Moolec Science Q1 2024 Earnings Call Transcript

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December 14, 2023

There are 6 speakers on the call.

Operator

Good morning, and welcome to MULAC's conference call. My name is Michael Bowen from ICR, Strategic Communications and Advisory. During this conference call, all participants will be muted. After management's remarks, there will be a question and answer session. Please also note that today's session is being recorded.

Operator

Mulek announced today its Q1 fiscal year 2024 business highlights. The document is now available on the company's Investor Relations website at ir.mulek science.com. This morning, you will hear from Gaston Paladini, Chief Executive Officer and Co Founder of MULIK Science, together with Amit Dhingra, Chief Science Officer and Jose Lopez Lecubit, Chief Financial Officer. In today's call, we will be referring to a presentation that will be available on the Company's Investor Relations website. This conference call is mainly for informational purposes only, and during this call, the Company will be making some forward looking statements regarding future events and results.

Operator

Statements that are not historical facts, including but not limited to statements about the company's beliefs and expectations are forward looking statements. Forward looking statements involve inherent risks and uncertainties. Further information regarding these and other risks will be included in the company's annual report on Form 20 F filed with the SEC, later also available on our Investor Relations website. Now, I would like to turn the call over to Mulek's CEO to comment on our business and recent developments. Gaston, please go ahead.

Speaker 1

Thank you, Michael. Hello, everyone. I am happy to present our quarterly business update conference call. I want to thank you all in advance for your interest and support. Not much time has passed since our last update, but this quarter has been other solid periods of performance and development.

Speaker 1

After having a great 2023 fiscal year, where we announced many great breakthroughs in our development, we certainly continue to steadily deliver and execute on our strategies. I would like to start by outlining today's agenda on Slide 3. First, let me briefly review bullet's business opportunity. 2nd, our Chief Science Officer, Amit Dhingra, will walk you through our latest scientific and operational progress. 3rd, Boulek's Chief Financial Officer, Jose Lopez de Cubel will go through our financial highlights from Q1.

Speaker 1

Let's move now to Slide 4. This morning, I will start our remarks by quickly reemphasizing the important work we do here at Molek. Molek is using science to bypass dependence on animals by genetically engineering plants to produce the proteins of animals in addition to the native plant proteins. GOLIC is at the forefront of contributing a solution to the current unsustainable food industry. We are a science based food ingredient company using molecular farming, a cutting edge technology to move away from traditional practices and overconsume resources and contribute to excessive gas emission.

Speaker 1

Let's move now to Slide 6 to quantify the massive market opportunity ahead. We are exposed to a very large and growing market, sitting in an $829,000,000,000 market by 2025, mostly represented by processed meat such as burgers, sausages, beef balls, brown meat, nuggets, cold cuts, etcetera. We like to focus on these big markets on top of the alternative protein niche. Due to the good scientific and product development results we have obtained and in comparison to the chart we showed last quarter, we have included iron supplementation as one of our addressable markets. Our ingredients can be applied not only to the food ingredient industry, but also to the pharmaceutical, nutraceptical, supplementation and others.

Speaker 1

I would like to comment on our product development and research team for their excellent work in developing revolutionary products. And I would like to hand the call over to Amit, Munich's Chief Science Officer, to comment on our scientific and operational progress. Amit, over to you. [SPEAKER PIERRE YVES LESAICHERRE:]

Speaker 2

Thank you, Gaston. I will provide an update on our Scientific and Operational Progress section of today's agenda. Let's go to Slide 8. First, I will highlight the progress on our gamma lilac acid, safflower oil, which we call Glaso. During the Q1 of fiscal year 2024, which corresponds to calendar year June to September 2023, we successfully harvested 35 hectares of Glaso with a notable yield of 1.8 tons per hectare, which exceeds average yields by approximately 50%.

Speaker 2

At the same time, we maintained exceptional levels of up to 60% from the previous harvest, exceeding our original expectations by 10%. We have been in the process of scaling up our operations as we move towards commercialization, and we expect to plant between 100 to 3 50 hectares in fiscal year 2024. In 2025, we still have plans to harvest, crush and market our 2024 glass of seed, and we continue to actively engage in discussions with potential clients and partners to expand and advance our GLASSO business. This will result in risk reduction as we prepare to launch our inaugural molecular farming product. Moreover, it represents a crucial step towards diversification in terms of our product portfolio as well as resilience against potential challenges from weather and geography.

