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

Thanks so much, and welcome everyone on this afternoon. I appreciate each of you setting aside time to be with us for the Cibus Third Quarter 2024 Financial Results and Business Update Conference Call and Webcast. Joining me on today's call are Rory Riggs, who serves as our Co-Founder, Chief Executive Officer and Chairman, along with Mr. Beetham, our Co-Founder, President and Chief Operating Officer. Ahead of getting started, please allow me to note for all listeners that any remarks delivered during this call and webcast — including those touching on future financial results, future operational goals and industry prospects — constitute forward-looking statements and could be affected by various risks and uncertainties that might lead actual results to differ materially from what gets described here today. For a list of associated risks, please consult Cibus SEC filings; this conference call is being webcast. To help with your analysis of our business, the webcast link, together with our press release and corporate presentation, can be found in the Investor Relations section of cibus.com. Having said that, I'll hand things over now to Mr. Riggs. Go ahead, Rory.

Thank you, Carlo, and hello to everyone this afternoon. Prior to getting started, I want to acknowledge that Carlo is joining us on this call in his capacity as our Chief Financial Officer. After Wade King took a leave of absence, Carlo filled in for him. Even though Carlo had not previously been part of the investment community, he is an accomplished financial leader possessing close to 14 years of experience with Cibus by itself, plus decades spent in numerous positions, among them serving as Head of Finance for the EMEA region and as CFO for the Netherlands and Belgium at Syngenta, along with his audit work in his earliest years at Deloitte. We appreciate how he has smoothly taken over for Wade, and we anticipate his contributions as a member of our executive team as we look toward what lies ahead for us as a commercial enterprise. Having said that, I want to open today's call by giving a high-level update regarding our business activities for this quarter and year-to-date. Once I finish my remarks, Peter will offer additional detail about our recent developments and the progress we are making within our crop platforms. Then Carlo will wrap up with the financial discussion. When we consider the first 9 months of 2024, it is evident that this period has been transformative for Cibus as we move from being an R&D-based business into becoming the industry's first commercial gene editing company. This ongoing shift from a company centered on R&D toward the first commercial stage gene editing company was necessary for streamlining our organization so that our efforts could more efficiently concentrate on carrying out our product launches involving our herbicide-resistant traits in rice and traits for Pod Shatter Reduction in canola, all while preserving our capacity to take advantage of the positive momentum we have achieved in building out our soybean platform and pushing forward our traits for Sclerotinia resistance and herbicide tolerance, which are our H2 traits. Our evolution has been accomplished. A set of successful milestones came about that tied to 3 cornerstones of our business. Cornerstone number one is finishing our Trait Machine process along with the industrial technology breeding platform, which delivers a trait development process that is time-bound and predictable. Cornerstone number two involves operationalizing, or scaling up, the Trait Machine platform so as to build a multi trait pipeline, with the aim of commercializing plant traits alongside multiple customers and across multiple crops. Our third cornerstone is embodied by the collaborations we continue to carry out with major seed company customers, aiming to develop, to license, and to commercialize these traits within their seeds in exchange for trait fees or royalties. These 3 cornerstones, together with the foundation of this new technology business in agriculture, exist for the development of productivity traits, meaning traits that allow farming to become more productive, economical, and sustainable. The Trait Machine process is our first cornerstone; it represents a paradigm shift in the breeding of complex traits. For every one of our crop platforms in canola and in rice, and for every one of our traits for these crops, we are now able to finish our edits on the customer's elite germplasm and regenerate the edited germplasm into a plant in only 12 months. The predictability and pace of breeding driven by technology—and the breakthroughs it enables—form the basis for creating every trait, as well as for shortening how long it takes to bring each trait to market once it exists. We think that same shortened schedule applies to our soybean platform as well. Having a dependable timeline for putting our traits into a customer's germplasm matters greatly when commercializing a customer trait, and that work starts when the customer's germplasm arrives. Proof that we can employ the Trait Machine process to edit and then deliver into the greenhouse on a predictable, time-bound basis comes from what we recently shared: successful greenhouse data for our HT-2 trait in canola. For that trait, the span from edit to greenhouse results came in under 12 months. We have likewise made an announcement < > about our disease program, where we also anticipate greenhouse results within 12 months after the edit. At present our pipeline contains 5 distinct traits, and for every one of them we have finished edits and achieved either successful field trials or the greenhouse results we expected. Being able to create this many traits in such a compressed period demonstrates how efficient the trait machine process has become. Operationalizing—or scaling—our trait machine process so we can build a pipeline of traits is our second cornerstone. This too represents a paradigm shift in how new traits are bred. The way we can industrialize both trait transfer and the creation of new traits demonstrates the power of our Trait Machine process to cut the development timeline, the commercialization timeline, and the expense of creating new traits. The third quarter proved an excellent quarter for showing that we can scale our Trait Machine process as a continuous production system spanning multiple crops and multiple traits. In rice, we now serve multiple customers, and each of them has multiple lines. The first edit took place inside a 12-month framework, and we anticipate that gene editing of the HT3 trait across multiple customer lines will likewise all fall within this 12-month production target. In winter oilseed rape, working with multiple customer germplasms, we finished the first field trials for our Pod Shatter Reduction trait; those trials took place in the elite germplasm of several customers. These edits were finished in the greenhouse inside a 12-month time frame. Beyond that, we achieved the first successful field trial involving stacked gene edit traits, using our HT1 and HT3 traits in rice. We anticipate building a family of stacked herbicide tolerant traits for our rice customers; the capacity to develop a family of stacked traits efficiently stands as a key strength of the Trait Machine process. Our Sclerotinia-resistant disease trait in canola is expected to be made up of multiple modes of action, which will be combined into our Sclerotinia resistant product. We expect to offer multiple gene edit herbicide traits throughout the entire industry; we anticipate that these traits, together with sclerotinia resistance, will present a comparable scale opportunity in soybean. We anticipate that our technology can reach scale within a comparable timeframe and in a way we can count on. That's the meaning behind operationalizing what we call the Trait Machine process. A third pillar involves working alongside large seed company clients, aiming to create, license, and bring to market such traits within their seeds in exchange for trade fees or royalties. This matters greatly as proof that our technology works as a commercial platform. Extending breeding programs for our seed company clients through gene editing is essential to building this emerging gene editing trait sector; this pillar concerns employing the Trait Machine process as the central driver for commercializing our traits spanning numerous crops, numerous traits, and numerous customer lines, all in an efficient, time-bound, and foreseeable fashion. Such is the foundational structure and proof of our commercial process model for gene editing in agriculture. The pace of our Trait Machine process will deliver substantially quicker commercialization schedules for novel traits, plus refreshes for novel traits after they launch. Momentum with current clients, with the aim of commercializing our traits in varied customer germplasm across varied crops, carried on through the third quarter.

