Burcon NutraScience Corporation (BU) Earnings Call Transcript & Summary

Hello, and welcome to the Annual General and Special Meeting of Shareholders of Burcon NutraScience Corporation. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you will be deemed to consent to the recording, transfer and use sustain. If you disclose personal information of another person in today's meeting, you will be deemed to represent and warrant Computershare and the corporation that you first obtained all required consents for the disclosure, recording transfer and use of such personal information from all appropriate persons before your disclosure. During the meeting, we'll have a question-and-answer session. [Operator Instructions] It is now my pleasure to turn today's meeting over to Mr. Peter Kappel, Chairman of the Board of Directors of the corporation. The floor is yours.

Thank you, operator. Good morning, and welcome to the Annual General and Special Meeting of the Shareholders of Burcon NutraScience Corporation. As mentioned, my name is Peter Kappel, and I am the Chairman of the Board of Directors of Corporation. The Board has authorized me to lead the meeting of shareholders today. [Operator Instructions] We will now proceed with the formal portion of today's meeting. To expedite the formal part of the meeting, I will move and second all motions. I now ask that the Annual General and Special Meeting of the Shareholders of Burcon NutraScience come to order. Dorothy Law, Senior Vice President, Legal and Corporate Secretary of the corporation, will act as Secretary of the meeting. With your approval, I appoint Bernadette Villarica of Computershare Investor Services to act as scrutineer for this meeting and to compute the votes of any polls taken at this meeting and to report thereon to me. On behalf of the Board of Directors, I'm pleased to welcome you to this Annual General Meeting of Burcon NutraScience Corporation. I am pleased to introduce your representatives of our Board of Directors who are present today. They are Alan Chan, Deborah Fang, Doug Gilpin, Alfred Lau, Aaron Ratner, Lorne Tyrrell and myself, Peter Kappel. In addition, Mr. John Vassallo, who is not a current director, but one of the nominees for director is also present constitutional meeting. The purposes of today's meeting are set out in the management proxy circular of the corporation dated August 2, 2023. The notice calling this meeting, the management proxy circular and the form of proxy were mailed to shareholders on or around August 11, 2023, along with the audited consolidated financial stations -- statements of Burcon NutraScience Corporation for the fiscal period ended March 31, 2023 and related MD&A to shareholders of the corporation who requested such statements and related MD&A. Unless there is any objection, I will dispense with the proceeding of the notice of meeting. Copies of the management proxy circular and other meeting materials are available under the corporation's profile on the SEDAR website. on the corporation's website and it's www.burcon.ca. Our transfer agent, Computershare Investor Services, Inc. is attested to the proper mailing of the notice calling this meeting. There has been filed with me proof of service of such mailing provided by the corporation's transfer agent. I direct that a copy of such proof of service be annexed to the minutes of this meeting as a schedule. Quorum, I have been advised that there are voting shares representing more than 5% of all outstanding voting shares of the corporation present, and therefore, a quorum of shareholders of the corporation is present and the meeting is properly called and duly constituted for the transaction of business. I have received the scrutineer's report, and I direct that their formal report be annexed to the minutes of this meeting as a schedule, 2022 annual meeting. The minutes of the last annual meeting held on November 23, 2022, are filed in the minute book and available for inspection. I will entertain a motion that the reading of the minutes of the last Annual Meeting of the corporation be dispensed with and the minutes be taken as read, approved and adopted as tabled. Unless their objections, I declare that the minutes be taken as read, approved and adopted as tabled. As the first item of business on today's agenda, I now present to the meeting the audited consolidated financial statements of the corporation as at and for the fiscal period ended March 31, 2023, together with the auditor's report to shareholders thereon. Copies of such documents have been mailed to shareholders who requested such statements, and it is not proposed to read them to the meeting. The