Cibus, Inc. (CBUS) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to Calyxt Virtual Analyst Day. [Operator Instructions] This conference is being recorded today, November 17, 2020. At this time, I would like to turn the conference over to Chris Tyson, Executive Vice President of MZ North America, Calyxt's Investor Relations firm. Please go ahead, sir.

Thank you, and good afternoon. I would like to thank you all for taking time to join us for Calyxt Virtual Analyst Day. Your hosts today are Jim Blome, Chief Executive Officer; Bill Koschak, Chief Financial Officer; and Chief Technology Officer, Dr. Travis Frey. A presentation being utilized for today's call and webcast is available on the company's website, calyxt.com. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks. Finally, this conference call is being webcast. The webcast link is available in the Investor Relations section of our website at calyxt.com. At this time, I would like to turn the call over to Calyxt's Chief Executive Officer, Jim Blome. Jim, the floor is yours.

Thank you, Chris, and thank you for joining us today for Calyxt's Virtual Analyst Day. As many of you know, 2 weeks ago, we reported our third quarter 2020 financial and operational results. During that call, we announced our first commercial trait license agreement with S&W Seed Company, substantial progress with our soybean product transition plan, the commencement of our differentiated go-to-market strategies and improved financial metrics as a result of the culmination of these efforts. Today, we want to provide our investor and analyst communities with information regarding our TALEN technology platform, our product development pipeline, our go-to-market strategies and finally, our financial projections based upon these strategies. We will then open up the call for questions from the sell-side analyst community. And with that, let us begin. Calyxt is a technology company focused on delivering plant-based innovations to end users across industries, including food, agriculture, pharmaceuticals and energy. We see our technology being applicable to other industries as well. We are a leader in gene editing with exclusive tech access to proprietary TALEN technology for use in plants, which we used to successfully commercialize the first gene-edited food product in the U.S. We have a capital-efficient business model with 3 differentiated go-to-market strategies. We have a robust development pipeline that spans multiple crops and that is focused on several important trends, including improving grower economics, consumer health and sustainability. In the aggregate, our most advanced projects have revenue potential within an $8.8 billion addressable market. The world is in a precarious place. Industries and companies are facing mounting pressures to be a part of the solution to our challenges versus contributors to the waste piling up in our oceans and earth, rising emissions that impact climate change, disease states and so much more. The future demands healthy and sustainable innovation, which is where Calyxt comes in to play a role. We're revolutionizing the way the world uses plants and seeking to solve problems across a variety of industries and market sectors. We were founded in 2010 by Cellectis and Dr. Dan Voytas, inventor of TALEN gene editing technology. We are headquartered in Roseville, Minnesota. Beginning in 2015, Calyxt voluntarily consulted with the USDA under their MI regulated process to confirm the regulatory status of our products. We have submitted 8 different products to the USDA, and all have been confirmed as nonregulated under their guidelines. In 2019, following our successful completion of a voluntary consultation with the Food and Drug Administration, we launched our first commercial product, a high oleic soybean from which we derived a premium high oleic soybean oil with 0 grams of trans fat per serving, a reduced saturated fat content, low polymerization levels and other benefits that make it attractive in multiple food manufacturing and foodservice application. This was the first gene-edited food product to complete the FDA consultation process and be commercialized in the United States. In mid-2020, having achieved proof of concept, we progressed into a new commercialization program, seeking to supply Calyxt high oleic soybean seed to large grain processors for their own soybean processing businesses. Moving upstream enables us to focus on developing and capturing greater value from high-value innovations and plant-based solutions with substantial disruption potential. As our first trait license agreement, this alfalfa launch represents a milestone in the execution of Calyxt's 3 go-to-market strategies. It is a great demonstration of our ability to work collaboratively, choose traits to enhance value, do the research to make it happen and support S&W Seed Company in bringing advanced plant science to the market. Our technology platform is founded on TALEN. TALEN is an advanced breeding technology that allows for precision targeting of existing genes within a plant's genome. What really sets TALEN apart is the fact that it is very, very precise. And with the right expertise, the development process is relatively straightforward. In the hands of our scientists, TALENs can be developed quickly. As you can see on this slide, TALEN has potential broad applicability across many end markets from regenerative agriculture to renewable clean energy. Our product portfolio is currently focused on several of these areas. First, plant-based protein is becoming a staple on menus and commands premium shelf space in supermarkets. Consumer demands for the health and sustainability benefits of nonanimal-sourced proteins are expected to continue to grow. Second, regenerative agriculture. We believe farming systems can be made into engines that combat climate change by focusing on soil health, water management, fertilizer use and more. Third, animal nutrition. Pet owners want to feed their pets as good as they feed the rest of their family. Consumers are demanding their pet food to deliver benefits like clean