At this point, we've built partnerships with leading seed businesses across every crop platform we work in. In every instance, we've gotten the elite germplasm belonging to each customer for a particular crop. All of these seed company cooperations are undertaken with the aim of developing, licensing and commercializing the trait in near germplasm in exchange for trait fees. When it comes to soybeans, the current aim is to build out the Trait Machine crop platform; in rice, every one of our collaborations was undertaken so that we could develop our herbicide-resistant trait and near germplasm for commercialization. Additionally, in the U.S., we signed a significant agreement with Albaugh and RTDC so that our collaboration would continue for supplying Clethodim herbicide, which supports the anticipated launch of our custom tolerant on rice trait — our HT-3 trait — to our U.S. rice seed customers, drawing on Albaugh's herbicide registration and crop protection know-how. A key piece of the continuing commercialization of herbicide-tolerant traits is this partnership, structured as an economic partnership involving the seed company, the chemical company and the trait company. Our continuing field trials for our Pod Shatter Reduction trait in canola and winter oilseed rape in customer germplasm are likewise key elements in commercializing our Pod Shatter trait alongside seed company customers. On the soybean side, our first platform is being developed using GDM germplasm. It was set up with the aim of building a platform for developing and commercializing selected traits in soybeans, such as our HT2 trait and our trait for sclerotinia. The continuing effort involving our traits and customers' germplasm as part of their commercialization program serves as a model for how this new gene editing industry functions. Having entered the last quarter of this year, we're enthusiastic about the technological and commercial foundation we've built to establish the first commercial trait business. Through every cornerstone of our model, we are setting ourselves apart and establishing our place as a significant element within the seeds and trait industry, and we're able to drive value for our seed customers and the grower community. At this point Peter would like to give some further background on our commercial activities and technological updates. Peter?

