Moolec Science Q2 2024 Earnings Call Transcript

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March 13, 2024

There are 6 speakers on the call.

Operator

Good morning, and welcome to MUEKS Sciences' Second Quarter 2024 Conference Call. My name is Stephanie Ashevkov of ICR Strategic Communications and Advisory. During this conference call, all participant lines will be muted until after the management's remarks when there will be a question and answer session. Please also note that today's session is being recorded. Today, MULIK announced its Q2 fiscal year 2024 business highlights.

Operator

The document is now available on the company's Investor Relations website at ir.mulexscience.com. This morning, you will be hearing from Gaston Paladine, Chief Executive Officer and Co Founder of Molex Science, together with Jose Lopez Lecube, Chief Financial Officer and Amit Dhingra, Chief Science Officer Henk Hugenkamp, Chief Product Officer, will also be joining the subsequent question and answer session to be held immediately after the business update remarks. In today's call, we will be referring to a presentation that is available on the company's Investor Relations website. Moving on to Slide 2. This conference call is mainly for informational purposes.

Operator

And during this call, the company will be making forward looking statements regarding future events and results, which are not historical facts and include, but are not limited to, statements about the company's beliefs and expectations. Forward looking statements involve inherent risks and uncertainties. Further information regarding these and other risks are included in the company's annual report on Form 20 F filed with the SEC, also available on the company's Investor Relations website. Now moving to Slide 3, I would like to turn the call over to Mubeck's CEO, Gaston. Please go ahead.

Speaker 1

Thank you, Stephanie, and good morning, everyone. I am glad to present to our attending audience our lasted business update. As we have been doing over the last couple of conferences, today's agenda will address 3 different topics. 1st, I will give a quick review of Boralex strategy pillars for value creation. 2nd, Amit will walk you through our last scientific and operational developments.

Speaker 1

And finally, Jose will present our financial highlights from Q2. Here I would like to take the opportunity to reintroduce our framework for value creation. Let's move now to Slide 5. This framework not only organizes but also illustrates the way in which we are creating value for all of our stakeholders. We have refined our current business strategy into 4 foundational pillars.

Speaker 1

Allow me to provide a more detailed overview. Number 1, product development. This pillar includes research and development, product creation and improvement and associated processes to ensure the highest standard of food and environmental safety and quality. Our primary focus is on developing disruptive solutions using innovative technology for the food industry. Number 2, patent portfolio.

Speaker 1

Our strategy objective is to evolve into an IP powerhouse. R and D is feeding our portfolio and will incorporate a wide spectrum of patents that covers methods, processes and applications. We continuously screen the market to identify the most valuable geographic areas for our IT efforts, ensuring our assets align with market demands. 3rd, regulatory pathway. We possess deep knowledge and expertise in navigating regulatory approval processes such as those with the FDA and the U.

Speaker 1

S. GAIL in the United States among, of course, other territories as well. Our objective is to navigate the regulatory landscape swiftly and efficiently maintaining compliance while minimizing time to market. Number 4, strategic alliances. Building a strategic partnership with leading industry players is crucial to accelerate and complement our business.

Speaker 1

These alliances are pivotal for the exchange of technology, expertise and industrial processes, ultimately enhancing our competitiveness in the market. This framework is our roadmap for planning and execution, providing a comprehensive and focused approach to achieving our objectives. Before I hand over to Amit to discuss operational progress, let's move to slide number 6, where we will examine the status of our pipeline. As illustrated, most of the projects maintain their status, with notable internal progress in Glasho and Sol 1. However, I would like to highlight the exceptional advancement in the year 1 project, specifically in progression in product development.

Speaker 1

Now I leave you with Amit Dhingra, Murex's Chief Science Officer, who will provide a thorough overview of our technical and operational advancement.

Speaker 2

Thank you, Gaston. Greetings to all of you. We will move now to Slide 8. I'm excited to present our technical and operational milestones. We continue to make progress on our piggy swipe platform.

