BioHarvest Sciences Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2025

There are 6 speakers on the call.

Operator

Greetings, and welcome to the BioHarvest Sciences First Quarter twenty twenty five Corporate Update Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results 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 on the call.

Operator

Please refer to the company's regulatory filings for a list of associated risks, and we would also refer you to the company's website for more supporting industry information. In addition, throughout today's call, the company may refer to adjusted EBITDA, a non IFRS financial measure, which it believes provides helpful information to investors about the performance of the business on an ongoing basis. A reconciliation of adjusted EBITDA to its most directly comparable IFRS financial measure is included in today's earnings release, which is available on BioHarvest website under the Investors tab. On our call today, we have Chief Executive Officer, Ilan Sobel and Chief Financial Officer, Bar Dichter. I would now like to hand the call over to CEO, Ilan Sobol.

Operator

Ilan, the floor is yours.

Speaker 1

Thank you, operator, and good afternoon, everyone. I'm pleased to welcome you to today's first quarter twenty twenty five corporate update conference call. For those of you who are new to our story or joining us for the first time, I would like to introduce our company and background very quickly. BioHarvest Sciences is a biotech innovator and the inventor of botanical synthesis, a proprietary platform technology process which synthesizes plant based compounds without having to grow the plant. Rooted in plant cell biology, botanical synthesis provides consistent, reliable, economically viable, and patentable, potent, non GMO biological compound for the use in the pharmaceutical, nutraceutical, cosmetic, and nutrition industries.

Speaker 1

We at BioHarvest have spent over fifteen years perfecting our patented botanical synthesis technology platform, providing an alternative for non GMO production of plant based biological compounds without the need to grow the entire plant. And in fact, only requiring us to use the physical plant once in the initial stages of our process to develop a valuable perpetual cell bank. Our botanical synthesis platform technology allows for the creation of consistent botanical compounds with much greater levels of potency than what is produced by the plant. This is achieved via the platform technologies ability to develop valuable cell banks, which produce a mirror of the phytonutrients or phytomedicinal compounds contained in the plant, but at magnified levels of potency for specific targeted molecules and the ability to multiply these cells in industrial scale bioreactors to produce a final soluble, bioavailable, and highly efficacious end product. The platform technology also gives us the ability to address significant unmet market needs across the pharmaceutical, nutraceutical, cosmetics, and nutrition industries, both with our own BioHarvest branded products sold via our direct to consumer health and wellness products business and by developing molecules or compound for industry partners via our CDMO services business unit.

Speaker 1

In the first quarter of this year, we continue to scale both our products and CDMO business units. Revenue rose 47% year over year to $7,900,000 exceeding our $7,800,000 guidance driven by balanced growth in the Vinia business across both our vinia.com website and our Amazon business. Total active subscribers as of February 2025 reached a major milestone exceeding 50,000 consumers in The USA and recurring subscribers comprise a very healthy 90% of revenue of our vineyard.com platform. In the Amazon channel, which represents a healthy 20% of our business, we saw continued improvement in key performance indicators such as customer conversion, repeat purchase rates, and return on advertising spend, otherwise known as ROAS. We are continuing to operationalize our strategy to broaden the reach of Vignia into new consumer segments with our expanded portfolio of Vignia product offerings while also reinforcing our core value proposition with existing customers anchored in delivering the multiple benefits of Vina for approximately $1 per day.

Speaker 1

We also improved gross margins by 227 basis points to 58.5%, up from 56.2% a year ago, driven by the benefits of scale, including finalizing the implementation of 22% larger bioreactors as well as other savings and cost efficiencies across the business. The continued scaling of our business combined with the yield improvements we are generating from our efforts to digitize the biological metrics in our production process positions us well for ongoing operational improvements and a structurally stronger margin profile. It's important for me to acknowledge that these significant gross profit margin gains that we have achieved over the last two years have been all through our efforts to drive scale and efficiencies in the business as we have continued to maintain the same retail price across all our capsule related SKUs for the last four years since entering The USA on May 1235. Now I'd like to turn to our direct to consumer health and wellness products division. Our Direct to Consumer Health and Wellness Products Division is led by Vinya, our flagship red grape cell derived nutraceutical, sold direct to consumers accounting for the majority of our revenue.

Speaker 1

Vineyard delivers a full matrix of red grape polyphenols including Pisces Resveratrol at 100 times the level of what is found in the red grape itself and has been clinically shown to significantly increase arterial dilation after ninety days of consuming one four hundred milligram capsule every day. This increased arterial dilation improves blood flow, enhances both physical energy and mental alertness, and other critical longevity related metrics. Vinia is quickly earning a reputation as being a premium, high quality product and recognized by consumers and the industry as a leader in driving enhanced blood flow delivery and its derived benefits. As of today, we have surpassed 9,000 verified customer reviews with a 4.8 out of five rating, and we look forward to shortly reaching the milestone of 10,000 reviews. I'm proud to say that despite our significant pricing premium relative to competitive products, which is in some cases more than 100% premium, Vignette is always a top 10 performer in its Amazon category.