Thanks, Rory, and good afternoon, everybody. Our recent quarter, along with the opening 9 months of this year, has brought into focus the considerable strides we've made worldwide in gene editing for key traits and key crops. As Rory pointed out, everyone at Cibus is concentrating on bringing our products to market. We're making our workflows more efficient, drawing on the efficiencies and synergies that come with our semi-automated trait development process. We're finishing the year in a solid position to hit a number of significant milestones. Before I walk through our progress, I want to underscore how vital our leadership role is within the agricultural gene editing sector. Only this past week in Iowa, during the World Food Prize keynote delivered by Dr. Dongyu, who serves as Director General of the Food and Agriculture Organization of the United Nations, he named several of the urgent problems created by growing food insecurity, and he made a clear case for the essential role gene editing will play in addressing those problems. To quote Dr. Dongyu, gene editing technology accelerates the breathing process significantly. It's faster than traditional breeding methods. It improves resistance to pests, diseases and environmental stresses. This includes tolerance to high temperatures, droughts, floods and salinity, among others. For those of us at Cibus, there's no doubt that a worldwide movement now exists, along with a demand for action, to bring gene editing into the breeding programs of seed companies. Cibus has spent more than 2 decades building the foundations of gene editing from the ground up. We're positioned well to seize this moment as we carry on with our shift into becoming a commercial-stage gene editing company. As we laid out in our previous quarterly update, the past year has brought growth in our customer base among rice seed companies. Today, I want to walk through our rice platform as a case study showing what gene editing can accomplish in agriculture and how Cibus is spearheading that work. Rice ranks among the most vital food cups in the world. Yet historically, it hasn't gained from the finest nonselective herbicide tolerance traits, because conventional breeding and GMO technologies have their limits. This is the one example where our gene editing capabilities come into play. Our rice platform journey started when we identified a crucial need. Rice farmers around the world, particularly in Latin America, was driving with weed management and, in some cases, spend over $120 per acre on herbicides and their application. Absent workable weed management options, farmers have given up yield and grain quality, which lowers profits. To tackle this, we used our Trait Machine process to create our herbicide tolerance traits HT1 and HT3, which let rice plants endure herbicide application and offer the chance to cut weed management costs substantially. Once these traits were developed, we advanced edited plants into field trials to show how well our traits perform. You can see striking photos on our website, showing treated rice field trials where elite genetics of rice with our gene edited traits thrive after herbicide application, while the unedited crops are devastated. What matters greatly to growers is that these trials demonstrated outstanding suppression of the weeds that are hurting both yield and quality. As Rory mentioned, we then took the unprecedented step of creating, for the first time anywhere, stacked gene-edited herbicide tolerant traits in rice, and there we saw encouraging field trial data that strengthens the outlook for better weed management choices available to farmers. Given these strong results, we entered into commercial agreements with 4 leading rice seed companies across North and South America. Germplasm has arrived from every one of those customers, and we are currently integrating our traits into their elite germplasm. Beyond that, we signed an arrangement to keep working alongside Albaugh, LLC and RTDC company on supplying Clethodim herbicide, which supports the launch Cibus anticipates for its Clethodim, known as the HT3 trait, in the U.S., and that represents a significant milestone for the commercial development of HT3 in the U.S. Together with our customers in the U.S. and Latin America, we are preparing to launch these traits in 2027 or 2028. We believe there is a chance to reach roughly 9 million seeded rice acres, which by our estimate equals a market opportunity of about $200 million in possible yearly royalties. We are also exploring expansion of our rice traits into Asia. That represents a huge long-term opportunity beginning in 2030. Yet even excluding China, it might produce roughly $150 million more in yearly royalties. This rice case study shows why and how Cibus leads the gene editing effort in agriculture; we tackle critical pharma needs by using our Trait Machine process to create traits rapidly and affordably, solving problems that conventional breeding and GMO technologies were unable to solve. Because we can stack multiple traits, we expect to deliver comprehensive solutions to farmers, and our non-GMO approach keeps gaining regulatory acceptance around the world, unlocking markets that were previously shut off to older technologies such as transgenic biotechnology. The fact that major seed companies are choosing to partner with us confirms our technology and our approach. What we are achieving in rice underscores the commercial potential of our trait development process across multiple crops. We are not merely creating individual traits, but pioneering a new paradigm and agricultural innovation. Turning now briefly to canola and winter oilseed rape, as Rory already noted, we have achieved significant progress in both our developed and advanced traits. As stated, for Pod Shatter Reduction, PSR, we finished initial successful field trials for winter oilseed rape in the U.K; and to be more specific, planting is already complete for our expanded next set of European field trials, with results anticipated in the fall of 2025; we also keep working closely with our North American customers through our initial commercial launch of PSR in 2026. That work involves confirming key specifications for PSR and the other agronomic or trait characteristics from our seed company customers for hybrid seed launch. Although we are streamlining to focus our herbicide tolerance in rice, our PSR trait work and our soybean platform, we retain the ability to keep making progress in other areas. We're continuing to make headway on our sophisticated traits, which got their start in canola — covering the first editing work, greenhouse findings, and field trials. With regard to HT2, we verified second-generation edits along with preliminary results demonstrating canola that has better herbicide tolerance than what we saw with our first-generation HT2. Because this advanced trait has potential and can be applied across multiple crops, HT2 may end up being the first gene-edited trait to reach 100 million acres of annual use, which stands as one of our biggest opportunities as we work toward earning royalties on the same trait across several crops. Alongside HT2 in canola, we've achieved considerable headway on our Sclerotinia resistance trait, hitting several significant milestones so far this year; edits have now been completed in 3 modes of action. Let me pause to explain why having multiple modes of action matters so much when it comes to disease resistance in crops. Diseases such as Sclerotinia, which is also called white mold, are capable of evolving rapidly. On top of that, Sclerotinia has complicated life cycles, so giving crops several different ways to protect themselves from disease — what we refer to as modes of action — is essential for dealing with a disease and environments that keep changing. The strongest kind of resistance, known as durable resistance, has been attained by using multiple modes of action; thus at Cibus, our gene editing approaches create the chance to deliver that durable resistance across multiple crops. Although the progress on our advanced trait canola is thrilling by itself, the strides we've taken on traits such as Sclerotinia resistance in HT2 are establishing vital groundwork for our growth into other crops, in particular our planned development of a soybean platform. This sophisticated platform — among the hardest undertakings in Plant Biology — should be up and running by the end of 2024; editing efficiency in soybean cells has already been enhanced by us. We expect to finish further editing and reach regeneration capabilities during that period, which marks a key inflection point enabling our entry into what we see as a soybean market opportunity exceeding 200 million addressable acres. Past market size alone, the soybean platform will also act as one of the cornerstones of our sustainable ingredients business, where we keep chasing collaborations funded by partners. These accomplishments throughout our crop platforms and trait pipeline demonstrate our capacity to create intricate multi-crop traits that tackle major global agricultural difficulties. We aren't merely hitting our milestones — we're breaking new ground toward a more sustainable and productive future for global agriculture. With that said, I'll pass things to Carlo for a financial update. Carlo?