Speaker 2

On to Slide 9. Let us walk together through our process of discovery to selection to get that one selected event of molecular seed for our Soy 1, the first product of our piggy soy platform. Our ultimate goal is to get to that one transgenic event that has the best combination of the highest expression level of animal protein and yield performance. Then that seed is multiplied for further work. For discovery, we started by synthesizing DNA or the gene coding for animal proteins of interest.

Speaker 2

After that, the gene was inserted into an expression vector. As I explained to you during our first conference call in May 2023, a vector is like a truck that allows us to deliver the cargo of gene expression components into the cells and integrate the DNA coding for animal protein into the plant DNA, so that the animal protein can be expressed stably in the transgenic lines through different generations. During the genetic transformation stage, vectors are inserted into plant chromosomes. Plants expressing the desired animal proteins were then selected by using PCR and were grown in cultures. In this project, we first started with 550 0 generation or T0 transgenic events that were narrowed down to 256 transgenic generation 1 or T1 events using PCR tests that allowed us to know whether or not those events contain the desired animal protein genes or not.

Speaker 2

Thereafter, the remaining events were further narrowed down using the main KPIs from the plants where we finally selected 100 and 40 second generation transgenic or T2 transgenic events. Second generation transgenic or T2 transgenic events. We are currently at the developmental stage. We have just finished harvesting and analyzing our 3rd generation or T3 transgenic events using annual protein level of expression as our key selection criteria. I will discuss the results on the next slide.

Speaker 2

To complete the process first, we will select some of these transgenic events and we will test them in the field to see how they behave under real agronomic conditions in order to finally select the best event. In the next slide, I will provide details about the expression level of the animal protein, which is myoglobin, observed in the soybean seeds. Slide 10 shows our soybean seeds consistently expressing high level of myoglobin, both in the second and third generation of seeds. The exceptional expression levels of myoglobin achieved in the Piggy Soya platform remains consistent across 2 generations. This chart shows 16 selected events and the corresponding level of animal protein expression for transgenic generation number 2 or T2, which is the green bars, and that was tested in June this year.

Speaker 2

And generation number 3 or T3 represented by gray bars tested in November this year. You can see that the expression values for TE3 correlate with T2, while expression values reached up to 26.6% total soluble protein in the T2 generation. And in T3, we were able to achieve 20.4% total soluble protein expression in one of the lines. Overall, this is a demonstration that the animal protein continues to express stably through the generations. We expect these expression values to stabilize with the advancement of generations and identification of completely homozygous lines.

Speaker 2

I would also like to point out that these T3 expression analyses were performed at our own lab, the Mu Labs located in College Station, Texas. As depicted in the prior slide, we will finally narrow our selection of events to the one best candidate after testing the performance of several selected events in the field. Now, an update on our fully equipped molecular biology lab. I'm very pleased to share with you that Mulek has successfully set up Mulek, a fully owned plant molecular biology lab in a research incubator space operated by Texas A and M University, College Station, Texas. Our lab became fully operational in September of 2023 and this is where I oversee our plant molecular farming team.

Speaker 2

As I said, the lab is currently 100 percent operational and our aim is to focus efforts here in the molecular characterization of the transgenics produced by Molec. The company is able to now perform a significant part of R and D in plant biology projects here at this location. Compared to conducting research via 3rd party labs as done in the past, the initiative to centralize Bulex molecular farming research will establish a clear chain of command, facilitate quick implementation of decisions, ensure higher standard quality control and improve the timeliness and quality of work while reducing costs. These new facilities have already come to generate cost and time savings for each of the phases of the R and D projects we've completed there thus far, which have demonstrated accelerated and streamlined development compared to the use of 3rd party labs. Overall, I would like to thank my research team for the quality work they've been producing.

Speaker 2

I will now hand it over to my colleague, Jose, for the financial overview. Thank you.

Speaker 3

Thank you, Amit, and good morning to everyone. It is a pleasure to be providing Rulex business update for the Q1 of fiscal year 2024. Today, I would like to take some time to review our latest highlights with regards to revenues, expenses and cash utilization. Please keep in mind that all numbers mentioned today are in U. S.