label, increased palatability, higher performance, therapeutic support and more. Finally, functional nutrition. The better-for-you foods have never been in higher demand as consumers are expecting more out of their processed and packaged food choices. From enhanced nutritionals to meaningful front-of-pack claims, CPGs need to offer more. We have a robust development pipeline that offers innovative solutions for these key end markets for growth across oats, hemp, soybean, wheat and more. We are actively negotiating agreements with potential partners with respect to specific opportunities for which development activity would only commence upon reaching a commercial agreement. For product development activities, our specific entry point into the value chain may vary by crop depending on several factors. For each product candidate, we will evaluate which go-to-market strategy provides the greatest value creation and most efficient path to bring the product to market. We will seek the highest available margins and best path to delivering positive cash flow. Let us walk through the seed opportunity across these 5 crops. As we look out over the next several years for our top 5 crops utilizing a seed and trait model, we see immense opportunity. The total addressable markets are based on seed and trait market value on an annual basis. We would expect our share of the total $8.8 billion market opportunity to be at a high gross margin profile. Bill Koschak, our CFO, will explain these metrics later during today's call. One final note about our addressable market analysis. While we think it is important to share with you how we think internally about addressable markets and revenue opportunities, assessing the scope and scale of opportunities is inherently challenging and necessarily involves significant estimates and assumptions. As a result, changes in a variety of factors could cause our assumptions to prove incorrect, which could materially impact our estimates and calculations. All estimates regarding price and acres for all crops in the United States are sourced from the USDA economic research service. Additional details on sources and key assumptions are included in the materials. Let us do a deep dive into the business case for 2 of the largest opportunities that we have in front of us. Most people see oats in the United States as literally the horsepower or feed of last century's farms. In the U.S., oats have lost acres to corn and soybeans and wheat, but it is a great source of gluten-free flour and a fantastic food and feed source. And it seems every time you turn around, there's another new oat-based food introduced into the consumer market. As many of you know, based on oat market dynamics, it is difficult for oat farmer economics to compete with corn and soybeans to get planted in the United States. Our answer is don't compete for spring-planted acres, complement the whole system by planting in the fall and harvesting in the spring, or as we call it, Calyxt winter oats. The potential benefits of winter oats are many for the grower as they provide an opportunity to increase grower net income per acre per year. They also could increase income diversification, improve equipment use and amortization and increase cash flow to support planting expenses for spring crops. The benefits would not just be realized by the grower but also provide a potential sustainability benefit. Winter oats would be a true cover crop. They could prevent soil erosion and improve water quality through water filtration in the field. Winter oats can provide a cover crop for weed control and improve soil health through increased organic matter. Winter oats could provide a spring straw crop that could be income for animal vetting, and oats could even also serve as a great winter wildlife habitat. Locally-sourced oats would reduce imports from Canada and thereby reducing food miles. We believe winter oats are a great fit in regenerative agricultural systems, and we also think there might be carbon credits to be explored with this system in this new way of farming in the United States. Now on to the opportunity in hemp. Most people hear hemp, and they immediately think CBD. At Calyxt, we believe the hemp plant can also be a great sort of protein and can also be used in fiber textiles, in green sustainable building materials and, of course, in therapeutics if only it could be planted in large acreages. So what prevents hemp from becoming a broad acre crop? We are seeking to accomplish what farmers and breeders have done for centuries: domesticate the crop. And our gene editing tools are well suited to do it. So what does hemp need for domestification? Number one is dependable, low and legal THC levels. This would allow agricultural lending for production. And as you know, if THC levels are too high, the grower must destroy the crop. Bankers are not keen on high-risk lending, and it's also necessary for hemp to remain in the U.S. farm bill as it was in 2018. Number two is uniform plants as this allows for mechanization for large acres. And third, for hemp bred for CBD, we need feminization. Single plants left uncontrolled in a field can destroy yields. From our viewpoint, domesticated hemp can be planted in broad acres like corn, soybeans and cotton, providing an alternative economic model for growers and one that is vastly improved from today's, all by turning hemp into a broad acre crop. I've described several addressable opportunities that our product pipeline is poised to capture. We also work to ensure our projects are aligned against several key themes that can drive adoption, including grower economics, consumer health and sustainability. Each of our product candidates is well aligned against these trends, and we see sustainability as one that spans most of them. Our product candidates have the potential to help our customers achieve their sustainability goals. And thus, we share in the commitment and their ultimate success. And with that, I'd like to turn it over to Dr. Travis Frey, Calyxt's Chief Technology Officer, to present our technology and product development pipeline. Travis?