Speaker 1

And often over the past few weeks, we have entered into the top five positions. We have now surpassed more than $55,000,000 of lifetime revenue, and I feel we are still just tipping our toes into the ocean as far as the opportunity is concerned as consumers today increasingly realize the integral relationship between blood flow, quality of life, and longevity. Q one saw the rollout of our Vineyard Superfood Tea lineup in individual tea sachets, and we are seeing encouraging results with very positive feedback on the product quality and taste as demonstrated by our 4.9 out of five rating on Amazon. In the course of this quarter, we will roll out two new SKUs in our vineyard super food tea lineup with the rollout of an English breakfast tea and matcha green tea in k cup compatible pods. We will also build upon our product line of Vineyard Superfood coffee where we have sold to date more than $2,500,000 of coffee since launching in December 2023 across a regular and a decaf coffee in k cup compatible pods, just two SKUs.

Speaker 1

Our new product will be Vina Espresso in espresso compatible pods targeting the 5,000,000 plus households that today have Nespresso compatible machines. I'm excited to say that as we speak here today, we are preparing to launch our Vinnia Daily two x formula chews. This is a double dose eight hundred milligram format designed for highly active consumers and athletes in a great tasting grape flavored chew. Importantly, these chews are Informed certified. Informed Sport is the world's leading testing and certification program for brands producing sports and nutritional supplements.

Speaker 1

It is recognized by sporting and govern governing bodies, anti doping bodies, and nutrition industry organizations, and the armed and special forces. The informed sports certification ensures the highest quality and safety for athletes and professionals as every batch of product produced is required to undergo testing for over 2,000 banned substances. This certification is a critical enabler for Vinia to penetrate into the professional and amateur sporting market as well as military channels where it has a significant role to play given its unique blood flow derived benefits. The second half of this year will also see the rollout of our Vina blood flow hydration powdered beverage lineup, which we will use to disrupt the multibillion dollar hydration and sports drink categories. Our product lineup will be uniquely differentiated as being the only sports drink or hydration beverage which delivers hydration benefits backed with the power of superior blood flow.

Speaker 1

We will educate consumers about the important relationship between blood flow and hydration given the critical importance of having high performance blood flow levels in our body to best transport the water and electrolytes to all of our body's cells. I'm looking forward to sharing further developments of this launch over the next few months. Expansion of our Vinia Insight strategy with additional Vinia product lines provides consumers with superior science, superior efficacy, and superior taste while allowing BioHarvest to address a highly incremental younger consumer and capture incremental revenue from this important market segment. As part of this effort, we are also in the process of activating incremental marketing channels such as podcast integrations, TikTok, and a health and wellness influencer program. Whilst Vennia product innovation represents a significant incremental revenue and gross profit opportunity for BioHarvest, we are excited to add in 2026 our Oliver Bosco site sales.

Speaker 1

In March, we shared in vitro results showing our olivoboscoside cell compound reduced fat accumulation in human liver cells. With further clinical support, we plan to launch this product in 2026 to the market and to our highly engaged subscriber base, which represents an immediate significant revenue opportunity for the business. Overall, our direct to consumer health and wellness products division has proven the potential of our botanical synthesis technology and the significant market demand for high performing plant based non GMO compounds that we provide. I'm personally super excited by the innovation lineup we have for our direct to consumer business over the next twenty four months. I would like to now turn to our CDMO services division.

Speaker 1

One year ago, we launched our CDMO contract development and manufacturing organization services division to give industrial partners, leaders of industry, access to botanically synthesized non GMO proprietary compounds via our botanical synthesis technology. This strategic move was made to deliver on the company's north star to discover, develop, manufacture, and democratize life changing plant compounds that improve the health and wellness for hundreds of millions of people whilst protecting the planet for future generations to come. Our CDMO unit develops patentable plant based compounds for pharmaceutical, nutraceutical, cosmaceutical, and nutrition customer partners. These complex molecules offer faster development, lower cost of development, improved safety, and scalable production that others simply can't match. We built robust infrastructure with the tools and scientific talent that we have to handle multiple projects in parallel while sourcing plants ethically.

Speaker 1

Our proprietary AI tools, which we have developed internally, are producing tangible results in driving optimization across our R and D processes, including playing a critical role in discovering new high value compounds. We can deliver trial ready biomass in nine to fifteen months and scale to full production within twenty to twenty four months, generating high margin revenue through non recurring engineering fees from our CDMO customers. Successful programs then move to royalty based manufacturing, providing long term recurring revenue and potential equity upside. To date, we've already signed multiple CDMO customers, including a marquee partnership with Tate and Lyle to develop next generation plant based zero calorie sweeteners. Our selective strategic r and d focus target high impact projects with strong commercial potential.