Speaker 3

Dollars unaudited and based on IFRS unless otherwise stated. During the Q1, revenues increased to $1,700,000 versus $900,000 in the last quarter, representing a growth of 92% quarter over quarter. This growth was primarily driven by a full quarter consolidation of our acquired business versus only 2 months last quarter. In addition, revenues were also positively impacted by higher average pricing and higher volumes than last quarter. In terms of COGS, our operations benefited from stable soy origination from local farmers and more favorable market conditions.

Speaker 3

As a result, there was a gross margin increase versus last quarter. Quarterly expenses have remained in line with our historical track record, with no significant changes except for admin expenses of approximately $1,900,000 which were significantly lower than last quarter. Admin expenses in the previous quarter of approximately $3,000,000 were exceptionally high, mainly due to one time items such as accounting provisions and end of fiscal year non cash payments. Finally, our operational cash utilization this quarter of approximately $1,800,000 remains in line with our historical track record of controlled cash expenses while supporting R and D progress. As mentioned in our previous earnings call, Mulek has recently closed a capital raise with strategic investors, resulting in $10,000,000 of cash contributions and $21,000,000 of in kind contributions, which strengthens our liquidity position.

Speaker 3

We are pleased with the evolution of the business this quarter and remain focused on the execution of our R and D pipeline. I would like to take some time to thank our partners and investors for their support as we continue to work towards building value for our stakeholders. I will now turn things over to Michael for the Q and A portion of our call. Thank you.

Operator

Thank you, Jose. At this time, our management will be taking questions. You may submit questions through the chat box directly to me or by using the hand raising function. We ask those who would like to participate in the Q and A session to right click their image, click rename, and enter their firm and full name before asking a question. Okay.

Operator

Thank you, everybody. While we are assembling a roster of questions, we've had a couple come in over the Internet and email. So I will start off by asking them now. So give me one second. Okay.

Operator

The first question is, what are the biggest advantages of setting up MooLabs at Texas A and M? Why is it such an advantage to not use a third party lab as you've done in the past? And then finally, could you help us think about the cost savings as a result of setting up MuLabs? Thank you.

Speaker 1

Well, thank you so much, Michael, for the question. And good morning to everyone. Thank you so much for attending our business update today. Well, personally, I'm really happy to have a cell phone cell phone molecular biology lab in Texas. And there's a lot of upside by getting our lab running now fully operational with our team.

Speaker 1

I'm happy also that Amit Bilgo is here and he is leading the lab itself by being located in Texas. So, hand it to Amit to fully explain the benefits, the upsides, the saving, because when we going back to when you founded Mulek, it makes sense at that time to start working with your parties, with great partners. But now that the progress and the great milestones are getting now into a very good result. We need to take control of that intellectual property and all that seeds and all the processes. So there's a lot of upside by getting our lab.

Speaker 1

I'm sorry, Amit, please go ahead and give more colors about the new

Speaker 2

Sure. Thank you, Gaston, and good morning, everybody. Thank you for joining us today. So there are different phases of this discovery and development piece. The big part is that there are certain aspects of the work that we have outsourced, but now that we do have those transgenic events, we need to move rapidly towards deployment, scale up towards market.

Speaker 2

So how do we get there is we want to control all that material. It really provides protection to our intellectual property, of course. But also we can we are very nimble. If we need to do different types of analyses, we don't have to go farm it out because every time we do that, we waste time. At this particular stage, it really makes us more efficient in cost savings.

Speaker 2

Also, we are not paying overheads to a third party for their work because that's all our work itself. And we have access to some excellent scientists, plant biology senior plant biologist in our group, Bruce Williamson, who's really who's very well trained in different areas and can really move very quickly. Thank you.

Operator

Okay. Thank you for that. Actually, at this point, we're going to take our first question from Brian Wright at ROTH MKM. Brian, I'm going to we're going to unmute you and let you ask live. So give that a try.

Operator

If not, I can read your question. All right. Well, Justin Brian, if you want to unmute I have a way.

Speaker 4

Okay. Okay, great. Thanks. Sorry about the operator error here on my end. Sorry about that.