next item of business is the election of directors. The corporation did not receive notice of any director nominations in connection with the meeting within the deadline imposed in accordance with the advanced notice provisions of the articles. Accordingly, the only persons eligible to be nominated for election to the Board of Directors of Burcon NutraScience Corporation are the management nominees. The eight directors to be elected by shareholders of the corporation shall hold office until the close of business of the first Annual Meeting of Shareholders of the corporation following election or until their successors are elected or appointed Lorne Tyrrell, Alan Chan, Peter Kappel, Debora Fang, Jeanne McCaherty, Alfred Lau, Aaron Ratner and John Vassallo have been nominated as directors for the ensuing year or until their successors are elected or appointed. Each of the persons nominated as confirmed that he or she is prepared to serve as a director. Since there are no other nominations, I move and second a motion to elect the directors. Unless there are any questions, I will move on to the next item of business. The next item of business is the appointment of the corporation's auditors. Yes. The next item of business is the appointment of the auditors of Burcon NutraScience Corporation for the ensuing year. And to authorize the directors of the corporation to fix the remuneration of the auditors. The Audit Committee of the Board of Directors of the corporation has approved, subject to shareholder confirmation, the appointment of KPMG LLP as auditors of the corporation. I move and second that KPMG LLP, the appointed auditors of the corporation until the next Annual General Meeting of Shareholders and that the Board of Directors be authorized to fix their remuneration. The next item of business is the reapproval of the amended and restated 2001 share option plan. As outlined in the management proxy circular, shareholders are requested to pass the resolution to reapprove the corporation's amended and restated 2001 share option plan. The principal terms of the amended and restated plan are summarized in the management proxy circular. I now move and second as an ordinary resolution of shareholders of Burcon NutraScience Corporation that one, the amended and restated plan in the form approved by the Board and attached as Schedule A to the corporation's management proxy circular dated August 2, 2023, B, and is hereby approved. Two, all unallocated options under the amended and restated plan B and are hereby approved. Three, the corporation has the ability to continue granting options under the amended and restated plan until September 20, 2026 and being the date, which is 3 years from the date of the shareholders' meeting at which shareholder approval is being sought for that any one officer or director of the corporation is authorized on behalf and in the name of the corporation to execute all such documents and to take all such actions as may be necessary or desirable to implement and give effect of this resinous resolution or any part thereof. Great. As we mentioned, today, voting will be conducted by electronic ballot. [Operator Instructions] I would ask that the scrutineer compile the report regarding the results of voting on all business matters and results will be published on SEDAR and web press release. I have been advised by the scrutineers that the ballots and proxies deposited for the meeting have been voted in favor of the resolutions. One, each of the eight nominees have been elected as directors of the corporation to serve until the next Annual Meeting of Shareholders or until their successors are elected or appointed. The appointment of KPMG LLP as auditors of the corporation has been approved, and the Board of Directors and corporation has been authorized to fix the remuneration. And three, the amended restated plan was reapproved by a majority of votes cast for the meeting. I direct that the results of the poll be included with the minutes of this meeting and the results of the voting will be announced in a press release in accordance with the policies of the TSX and filed on SEDAR. The formal items of business as set out in the notice of meeting have now been dealt with. I move and second that the meeting now terminate. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. I will now turn the floor over to Mr. Kip Underwood Chief Executive Officer of Burcon NutraScience Corporation, to report on the operations of the corporation for the year ended March 31, 2023. And on its prospects for the current year. After that, we will open the floor to a question-and-answer period. Go ahead, Kip.