Speaker 1

And to that end, I'm very pleased to share that we've successfully completed stage one of development for a major CDMO program with a NASDAQ listed pharmaceutical partner. This is a major win for our company and a sign for what is coming. I want to remind our investors that stage one carries the highest development risk, and this achievement underscores the adaptability of our botanical synthesis platform technology to diverse molecule and compound types. With a high likelihood of continued progress over the next twelve to eighteen months, we're on track for volume manufacturing and broader CDMO growth as the platform proves itself over time. The R and D experience gained in stage one has sharpened our analytical capabilities, further strengthened by our proprietary AI tools and will enhance the efficiency of future CDMO projects across a wide range of compounds.

Speaker 1

Before passing the call off to our CFO, Bart Dichter, I'd like to remind the market of our 2025 growth strategy. Our growth model is guided by the principle of balancing growth with profitability while achieving scale. We have elected to reach adjusted EBITDA breakeven at 11,000,000 to $12,000,000 in quarterly revenue, which we expect to achieve in the second half of twenty twenty five. This approach enables continued investment in three critical strategic areas. One, expanding our direct to consumer portfolio by scaling our Vinaya compound with new products, enabling us to penetrate new channels, improve funnel conversion and reducing customer acquisition costs, while launching new clinically backed compounds like our olive cell product focused on liver health.

Speaker 1

Two, investing in R and D to drive critical process improvements, utilizing new technologies, many being applied from other relevant industries and applied to our processes, which we call botanical synthesis two point zero, aimed at further improving gross margin in our manufacturing organization and the speed of compound development in our CDMO. And three, building AI powered CDMO tools to speed up go to market timelines for compounds we develop as well as to improve efficiency levels translating to lower R and D costs required for the development of each compound. Long term, we target a 20% adjusted EBITDA margin for our direct to consumer health and wellness products division with even higher margins expected in the CDMO. These initiatives support our mission to deliver high impact, life changing compounds across multiple delivery formats and high value wellness categories, driving strong lifetime value and accretive margins. With that, I'd now like to turn the call over to our CFO, Bahr Dichter, to review our financial results for the quarter ended 03/31/2025.

Speaker 1

Bar, over to you.

Speaker 2

Thank you, Ilan, and good afternoon, everyone. I will provide you with a succinct review of our financial results. A full breakdown is available in our SEC filings and in the press release that crossed the wire after market close today. Please note that all figures are in U. S.

Speaker 2

Dollars unless stated otherwise. Revenue for the first quarter of twenty twenty five increased 47% to $7,900,000 which exceeded our prior revenue guidance as compared to $5,300,000 in the first quarter of twenty twenty four. The increase was as a result of the continued success of our Leukemia family product. Gross profit increased 53% to $4,600,000 or 58.5% of total revenue in the first quarter of twenty twenty five, as compared to 3,000,000 or 56.2% of total revenue in the same year ago quarter. The increase in gross margin was primarily driven by benefits of increased manufacturing scale and improved manufacturing yield.

Speaker 2

Total operating expenses for the first quarter totaled $6,300,000 as compared to $4,400,000 in the same year ago quarter. The increase in operating expenses was primarily due to an increase in marketing spend, which was reduced as a percentage of revenue to 46.8 as compared to 48% in the same year ago quarter, and the higher expenses from the CDMO service division. General and administration expenses increased 67% in the first quarter of twenty twenty five, but declined by 6% versus Q4 of twenty twenty four, reflecting an increase in operating leverage as the company continued to scale. Net losses for the first quarter of twenty twenty five totaled $2,300,000 or $0.13 per basic and diluted share as compared to a net loss of 6,600,000.0 or $0.48 per basic and diluted share in the same year ago quarter. Adjusted EBITDA loss and non IFRS measures totaled at $1,400,000 in the first quarter of twenty twenty five as compared to an adjusted EBITDA loss of $1,100,000 in the same year ago quarter.

Speaker 2

Cash and cash equivalents as of 03/31/2025, totaled $3,400,000 as compared to $2,400,000 as of 12/31/2024. During the quarter, we raised $3,900,000 in debt financing primarily from existing investors. I would like now to pass the call back to Ilan to offer some closing remarks, after which we will begin our Q and A session.

Speaker 1

Thank you, Bah, and thank you for all your time today and your continued support of BioHarvest. I want to end off today by saying that I'm incredibly proud of the platform, the team, and the momentum that we've built. I count myself lucky to be part of this organization, and I've never been more confident in our ability to execute and deliver on our North Star to democratize life changing compounds. The synergy between our direct to consumer health and wellness products division and CDMO division is proving itself as we find strategic CDMO deals and open the gates for sizable customers. We are starting to really lay the groundwork for botanical synthesis to become one of the biggest contributors in the quest for new science based therapeutics solutions and nutritive compounds over the next ten years.