Speaker 4

Thanks for allowing me for the question. 1st of all, congrats on both the financial results and on the operating and R and D development during the quarter. What I was just struck with is just given those yields on Glasso are so impressive, just like thoughts on potentially accelerating that commercial development or even advancing that commercialization model to maybe a royalty based model to kind of get in the market quicker and just kind of like your thoughts on that.

Speaker 1

Sure. Well, thank you so much, Brian. And yes, we are happy for this strong Glaser deals. We are happy because the pathway, the timeline is on track. And this is very important, specifically in the scale up stage.

Speaker 1

To get the proper amount of seeds, tons of seeds, do not forget that we went from a bunch of cranes to tons now. So everything is on track and we are happy about that. We are not expecting to accelerate the process because this is a part of the process. We still need to crush the grains and get the product into the market. But we are quite optimistic of that process so far.

Speaker 1

Going to your second question, royalty model, I want to point out that the royalty model is always a possibility in Boulet since we are focused on intellectual property and get our own IP or our own seats. This option could be execute to expand different territories. Going specifically and talking specifically about Glazo, we are focused we are focusing this product in the U. S. And we are getting fully control of the process of our seats.

Speaker 1

So it's an option. It's a possibility. We're very open to explore it. In the meantime, we are focusing the process to get fully control of our products and delivery to customers directly.

Speaker 4

Great. Thank you. If you don't mind, I've got a couple more, or I could go back in queue, whichever works best for you all, for the team.

Operator

No, no. Go right ahead.

Speaker 4

Okay. Thank you. It looks like the T3 for piggy soy, really strong again up around that 20% level. Is that where you think as you go from T3 to T6, is the thought in like I mean that's well above your initial expectations to begin with by multiple factors. But like, is that kind of like a reasonable expectation for like when you get to T6 kind of in that 20% content range?

Speaker 1

Well, but first, I'm glad that you are putting focus on the level of expression because definitely, the level of expression is one of our main KPIs, scientific KPIs. Don't forget that when we started, our first expectation was 5%. Now we are talking about 20%. So that's amazing. But I will pass to Hamid to fully explain how the level of attrition will continue or what our expectation for the future generations.

Speaker 1

Hamid?

Speaker 2

Sure. Hi, Brian. That's a great question. And since you've seen when you get a chance to see the slides, we can tell that the expression level is still stabilizing. So in T3, we are at 20%, which means that we expect these levels to stabilize at this around this level.

Speaker 2

And of course, when we do agronomic, when we do field trials, that's when the real answer will come out. We can expect there is equal possibility that we might even get higher levels because of proper fertilizer use, proper photosynthesis in the field as well. So we're very optimistic on based on what we've observed so far. However, it's the stabilization at 20% is really great observation for this generation of seeds.

Speaker 4

Great, great. And then Jose on the finance question, so revenue was higher than expected and gross margin was a bit higher than expected as well this quarter. Should we think about as we get to harvest in the second half of the year, how to think about that in terms of cash flow? Is it just kind of keep thinking about that kind of similar kind of range of the 2 million a quarter? Or is there some potential improvement depending on how the processing once the harvest comes?

Speaker 3

Sure. Thank you, Ryan. Sorry, I thought well, I took the question directly. But look, I think that the impact of the drought in Argentina, we're still going to see that throughout the next couple of months. So it will be difficult to originate soy.

Speaker 3

So we're going to see that impact until May, June of next year. So but in terms of cash burn, what I would say that the most important thing here is that we will control we will have a controlled cash flow as we have had in the past. We're going to keep that track record. We'll continue progressing our R and D pipeline. We're very good at delivering milestones and keeping our cash burn controlled.

Speaker 3

So look, going forward, of course, there's going to be some increase in the cash burn, specifically probably related to the campaign of Glaco starting in mid calendar year 2024. So again, controlled cash flow in the short term, probably increasing second half of calendar year next year given the Glaco campaign.

Speaker 4

Okay. Thank you. That's very helpful. And then, I guess, just a bigger kind of a picture question. How should we think about the proposed economic reforms and any impact on the business positive or negative or just how to think about that impact on any potential impact on that from that to the company?

Speaker 1

Hosei, do you want to expand?

Speaker 3

Sure. I believe, Brian, you're talking about the elections or the changing government in Argentina, right?

Speaker 4

Correct. Yes.