Thanks, Peter. Turning to our numbers for Q3. As of September 30, 2024, cash and cash equivalents stood at $28.8 million. When you factor in the cost-saving initiatives, once they're fully in place, we estimate those will cut our monthly cash usage by roughly 20%. Cibus anticipates that its current cash and cash equivalents will cover planned operating expenses and capital expenditure needs through Q1 of 2025. Now on to the income statement. R&D expense came in at $13 million for Q3 of 2024, versus $70.5 million in the same period a year ago. That $4.5 million decrease was mainly driven by lower noncash stock compensation expense along with the strategic realignment and reduction in force we announced in Q4 of 2023, which brought down personnel costs and supplies. SG&A expense was $7.7 million for Q3 of 2024, compared with $8.8 million in the prior-year period. The $1.1 million decrease was largely attributable to lower noncash stock compensation expense. Noncash items totaled $1.2 million for Q3 of 2024, versus $9 million a year earlier. That decline was mostly tied to the fair value adjustment of the liability classified common warrants during Q3. Net loss came to $201.5 million for Q3 of 2024, compared with a net loss of $34.5 million in the same period last year. The bigger net loss stemmed from the impairment of goodwill, which resulted from a fair value assessment tied to the stock price decline, carried out in Q3 of 2024. Net loss, excluding goodwill, was $20 million for Q3 of 2024, versus a net loss of $34.5 million a year ago, which works out to a $14.5 million improvement year-over-year. For more details on the financials for Q3 of 2024, please see our press release and our filings with the SEC; that wraps up our financial discussion. Rory, back to you for your closing remarks.