Speaker 1

As we continue building our momentum and scaling our business, we remain focused on executing and delivering every day incremental human utility value and creating sustainable value for our shareholders. With that, I'd now like to hand the call back to the operator to begin our Q and A session. Over to you, Mr. Operator.

Operator

The first question comes from Matt Hewitt with Craig Hallum Capital Group. Please go ahead.

Speaker 3

Good afternoon and congratulations on your progress. Maybe to start things off, you issued the press release and spoke earlier regarding the pharma CDMO contract moving into Phase two. Could you provide a little bit of color on what is entailed in the Phase two portion of the contract and the timeline for that to be completed before moving on?

Speaker 1

Thank you, Matt, and good afternoon to you and everybody else. Yeah, so this obviously is a major milestone for us to move the CDMO contract with our Nasdaq listed pharmaceutical partner to phase two. And I'm sure you understand that, you know, phase one is the phase that carries the most significant risk. So, you know, we've been successful demonstrating the ability to produce the appropriate biological material. That biological material has been produced in what we call solid media state, which is basically in a petri dish with solid media.

Speaker 1

Phase two has us moving from solid media to what we call liquid media, which is basically the start of the process to get ourselves, our cell bank, conditioned, normalized to be able to survive effectively and grow the critical phytomedicinal compound in liquid media. And so in phase two, we start with Erlenmeyer's and then we move to small and medium bioreactors as we get ourselves more used to the challenges of growing in liquid media with the different elements of that environment. And then from a timing perspective, you know, we believe this is a, you know, normally six to nine month period that we're able to drive the required conditioning of the cells and optimization of the overall growth process of the biological material that we're seeking to grow here. And again, I want to emphasize for us it's a major achievement because the phase one is clearly, or I should say stage one, is clearly the most challenging as it relates to us needing to do significant experimentation where we're leveraging multiple different types of food that we feed the cells, other conditions such as temperature conditions, lighting conditions and a number of other variables we don't get into because they're in our IP box.

Speaker 1

And you know we've now found the secret formula of all the critical variables that are required to elicit the critical growth of a specific biological compound and now it's matter of just, you know, conditioning the cells and getting them used to a liquid media environment, so almost like we're training them and preparing them for the much larger industrial scale bioreactors which happens in stage three.

Speaker 3

That's very helpful. Thank you. And then shifting gears to your relationship with Tate and Lyle. I'm just curious, what point or how long do you think it'll take to kind of narrow down, the targets to one or two that you would then start scaling up production of?

Speaker 1

So with Tate and Lyle strategic, what we call anchor partnership, because it's just so important given the opportunity that we're going after to develop, you know, ultimately the next generation of zero calorie or non nutritive natural sweetener in a market that really is craving I should say for this kind of innovation and obviously from a consumer perspective, from a commercial perspective in the context of food companies and beverage companies, and I think we all understand the magnitude of impact if we're able to move more millions and millions of additional American consumers or global consumers from sugar into a non GMO zero calorie natural sweetener. So this for us when we talk about life changing compounds, it doesn't have to just be specific biological material used in pharmaceuticals, but it can also be in this case, you know, the opportunity of natural zero calorie sugar replacement opportunities. So for us, we've commenced doing significant work. We've been very successful on the sourcing side of the plants and the R and D team is working feverishly on the work that gets done in stage one and we expect before the end of the year to be able to give a more comprehensive update on how we're tracking on Stage I outcomes.

Speaker 3

Again, I guess given the current administration's focus, you seem to be in a really good position there. Maybe one last one and then I'll hop back in the queue. Obviously, a very strong quarter from a gross margin perspective. I'm just curious, and I think you touched on this briefly in your prepared remarks, but should we anticipate that as you continue to grow that top line that your gross margins will continue to expand as well? Thank you.

Speaker 1

I think one thing that my father always used to say to me as a young man growing up, not that I'm an old man today, Matt, at the tender age of 51, he always said to me that past performance predicts future performance. So in that context, as you've seen, every quarter, consecutive quarter, we've driven significant revenue growth and that revenue growth has been paired with improved gross margin performance. And it's very much our intention, myself and my management team all the way through to the operators who are working in our biological facility who are acutely aware of the KPIs of the business as we really drive the operationalization of KPIs down to the biological floor as we say in our industry and therefore obviously driving continued gross profit margin improvement is a major focus. So I would expect that we will continue to see similar kind of improvements over the course of this year as we look to land the company at an adjusted EBITDA profitability positive standing.

Speaker 3

Excellent. Thank you.

Speaker 1

Thank you.

Operator

The next question comes from Amit Dayal with H. C. Wainwright. Please go ahead.

Speaker 4

Thank you. Good afternoon, everyone. Thank you for taking my questions. Congrats, Ilan, on all the progress. It looks like there's so many things happening.

Speaker 4

It's hard to keep a track of everything, so good to see that. Just along those lines, can you clarify how many products contributed towards revenue in the first quarter? And how many products do you expect could contribute to revenues by the end of the year?