Speaker 3

Okay. Look, I think it's too soon to tell. The government just took office 2 days ago. They announced several measures that we are seeing them explained a little bit more as days go by. So there was a devaluation of the Argentine peso.

Speaker 3

MULEC is not a company that is that has a huge exposure to Argentina. We do have some exposure to Argentina. So theoretically, devaluation should mean lower cost in terms of dollar denominated expenses. But again, I would say, Brian, Tussaud Hotel, it's been only 2 days. And as days go by, we will know more about the measures and how they have an impact on limited exposure to Argentina, but it does have an exposure.

Speaker 4

Okay. No, that's great. Congrats again on all the progress and thanks for letting me ask some questions.

Speaker 3

Thank you, Ryan.

Operator

All right. Thanks, Brian. If you have any other questions, either raise your hand or jump back into the chat and we'll turn you live again. In the meantime, we have a question from Tom McGovern at the Maxim Group. Tom, we'll flip you live.

Operator

Go ahead. Make sure you unmute yourself.

Speaker 5

Hey, guys. Can you hear me?

Operator

Yes, we can. Go ahead.

Speaker 3

Yes. Great. First of all, congrats

Speaker 5

on the quarter. And I just have a real quick question here relating back to Moo Labs. So just kind of high level, how are you guys looking at the relationships you guys currently have with other third party labs? Do you expect first of all, how many third party labs are still in use? Maybe where are they located?

Speaker 5

And then kind of again high level, as you look at this moving forward, do you expect to continue to utilize 3rd party labs? Or will you eventually start to transition? I know you already said significant, but almost all or maybe all of your R and D efforts to company owned and managed labs? Thank you.

Speaker 1

Good question. Well, we are still using 3rd party labs. 1 is Wisconsin Crop Innovation Center in Mizone, Wisconsin. The other one is specific lab in Washington State University. And we do use partially some efforts in Indiar, that's a company of agrinity in Argentina.

Speaker 1

So we have 3rd parties in different locations. Sorry, and we also have some efforts in the U. K. For a specific bank in Cranfield University. So Vivek Narzetti or Molecular Biology works there as well.

Speaker 1

I think that we it's very important to have our self owned lab to concentrate the efforts, cost savings and specifically to get fully control of our intellectual property and seed. But as Jose said, Mullet's management could really focus on cash expenses and invest really wisely. So there are specific efforts from the scientific team that makes sense to do it in a specific third party labs. And some other ones makes more much more sense to have it internally in our cell phone lab. So we are pragmatic, but we always put really, really focus on control and intellectual property because that's where the value is.

Speaker 1

It's one of the value for Muleg to have fully control and traceability of where our seeds are, where our strains are, and where and how to protect the IP. I don't know, Wami, do you want to expand my answer?

Speaker 2

Sure. Thank you, Gaston, and thanks, Thomas. Thanks for your question. I think continuing where Gaston left off, the strategy is really to see if we need a lot of infrastructure to accomplish something, which will be a very large overhead cost. Of course, we don't want to do that inside if we can outsource it in a 3rd party lab.

Speaker 2

What we are doing in Moo Labs right now, it's one time investment of creating a system where we can do the analysis piece. So the question going forward would be depending on the volume of things we have to do. I think these partnerships also have another advantage. It provides access to us to additional ideas, to additional thoughts. As a scientist, we are always trying to innovate, bring more value, intellectual property value to the company.

Speaker 2

And so these relationships have another advantage to be maintained. But as Ghassan said, we just have to be very pragmatic on where we invest in our efforts and in the end generate value through intellectual property generation. Thank you, Thomas.

Speaker 5

Great. I appreciate your response. Congrats again on the quarter.

Operator

Okay. As a quick reminder, if you have any questions, you can submit through the chat box or raise your hand and we can turn you live to ask your question. In the meantime, we have a second question in coming from the Internet. So the question is, could you please elaborate on what are the majors what's the major significance of moving from greenhouses to field trials?

Speaker 1

Good question. Well, it's a good question because that is what is happening as we speak. We are transitioning from greenhouses to environment control stage into field trials, because I want to point out before going to Amit that he could explain it much better than me, is that the competitive advantage of MULLEC is to keep the commodity cost. And soybean will get Mulek soybean will get the commodity cost if we perform with good yields in open fields, not in the environment control. So it's a very important transition, not only for the whole path, also to confirm level of expressions and plant performance and also for the regulatory process.