Appreciate that, Carlo and Peter, for the updates. Like we've talked about, the third quarter has been a key one for Cibus on several fronts. The progress we're seeing in rice, along with the gains in our trait pipeline — canola in particular, plus the foundation we're putting in place for soybeans — truly demonstrates how broad and deep our capabilities run. We aren't only creating single traits. What we're doing is constructing a full-fledged trade development platform that could reshape many areas of agriculture. So I really appreciate all of your focus and interest. We can't wait to bring you another update next quarter as we keep reaching our milestones and pushing our mission forward. That wraps up what we have to say. Operator, would you please open the line for questions?

To kick things off, could you give us a rundown of where things stand on the legislative and policy front for gene editing? What's been going on in Europe, particularly the debate regarding rice, and how would you characterize the situation with the right policy in China? Is there anything that needs to be modified? Could you just give a brief < >?

I really appreciate that question; across the Americas, we're in a fairly solid position in the main nations where we're launching. And over in Europe, the legislation went through, but they haven't managed to secure what's known as the tripartite agreement. And the expectation is that it's present each quarter, and a new President from Poland is coming in January, and everyone's saying that the incoming President is prepared to make a move on this for Hungary < > year; so we're feeling quite confident that Europe will act, and Asia as well. Peter, would you like to — it shifts constantly, but my understanding is China permits it in some form, Peter?

Absolutely. I'll expand on that a bit, Laurence. Thank you very much for asking. Across the globe, regulatory systems are moving toward alignment — that's certain. To back up what Rory noted regarding the Americas, nations in both North and South America are bringing many of their regulatory approaches into line; the same thing is taking place throughout Asia. In China, we keep witnessing encouraging developments, and gene editing is now viewed as no different from what happens in conventional breeding methods, and that matters a great deal. I'd also note the second point Rory raised — confirming that in Europe, a shift in the EU Council presidency is expected at the start of next year. Based on everything we're hearing, that should represent a very favorable step forward in that effort and in the completion of legislation across Europe, which is thrilling for every one of us.

One more thing to mention: with rice, the first major product we're bringing out, every market we're entering immediately already has approval for us, and that's something we're quite thrilled about.

Nice. Could you also give us a quick refresher on the expected timing for when rice commercial revenue should start hitting the P&L? And I suppose rice and soy are the 2 I'm most focused on right now; but beyond that, how much is the gene editing platform turning into a situation where partners bring you seed — inserting their own edits into that seed instead of using your traits? And when might that begin to appear as a revenue opportunity?

Good question; this touches on 2 things. I'll hand a bit of it to Peter. On rice, we've just posted a new deck on the website, and it lays out the anticipated launch dates for every one of our traits along with the anticipated market. So — we made the call this quarter to release that publicly. And with rice, the arrangement we reached with Albaugh mattered a great deal since it gets the clock running for the herbicide trait. So for rice, we require herbicide field trials plus a launch. And therefore, our expectation in '26, '27 in Latin America is that you'll begin seeing certain launches in Europe. Within the United States, it takes somewhat longer given the EPA and how many steps are involved, but somewhere in '27, '28 is when we expect the U.S. to launch. Peter?