Thank you, Peter, and good morning, good evening, good afternoon to those joining around the world today. I'd like to start by thanking our investors for their patience and confidence in us. Our team members for their diligent work and creativity to get us to this point. And to our Board for their active and continual support as we move forward to executing our plan. I think I have to acknowledge that it's been a tough year for Burcon. The merit situation earlier in calendar '23 literally put us in survival mode. What I'm happy to say is the team and the Board, we have regrouped, we have completed a deep dive into the value propositions of our offerings. We are excited and ready to engage the market with a new approach with our complete plant-based portfolio. Today, what we review with you is the market opportunity, our relevance, the status of some of our proof points and our path forward. In that conclusion, what we hope is that you will be as excited about Burcon's future as we are. I'd like to acknowledge our safe harbor statement to all in attendance, please. Our mission to improve health and wellness to discover and develop sustainable, functional and renewable plant protein solutions. In order for us to realize this mission, we must bring our products to market. Therefore, the focus in our conversation today and moving forward is the commercialization of our technology, the commercialization of our products, and that is what we are excited to both talk about and do in the future. Late '22, we sat down and said -- and laid out how do we as Burcon want to make choices? What are our strategic imperatives? That led us to what we call the Burcon 2.0 approach. Three, guideposts. One, we need to identify multiple revenue streams. We must have optionality. Two, and maybe most importantly, we must get closer to customers and markets. We have to understand what do customers like, what did they not like, what do they need? And most importantly, Why? Third, we have to get more influence and/or control of the manufacturer of our technology or products. we have to ensure that when the product arrives at the customer's door, it meets our value proposition and their expectations. The market. It's exciting. Consumers have learned that the food choices they make affect and impact both the health of themselves and the health of their plan. Because of this, they are seeking new and different food choices. Companies then are reacting to that and investing Danone, Pepsi and many others see this consumer need, believe we're at the beginning of the runway and are launching and investing products to meet that need. Among the way research companies are speaking to consumers and asking them validating the needs and then what are they seeking to act against that need. And the one thing that might be missing is, frankly, many plant-based foods don't taste good enough. The unlock for taste is innovation. The unlock for innovation is our offering. Beyond just the headlines, we need data to back up the story. And then the data continues to show that plant-based foods continue to grow much faster than the food industry at whole and there continues to be extensive investment in what we call the plant-based food ecosystem. Why it is important to Burcon? One, you want to invest at the beginning of a long growth runway, we're there. Two, for Burcon to go to market, we need partners, customers, people to go along with us. The investment in the food ecosystem adds depth and breadth and correctly increases the potential number of partners, collaborators and customer for us to work with. Our portfolio. One of the things that makes Burcon unique in the food space is that we have a portfolio of plant-based proteins. They range from ones that are commercially proven at scale with pea, canola and soy to new-to-the-world proteins from sunflower and hemp. We've spent considerable time this summer diving into the value propositions of each of these with both internal and external resources. How are they differentiated from the choices in the marketplace today? What are they worth? What would be required for us to capture that value as we bring them to market? We left that work, again, both more excited and truly validated that we are on the right path. How do we do that? How do we monetize our innovation investment? Well, to do that, we must bring new products to market. I mentioned to work on the value propositions, understanding the value created and how we might capture. To do that, again, I go back to the word optionality. We will evaluate multiple paths. We're open to licensing, we are seeking partners. We are actively looking for opportunities to build and/or so. We are not approaching this as a one size fits all. The right answer for soy or canola may be very, very different than new-to-the-world proteins sunflower and hemp. The key is we are focused on bringing these [ technic ] knowledge to the market in a way that is as fast as possible like capital as possible to monetize and deliver value to our shareholders. We're very excited about our first proof point of this strategy with 8 to 10 weeks ago with our partner, HPS, we launched the world's first hempseed isolate protein. We have proven the value proposition. We have discussed this with customers. We understand how to repeat the production and deliver a high-quality product. We are -- our next stage will be full-scale commercial production, which we anticipate will happen sometime in the next 3 to 4 months. The market reaction has been fantastic. From my experience, any ingredient company in the world would look at the reaction and the activity of our potential customers and frankly, be blown away. We have sampled customers, both big and small and multiple food applications. Their feedback has been the product performs. To that end, we have multiple customers who are at the pilot stage. The pilot stage of evaluation is a precursor from their perspective to launching a product to consumers. Based on this customer activity, we see a very clear line of sight to revenue inside of 2024. Another protein, I want to highlight again is sunflower. Sunflower protein, we're excited about it. Why? First, Sunflower is the world's third largest oilseed crop. But the protein or meal fraction right now is almost 100% sold in low-value agricultural applications. We have the technology to upcycle that and create a high-value protein offering that is differentiated in the food space. Along the basis of color, flavor and its sun protein, a great consumer halo. The last and maybe the most important piece that gets us excited about sunflower protein is traditional food ingredients have a finished product and to create the finished product you have byproducts that are typically sold at cost or you have to pay literally to get rid of. With Sunflower, we don't have that. We actually have two finished products that are differentiated, that approach and open new and independent markets. which makes Sunflower both a powerhouse to food companies and a powerhouse financially. Cash, they say it's king. We wanted to address this with our shareholders and the attendance on the phone today. The short answer is we have the cash to execute our Burcon 2.0 strategy. With our successful private placement in May in our pursuit of non-dilutive government funding, we are confident that we have the cash to execute our strategy. In addition, we have access to our second tranche loan to further extend the runway. And lastly, we don't stop here. We will continue our diligent cash management as we continue also to seek non-dilutive funding sources from both government and philanthropic organizations, most of these tied to sustainability. As I have mentioned, we are excited about the opportunity in front of us. We've done the hard work this summer to understand the value created by our innovation, how others will see that. And how do we capture that, which leads to the monetization of our investment. We are executing our strategy. We just completed the world's first hemp seed protein launch and as I mentioned, the market receptivity has been fantastic. We have a clear line of sight to revenue in 2024. We changed our market approach. Winning is contagious. Start small, think big, scale fast. To use a baseball analogy, singles are good. We'll take them every day. And when the right pitch comes along, we will still swing for the home run ball. We have to be diligent in cash management. We had to be responsible leaders with the assets and the confidence the investors have given us. We do all these things right, we will capitalize on the market opportunity in front of us. And bring Burcon's products to market. I want to thank the investors again for your confidence and patience with us. I want to thank the team for their work and the Board for their support. We are excited to move forward and hope that you all will move forward with us. Back to you, Peter.

