay. Great. Well, let me move now to the question you had around Novonesys. And if we think that there's a higher, let's say, production capacity elsewhere? So let me start my answer, Christian, by saying that the road to success in the R&D world is rarely a straight line, which is why it makes the sector so much fun and challenging at the same time. So the key, in my opinion, is to continually assess your progress, make course changes as appropriate, which is something we certainly plan to do here at Biotalys and then move on, right? So you're continually doing work, you discover or create information, you assess the information, you either continue down the path you're on or you make course corrections as appropriate. And I think that's what separates truly successful R&D companies from, let's say, the rest of the pack. So backing up the step, our objective is to produce highly efficacious products at scale and at the cost of goods that will allow commercial success for all key stakeholders from Biotalys stakeholders all the way to the grower. We're happy to say we've accomplished our first objective with Evoca in terms of creating an efficacious active ingredient. And as I think everybody knows we've been working collaboratively with Novonesys for the last year on the second 2 objectives. I'm pleased to say that Novonesys has made significant progress on the strain engineering work and we're now discussing how to best move forward for production and distribution of Evoca NG. This may mean we end up exploring other options on these 2 fronts, Christian. We'll see how the discussions go, but I want to say that we feel fortunate to have a solid leader in the sector such as Novonesys to work with on this project. And I'm really and absolutely confident we will find a solution that works for everyone at the end of the day. And as we said in our opening remarks, it could be we continue with Novonesys. We could collectively think that somebody else may be the better partner. But I think that's the best part about an open collaboration partnership like we have with Novonesys that we're able to put all these things on the table and really determine what works best for everybody. So hopefully, that answers your question.

We will now take the next question from the line of Guy Sips from KBC Securities.

I also had questions on EPA and Novonesys, of course, but let's -- I want to focus on Brazil and what is the potential of Brazil going forward? And how would you tackle this huge country? Yes. And will you partner -- what's the strategy going forward for Brazil?

Guy, it's Kevin. I'm just writing down your comments. So the potential of Brazil, how will we approach it? And I think maybe time line was your -- okay. Great, Guy. So I mean, Brazil is obviously a very important agriculture market, and quite interesting to us. It's arguably one of the easiest to get a biocontrol registered in. In fact, I was at a conference in Europe last fall, where one of the leaders in the Brazilian regulatory process was on the panel, and he basically said to the entire conference, "come to Brazil, we welcome all of you to bring your technology here." So from our standpoint, Brazil is definitely on our radar, Guy. And as we announced earlier, we're very pleased to obtain the patent for Evoca last month under the Green technology initiative, which is a process which accelerates patents having a positive environmental footprint. So really good news there. In terms of where do we go in Brazil, Guy, our thinking is we want to get in with Evoca NG, time line to be determined, because we believe that will lay the groundwork for the future product to come out of our platform. So Evoca NG, then BioFun-6 and then the other products that come through because once -- we believe once you have your first product approved through the regulatory product process, following products will be much easier because it's like, oh, okay, it's another protein-based biocontrol from the Agrobody platform. We know how that works. And so the approval process should, we believe, be relatively simple. So we think it's a market that we need to focus on, time line, let's say, to be determined because we remain absolutely focused, Guy, on Evoca registration and working on Evoca NG in both Europe and the United States right now. To answer your last question, how will we approach the market? I'll say this in terms of all of our markets, Guy. We look to work with key distribution partners. I do not envision Biotalys having boots on the ground all over the world. That is a -- I mean that's a strategy that obviously works for large companies. But our intention is to leverage the size and scale and influence of the large distributors that are already in the marketplace to take the products to last mile for us to the farm gate.

There are no further questions on the phone at this time. I would like to hand over to Toon Musschoot for webcast questions.

Yes. Maybe Guy also had other questions. [Operator Instructions] We can take those. And in the meantime, I will handle 2 questions that we have in the webcast tool. One by Frank [indiscernible] from [indiscernible] Petrochem. Frank is asking on the EPA request for information and the type of information and the timing. But I think, Kevin, you addressed that in your comments already. And then we have a question from Mr. [indiscernible] on, again, the timing on EPA approval for Evoca in the United States. This was also already addressed by Kevin in his earlier comments. And of course, if there's a requirement to follow up on that, feel free to reach out to [email protected], our Investor Relations Department. So other than those 2 questions which you already addressed before, I don't see any other questions in the webcast tool. And I see that Guy maybe has another question. Feel free to take that one, Sandra as well.