Speaker 2

We are getting ready to harvest the 4th generation or T4 seeds in April this year. In the meantime, our team performed analysis on the stability of the porcine myoglobin gene. The gene is no longer segregating, which means that it is genetically stable in the selected lines. I am also excited to share that the integration of the bovine myoglobin gene has now been confirmed in several 1st generation T1 or 2nd generation T2 seeds, indicating that the myoglobin gene is being stably integrated across the generations. Moving now to Slide 9.

Speaker 2

I'm excited to provide an update on Mulek's prototyping division using our novel yeast platform. Our objective is to identify high value applications for a yeast strain that's new to the food industry. This platform not only finds value for a novel microorganism but also paves the way for future target molecules to be economically viable by distributing overhead costs across multiple products. Specifically, we have found traits in this yeast strain, which allowed us to adapt standard processing techniques to produce an iron supplement that's novel to the market. Preliminary data is promising indicating that the supplement could approach the efficacy and cost efficiency of traditional animal derived nutritional supplements, particularly in terms of iron absorption.

Speaker 2

A regulatory pre submission meeting was held with the FDA. We feel encouraged to continue our efforts. On to Slide 10. Our immediate focus is on scaling our production. We plan to produce successive batches at the pilot level, ultimately increasing the capacity to 1,000 liter batches.

Speaker 2

These larger batches will allow us to create standardized prototypes, which will be thoroughly characterized. The insights gained from the characterization will be instrumental in finalizing our safety dossier and more precise cost computations. Additionally, we aim to leverage any surplus material by offering our samples to potential partners and stakeholders. Now I will pass on the presentation to my colleague and our CFO, Jose. Thank you.

Speaker 3

Thank you, Amit, and good morning to everyone. It is a pleasure to be providing this business update of Mulek for the Q2 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 figures mentioned today are in U. S.

Speaker 3

Dollars, unaudited and based or derived from IFRS unless otherwise stated. Let's move on now to Slide 12. Before we deep dive into the numbers, I would like to point out that in this quarter financials, we are also introducing normalized figures that exclude the effect of the application of IAS 29 accounting in our Argentine subsidiary, which has the Argentine peso as functional currency. For those of you not familiar with IAS 29, it is an accounting adjustment applied in hyperinflationary economies, which utilizes the end of period exchange rate to convert revenues and expenses into U. S.

Speaker 3

Dollar. For this period, given that the Argentine peso was devaluated 125% in the last 15 days of the quarter, it affects our as reported numbers in a way that we understand does not reflect the evolution of the underlying business. Molex subsidiary is located in Argentina, but the business mostly operates in U. S. Dollars given its product export nature and its raw material procurement needs.

Speaker 3

In this sense, we believe that normalized revenues and COGS, excluding the IAS 29 effect, better reflect the reality of the business. Moving on now to the performance of the operations. During the Q2, we continued originating soybean efficiently and delivering a sustained coverage of the existing commercial geographic footprint. Normalized revenues and other income, percent. Normalized revenues and other income, excluding IIS 29 effect, were around $1,700,000 generally in line versus last quarter with a slight decrease in volume.

Speaker 3

On the other hand, as reported revenues and other income were approximately $500,000 As mentioned before, this decline is mainly due to the application of IIS 29 accounting. In terms of COGS, excluding IIS 29 figures decreased versus last quarter, mainly due to lower value of inventories of our subsidiary in Argentina as a result of the devaluation of the local currency at the end of the period. SG and A expenses have remained generally in line with our historical track record with no significant changes, continuing an efficient trend of low expenditure while supporting the company's progress. In particular, R and D expenses increased slightly quarter over quarter, but partially offset by lower admin and marketing expenses. Cash utilization was approximately $4,000,000 which remains in line with our historical track record of controlled cash expenses and it also includes around $2,700,000 in non recurring payments associated with transaction expenses.