Thank you, Jim. Hello, everyone. I want to begin today by speaking about our groundbreaking technology, TALEN. Short for transcription activator-like effector nuclease, TALEN is the engine behind what we use to do precision breeding. TALEN can significantly accelerate the breeding process over more conventional processes. The way TALEN works is that we identify a gene or a set of genes illustrated by this blue circle on a piece of DNA. We then build TALEN pairs represented by the turquoise elements with the long dotted line tails, which land precisely on the gene that we are editing. TALEN recognizes any specific set of sequences within the DNA. And when these TALEN pairs sit down on the DNA, they can cause a break. The DNA recognizes this break and naturally auto-repairs itself. We use our genotyping systems to identify the plants where the target genes are removed, and we call that a knockout. What really sets TALEN apart from other technologies is the fact that it is very, very precise. The length of the TALEN itself and the fact that it can lay down anywhere in the genome gives us precision not only for individual DNA targets, but we can actually target genes across different genomes and complex plant species like wheat, where you have 6 copies of genes across 3 different genomes. The efficiency of the TALEN system is very robust in our hands. We have been working with TALEN for over 10 years, and our TALEN is comprised of some of the best experts in the field. Another advantage is the cost, which is very competitive compared to other technologies, in part because we have all the in-house proprietary automation necessary to identify and build TALENs. We also believe that our IP portfolio provides a straightforward path to commercialization for the gene-edited products we develop. We have a broad patent estate that covers multiple technologies, not just TALEN. And it gives us a large portfolio of IP, which is largely untapped to monetize and leverage both in the U.S. and globally to establish our ability to commercialize and maintain a competitive advantage. We also have proven regulatory processes that have resulted in Calyxt bringing the first gene-edited food product to market, which aids in securing regulatory predictability. We are shifting our focus from U.S.-only to work toward global product acceptance as we progress through our product commercialization time lines. We are shifting the paradigm by communicating the benefits that innovative plant-based products can bring to consumers. Calyxt's regulatory expertise has been pivotal in engaging with industry groups, and we are recognized as a leading voice for regulatory matters on gene-edited products and the first company that successfully shepherd a gene-edited product through the regulatory process in the U.S. Because of our role in the industry, we have an active voice in many discussions that may impact future regulations, which we always approach with product safety in mind, which we address through rigorous plant breeding and selection processes internally. Speaking of products, I'm now going to transition to our product development pipelines. We are very excited about the possibilities that we can bring to market using TALEN and other technologies that we have developed here within Calyxt. Our objective is to partner with leading companies across industries to ideate, develop and deliver crop innovation using our internal technical expertise through a 3-step process: first, working together to ideate on new product concepts; second, deliver traits of interest within the plant for our partners; to then third, we'll bring the product to market. We work collaboratively from start to finish to ensure these product innovations make it to market. Once a concept or idea is identified, we leverage our internal databases and scientific expertise to identify biochemical pathways for the underlying traits and specifically, the genes that underlie those trait or traits of interest that we are looking for. Once we have the targets for the TALEN and they are made, we do the editing and genotyping to select the edited plants we desire. In Phase 2, we begin our breeding and field testing process, taking the identified plant of interest and increasing the amount of seed we have of it. After this, we plant in the field to validate the product quality, and we'll also start the trait integration process to put the trait or traits into different varieties that can grow in various regions across the U.S. After testing and validating that the plants are performing as expected, we will begin working with our downstream partners to begin identifying and establishing the processing phase. We expect to work with our partners to establish a smooth harvest, storage, transport and processing system, building that pipeline out and identifying the need for seed that we will need to grow. And then ultimately, the product goes through the final commercialization by our customers, and it's launched in the market. As Jim described, the first product candidate I want to discuss this morning is our groundbreaking new concept we are calling winter oats. Currently, there are no winter oats in the U.S., but we believe our trait concept can support bringing a product to market that could enable the growth of high-quality U.S. grown oats to meet increasing consumer food and feed demand. Currently, about 90% of the oats grown and used in the U.S. come from Canada. We want to develop a U.S.-grown version of oats but also deliver a sustainable solution that allows growers to leverage their crop to protect their soil over the fall/winter months, which would provide them with another potential way to generate income on their farm. We are positioning this product candidate as a solution for the regenerative agriculture, the functional nutritional market and the animal nutrition market. This project is in Phase 1 with target commercialization -- commercial planting in 2026 and an addressable market estimated to be $3.6 billion. High saturated fat soybean for palm oil alternative is another interesting trait in development. We are leveraging what we know about the soybean genome to develop a palm alternative using U.S.-grown soybeans. There are significant sustainability and supply chain reliability challenges with palm oil, many of which we believe can be overcome with this prospective oil alternative. We intend to optimize the saturated to unsaturated fat ratio, which gives soy a palm oil-like quality while maintaining agronomics and yield and delivering taste and performance improvements. We're positioning this product candidate as a solution for the functional nutrition market. The current project is in Phase 1 with a planned commercial planting of 2026 and an addressable market estimated to be $2.1 billion. The next product candidate I want to present is hemp. As Jim mentioned, hemp is a valuable crop with untapped potential across industries, but it carries some real challenges with the growers in supply chain. It is a nearly wild species in contrast to more domesticated crops like corn and soy, and there are several problems that prevent the commercialization of hemp at a large scale. And we have heard of many growers losing their entire crop because it surpassed the regulated 0.3% THC threshold. We are working to improve hemp seed genetics by stabilizing the crop through crop uniformity, enabling mechanized harvest and delivering consistent low to no THC levels. We are positioning this product candidate as a solution for the plant-based protein, functional nutrition, green building materials and advanced therapeutics markets. This product is in Phase 1 of our development pipeline with a planned commercial planting in 2024 and an addressable market estimated to be $2.1 billion. High oleic low linolenic soybean or what we call HOLL is our next-generation high oleic product. Food processors are demanding an oil that really delivers high performance with improved nutritional profile, specifically one that offers flexibility for blending for flavor specifications. This next-generation HOLL soybean will have the same high oleic content of our first-generation HO product with the additional benefit of an ultra-low linolenic acid content, which improves the flavor and blending performance. We are positioning this product candidate as a solution for the functional and animal nutrition markets. This product is currently in Phase 2 with a planned commercial planting of 2023 and an addressable market estimated to be $760 million. I'm excited to talk about our high-fiber wheat product candidate, which is nearing Phase 3 advancement as we completed our field trials this summer. This is great -- this has great potential for our high-fiber wheat product to help address the fiber gap as the average American adult only consumes about 50% of the recommended daily value of fiber. We are developing a high-fiber wheat with up to 3x more dietary fiber, delivering good and/or excellent sources of fiber, nutrient content claims and a simple label declaration of wheat to be -- to get consumers to 100% of their daily recommended value. We are positioning this product candidate as a solution for the functional nutrition market. Our high-fiber wheat has an anticipated launch as early as 2022 with an addressable market estimated to be $190 million. And with that, I will pass it on to our CFO, Bill Koschak, to review our go-to-market strategies for these products.