Absolutely. To build on what was said, Laurence, one thing we find really thrilling is how the field testing done last summer, plus the one before it, has given us a clear window into the specs required for the herbicide tolerant traits in rice. And I really can't overstate how great it is that Albaugh has come aboard with us on the registration effort for Clethodim, which is truly an outstanding herbicide. Let me expand on that a bit, since Clethodim is a genuinely vital grass herbicide — it plays a central role in destroying some of the worst weed problems facing rice growers in the U.S. as well as in Latin America. One of those weeds goes by the name red rice. It's actually related to rice, and it has developed resistance to numerous herbicides in use today. That means growers are unable to eliminate it. They simply cannot kill it. As a result, you get lower yield and diminished quality. So being able to apply Clethodim over the top of the rice crop lets you wipe out the red rice. And lets your crop reach its full yield. I'd say that's a promising choice when it comes to weed management options for rice farmers across North and South America. As for us, we remain on schedule for that commercial launch in '27, '28. And it's great to watch those agreements move ahead and the field trials delivering the outcomes we anticipate.

So like I mentioned, with canola, our expectation is for the U.S., and we're looking at '26 for Europe. For the remaining portion, what we need is their affirmative vote, and following that timeframe. As for soybean, we're still anticipating that during this quarter we'll get the platform's initial validation; after that point, GDM along with additional customers will be ones we begin placing the trait with and rolling out. That process requires a couple of years, and we do anticipate securing approval so we can start moving in that direction.

And then, to wrap up, in a way that might help clarify how distinctive your offering really is: could you describe how far customers are prepared to go—or are actually coming to you—to talk about possibly paying extra for the field trials so you can expand them, rather than accepting a somewhat smaller royalty over a longer period? The second thing is, what share of your capacity is tied up right now? And how much—based on how much—if every customer were fully on board, how much additional work could they be asking you to take on? Could you shed light on both of those areas?

This is quite thrilling. I'll kick things off, and then Peter will wrap up. The thing is, with every one of these, we're beginning to edit all the crops. And the timeline we're operating on—breeding takes more time. And once they do it, they ultimately hand you seed that you can then plant, and we return their germplasm to them with the traits inside it, correct? So that's the system we believe will apply in rice. And then in the remaining countries, particularly for soybean, we have people telling us, we've got other concepts, couldn't we collaborate with you on that. And as for every one of our partners, I believe they're all expecting us to say whether you can hit these timelines. And that means, as we mentioned in our talk, that for 2 of our traits in soybean, the edits are done, they're headed to the greenhouse, and we fully anticipate having those results within 12 months of the edit, which is pretty cool. Does that answer it? Peter?

Absolutely. I want to expand on this a bit, since I believe what Laurence asked really matters. It gets right to how much time is required to move from an edited germplasm all the way into the field and then to launch. By collaborating with seed companies — the customers and partners we serve — we keep seeing demand grow. Interest from seed companies remains strong, and the reason is the seed itself. They've come to understand that when you're able to accomplish this in 12 months and return it to them promptly, it slots neatly into their breeding programs. Beyond that, we partner closely with them on field evaluation work right after the edits are finished. So once more, as we progress alongside our customers, they gain that hands-on experience with us, and they witness us delivering in a manner that's tightly time-bound and predictable. Not merely a handful of elite genetics, but a wider genetic base destined for their breeding program. I can't emphasize this point enough, Laurence, since this represents a genuinely different paradigm. We spend a lot of effort educating people about why gene editing differs so greatly from conventional breeding and from GMO technologies. With GMO technologies, things were time — they consumed a long period, they relied on event-driven science, and being able to produce materials and select genetics directly, the way our single-cell methods allow, then swiftly return it to the customer, truly transforms the paradigm for when you conduct that field work jointly and validate it on the path to launch. I realize I've wandered somewhat broader here, but I hope that has helped address the question.

Perhaps — if I could squeeze in one final question, then it's simply about the degree to which, when you consider all the field trial validation licensing expenses that a crop would involve for someone from development through commercial sales to the farmer. It sounds like there's — could you give us a rough sense of how much of that cost is being carried by your partners? Or is it something like a 50 to 50 split? Is it 70 to 30? Are they placing it entirely on you because you still have to prove yourselves? Could you just give us a sense of how the total cost pie is being divided?

We've made it pretty clear that the first round of modifications is something we've been doing on behalf of customers. As for the modifications that come after, the whole idea here is that you might have five or six lines in rice that you'd like converted to soybean; there are just so many different areas involved. At that stage, each modification would be paid for. So we include it, demonstrate our capability, and the expectation from everyone — every conversation we've had points toward this being a profitable venture in which we adjust our time and cost so that this trait can be introduced into their crops. Does that answer your question?