Speaker 1

Thank you, Amit. So if you look at the first quarter from a direct to consumer health and wellness product division, obviously the lion's share of our business is still our capsule business. However, our coffee business is growing significantly as demonstrated significant growth and is becoming a more scaled business right now, which is very encouraging. We did launch tea in the end of the fourth quarter in December and obviously now we've started to expand tea across multiple channels. But the majority proportion is definitely still anchored in the capsule business.

Speaker 1

So to your question, it was three product lines anchoring in the capsule business, which is driving the revenue in the first quarter. As you look at moving into the second quarter, that will be increased to a fourth line, which is the Chew product, which is our Vinnia Daily 2X Formula Chew, which we're very excited. This is Inform Sport Verified focused on super active consumers and the athletes out there. Obviously Informed Sport Verified because the need to have a product that has gone through all the required anti doping testing and validation is critical for the market that we're serving and that will be a fourth major line that will come into the play in the second quarter. And then in the end of the third quarter or early fourth quarter, we will move our efforts towards the hydration category.

Speaker 1

That you will then have a fifth, let's call it vertical that we'll be playing in.

Speaker 4

Thank you. That was very helpful. On your marketing costs, could those potentially drop for you going forward given there may be more ad inventory supply in the market because of these tariff related issues and challenges that some of these DTC businesses are facing right now?

Speaker 1

So for us, from a sales and marketing perspective as a percentage of revenue, there's like a maniacal focus in our company of doing two really, it's four things: grow top line revenue, improve gross profit margins, reduce sales and marketing as a percentage of overall revenue, reduce all of our OpEx to ultimately get to that breakeven on an adjusted EBITDA perspective. So we have very, very focused efforts quarter on quarter to I would say appropriately reduce the percentage of sales and marketing as a percentage of revenue. We are also now very focused on opening up additional channels. You saw that in one of the charts where we're looking at we've just opened up for example international shipping and it's amazing to see. You'd be surprised how many people all over the world are accessing Vinnia from our U.

Speaker 1

S. Website. And now we give them the flexibility. They obviously are paying for the shipment costs. We do free shipping to The U.

Speaker 1

S. And to Canada, but anything outside is paid for by the actual consumer. So that's an additional channel that brings in revenue with a much lower cost of acquisition. And we continue to drive other key channels now that we're opening up, doing a lot more work with YouTube where we've actually again, we're seeing great cost of acquisition levels. And importantly now with the portfolio that we have, we're able to target a younger consumer base as we broaden the footprint of the brand and TikTok is going to be a very important channel that we're now starting to experiment in.

Speaker 1

And again, these are channels that today based on our category have very favorable cost of acquisitions. And then lastly, we're working and we're about to roll out in the next three to four weeks a HealthPro influencer program where we're working with, in a very structured way, with doctors and health professionals who understand the magnitude and importance of blood flow in driving their, you know, their patients or their, you know, their specific, if it's a coach or a gym instructor, know, call it their customers overall quality of life and these channels allow us to basically bring more oxygen into the overall business as it relates to helping to improve marketing efficiencies. And so this is more of the DNA of our company and our sales and marketing team that specifically now that we've got a broader portfolio of products, disruptive products in these major verticals that we're now able to be able to build the brand with a broader footprint and we're able to play effectively in a number of different channels. So for example, the health pros having the 2X Formula two which is Informed Sports certified is critical. Similarly, when we launch our Blood Flow Hydration product into the market, it will also be Informed Sports certified.

Speaker 1

So again, we bring all the critical credentials for these new channels, which ultimately has a better overall cost of acquisition, which ultimately will as the business continues to scale will allow us to quarter on quarter as we move the needle to reduce our overall sales and marketing as a percentage of revenue.

Speaker 4

Thank you, Alain. That was very helpful. Just last one. Does your second quarter guidance include any contribution from the CDMO business?

Speaker 1

Right now yes, it does include contribution of our CDMO business. I think it's important to understand that there's a few facets of that contribution. One facet is revenue recognition of existing projects, so specifically the two major deals that we speak about most often. So as we continue to hit key milestones in the projects, we're obviously able to recognize the appropriate revenue. So it includes this factor.

Speaker 1

And then obviously, I've spoken about this. We have a very interesting pipeline of companies that we're working with as we think about the catalysts that are coming through the funnel as it relates to CDMO customers. Zaki and myself and the team are juggling a number of different opportunities that we're working very cautiously and in a very methodical way through the funnel, and we believe that we will have the opportunity of sharing with the market some significant news in the near future and I believe that we expect that near future to be a second quarter opportunity that we believe we will be able to land as it relates to additional CDMO catalysts. And as I've said in the past, we believe this year in addition to the CDMO deals that we have today, we will land an additional three to four CDMO catalysts and actually land those as major deals in 2025.

Speaker 4

How many CDMO programs can you run at one time?