Thank you, Travis. And good afternoon, everyone. Our streamlined business model comprises 3 go-to-market strategies. First, seed sales, where we'll seek to negotiate agreements for the sale of seed with agricultural processors, including millers and crushers or others in the relevant crops supply chain. Second, trait licensing arrangements, where we will seek to license Calyxt-developed traits to downstream partners with commercialization expertise. And third, technology licensing to third parties for use in their own development of specific traits. Under the right circumstances, our -- licensing our technology can be attractive for several reasons, including enabling others to advance the technology or for product ideas for which we do not have the time or resources to pursue. We intend to be strategic about how and to whom we license the technology. For each product candidate, we will evaluate which go-to-market strategy provides for the greatest value creation and the most efficient path to market. Our core go-to-market strategies provide differentiated path to commercialization and have the potential to result in cash payments throughout the development cycle. When using our seed sale go-to-market strategy, we expect that revenue generation will be driven by the seed sales, though sales are anticipated to be at mid-double-digit margins. In the case of a trait license, we expect to receive fees upfront and then upon the achievement of major milestones from our partner. The earlier partners identified, the more of the development expense we can recapture from these payments. We also expect to receive ongoing royalties upon commercialization by our partner. In the case of a technology license, we expect to receive fees upfront and then annually from any prospective licensee. Upon commercialization by the licensee, we also expect to receive ongoing royalties. We recognize there is a trade-off between the certainty of upfront payments and milestones versus higher-risk royalties, and we want to strike a balance between the 2 potential cash flow streams. In our licensing strategies, we are targeting high double-digit margins over time. Our seed sales are expected to be the large processors, millers and others in the relevant crop supply chain. They are expected to handle the sale of seed to growers. In these arrangements, we would sell the seed and record revenue, which because of our North American focus for the product candidates we anticipate commercializing with this go-to-market strategy will be seasonal, largely in the second quarter. Based on our experience, we expect to achieve mid-double-digit margins on seed sales over time with limited working capital investment due to the timing of when we make payments for seed production. Our trait licenses are expected to be with seed companies, biotech companies, germ plasm providers, suppliers of plant-based inputs, agricultural processors and producers, growers and others in the relevant crops supply chain. We will target upfront and milestone-based payments in these development arrangements, largely tied to when a partner joins that process. Payments will vary based on the size of the opportunity, risks and costs borne by each of the parties and the overall structure of the arrangement. Ongoing royalties are expected to be based on the incremental value of the trait over the nontraited seed. Our technology licenses are expected to be with higher education institutions, seed companies, biotech companies, germ plasm providers, suppliers of plant-based inputs, agricultural processors and producers, growers and others in the relevant crops supply chain. We will target upfront and annual payments in these licensing arrangements. Payments will vary based on the size of the opportunity and the overall structure of the arrangement. Ongoing royalties would be based on the value of the innovation developed and commercialized by the licensee. We have a robust development pipeline spanning an estimated $8.8 billion addressable market represented by seed and trait values for these projects. The addressable market for hemp, cold-tolerant oats and our high saturated fat soybean for palm alternative are all more than $2 billion of opportunity and are new projects initiated by Calyxt in the last year. We recently executed a commercial agreement with S&W Seed Company on the IQ Alfalfa product, marking our first trait license agreement. We are actively seeking partners for all projects in our development pipeline, and we are also actively negotiating agreements with potential partners with respect to specific opportunities for which development activity would only commence upon reaching a commercial agreement. This development funnel is a measure of our R&D activity and does not include potential technology licensing activities. Cold-tolerant oats are an incredible opportunity for Calyxt in the market. Today, most food-grade oats are grown in Canada because the economics for the U.S. farmer do not work when compared to other crops they can choose to grow. We believe this product candidate could change that. We see 3 addressable markets in oats, including high-quality food grade oats used in breakfast cereals, snack bars and fast-growing categories like milk. We also believe these oats could be both a high-quality feed-grade oat and a cover crop that benefits the growers' economics as well. Based on acreage assumptions leveraging USDA information and our knowledge of oat seed prices, we estimate cold-tolerant oats represent a $3.6 billion addressable market and a 30% share, a $1.1 billion potential revenue opportunity, which we would likely pursue using a seed go-to-market strategy. Palm oil is a product with significant sustainability issues, and we believe we can deliver a U.S.-grown solution that is far more sustainable than imported palm oil. For this product, we believe there are significant market opportunities in the U.S., Brazil and Argentina based on where palm is imported to today. When converting the palm oil imported to soybean equivalent acres and using a trait value, we estimate these soybeans represent a $2.1 billion addressable market; and at a 20% market share, a $420 million potential revenue opportunity, which we would likely pursue using a trait license go-to-market strategy. This product represents 2 hemp-related product candidates. As both Jim and Travis have described, we see a significant opportunity to transform hemp so that it becomes a mainstream crop given all of its attributes and potential end markets. We believe that hemp has 3 broad end markets, including acres planted for CBD, acres planted for plant-based protein-related products and acres planted for fiber. Our acreage projections for fiber in the addressable market represent only fabric-related acres, where the hemp could replace cotton. Building materials and other uses would add additional acres to this total. Hemp is a very sustainable alternative to cotton for fabric uses as it uses a small