Great. Thank you very much, Kip. That's a good presentation and really, all I can say is that the Board is really, really glad that you're on board and sort of meeting the team and moving things along. We're seeing a lot of great developments. Well, let's continue on with this meeting. Now I ask that all attendees who would like to ask a question use the Q&A icon on the virtual interface to do so. We will answer as many questions as time permits. [Operator Instructions] We will now give attendees a moment to type their questions. Mr. Paul Lam, Director, Investor Relations at Burcon, will facilitate the Q&A period. For each question we answer, we will summarize the question and read out loud the name of the person who asked such question, and if applicable, the entity such person represents. We would like to remind you that questions which are already answered or that are redundant or repetitive will not be published or answered. Now over to you, Paul.

Peter. We have a few questions from long-term shareholders. We'll start with questions from [David]. Could you please provide an update on the status of merit and the chances of our eventual participation?

Dave, thank you for the question. I think I will start with the merit facility, as we all know, is purpose-built to produce our technology. And I have always believed that there is a role for us to play. The question is, what role is that? We continue to seek partners for the purchase of the assets, they are still for sale. If we are -- if someone else purchased the asset, then we will seek common ground with that company or entity to do a variety of things. It could be licensed and continue with the previous arrangement. It could be contract manufacturer, we pay them a fee to produce our products and then we take to market. Or lastly, it could be, if they're not interested at all, we can remove the key equipment, place that into another facility and launched a product or products ourselves. In short, there's a role for us to play here. Our job since the perceiver drives the time line is to be ready when the opportunity presents itself.

Thank you. Next question is from David as well. Could you please provide an update on the status of the Sunflower protein and partnership discussions?

Thanks again, David. The Sunflower is exciting. And as I mentioned in our value prop work, we did a real deep dive on all of our proceeds and in particular, Sunflower. And with Sunflower, we unlocked a couple of things. We unlocked that we have a better understanding of where it is differentiated versus other plant proteins in the market. It's better than we thought. Second unlock was what we call product B, a Sunflower concentrate that truly was unknown earlier this year and really changes the opportunity associated with Sunflower. To that end, we felt the value proposition was great and powerful enough that we needed to really take this back to the market in total and seek all viable partners, including options to take it to market ourselves. We are now engaging in the market to do that. And as we have relevant milestones, we will come back to the marketplace. The biggest thing is Sunflower a tremendously exciting plant protein, and we're excited to bring it to market.

Okay. Thank you. The next set of questions comes from Paul [ Westell ]. Long-time shareholder of Burcon. And he has a few questions, but there are excellent questions. Massive investment in conventional plant protein, cell culture and other technology continues unabated in spite of market headwinds, inflation and consumer sentiment. Our company is now one of many. What differentiates our company, what is our special value proposition? And how is it being tested in the market?