Yes. I have an additional question on the expected news flow in 2025. So what can we expect from news flow in 2025?

Yes, Guy, it's Kevin. Well, we certainly are working on a wide range of topics, I would say, and milestones. What could we expect? I'm just going to answer it very simply, Guy. We would love to be able to announce regulatory approval of Evoca, right? I mean that's the big one. But I mean we are also working on commercialization agreements. We're working on, as I spoke to earlier, the path forward with Novonesys. So as we -- we're quite busy and certainly, our intention is to continue to have good news flow through the year. We'll see how things progress over the next several months, Guy.

And yes, in your strategy going forward for optimal calibration monetization, where is now the focus? Is that in upfront payments, in cost compensation, in milestone payments, in royalties, in traditional buy-sell relationship, where do you want to focus going forward?

Yes. So certainly, we are exploring all options, Guy, to monetize our platform. Certainly, milestone payments are a key component of that for a company at our stage, right? So that helps with our cash flow, as Douglas was speaking to. Royalties certainly could be on the table. But I would say, right now, our mindset is around producing, getting our product portfolio -- well, let me back up a step. Our core focus and our core competency is research and development, right? So bringing the product up to the point where it is ready to be produced. I do not envision this company will be investing in production or replicating the horsepower of the distribution channel in the various markets around the world ourselves. So that's our focus. And then we're looking to partner for, let's call it, production and distribution. So in that mindset, certainly, we're thinking a buy-sell relationship, but it may end up being, for example, somebody wants a part of our portfolio to take it through the marketplace and does a lot of that upfront work themselves. So we may end up in a situation where perhaps we sell the active ingredient or make an arrangement with an active ingredient and we have a royalty fee. So I mean, we're quite open, Guy, and as I think we should be in terms of which is the best and most efficient way to maximize the value of our portfolio. So we haven't -- we don't really have much off the table, Guy, I would say, with the exception that we do not ever envision going direct to grower. So that is not a model we would employ here at Biotalys.

We will now take the next question from the line of Christian Faitz from Kepler Cheuvreux.

Just a quick one. Can you elucidate a bit on the -- on your fuse on the peak sales potential of BioFun-8 and in terms of maybe also timing of market introduction.

Yes. Thank you, Christian. So it's a question we ask ourselves all the time, obviously. BioFun-6, Christian is still in the evaluation stage. As we alluded to, we took out one candidate to the market or to the field trials last year. We're super happy with the results we had. But the great thing about our platform is that it produces multiple candidates, right? So we're still evaluating which one of our top candidates may be progressed all the way through to commercialization. So until we get a better line of sight, Christian, in terms of what do we have, it's a little bit difficult to project peak sales at this point. So I hope you understand kind of where we're at. But what we can say at this point is we're very happy about the step change in efficacy we've seen with the candidate that we put out last year. We're going to put more trials out of BioFun-6 this year and develop more data and continue to progress. And then in terms of timing, Christian, that one is going to depend heavily on what we see in the field, obviously, and how fast we can move with a preferred candidate. But I will say that in general, what we walk around with is, if you think about the start of a program all the way through to commercialization, it's 8-ish years in that time line. So we're still quite early on with BioFun-6. So we have some work to do before we would be in a position to predict the product launch or even get to a regulatory submission because, as I said, this last year was the first year we took a product to the field. So promising results, very promising results in our first year, but more work to do before we can provide much more clarity on the future of that product today.

There are no more questions at this time. I would like to hand back over to Toon Musschoot.

Thank you, Sandra. So there are no other questions either in the webcast tool. So I think we can wrap up. And before I hand back to Kevin for closing remarks, I just wanted to mention that the webcast will be available as a replay on our website. And of course, if you have other questions in the meantime, feel free to reach out to Investor Relations Department via [email protected]. So Kevin, please.

Well, thank you, everybody, for joining us on the call, and we look forward to speaking with you throughout the year and to our next investor call. And of course, as Toon mentioned, if there are any follow-up questions you have, please reach out to us. We'd be more than happy to speak to you. All the best. Thank you very much for attending.

This concludes today's conference call. Thank you for participating. You may now disconnect.