fraction of the water per kilogram of product compared to cotton, and it also requires limited to no pesticide application, again compared to cotton, which is one of the most pesticide-treated crops grown in the world. Considering these 3 end markets and the different seeding rates and seed prices per acre, we estimate that hemp represents a $2.1 billion addressable market; and at a 25% market share, a $520 million potential revenue opportunity for which we would likely pursue using both the seed and trait license go-to-market strategy. This product represents both our current high oleic soybean and 2 future innovations, including our near-term high oleic low linolenic soybean, which is projected to launch in 2023. The market opportunity represented by these soybeans is driven by a move towards HO soybeans in the U.S. market away from other premium oils that may be supply constrained, more expensive and less sustainable. We estimate these soybeans represent a $760 million addressable market and at a 30% market share, a $230 million potential revenue opportunity, which we would likely pursue using a seed go-to-market strategy. This product is scheduled to launch as early as 2022, and we are presently prospecting for a commercial partner. We believe the potential high-fiber share of the wheat market will eventually be 30% of total acres. And at traded seed value, we estimate high-fiber wheat to be a $190 million addressable market; and at a 30% market share, a $55 million potential revenue opportunity, which we would likely pursue using a seed go-to-market strategy. This product is scheduled for a pilot launch in 2021 by S&W. Alfalfa has 17 million harvested acres each year, but only a percent of the acres are planted annually. We believe that improved quality could hold nearly 1/3 of the market share. As a traited seed, we estimate improved quality alfalfa to be a $65 million addressable market; and at a 30% market share, a $19 million potential revenue opportunity, which we will be pursuing using a trade go-to-market strategy. Because we are using a trait go-to-market strategy, our share of the revenue opportunity is a portion of the potential feed product revenue as the premium associated with improved quality comprises a percentage of the seed price per bag, and we would receive a share of that premium. As a result, our revenues could be more than $10 million over the life of the patent pending for this opportunity. The addressable markets targeted by Calyxt from these projects is estimated to be $8.8 billion. And using our assumptions of at-scale market share, we estimate that they could provide up to $2.3 billion of annual potential revenue opportunity for the products, incorporating Calyx traits. Calyxt share of the potential product revenue will vary depending upon the go-to-market strategy ultimately deployed for a particular project. For example, if we sell seed, we will capture a larger portion of the Calyxt seed product revenue than if we license the trait. Each of our top 3 projects individually targets over a $400 million potential revenue opportunity and together represent $2 billion of potential total product revenue. Based on the margin expectations set forth earlier in these remarks, this presents a substantial gross margin opportunity for Calyxt. We separate our operating expenses into 3 primary categories. First, R&D, which includes the cost of performing activities to discover and develop products and advance our intellectual property. These expenses are primarily employee-related costs, fees for contractors who support product development and breeding activities, expenses for trait validation, developing our intellectual property, licensing, facilities, regulatory and other costs associated with owning and operating our own laboratories. In the trailing 12-month period, these expenses were $11.5 million. Second, selling expenses, which include the costs of our business development and supply chain activities that support our go-to-market strategies as well as, historically, the costs of marketing and selling our soybean products. These expenses are primarily employee-related costs, travel, samples and other internally-allocated costs for facilities and IT. In the trailing 12-month period, these expenses were $9.8 million, and most of that expense was associated with our soybean product line. Third, general and administrative expenses, which include the costs of our executive, legal, IT, finance, facilities and human resources functions. These expenses are primarily employee-related costs, facility and IT expenses not otherwise allocated to R&D or selling expenses; professional fees for auditing, tax and legal services; consulting costs and other costs of our information technology systems. Other expenses are primarily management fees we pay to Cellectis and the restructuring costs we incurred in the third quarter of 2020 related to the change in the go-to-market strategy for our soybean product line. During the trailing 12-month period, we have internalized all services previously provided by Cellectis and now only pay a much smaller amount of allocated costs annually. Our trailing 12-month operating expenses totaled $34.8 million and includes $6.3 million of noncash stock compensation expenses, which are included in each of the functional expense totals shown. In thinking about our trailing 12-month period, we refer you to our quarterly report filed on November 5, 2020, which included a discussion of anticipated changes between revenue and costs as we execute on our streamlined business model and provides a breakdown of stock compensation costs by function. With the soybean transition on the expense side nearly complete, our income statement profile will change as we look forward. First, the transitional soybean-related revenues will likely increase from 2020 to 2021 and then decline to 0. Associated costs will also decline from '20 to '21. Second, the seed revenue from soybeans is expected to begin in 2021. As that business begins to scale and other projects come to market, we anticipate revenue will increase at mid-double-digit rates over time with year-to-year variability expected. For our expenses, R&D will be the focus of our investment and is projected to grow at mid-single-digit rates over time. Beginning in 2021, selling expenses are expected to be comprised of business development resources. And those expenses, along with general and administrative expenses, should grow at low single-digit rates over time. Finally, I would like to end with an illustrative example of how we think about our business model. With $50 million to $60 million of illustrative seed revenue and assuming a margin structure as described earlier, we would expect to be cash breakeven, assuming the operating expense structure on this slide. Cash and revenue from product development agreements and licensing arrangements would be accretive to those results. With that, I would like to hand the call back to Jim.