Speaker 1

So right now it's actually very interesting. We're getting smarter and smarter at what we need to do in specifically as you look at stage one and stage two processes, which are a little bit more labor intensive. We're now utilizing significant AI in this area and we have a really strong team of computational biologists that are working together with Zaki. Obviously, you know Zaki's mathematical background and are really driving, I would say, cutting edge AI work in the botanical world to be able to drive a much more efficient process as it relates to a lot of the experimentation work that we are required to do in that stage one process. In addition, it's important to say that, you know, we're investing in additional technology which is allowing us to be more efficient.

Speaker 1

Late last year we bought our first robot to help us with media preparation. This really reduced the people power as we call it today, significantly in the organization. It allows us to really scale up the amount of experiments significantly. Right now as a team, we have the capacity to concurrently, if you want to call in a stage one, to be able to do anywhere between five and seven projects at one time.

Speaker 4

Understood. Thank you, Elan. I appreciate all the color.

Speaker 1

Thank you,

Speaker 4

take another question offline. Thank you.

Speaker 1

Thank you.

Operator

The next question comes from Susan Anderson with Canaccord Genuity. Please go ahead.

Speaker 2

Hi, good evening. Nice job and thanks for taking my question. I was wondering if maybe you could talk you talked a little bit about some new products rolling out soon such as the hydration. I guess how are you thinking about the longer term opportunity in terms of continued revenue pools? Guess, I think you're rolling out or you're working on maybe a beauty product, a skin product.

Speaker 2

I guess, how's the timing of that going? And then are there any other categories that we should expect in the next couple of years? Thanks.

Speaker 1

Hi, Susan. Thank you for that question. So look, we've been very surgical and specific on the multi billion dollar categories that we've decided to go after and categories that we could have played in as well that we've decided not to go after. As we know, strategy is what you choose not to do. And in each of the categories we've decided to go after, let's call it adjacent categories to your typical delivery systems for the nutraceutical market, these are all categories which are billion dollar categories where there are categories that play into the direct to consumer route to market.

Speaker 1

These are categories that allow us to make high the same margins or higher margins than our existing swim lane within the capsule, let's call it the capsule kind of nutraceutical swim lane. Categories where consumers are yearning for better for you health and wellness solutions and are willing to pay more. And we call this basically our Vina Insight strategy where we're really delivering to the consumer superior science, superior efficacy given the functional benefits that Vina delivers and obviously anchored in our clinical trial and then obviously superior taste because these are categories where there is a sensorial component and as many of our investors understand, nothing leaves the house of bioharvest without being quantitatively tested from a taste perspective and making sure we're parity or better versus competition. So right now we've been very clear. We're playing in multi billion dollar categories with significant margin opportunity and importantly the ability to come in and differentiate.

Speaker 1

And differentiation allows us to drive premiumization. We've seen it in the coffee category as I said where we sold already more than $2,500,000 direct to consumer which is a significant amount of money when you think about it what you're actually selling into people's homes and is being consumed. $2,500,000 on the direct to consumer side is like $25,000,000 at retail. You know, when you understand just the amount of households that you're getting into and not having to worry about pipeline fills. So what I shared with Amit earlier is the play for this year.

Speaker 1

We are doing extensive work as I speak in the area of, you know, what we call our BioHarvest Health and Beauty business where we see a significant opportunity in leveraging the power of a systemic delivery system I. E. Capsules plus a topical delivery system and I. E. Specific super moisturizing creams and we've got a very focused team that's working on our BioHarvest Health and Beauty deliverables and we expect in the first quarter of next year we will be launching a very disruptive proposition into this market, anchored again in clinical trials with ultimately being a very unique robust molecule that's able to play a significant role from a skin health perspective, a structure function claims on the actual capsule from a systemic perspective and then cosmetic claims as it relates to the actual topical solution.

Speaker 1

So this is basically the playbook as it stands today as far as us executing in the marketplace across key multibillion dollar categories with high margin realization, which are all synergistic, which all play to our competitive advantage we've built from a route to market in the context of our e commerce machine that we've built and ultimately will give the business significant scale scaling potential given the route to market that we have, the ability to trade up consumers. We're already seeing it today. It's amazing. I was watching last night orders coming through and we're offering a tea sampler pack for people on checkout. And it's crazy to see how many people are buying, for example, a three month subscription or a six month subscription of capsules and then they'll buy the 10 pack tea sampler.

Speaker 1

And ultimately, we hope that that will also drive incremental tea sales for us. So it's just the power of that portfolio. We're enjoying those benefits. We were pretty much a single business with just capsules. We've now layered on the coffee.

Speaker 1

We're layering on the tea. We think the chews are going to be very disruptive as well. And then when you layer on top of this our ability to bring to the market our olive verboscanide cell proposition, which is relevant for every single one of our customers today. You know, their ability to have complementary benefits from the olivoboscoside sell product that we're to bring to the market focusing on liver health, cholesterol health and joint health ultimately really gives us another major scaling point in the business. As I've said before, it's not going to be a build like we had with Vignia where it's taken us, let's call it four years to get to 50,000 active subscribers.