Thanks, Paul. I essentially challenged the team with this question in May. We had to look in the mirror and be able to clearly articulate a simple question. Why would somebody choose at Burcon protein when there are, in fact, alternatives in the marketplace. The result of this question was our value prop deep dive, which we brought external people in both technical and marketing to help us drive and truly uncover. Where are we differentiated? Why does it matter? And how then do we communicate that with impact to drive buying decisions from partners or -- and/or customers? We've completed that work and feel very confident that in the broader plant food ecosystem, we do, in fact, have a very significant role to play.

Thank you. Next question is commercial scale success is attainable only with major customers, what sales promoted by which members of the company are in the pipeline? And when will they close?

Interesting. So from my experience, the most of the greatest traction from innovative products or offerings in the marketplace actually does not come from big players. It comes from entrepreneurial players. It comes from those who are seeking to change the consumer mindset. And therefore, as an ingredient company, very often, your biggest success at the beginning are not with the large consumer food companies. They're with the entrepreneurial set. The smaller set is out there defining and creating. So for us, as we move forward, we already are seeking input for those types of companies via our hemp protein offering. And we'll continue to do both. It's not or, it's an and. As you go into the marketplace, how do you seek in [cast a net] for the entrepreneurial player, while at the same time, you're engaged with the larger players to understand their time line needs. So I don't think it's an either/or. It's an and with initial success actually most likely happening from more entrepreneurial brands.

Next question is also from Paul [ Westell ]. This question is about alignment of investors and directors' interests on whether the company has considered a minimum directors shareholding requirement? Or other means to promote, encourage or facilitate acquisition of shares by directors.

Yes. Peter Kappel here, let me step in on that one. Yes, Paul and other shareholders, we are considering this. This is something that I would like to put on the agenda for the Board during the next quarter. I'd like to just point out that six of eight existing directors do have holdings with Johnny on board now being a director. And they who are not in significance. So I think it's something that I think makes a lot of sense, and it's something that we've discussed in the past, and it's something that I would like to proceed with.

Thanks. Next question. Has the company considered consolidating operations at one location to enhance operational efficiency, reduce costs and provide leadership on site.

Certainly, cost optimization has been at the forefront of our focus. I think as we mentioned, we have reduced our expenditure run rate over 20% already and continue to seek any and all opportunities, both from a vision perspective and from the team. The team members also continue to bring forward ideas, how did this. A simple example was the team in Winnipeg, we were actually leasing application space at Innovation Center in Winnipeg outside of our location. The team at Winnipeg came forward and said, "Hey, Kip, we think we can consolidate this inside the tech center and save that rent and not miss a beat moving forward. We reviewed it, reconfigure office space and execute that plan. So it is a continual focus of the organization. We will continue to look at any and all options, including reorg to basically optimize our expenditure as we move forward to enable and increase our cash flow.

Thank you. And last question by Paul [ Wessel ]. What can investors hope for in terms of company size, activity, achievements and goals in 1 year and 5 years from now?

That's a great question, Paul. In year 1, what I believe you will see is real revenue from our products sold into the marketplace. In year 5, as we execute our strategy, while I believe you will see is a plant protein powerhouse and an ongoing concern, and we are excited to execute our strategy and deliver, [ Wessel ].

Thank you. We actually may have one more question from a long-time shareholder, Jason [ De Silva ]. This question comes from Jason [ De Silva ], has there been any interest from companies that fuel high-performance athletes?

Thanks, Jason. Certainly, our plant proteins are relevant into what I would call the sports nutrition market. And I do believe there are sports nutrition market is seeking plant protein alternatives. And it will be a market that we will actively seek and are seeking today within our hemp protein offering. So I believe we have our toe in the water today and agree with you, I think, and believe there is tremendous opportunity here in the future.

Fantastic. That is all for questions. And back to you, Peter.

Okay. Thank you, Paul. Thank you, Kip, and thank you all for the questions that you've given. We appreciate you, shareholders and the time you've taken to join us in this meeting today. So ladies and gentlemen, time has come to close this meeting. Thank you very much once again. Operator?

This concludes the meeting. You may now disconnect.