Thank you, Bill. So how will we measure success? Our innovation and commercial milestone targets highlight what success would look like for Calyxt over the coming years. We will continue to advance our product development pipeline by moving our plant-based protein product to Phase 1, our low THC hemp to Phase 2 and several additional advancements. We will also explore new opportunities through open innovation with our Scientific Advisory Board, and we are confident that our go-to-market strategies will open doors with prospective collaborators. As these projects advance through our pipeline, we're better positioned to meet our commercial milestones, including identifying a high-fiber wheat commercial partner and ensuring S&W Seed commercially launches IQ Alfalfa, pushing our plant-based innovations one step closer to another success. In summary, we believe we are well positioned to deliver on the promise of our technology by delivering plant-based inputs to partners across multiple industries. Our TALEN technology, our scientists and our intellectual property are strong and provide us with an innovation platform that will drive our company going forward. We have a capital-efficient business model with 3 differentiated go-to-market strategies. We were the first to market with our proof-of-concept soybean and have established a first-mover advantage and pathway to commercial planning that can be leveraged by new innovations. We have a robust development pipeline that spans several crops and that is focused on several important trends, including improving grower economics, consumer health and sustainability. In the aggregate, our most advanced projects have revenue potential within an $8.8 billion addressable market. The advancement of our soybean products to the seed go-to-market strategy is an important milestone for Calyxt. It extends our cash runway and brings our first product closer to the partnership strategy we expect. Our differentiated go-to-market strategies generates focus and improves the financial model of company. We believe the advancement of our soybean products, anticipated cash receipts from our product development efforts with partners and new cash infusion extends our anticipated cash runway into the second half of 2022. With that, I'd like to open the call for any questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from Ben Klieve with National Securities Corporation.