Speaker 3

Finally, during December 2023, Mulek raised an additional $1,000,000 through the issuance of a convertible note with farmers. The terms and conditions were the same as the previous capital raise closed with strategic investors, Group Point Sud and Viosere's Crop Solutions, for $30,000,000 We are very pleased with incorporation of these strategic investors, most recently farmers, who will be instrumental not only in our funding health, but also contribute to support MULAC product growth and commercialization in the near future. I will now turn things over to Stephanie 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, submitting your name and firm in the chat or by using the hand raising function. Please be advised that we will ask you to unmute your line to ask your question. We ask those who would like to participate in the Q and A if your name and firm is not indicated below your image, please right click your image, click rename, and enter your firm and full name before asking a question.

Operator

Again, you may submit questions through the chat box via email. So first question for management. In the business update, you highlighted SOY-1, 10 T3 events and that the T4 seeds will be harvested in April. What do you expect or hope to see in the T4 seeds? And what is next for your soy product?

Speaker 1

Well, thank you, Stephanie, and thank you for the question. Good morning to everyone. I'm very happy to have a SOY-1 on track. So, I will leave the floor to Amit to fully explain what is next, our following steps. So moving from T1 or to T4 onwards.

Speaker 1

So Amit, could you please explain the details of this project?

Speaker 2

Certainly. Thank you, Gaston. Good morning, everyone. So there are two parts to this as we are moving towards T4 seeds. There is the scientific part that we continue to perform quality control to look at the expression levels as well as the integration of the porcine myoglobin on one side.

Speaker 2

And secondly, we will have enough seed this time now to start utilizing it for downstream. And we will be passing on a lot of that seed material to my colleague, Henk, who is the Chief Product Officer, and he can elaborate on that, how will this seat be utilized in various applications. Over to you, Henk. Thank you.

Speaker 4

Thank you, Amit. Good morning, everybody. So of course, I'd like to with that, I'm very excited that we're getting more seats to start actual development processes on but also sparing some seed to start sending to our most important pre commercial customers. So first of all or second of all, I'd also like to say is that the efforts led by Ayomet to scale up the seeds will also yield in growing amounts of samples that are available for our customers so that we can scale along with them. So this means that the sampling process has begun and we're very confident that we can meet the needs of

Operator

Great. Thank you for your answer. The second question that we have through email, it says, in this quarter's presentation, you highlighted your yeast product, YEAH-one. Can you help us better understand your next steps there? What final steps are needed to enter commercialization?

Operator

And help us understand that opportunity. What kind of customers or market size are you seeing?

Speaker 1

Well, thank you, Stephanie, and thank you for the question. So continue talking about our pipeline status and the next step. So I'm happy to say that Rejcohekam is leading this specific project in Europe, mostly basic in Europe. So Henk, will you please explain the details of year 1 and also highlighting, of course, the market opportunity that is very exciting. So, can go ahead.

Speaker 4

Thank you. Thank you, Gaston. Also, thanks for the question. Basically, our immediate priority is to scale up our process, which is planned in the coming quarter. And the scaling up will yield a characterized prototype.

Speaker 4

So this is a prototype that can be used for the further refinement of our safety dossier, a further understanding of the characteristics and any excess samples can be then shared with our potential customers in the pre commercial processes. Parallelly, we're having continuous regulatory refinements and consultations, as Amit already mentioned in the presentation. This is really important because everything that we try and do is always try with full regulatory compliance in mind or finding the path of least regulatory resistance. In terms of the markets, our initial target is the iron supplementation, but also fortification market, which has a rough size about $1,000,000,000 Of course, this market access is something that's really important to us. So it's also worth noting that our strategic partner Grupo and Sood who is not only providing the industrial capacities to scale up and to produce fully compliant qualities, they also have access to the market through this portfolio, through their portfolio companies.

Speaker 4

So this is actually a fairly closed loop in terms of from beginning to end, from product idea to production to potential market access. And that's what we're really laser focused on right now to close the gap.

Operator

From Thomas McGovern of Maxim Group. At this time, I'm going to give you permission to speak live and ask your questions live on the call. If you can unmute your line, you may ask your question live, Brian.