Speaker 1

I will tell you we do have a significant non subscriber base as well, specifically when you look at Amazon, But when you start to think about bringing our Oliver Bosco site product to market, that 50,000 will be reached much, much quicker just given the fact that we have the customers and the complementary benefits are critical for our customers given the uniqueness of the functionality of the olivaboscoside cells. So I hope I've comprehensively covered your question, Susan.

Speaker 2

Yes. That's been very helpful. Thanks so much for all the details.

Speaker 1

Thank you.

Operator

The next question comes from Nicholas Sherwood with Maxim Group. Please go ahead.

Speaker 4

Hi, good evening. My first question is how are you helping some of the pharmaceutical companies you're working with on the CDMO side navigate any regulatory issues that might come from kind of generating compounds for them from what is a very unique and innovative method that's kind of generally not seen?

Speaker 1

Hi, Nicholas. Thank you for the question. You know, it's it's interesting because I think Amit or Matt talked about tailwinds. You know, the business has significant tailwinds right now. And you know, from my experience, I'm used to dealing with a lot of headwinds, so it's very nice to have so much tailwinds behind us.

Speaker 1

And we're starting to see and actually I was super excited to hear the announcement from President Trump a couple of days ago. It wasn't actually the tariff announcement, but it was more the announcement related to capping the revenues of pharmaceutical companies in The United States Of America, where you have today, you know, 5% of the population, but north of 70 of pharmaceutical companies revenues. And ultimately what this means, and we started to see this with our engagement with pharmaceutical companies, what this means is that pharmaceutical companies are going to be looking for other vehicles to be able to develop compounds or molecules because it's just getting way too expensive just given the fact that to find today with chemical synthesis a new compound that's able to deliver on its target is super challenging. You got to spend more money today than you had to twenty years ago and you're not able to get that return on investment specifically with some of the caps that are being put on from a regulatory perspective in critical markets like The U. S.

Speaker 1

And then obviously the whole biologics opportunities are very expensive, very challenging from a safety and immunogenicity perspective. So we started to see pharmaceutical companies in a way go back to the future because we know that they started there and looking to technologies like ours to be able to bring consistent compounds to the marketplace which are able to bring them new significant revenue pool opportunities going after new indications, which in the past they would have been more likely to, I would say, go back to their normal habits of looking at chemically synthesized compounds or more recently biologics. So the good news is, you know, we have really good tailwind in this respect and also at the same time there are a lot of compounds today that are super valuable that you just simply cannot chemically synthesize. And therefore either you have to get those compounds directly from plants using traditional methods or you utilize our technology where we have the unique consistency, we have much greater economic viability given our magnification and you're obviously also much more able to derive patents. So the bottom line is more focus and energy and interest from pharma than before and we believe that this will just continue to compound as for all the reasons that I've outlined.

Speaker 1

Now from a regulatory perspective, we're actually we believe in a very good space as it relates to basically the fact that in many cases we are working on materials that may require a further step downstream in purification. So ultimately from a regulatory perspective, it's a much more simpler regulatory path with the FDA to be able to demonstrate that the BioHarvest biological compound when purified, that final end, let's call it end molecule, is exactly the same as what was coming from the plant. So it's much simpler process and the FDA is used to dealing with these situations where you're changing sources of supply. And there's a protocol for it and but it's definitely something that is within the realms of doing for all of these companies and something that is not new to the industry. At the same time, we also believe that our materials give us the flexibility to also to also able to go just to be able to go down the path of the biologic to be considered as biological material, which also opens up a lot more flexibility in the regulatory path that we can pursue.

Speaker 1

And then lastly, you know, we are working with a number of different key regulatory consultants that have a lot of experience in this sphere and provide these, when required this level of support to some of our customers.

Speaker 4

I see. That all makes a ton of sense and I appreciate the detail and I'll return to the queue.

Speaker 1

Thank you.

Operator

The next question comes from Hunter Diamond with Diamond Equity Research. Please go ahead.

Speaker 5

Hi, everyone. Congratulations on the results. A lot of my questions were answered. But I do have one related to the Olive Cell, which was briefly mentioned. Maybe just touch on how quickly you would anticipate a ramp for that, your general excitement for that versus your other SKUs, and how you see that product developing, I guess, near term and then longer term a little bit.

Speaker 1

Thank you, Hunter. So with the olivoboscoside cells, OVC as we affectionately call it, we see a significant opportunity. I think everybody understands that you have one hundred million adults in America that are dealing with the challenges of nonalcoholic fatty liver disease, and I don't believe that's going to change in any shape or form in the next five to ten years. So it really represents a significant opportunity. Also importantly, just like there is very strong awareness of the French paradox, I think people today have a really good understanding of the power of the Mediterranean diet.