All right. First, a couple of questions on the oat market. One, just big picture question. This is not a market I'm terribly familiar with. Can you talk about kind of who the major players are that are in the oat market today on the seed side? And then also, to what degree is -- are oats used as a cover crop today in Canada?

Thanks, Ben. First question on oats. Oats seed business is not a value-added business today. So there are several university-based germ plasms and others that are used. Our intent is to get the very best lead germ plasm and put the trait in and add the value to it there. So this is really a lot of white space and a new area for us. And your second question was how many oat -- what was your second question?

Is the oat market today in Canada primarily a cover crop market, primarily a summer crop market? Is -- what does that look like today?

Yes. It's primarily grown for grain and harvested. So as oats moved north into land that we didn't have as good of carrying capacity or economic output, it moved up into cooler temperatures and competes well for the cost basis that is in that northern climate. So it's grown for grain, and then it's mostly imported back into the United States. And that's what we're trying to do, is add the sustainability of not moving it with fossil fuels back and adding a more year-round approach for our customers who have assets that would like to mill year round, not just have everything grown at once and stored and cash, moving all out at once waiting for annualized processing. So we see several benefits to this approach, but the number one is bringing it back to the United States because we're not competing with corn acres to get planted on economic basis. We're complementing it by getting 2 crops and diluting the property taxes, all the other expenses a grower would have on an acre per year.

Got it. And so in the development of this, you outlined several ambitions here. So not only having it be adaptable to cover crop, but also improving the nutritional profile, also improving the quality of the grain. Can you kind of break down each of these initiatives? And kind of which -- what is really the -- going to be the initiative that holds us back commercially to 2026? Is there a potential to bring this into the market sooner with only maybe 1 of those 3 boxes checked? Or is this something that really -- that you've got kind of one clear targeted transformation that you're looking for that's going to take until 2026? And if so, what is that?

That's a great question. We'll start with the winter hardiness and bring that as quickly as we can, and then we'll look at improving nutritional capabilities or milling qualities through other edits as we progress. But the number one thing is to bring it into as a gluten-free source and as a really great product for all of these new consumer products that are being launched, bringing it back and reducing food miles and getting it winter hardy so it can get planted in the U.S., and then we'll expand uses by looking at traits that take it beyond there. Travis, do you have anything to add to that?

No, I think that's exactly what we're targeting, winter hardiness for sure. And then I think it's just a matter of as we advance it through the process. If we pick up any gains, that will be reflected in the launch. But right now, it's a tough trait, where it's something we're targeting. I think we have a good target for us. So I'm looking forward to progressing it and giving you guys updates as we get through the progression.

Perfect. Pivoting away to the soybean that you are working on as a potential palm alternative. Is one of your ambitions here to develop a product that could be sold at room temperature like a palm oil? Or is that chemically impossible in -- on soybean?

Travis?

Yes. I mean, currently, the way soybean is set up to get that palm alternative, it wouldn't work. And so that's why we're targeting a ratio between the saturated and unsaturated so we can get similar types of palm characteristics. Also, there's also palm attributes with the way that they combine. So a lot of the palm alternatives also source various oils to bring together and create palm alternatives. And so this will also serve as intermediates for that to help replace some of the supply chain that's also being challenged with putting together the current alternatives.

Got it. Okay. Perfect. Last one for me, and I'll jump back in queue. Bill, I'm having a bit of a difficult time kind of parsing out the OpEx structure that you described when you consider the transition from the former model to the current model. You talked about how OpEx is -- on a trailing basis is about $35 million. To what degree is that $35 million? Does that include OpEx from the former model that will be falling off here as you completely transition away?

Thanks, Ben. Yes, the $35 million does include -- it's on a straight as-reported trailing 12-month basis. So it does include any of the costs that we would be, from an operating expense perspective, shedding as we go forward. And so look for us to talk more about that in future conversations, but we have talked about in the past targeting a number for cash operating expenses in the range of $25 million to $27 million. And I think that is a number that is right in line with where we've been when you back off the stock compensation and depreciation, both numbers that are in the financials.

Our next question comes from Bobby Burleson with Canaccord.

Thanks for putting together this overview, it's very helpful. So I guess my first question is just looking at the technology licensing opportunity, what kind of demand are you guys seeing there right now? Is there any kind of effort you guys have to do to market that platform? Or is there a decent amount of demand pull?

We have had -- Bobby, we have had inquiries over time and been working on this and looking at things. We wanted to be sure that we were prudent in doing it. One of our major advantages over some of our competing gene-editing platforms is our freedom to operate. So making sure we knew where we wanted to go by ourselves and being prudent in out-licensing in areas where it didn't make sense for us to go or others could do it better was a key to doing that. And now as we look forward in looking at that licensing opportunity, we see it as a very interesting part of the 2021 and a really interesting part of another revenue stream that we can pull in to enhance the numbers presented today.

Great. And then looking at the trait opportunity, there's this incremental value of traits that you guys are talking about as your real kind of revenue opportunity. How does that split in terms of negotiating with the development partner that you're working with another -- with a seed company? How would you see that split? Is that a 50-50 split? And is the number you showed just the overall pool of revenue that you're going after, including that portion that would go to the partner?

Thanks, Bobby. This is Bill. I'll take that one. So when we think about the trait premium that would get split amongst the parties, I think a general rule of thumb in the market is 1/3, 1/3, 1/3 between the 3 people: the germ plasm owner, the trait developer and the grower. And then the way we've talked about looking at these markets, again, there's seed and trait. So we know what the seed values are, and that's what we've sourced. We've assumed some value for the traits that we will create. We've added those 2 together to get to the market sizes, and then you can follow the math from there to get to where we are. The one thing that is relevant is we -- as you think about where we could end up playing is business model will matter. Several of the projects that we've laid out are expected to be seed. So that is the market is -- and the revenue are aligned. In some, like is the case with alfalfa, where we're just capturing our portion of the incremental trait, our revenue potential there is far less. So you got -- it varies, I guess, is the way to summarize it. Alfalfa is a real trait example. The others are traits plus seed. And we think that we've got a chance to capture all of that in the case of the seed go-to-market strategies, which we employ for several of the projects.

Great. And so in the trait plus seed, are there partners that you're looking at co-developing any of that with? Or is it basically between you and the grower?

I would think the wheat example -- sorry, the oat example rather that Jim gave is a really good one, where we would work with people that have each germ plasm and integrate our traits in. So I would think we would be working with people of that nature across many of these projects.

Okay. And I missed with the winter oats, the go-to-market there, is that seed and trait?

Yes.

Okay. And then just with the long-term growth targets, do all of the grain sales fall off post 2021?