Roseville, Minnesota, USA
May 7, 2020

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• First Quarter 2020 Revenue of $2.4 Million
• Provides Update on COVID-19 Impact
• Announces Extended Cash Runway and Revises 2020 Cash Usage Guidance to between $30 Million to $34 Million

Calyxt, Inc. (NASDAQ: CLXT), a plant-based technology company, has reported its financial results for the first quarter ended March 31, 2020.

Management Commentary

“The COVID-19 pandemic has caused an unprecedented global crisis. I am very proud of the dedication and resilience of the Calyxt team and of the actions we have taken in response to the COVID-19 pandemic to protect our employees and our business,” said Jim Blome, Calyxt CEO. “Most of our laboratory workers remain onsite at our headquarters and all workers who are able to work remotely have done so since early in the crisis. Protecting our scientists and their projects is critical to our future, and thus far we have handled the transition without disruption. I appreciate the actions of our team to help ensure we stay safe and on track. While the immediate future is uncertain, what is crystal clear is that Calyxt must act judiciously and decisively to succeed during this situation and after it is resolved. We have taken several measures to respond to a dynamic environment that compels us to bolster our liquidity and rapidly adapt to extraordinary circumstances.”

“The first quarter of 2020 was initially marked by increasing demand for our high oleic soybean products, offset in the latter part of the quarter by the beginning of the COVID-19 pandemic, which has temporarily disrupted the agricultural and food supply chains globally and depressed food industry demand for premium oil. These negative effects increased throughout the quarter and remain with us today. We have responded to ongoing disruptions by pausing our crush schedule to preserve cash, while continuing our seed distribution activities for 2020 plantings, and continuing to ship high oleic soybean oil to our recently announced world-class oil customer. Looking forward at the macro-environment, we expect prices for both oil and meal to remain low, demand for oil to remain depressed and, depending on livestock herd sizes, meal demand may also be depressed. We also expect some of the oil and meal price pressure to be partially offset by lower grain purchase costs. Despite these headwinds, we continue to geographically expand our soybean meal customer base and continue to sample and test with large consumer packaged goods companies. I am confident that when the macro-environment stabilizes, we will emerge stronger than before.”

“On the technology front, we continue to build out and improve our gene editing technology suite. We licensed a new breakthrough from the University of Minnesota, invented in a lab run by Calyxt co-founder Dan Voytas, Ph.D., that will enable us to significantly reduce the time needed to develop traits in certain crops. I am pleased with the four product candidate advancements in our development process in the quarter, especially considering the unique nature of each. Our innovative technology, continuous improvement and robust scientific team are what allows us to maintain a competitive edge in the gene editing space,” continued Blome.

“In the near-term, we expect to launch our first hemp product – improved plants to address key problems facing hemp growers – marking the launch of our second commercial product. We expect the velocity of our revenue opportunities to accelerate as we build up a robust portfolio of commercial products addressing several different markets. For our efforts to secure new collaboration agreements with industry partners, we aim to sign multiple new agreements this year. We expect collaboration agreements to provide us with cash milestone payments to further support our liquidity and our vision that Calyxt is an innovation platform company.”

“In summary, despite increased headwinds and unprecedented global disruption, we continue to execute on our business initiatives, improve our gene editing platform, drive forward our R&D programs, and extend our cash runway. I am incredibly proud of our team and look forward to sharing more on our developing story at the upcoming BMO Global Farm to Market Virtual Conference on May 13,” concluded Blome.

Product Development and Intellectual Property

• Continued to expand intellectual property portfolio with new U.S. patents granted and filing applications for new patent families. Granted U.S. patents cover expansion of the core TALEN® patent family with claims directed to methods for generating gene edited plants as well as an additional soybean product concept. New provisional patent applications focus on expanding the portfolio of novel gene editing tools and enabling technologies, new product concepts in soybean and wheat, and additional germplasm varieties from its breeding program.
• In the first quarter 2020, four projects in the R&D development process advanced to the next stage. As of March 31, 2020, there were 18 projects at the Discovery stage or later in development across alfalfa, canola, hemp, oats, potatoes, soybeans and wheat, with most projects in soybeans and hemp.
• Early in the second quarter the first hemp project advanced to the commercialization phase. Calyxt expects to launch the product for 2020 spring planting and complete the sale of all product available in the quarter. While not significant to revenue, the pilot is projected to deliver premium margins. To achieve these results, Calyxt worked with a partner’s germplasm to quickly purify and stabilize key varieties while leveraging Calyxt’s patent-pending production system and analytics capabilities. This success also enabled the gathering of valuable insights and data that will benefit the development of other hemp projects which are expected to launch beginning in 2023.

First Quarter 2020 Financial Results

• Revenues were $2.4 million in the first quarter of 2020, an increase of $2.2 million or 1,414 percent from the first quarter of 2019. The revenue growth was driven by 1,440 points of volume growth and 44 points of favorable product mix partially offset by 70 points of pricing changes. High oleic soybean meal was 87 percent of revenue in the first quarter of 2020, compared to 92 percent a year ago. Most oil revenue in the quarter was from a world-class customer, active in all four premium oil target market segments, to be used as a plant-based alternative to synthetic fluids.
• Gross margins, as reported, were a negative $1.5 million in the first quarter of 2020, a decrease of $1.6 million from the first quarter of 2019, reflecting the higher costs experienced at this early stage of commercialization of the high oleic soybean products. