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

Good day, and welcome to the Cibus Second Quarter 2024 Results Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask a question. Please also note today's event is being recorded. At this time, I'd like to turn the conference over to Wade King, Chief Financial Officer. Sir, please go ahead.

Thank you, and good afternoon. This is Wade King, the Chief Financial Officer of Cibus. I would like to thank you for taking time to join us for Cibus' Second Quarter 2024 Financial Results and Corporate Update Conference Call and Webcast. Presenting with me today is Rory Riggs, our Co-Founder, Chief Executive Officer and Chairman; and Peter Beetham, Co-Founder, President and Chief Operating Officer. Before we begin the call, 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 SEC filings for a list of associated risks. This conference call is being webcast. The webcast link along with our press release and corporate presentation are available on the Investor Relations section of cibus.com to assist in your analysis of the business. With that, I would now like to turn the call over to Mr. Riggs. Go ahead, Rory.

Thanks, Wade. I would like to begin this call with a high-level update on our business activities in this quarter and in this year. Following my remarks, Peter will walk you through our recent developments in more detail. In addition, we will review the value proposition for all of our developed traits and discuss how we're doing on our expected 2024 milestones to help you understand why we are so excited with our progress. Wade will then finish with a discussion of the financials. I'd like to start by reviewing the business we created last year where we merged Cibus and Calyxt. When we merged, we were the 2 leading gene editing companies in terms of owning the foundational patents and technology for gene adding in agriculture. These cover exclusive proprietary use of the foundational intellectual property in the agricultural gene editing industry, including our branding technology platform, the exclusive use of tailings in agriculture, and in certain geographies, the exclusive use of CRISPR technology in agriculture. When we created this gene editing powerhouse, we had a stated mission to become the leading independent gene edited trait developer for the major crops, canola, rice, soybean, wheat and corn. Selling GMO-based traits to seed company is a huge industry, and we seed companies on an annual basis, paid billions of dollars in royalties to trait developers for specific traits. These attributes are genetic expression in a plant that is associated with the specific plant attributes such as herbicide tolerance and disease resistance. A great example of our trait strategy is the traits we have developed for herbicide tolerance. Herbicide tolerant traits are the mainstay of the GMO trait industry. The principal attribute of a herbicide tolerant trait is that the trait enables plants to survive when the farmer sprays herbicides on the plant. In other words, these traits enable farmers to kill the weeds with herbicides without killing the crop. The GMO herbicide tolerant traits were developed using foreign materials from other plants. And as such, severe regulations are banning, which virtually stop GMO trait innovation in crops such as rice and wheat. The difference is that with our genetic technology we can develop herbicide tolerant traits without using any foreign materials, and that our traits are indistinguishable from trace developed using conventional breeding. This is why globally; regulations are changing to regulate traits from our technology as traits from conventional breed. This is why we're excited about the prospects for our rice and wheat crop platform. We can now develop families of herbicide-resistant traits in crops that did not have GMO traits. In addition, gene editing has created opportunities in areas that have been difficult to develop using GMO technology because of the complexity required to develop the specific traits. Disease-resistant traits are a perfect example of complex traits. In disease-resistant traits, we are initially focused on Sclerotinia white old disease that are critically important in canola and soybean. These traits have a direct positive impact on farming yield, cost and efficiency. The promise of gene editing is that it can address areas like disease resistance. This is why traits that make plants resistant to disease is such an important focus for Cibus. Agricultural trait royalties are very similar to the massive royalties paid in the pharmaceuticals industry for technology associated with each drug. There are virtually no drug producers in the pharmaceutical industry nor seed companies for the major crops that do not pay significant royalties to third parties for license technology for their products. This is our business model. Using our proprietary technologies, we can develop complex seed traits in a fraction of the time and cost of conventional or GMO reading. And with our technologies, we were able to accelerate the path towards commercialization. When we announced our merger, we established major milestones to track our progress in becoming the leading trait developer to seed companies in these major crops. We divided our milestones into 3 categories: first, new crops. We track milestones that follow our progress in developing new crop platforms and technologies. This, for example, means providing updates on the recent development of an operational platform for wheat, our expected soybean platform in 2024, and our recent patent expansions for new technologies. Second, new traits. We track milestones that follow our progress in developing new productivity traits in the signing of agreements with seed companies. This means providing updates on the developments within our trait portfolio and the commercialization of these traits, such as our advances in commercializing herbicide color traits in rice and the progress in our advanced traits for disease and herbicide trollers and other crops. Third, regulatory. We track milestones that follow our progress in gaining regulatory approvals for gene editing. Here, we have been tracking regulatory procedures for gene editing on a global basis, such as the recent Canadian approval, the approval in the U.K. and the positive parliamentary vote in February. I'm disappointed in the delay in the final regulatory approval in the EU. Post the parliamentary vote, the EU process continues positively in other countries globally like Canada and the U.K. are continuing to adapt their regulation for gene-edited traits to be similar to traits developed using conventional breeding. We continue to see a ground swell of support internationally for gene editing to be the technology that will be critical in solving the world's challenges to address food scarcity and the next generation. Most importantly, we are really excited because we have continued to meet our milestones. We are rapidly establishing ourselves as the leading trait innovator and developer that is addressing unique needs within these major crops. Reflecting on our recent accomplishments, the second quarter was another strong quarter for our commercial and technological progress. It has what has been our first -- great first half for Cibus, and frankly, a great launch of an important new company. Peter will take a deeper dive with our recent progress, but I want to highlight a couple of key accomplishments supporting our trait portfolio. In the second quarter, we successfully completed edits in our important third mode of action for our Sclerotinia resistant trait and successfully completed an initial edit for our first mode of action for a nutrient use efficiency trait. Both of these are extremely important as we broaden our opportunity set for new traits. Commercially, we are making great progress in launching our herbicide tolerant trait platform in rice. In this quarter, we signed agreement with Federa, one of the largest right seed companies in Latin America, which brings our right partnerships to 4 leading companies in the U.S. and Latin America, including Interoc in South America and Levelum products, subsidiary of nutrient in the U.S. In addition, we recently reported important field data in support of tack gene-edited polling traits in rice, building our herbicide tolerance platform and rice is important to us. We expect '24 and '25 to continue to expand our presence in the Americas and in Asia, both in companies working with us and in new traits. These milestones will continue to demonstrate our progress commercially and our momentum in developing new traits and new technologies. With that, I'll pass the call over to Peter. Peter?

Thank you, Rory, and good afternoon to everyone. It really has been a transformative first half of 2024 for Cibus, marking significant progress in our commercial development, our trait pipeline and the global regulatory landscape. I'd like to reemphasize how far our businesses come. While it can be challenging to appreciate the arduous path towards generating an annual recurring royalty stream, we believe we are really close. Importantly, we continue to move our customers' genetics through the development phase, and I would like to start by explaining how we see commercial developments at Cibus. Commercial development at Cibus is defined by our ability to make gene edits in customer crop genetics that provide them with a new desirable characteristic or trace, and to confirm our edits with multiple field trials. For each trait, field trials validating their effectiveness are a critical element and an important milestone towards ultimate commercialization. In each case, our traits in the fields are compared with the customers' seeds without the trait. These first-hand observations of the trait's effectiveness are invaluable to our commercialization process. We've experienced this with each of our developed traits with customers signing on after first reviewing our field test results. You can see some photos of this on our website with one of our herbicide traits in rice. It's a clear example demonstrating the performance of our gene-edited herbicide tolerant crops. On one side, you see a crop that has survived the herbicide application while the weeds do not. And on the other side, you see the control crop that didn't contain our edits and the crop was devastated by the herbicide. Excitingly, earlier this week, we announced yet another milestone in rice where we initiated the first stacked gene edited traits for herbicide tolerance. In this case, we reported that trait effectiveness was also promising after initial field trial. These traits can provide an excellent lead management solution that creates value for Cibus seed company customers and more profit and sustainable options for farmers. Today, I'd like to focus on a couple of key areas of achievement. First, being the further expansion of our developed rice platform and customer base, as Roy just mentioned; and the second being breakthroughs in canola, which we confirmed edits in canola for our advanced traits. Sclerotinia resistance also known as white mild disease and herbicide tones HT-2. So, let's start with the progress on our rice platform. We've gained significant commercial momentum in rice and are experiencing increasing customer demand for our HT-1 and HT-3 traits, which coincided with our reporting of successful field trials back in January 2024, underscoring the significant market opportunity we see in rice. In addition, this last quarter, we have observed initial trials showing the amazing opportunity to further lead management solutions with the stacked gene-edited traits I mentioned earlier. As we've discussed before, rice represents a major opportunity given the industry's continued challenges in developing conventional herbicide tolerance systems. Remember, the widespread adoption of herbicide tolerant GMO traits in over 95% of canola, soybean and corn crops highlights both the potential for similar uptake in rice farming and the limitations of current agricultural technologies. We are working with our rice customers to enable launching of our HT traits in rice as early as 2027. Our current partnerships could provide access to 6 million rice acres, and an annual royalty opportunity target, we currently estimate at approximately $120 million. The United States and Latin American markets are our primary focus for us, but have a developing strategic partnership for Asia as well. In addition to our momentum in rice, we continue to make progress in canola. We are doing important field trials in canola, and winter oilseed rape in the U.S., Canada and the U.K. In addition, we successfully made significant progress in our advanced trait pipeline, which I'll turn to now. Advanced traits in canola include disease resistance, new herbicide tolerant and nutrient use efficiency, we call NUE. The enormous commercial opportunities of these 3 trait areas are not only the clear value of productivity and sustainability, but these traits also represent significant opportunity to be expanded to other crops like soybean. This quarter, we successfully completed our edit milestones in our canola franchise with a third mode of action for our Sclerotinia white mold resistance trait. It's an incredibly important step to provide durable resistance to this disease in canola and other crops, including soybean. With the editing complete, the plants containing these edits will be evaluated in controlled environment growth rooms, with results expected later this year. For our herbicide tolerance trait, HT-2, we've completed another generation of edits in canola and anticipate greenhouse results later this year. We believe this trait once available, has the potential in multiple crops to be the first gene editor trait to achieve 100 million acres of yearly use, representing one of our largest opportunities. As a further reminder, Sclerotinia and HT-2 are multi-crop traits. Meaning that the efficacy we expect to achieve in canola would translate to other crops, including soybeans, and eventually, the company would have the opportunity to earn royalties across multiple crops for the same trait. We also achieved an important milestone with the initial editing for Services first nutrient use efficiency, NUE in canola. We believe this to be the first annually gene edits in a major crop in North America. This is a significant milestone not just for our company but for the entire agricultural industry as there is mounting pressure on crop production to use fewer fertilizers produced using fossil fuels. Let me explain why this is so important. NUE trait are part of a very large category of traits relevant to oil crops. These traits have the potential to make fertilizer use more efficient on a global basis without compromising the yield that farmers expect and rely on. In essence, NUE traits will provide a solution to optimize farmers' agriculture practices while maintaining productivity. This achievement is also significant because it represents our first use of the trait machine process to operationalize a third-party developed trait. This demonstrates our company's ability as a development partner to take gene edits identified by third parties and successfully make edits in our platforms to develop a trait. In addition to the achievements within our pipeline of developed and advanced rates, we continue to make progress with our crop platforms. Earlier this year, we successfully completed our crop platform in wheat, providing us a potential access to the largest global grain crop as measured in planted acres. This enables us to develop productivity and sustainability traits addressing major challenges for wheat farmers worldwide. Since achieving this breakthrough in wheat, we have been actively engaged in discussions with potential seed company partners with herbicide tolerance and disease resistance traits being a key focus of those discussions. Based on these discussions, we believe we are on track to enter into initial development and commercial agreements related to weak this year. We also expect to initiate the first edit toward developing traits for wheat. Finally, our advanced soybean platform is another exciting opportunity for us. And as I've mentioned before, one of the more challenging endeavors in plant biology. We are making steady progress, and we still anticipate this platform will be operational with initial editing completed by the end of 2024. That achievement would allow us to penetrate the vast soybean market, which encompasses over 200 million addressable acres. But it's more than just about market size. We expect our soybean platform to serve as the foundation for our sustainable ingredients business, which is a key component of our company's long-term growth strategy. We see significant opportunity in being able to develop sustainable, low-carbon ingredients and materials for the consumer-packaged goods industry. Our goal with this business is to be able to create products that do not negatively impact the environment during production, use or disposal. And with that, I'll pass the call to Wade to briefly review our financials. Wade?

Thank you, Peter. Looking at our financials for the second quarter, cash and cash equivalents were $30 million as of June 30, 2024. Moving to our income statement. I would like to start by noting that the second quarter of 2024 isn't directly comparable to that of the prior year second quarter of 2023, given the merger with payments that closed intra-quarter at the end of May 2023. Specifically, the prior year period only reflects 1 month of our combined company results. Please keep this in mind as I make reference to the prior year results. R&D expense was $13 million for the second quarter of 2024 compared to $8.4 million in the year ago period. The increase was primarily related to increased lab supply and facility expenses and increase in employee headcount and an increase in stock-based compensation expense for restricted stock award trends. These expenses were partially offset by $1.3 million in onetime expenses due to the closing of the merger transaction in the year ago period. SG&A expense was $9.3 million for the second quarter of 2024 compared to $11.1 million in the year ago period. The decrease of $1.8 million is primarily related to $6.5 million in onetime expenses due to the closing of the merger transaction in the year ago period. This was partially offset by an increase in headcount, increased consultant and legal fees and an increase in stock-based compensation expense for restricted stock award grants. Rarely liability interest expense, a noncash item was $8.7 million for the second quarter of 2024 compared to $2.6 million last year, an increase of $6.1 million. This was related to the liability assumed in the May 31, 2023 merger with HEDIS Global LLC. Net loss was $28.5 million for the second quarter of 2024 compared to a net loss of $20.5 million in the year ago period. For additional details about our financials for the second quarter of 2024, please refer to our press release and filings with the SEC. That concludes our financial discussion. Rory, now back to you for the closing remarks.

Thanks, Wade and Peter. As we explained, this quarter has been very important for a number of reasons. This has been a prudent period for building our weed management platform in rice. We ended the quarter with 4 leading seed company customers in rice, representing approximately 40% of the addressable acres. In addition, with our recent field studies for stack traits, we have begun to build our product offering to establish ourselves as the leading lead management solution in the important rice industry. The progress in advanced traits is key because they are the backbone of our current trait offering in canola, where we have 10 customers. In addition, these traits are expected to be the backbone of our product offerings in soybean. And this concludes our remarks. Operator, can you open the call up for questions?

[Operator Instructions]. We'll pause a moment to allow any questions to queue. We will take our first question from Scott Fortune with Roth Capital.

This is Nick on for Scott. Congrats on the quarter. The first one for me, just on the soybean side, getting up to speed there. I wanted to unpack that market opportunity a little more and just the timing around monetizing and maybe reaching some of the other milestones you've mentioned achieving in that segment? Just a little more color on the soybean side would be helpful.

That's great. One, as we said, we're making our conversion -- our single cell conversion, and we're very close as one of those days, we don't know when it's going to happen, and we're going to wake up. We're really comfortable what's going to happen in 2024. And when it happens, it unlocks a bunch of opportunities. First, it's a very concentrated crop. It's 200 million acres on the top -- we believe the top 4 guys are all really interested in working with us on Sclerotinia and HT-1 importantly. And so, what we expect is as we get the pipeline improved pipeline validated that we would one by one sign with each of the partners have their germ plasm. We're already working with a company called GDM, who is the largest company in Latin America, and they have interest in our crops. And so, we'll start by editing their crops. We expect to be editing by year-end this year to be in addition to work with them next year in developing a platform in soybean. Additionally, there's a big movement by all the consumer products packaged goods companies in terms of changing some of their composite oils, which have vial challenged sources. And so, we've just increased our -- the money paid to us to develop an alternative lauric oil and the soybean platform is going to be our key to that. And so, we think that soybean is a really important one because the number of acres and the value of a crop like Sclerotinia and secondly, building a brand-new industry in sustainable ingredients is a really, really big opportunity and very excited about that. And so, they'll both start happening together at the same time. Was that helpful?

Yes, helpful. Second one for me, just kind of piggybacking on the sustainable ingredient side. I wanted to unpack that opportunity a little bit more. You mentioned targeting your launch in 2025. But can you just give us a little more color about what you believe this segment could look like longer-term and if there's any additional investment needed to kind of get this program up and running?

So, this is an investment that's being funded by the corporations. So, we've been funded -- P&G has funded us in this project to date to develop these products and they intended it as to work with the other consumer product companies. So, we think this is -- the sustainable ingredients are a really big category across many of the consumer product goods and the other side. They had a fragrance business, and we had a business called Nucellus, very, very good, have a differentiated instance of editing of seeds and building products from it. And so, we're working very closely with them to hopefully start shipping bio fragrance site products next year. We think that the whole sustainable ingredients business could be the value of the same size as the rice opportunity. It's a really, really big opportunity, and it will happen as soon as we have the soybean platform, we set on making edits in these platform implementations, we're already making the products, and we're validating our process right now to be in a position to start shipping. And so, it's a big category that will start with fragrances and then move to oil as opposed to soybean.

We'll take our next question from Matthew Venezia with Alliance Global Partners.

Yes. Congrats on the quarter and good to hear from you all. My one question for today is, are you planning on transferring HT-1, HT-3 stack traits to customers only in the stacked version in Rice? Or do you think you would be transferring them separately at all, just like HT-1 by itself or HT-3 by itself?

That's a great question. The bread and butter of the herbicide business is having stacked traits. That's what GMO made their name. And so, if you go into rice and corn, they have probably 5 different herbicide stacks. And what we're really saying is that the same thing is going to happen in the non-GMO crops, and we're going to be leading in that field. And so, to think of this sector as one where we'll offer each of the traits individually, and then we'll start developing stack traits with each of envision. And we have for different herbicides we're working on right now to try to complete the opportunity in stacks, but we'd expect to have it available so that depending on where you are, the farmer and the seed company can sell a seed that has the ability for the farmer to be able to pick the herbicide that works best for them. It's the way you get it, not so much in the trait business is that we management businesses. The lead management business, you need to offer a seed that has a bunch of different ways for the farmer to manage the weeds and to do that for the different levels of pre-plant and pure plant. You need to handle a bunch of different ones. And we're alone in this field, and we're pretty excited about the ability to lead them by having that whole group of stack traits. Is that helpful?

Let me add a little bit to that because I think this is such a great question. And it is one of the things that I'm most excited about being able to bring to the market opportunities for farmers to control their weed as Roy said, this is the lead management business. We are a huge headache for farmers globally. And it really steps their productivity. It costs a lot of money to actually use herbicides across the crop. They use diesel or they fly on using aerial sprayers, as I mentioned, it can be as much as $120 per acre just to control weed. So, for us, bringing forward the opportunities, as Rory mentioned, one, it's exciting for the farmers, but the seed companies being able to provide those offerings. So, it helps with regards to weed resistance management and having the multiple stack traits. And as Rory said, in soy and corn, this has been done for many years. But it has been done with GMO. So, the non-GMO crops like wheat and rice haven't had those opportunities. So that's why I think bringing HT-3, HT-1 and others to the marketplace, not just in the U.S. but Latin America and into the Asian markets is very exciting that we've made so much progress in such a short amount of time.

We'll take our next question from Austin Moeller with Canaccord.

My first question here, can you go into detail about what processes will be undertaken in the second half to evaluate those edits made in canola for Sclerotinia and nutrient use efficiency in HT-2?

In each of those, the first thing you're doing for Sclerotinia and HT2 and Sclerotinia, you have 2 different modes of actions we've had field studies on it. And I'm really excited in our third, which we think is really going to be the blockbuster the 3. You're waiting first for just greenhouse data and growth room data, and we'll get it in the field until next year, but we're the first thing is to look at the greenhouse data. And the same thing is true in HT1, because we've made the other the next step, there's so many good assays right now is to validate the value of those things in the greenhouse. And then because we have customers, how quickly we can move it as the customers. Peter?

Yes. Thanks, Rory. I think that we talk about the modes of action for disease resistance. And it's important to understand that's the beauty and the uniqueness of what Cibus is doing. Rory often talks about antivirals as an analogy in the pharmaceutical business. And this is the same for us, having multiple modes of action for disease resistance is the ability to give durable resistance to crops against diseases like Sclerotinia. So, we're excited to see the second half of this year with the third mode of action, as Rory said, in our growth chambers and greenhouse to validate the trait. We know it's going to work. We've got good evidence already as the other modes of action, bringing them all together is the next step for us. And the customers that we talk to and that we have with our canola franchise, we see them very excited by this. It is one of the complex traits that we've talked about and the uniqueness of what we do to address those complex traits. You asked about the herbicide tolerance and also NUE. And they're the same. We have our phase already for HT. We understand what we do to address the next stage of showing that the crop is tolerant to that particular herbicide. And then with regards to NUE, that's come on faster than we expected. And we're excited because I think, as I mentioned in my remarks that it is one of the biggest opportunities we have globally and bringing forward the NUE traits. The first set of edits is just the first generation, and we'll look forward to reporting on those later this year.

Great. And just a follow-up. Will the cost saving initiatives mentioned in the release, to conserve capital, slow down the rate at which further editing and development work on new traits will be completed? And would that move like greenhouse and field testing to the right or not particularly?

No. We have 3 big platforms, weeds, disease, and you'll be following that the -- our focus right now is really to make sure that these get going and you start making money and we can break out then. So, our focus has really been out of theirs. And there's nothing we're doing and it's going to stop the growth and building of those which is sort of rationalizing and understanding what we need to build the rest of the business. But the big things we care about, which is getting this herbicide-tolerance in rice, in the wheat is really just a really big category, and we already have a bunch of herbicides to work with. Disease, we have our patterns. It's really more development process.

We will take our next question from Sameer Joshi with H.C. Wainwright.

Just a few clarifications. It was a good presentation; the press release is pretty detailed. On the sustainable ingredients, you say there will be -- there has been a material increase in funding for the in 2024 and 2025 -- for 2025. Is this a prospective thing? Or have you seen some initial funding increases already?

Can you repeat that? I just want to get it clear.

Enabled ingredients sort of milestones you have a material increase in funding, into next year.

I think our partners are excited and more excited than we are. I think that we really have -- we're all convinced that -- and we've made great progress in understanding the edit that we can modify soybean in a way to really address the comparability of any of these things are trying to change, and we're really excited about the bio fragrance. And so, this increase in funding was just the ability for us to accelerate and be sure we're ready as the soybeans come along.

I agree, Rory. I think what's been exciting and encouraging over the last 6 months at Cibus is the there's an appetite for plant-based solutions. And as Rory has mentioned, we've got some partnerships already with companies that want to fund this research. And so, it's not just soybean, it's beyond that as well. I think we're seeing a real appetite in the market for people coming to us and with a pull-through strategy of saying, we really need this sustainable ingredient. And it really does meet their sustainability goals. And so, part of that is to expand even things like different fuels or different oil profiles, as Rory mentioned, soy is a really great basis for that. I think there's -- and we'd love to move forward on other crops that we've talked about before like peanut where we've got some plant-based opportunities that will be good for human health for nonallergenic peanuts. There's lots of opportunities in this space, and this is an area where we're getting funding towards some of these opportunities for sustainable green. So, a very exciting area that is part of our growth for long-term growth.

They're funding to buy. They're funding because they want us and they're scoping out where the acres and how to build it. And so, this is a real development plan. We decided we were going to go after output products and as customers are willing to fund it and build the business around it.

Yes, yes. And I also noted, Rory, you say that this opportunity could be as big, if not bigger than the other businesses as well.

I think we look at it as rice, canola, and this close behind soybean they're all 3 really big platforms. Both of them have the ability to take us to our expense take us through our current expense more importantly, to build the business, we think we're in build.

And I think we may have discussed this previously, but the Canadian approval in May of this year. Can you talk about the size and the scale of the markets that this opens up for you?

I'll let Peter to. I think the Canadian is a very respected market. And so, one by one of these countries to prove it. It's really just -- obviously, it's big for canola. It saves time on increasing, but it's sort of -- it's a really good example of how around the world are all starting to approve it, and they're all passing the same things to put us in the category where we're regulated, conventional breeding. And the U.K. may be small that we're just doing our first field trial in the U.K., and we'll soon announce results from a field trial in the U.K. So, each of these approvals just build the whole idea that -- I don't know if we're alone in this field or alone with technology that we can make these edits and these edits certainly be regulators like breeding. And so, I think my team is excited about Canada and yet just because of respected our team thinks about Canada.

Yes. I'll just add a little bit to that because I love flying across Canada and seeing how much yellow flowering there is. There's 22 million to 25 million acres of canola in the prairies. But not only that, you've also got a really strong weak market and soybeans move north as well. So, you've got 3 of our crops that we're working on. And so, Canada is one of our key markets for sure.

And they do have an environment where Sclerotinia resistance would be pretty important trait.

That's good to see as well. Last one for maybe Wade. The SG&A expense of $9.3 million on a GAAP basis, it is sequentially higher. Is there a reason for that? And should we expect for the next 2 to 4 quarters, similar levels of SG&A?

I think you'll see it be pretty consistent looking ahead. Remember, this is the last quarter we'll be reporting results whereby the comparable year, the comparable period from prior year is a mixed bag given the merger. We expect, frankly, our cash spend to be very consistently $5 billion going forward. And so, you've got a good blend of, obviously, development activity, production activity, and of course, the G&A supporting the fundamentals of the business. But any of that I think you will see that SG&A spend to be rather consistent looking ahead with once again, total cash spend approximating $5 million on months.

We're moving. Each of the platforms are doing a pretty good job of signing on customers and pulling along.

We'll take our next question from Steve Byrne with Bank of America.

Just curious, what's the mechanism of action behind this nitrogen or nutrient use efficiency, is it reducing the nitrogen content in the crop? Or is this really more root system-related, better ability to assimilate nutrient in the soil.

Thanks, Steve. Let me start by saying that we've reported on this as one of our first times where we're working with a partner as a third party to bring in edits to our canola platform. We're excited we made them very quickly. It is more associated with nutrient uptake in the crop. There's many modes of action that we're going to go after, Steve. I won't go into the specifics today, but fundamentally, it is not just nitrogen, that we're looking at, it is more the whole NPK fertilizer opportunity. And I think that like a lot of our opportunities in being able to do complex edits, we're looking at multiple ways to enhance the use of nutrients in crops. And so, for us right now, it's more on the route side, but within the plant, we hope to also bring on other edits that have a multifactorial way of getting to nutrient use efficiency. So yes, a really cool mode of action that is more nutrient-based.

Very good. And then one question on the Sclerotinia trait. Is there any risk that if you are successful at putting that edit into soybeans that it might have a different effect on fungal resistance than it does in canola? Or are you confident in that ability?

The work that we've done in our R&D team, Steve, would actually point to the opposite, but it is actually a little bit better than siting. We were able to do some early assays now. You have to get it in the plant. You have to get it in the greenhouse, you have to get it in the field to test it. But we're very -- the work that we have done and the assays we've analyzed give us a lot of comfort that we are going to be successful.

And there are no further questions at this time. I'll turn the call to the management for any closing remarks.

Thanks. And thanks, everyone, for listening. I think as I said at the end, we're mostly excited about how far we're moving this rice platform. And it's such a good example of weed management, the dollar value of it and the size of the rice market is such a big opportunity. And a lot of questions here on advanced traits, and for good reason, they're really -- both our advanced traits or potential billion-dollar royalties across the markets. And so, how they move and the inflection is really important. So, we're tracking pretty closely how we build those into our platform. So, thanks so much, guys, and look forward to next quarter. I'm all done. Operator?

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.