Speaker 5

All right, guys. Thanks for taking my question. So, yes, first question is related to the Gulf Food trade show and those associated 50 qualified leads that you mentioned in the press release. So, I was wondering if you could just give a little bit more detail on that, kind of where those qualified leads are at? And then maybe if you could talk a little bit about which ingredient product specifically those leads are interested in purchasing?

Speaker 5

Thanks.

Speaker 1

Sure. Well, thank you, Thomas, for the question. I will take the second one and Heng will elaborate on the Whole Foods ratio because he was he attended the show personally in Dubai. Well, the ingredient products are soy based meat analogs mostly. We have been developing new text and improvements of our current products.

Speaker 1

So mostly we use both food ratio to present these innovative and new samples. But no way better than trying to fully explain the show and to give you some insight and good info about what happened there in Dubai.

Speaker 4

Thank you. So also thanks for the question. In this case, the Gulf Food is a very is one of the leading shows for people all over the world, let's say aggregate. Also, it's a really important show where ingredients are showed not only for, let's say, niche applications, but for the large market, in this case, for meat replacement. And the meat replacement market is not in terms of plant based for the plant based movement, but it's basically the huge market to target to make meat affordable.

Speaker 4

And that's where currently our meat replacements are selling into the market, into I believe currently 11 countries worldwide. And this show is where people aggregate. So when we have an innovation or at least an iterative improvements all the way up to an innovation, this is a show where you show where you demonstrate this in person, you talk to customers live, you get live feedback, you to talk to them and what their problems are in terms of either from pricing all the way to texture to functional applications. And here's where you get, yes, the live feedback is very valuable in that sense. Also, it's the best place to find new qualified leads in terms of new markets, which we haven't accessed before.

Speaker 4

And it's not only about showing the commodities that we have currently in the market, but also our path to specialties, which we're currently developing to have a real time sense of how it's being received by these potential new markets that we're trying to access.

Operator

All right.

Speaker 5

I appreciate the response. Yes, so my second question relates just kind of more generally to the commercialization of several of your planned products. So in the past, you guys have discussed plans to kind of start to ramp up or fortify your sales and marketing efforts ahead of these commercial launches. So maybe if you can just review that, kind of give any updates on that front and just high level kind of what your plans are for expanding your sales and marketing teams? Appreciate it, guys.

Speaker 1

Sure. Good question, Thomas. Well, this is a B2B business and mostly food and dietary supplement business. So that's implied to the near samples. That's the key to capture new customers and to engage potential clients.

Speaker 1

Having said that, what we are doing is co working with the R and D departments of these potential customers. I can't reveal the names yet, but most of them, these things that take things specific things take time, you know. So that's what we are doing as we speak. Coworking with them, delivering some prints, preparing more samples and characterization information of the specific ingredients and deliver that samples to customers. In parallel, we work specifically in commercial terms, in master supplies agreements, and in MTAs, in material transfer agreements.

Speaker 1

So that's how the plant goes. And that's what we are doing as we speak, as I said. The idea is to strengthen the commercial and sales team since you said as you said, you are getting closer to commercialization. So that will be my short answer. I don't know, Jose, if you want to expand on that.

Speaker 3

No, sure, Tom. Thank you. Tom, what I would add here is that within the current team, there is a huge expertise in terms of the ingredient business and market. And we have that in Heng's shoulders and we have other people in the team with a lot of years and seasoned professionals in the ingredient business. So we believe we are having very interesting conversations and in the way we should be having these conversations with market beginning of 2025, yes, we might have some incorporations, beginning of 2025, yes, we might have some corporations to support that expansion in terms of the relationship specifically attached to the glass of product.

Speaker 3

But again, I would reinforce and highlight the great knowledge in terms of commercial and in terms of expertise into the specific market that we have currently in the team that will be, later this year strengthened with people more focused on the Glasgow business.

Speaker 5

Understood. I appreciate you guys taking the time to answer my questions.

Operator

Thank you. As a reminder, you can ask a question through the chat box or by using the hand raising function. We have one other question that is in through our email. This is for the management. What is the market not understanding adequately about your business?