Speaker 1

Also the power of the blue zones, you know, as the world becomes more global, people understand the longevity benefits of different behaviors that people have from an eating perspective and a overall recreation perspective in blue zones, obviously the congruency of the Mediterranean diet in this area is very, very critical. So, you know, the opportunity is really, really significant and specifically when you look at the areas that we're looking to really communicate structure function claims is anchored in the liver health space, but also as we know the overall Mediterranean diet also has an ability to maintain cholesterol within normal levels. So this is another area that we're looking at and then also the whole opportunities around joint health. So you've got three major multibillion dollar revenue buckets that we can access. Similarly with Vinia, we have multiple buckets that we can access and actually when we speak on the next quarterly update, we'll be sharing some additional areas that we'll be taking the brand into as it relates to the power of blood flow and certain systems within our body.

Speaker 1

So you know, ultimately both of these products have, you know, roughly $20,000,000,000 of value that you can go after. When you look at the category, it's a $60,000,000,000 category, and when you kind of step back and you look at revenue pools, both Vinnea and all of the vivoscoside cell products, we'll be accessing revenue pools of, you know, 15 to $20,000,000,000. So but what will be different, Hunter, is the ramp up, as I've shared earlier, will be literally I think the ramp up will be much faster, if not at more than double the pace because of the complementary nature and also our ability to bundle. There are multiple different ways that we can bundle the two unique cell based compounds together. We could even put the two together in one you know, kind of moonshot kind of capsule to help consumers or to put it in a chew.

Speaker 1

So there are many, many different ways and the team are starting to think about this as we kind of get closer to our 2026 planning cycle. Our intention is to bring it to the market in 2026, but obviously that is contingent on us moving through the clinical trial process in a successful way. There's a lot of work that has to go into that process, but we are very, very confident following our very positive in vitro results where we showed a significant ability to reduce the fat levels in human liver cells that will be successful as we go directly to human clinical trials. We will probably skip animal trials with Vinia. We went in vitro, then we went to animal, then we went to clinical with obviously humans.

Speaker 1

We'll probably go directly to the human trials, And so basically the key headline is similar size of the prize, but the ability to capture that will be much faster. And I also think, given the power of having two really strong arms as we hit the whether it's going direct to doctor or whether it's what we do online, it's going to allow the synergistic effect will be significant between the two and will allow actually us to, I would say also accelerate our vineyard growth levels with the power of the two working together.

Speaker 5

Great. Thank you for taking my question.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Ilan Sobel for any closing remarks.

Speaker 1

Yes, thank you very much, Mr. Operator, and everybody that's joined our call today. You know, I think in closing, I wanted to just share a couple of key messages to all of you as we sum up a little bit of what we've heard here today over the last forty five minutes. I think what you see as a company today that meeting or exceeding our guidance is in our DNA. It's embedded in every part of the management team and cascades down to the company.

Speaker 1

Before the end of the year, we believe we will be able to achieve our growth and expansion goals while also making sure we land the profitability targets that we've set. The fundamentals of the business today remain very strong and continually are validated throughout all of the company's activities across the two divisions of the business. I see more and more every day with the amount of incoming calls and the levels of interest and engagement from industry leaders that botanical synthesis, no doubt, will become one of the biggest contributors in the quest for new therapeutic and nutritive molecules over the next ten years. And ultimately, we're preparing ourselves and putting in place a critical capability building blocks with the AI tools that we're developing internally, and we're already seeing tangible results from all the work we're doing, and this will really continue to support the accelerated growth of the business in the future. And you know, I hope that our shareholder partners are seeing us, you know, delivering on the critical milestones that we've set as it relates to not just the financial milestones, but also the critical milestones to really establish the and demonstrate the magnitude of opportunity in the CDMO business with the quality of the deals that we bring to the table, as well as the ability to move deals from stage one to stage two.

Speaker 1

And lastly, as CEO, I'm really enjoying the benefits of the synergy that we're seeing between the product division and the CDMO division. It's proving itself every single day as we move to find more CDMO catalysts and opening the gates for possible customers. And we couldn't do this if we didn't have the significant credibility when we were able to sit and talk about Vignia, you know, being as I said in my earlier comments, being a top five on Amazon. This really gives us significant credibility sitting at the table with major customers when they see the scale of our manufacturing facility. Some of you out there have had a camera eye into our biological facility, and when they actually see the magnitude and the scale of our production and the ability to importantly be able to scale this globally with capital requirements that are not significant and enable a significant return on capital and quick return on capital, it really opens the gates for sizable opportunities for us to bring down the funnel in the CDMO business.

Speaker 1

So I'm very pleased with the performance of the business in Q1. We're now in the middle of Q2. We're focused on executing to make sure that we deliver on the numbers and I'm looking forward to having further discussions with all of you in the near future. And I'd like to thank all of you for joining us here today And I'm now going to pass this over to the operator. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

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Earnings Conference Call
BioHarvest Sciences Q1 2025
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