Speaker 1

But Amit, please give more color about the question that is very

Speaker 2

Yes, that's a great question. First of all, it's part of the process of going through that pipeline I was sharing with you where we started 5 50 events and then we've narrowed it down to the 16 events that I showed you on a slide where we are seeing variable expression of myoglobin in this. And the big part that we have to go through all of this is going from controlled environment where the light intensities are not at the level that will allow for maximum production or expose the plants to the elements. Because eventually, as Gaston said, how do we get commodity prices for soybean? Will be we have to do field production anyways.

Speaker 2

And the good part is soybean production is very routine across the world. And once we find those, we will basically do trials with several of these lines in the field. And the one that performs the best in terms of stability, agronomic performance as well as high expression levels is what we will continue to go towards commercialization with. Thank you.

Operator

Okay. We have another question coming in by email. And the question is, could you please help us understand what the most important operating metrics that investors should focus on each quarter and also annually as well? Thank you.

Speaker 1

Thank you, Michael. Good question. I think that the best way to address this question is to share with the audience how the management see our value creation. So before handing to Jose that he explained this part of our narrative quite well is that this there is not only one. There is not only one vertical to see.

Speaker 1

We have 4 different pillars. And inside each of these pillars, you could investors could find metrics that we internally follow and could really focus on. But this is very important to consider all and not just wholly 1. I don't know, Jose, if you want to get into each of these verticals, fully explain the value creation of wallet from our view.

Speaker 3

Sure. Thank you, Gaston. Look, we think that the correct way of looking at Wolek is on 3 strategic pillars of value creation. So the first pillar is, of course, product development and science. And I will put inside that bucket, for example, the expression levels on piggy soy and how we evolve in our product development.

Speaker 3

2nd, I would say very important is how we move forward with the regulators, USDA, FDA and how our R and D progress works hand to hand with how we progress with the regulators as they have to be articulated. 3rd is how we create intellectual property and how we present patents, provisional patents and other intellectual property protection mechanisms that we will use. 3rd sorry, 4th, I would say how we build relationships and how we formalize relationships with the market, with strategic players and how that translates into partnerships and alliances. Again, we believe that we are in a market that we can progress much more quickly. If we build bridges and relationships with well established players in the ingredients and the biotech industry in general.

Speaker 3

So I would say that those are the 4 buckets, which we internally continually monitor ourselves and how we are progressing in each one of those 4 buckets, which we believe are key for creating value for our business model.

Operator

Okay. Thank you, Jose. At this time, we are showing no further questions. So we want to thank everybody for joining our Q1 fiscal 2024 conference call. And at this point, I will turn it back over to Co Founder and CEO, Gaston Paladini, for closing remarks.

Speaker 1

Well, thank you, Michael. Thank you all for joining us today in our conference call. We are really, really excited about the prospect that lies ahead for Mueller for sure. We are working really hard to execute our strategies, our plans and bring value to our stakeholders. I want to thank all our team, Mueller's, great work.

Speaker 1

Also thank our partners and our investors for their continued support. And thank again for joining us today and really looking forward to updating you in our next quarter. So happy holidays and have a great day. Bye bye.

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Key Takeaways

  • In Q1 FY2024, revenues rose 92% to $1.7 million, gross margin improved, operational cash use was $1.8 million and a $10 million cash plus $21 million in-kind capital raise strengthened liquidity.
  • The Glaso safflower oil harvest of 35 hectares achieved 1.8 t/ha (50% above average) with up to 60% oil content, and scale-up plans target 100–350 hectares to de-risk commercial launch.
  • In the Piggy Soya platform, transgenic soybeans expressing myoglobin showed up to 26.6% total soluble protein in T2 and 20.4% in T3, demonstrating stable high-level expression as they move toward field trials.
  • MuLabs at Texas A&M is now fully operational, centralizing molecular farming R&D to accelerate development, enhance quality control, protect IP and reduce reliance on third-party labs.
  • The company is addressing an $829 billion processed meat market by 2025—plus iron supplementation and nutraceutical segments—using molecular farming to produce animal proteins in plants.
AI Generated. May Contain Errors.
Earnings Conference Call
Moolec Science Q1 2024
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