Speaker 1

Well, thank you, Stephanie. Thank you for the question. I think it's a good one. I will take it and probably my partners here will complement on that. I will say that there is 3 facts to highlight.

Speaker 1

The first one is the huge TAM and SAM market opportunity ahead. We're talking about more than $8,000,000,000 ton market and around $40,000,000,000 ton market. And this is, of course, as Henk said, considering food, meat applications and not only just a vegan or alternative protein niche. This is the opportunity is huge. And also consider, of course, the sustainable trend.

Speaker 1

2nd part, the extraordinary yield in soy that we got with the Pikis soy platform, 26.6 percent of porcine protein over total soluble protein is a lot, is huge. Grapefruit, this is no brainer. So we patented and the product is moving forward as Amit described it before. And third, lastly, the third fact would be that this team that we are representing the team here, but there is a great team of PhDs and food technologies and professionals in MULA is delivering milestone and getting this product pipeline closer to commercialization. So I will summarize these 3 facts to answer the question.

Speaker 1

Of course, there are more, but these are the most important ones. I don't know if my partners here want to complement on that, but that would be my short answer.

Speaker 3

Well, I would add, Yaron, on top of that, that in the last couple of months, I would say, in the last year or 1.5 years, this company has been delivering results that derisk the go to market strategy. And by delivering on the execution front, we are getting closer and closer to different the different stages of commercialization. 1st, the revenue that we're generating. 2nd, it will be glasshouse, as we mentioned before, beginning of the 2025, and then the other products related to the molecular farming platform. Having said that, the milestone that we have delivered in terms of science with extraordinary yields in terms of annual protein present in the plants, the progress on the regulatory front, the progress on the IP front.

Speaker 3

That all encompasses a good execution and derisks the go to market. So we believe that, that has a lot of intrinsic value. And going back to your question, we believe that probably the market is not fully understanding the value of that.

Operator

Thank you, management. I would like to conclude today's call as there are no further questions at this time. And I will hand the call back to Molex's CEO, Gaston, for a few closing remarks.

Speaker 1

Okay. Yes. Okay. So there is no further questions. I want to thank you all for joining us today, this conference call.

Speaker 1

We at Mule continue to work hard on all avenues and there's a lot, as you know. And continue to be excited, really excited about the many opportunities that we see ahead. We are working diligently with our teams and partners to execute our strategies and be and bringing value to our stakeholders. I also want to thank and express my thanks to all the Mulek team, the Muellers, also to our partners, investors and the analysts, of course, very grateful for that, for your continued support and helping us to spread the word to fully explain the MULEX technology and the opportunity ahead. So thank you for that.

Speaker 1

So thanks again for joining us today. I'm really looking forward to updating you in the next quarter. So as I always say, the best is yet to come. Thank you. Have a good day.

Operator

This concludes Melex Business Update Conference Call.

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Key Takeaways

  • Rolled out a four-pillar strategy—product development, patent expansion, regulatory navigation, and strategic alliances—to drive value creation and focus R&D toward disruptive food industry solutions.
  • Achieved genetic stability of porcine myoglobin in soy through T3 lines and confirmed bovine myoglobin integration, with T4 seed harvest set for April to supply material for downstream applications and pre-commercial partners.
  • Advanced its novel yeast platform toward an iron supplement, holding an FDA pre-submission meeting and preparing to scale production to 1,000 L pilot batches for prototype standardization and safety dossier completion.
  • Reported normalized Q2 revenues of $1.7 million (versus $0.5 million as-reported due to IAS 29 effects), maintained controlled SG&A, consumed $4 million in cash (including $2.7 million non-recurring), and raised an additional $1 million via a convertible note from farmers.
  • Secured over 50 qualified leads at the Gulf Food trade show for its soy-based meat analogs, with ongoing co-development, sample distribution, and master supply agreement discussions to accelerate market entry.
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Earnings Conference Call
Moolec Science Q2 2024
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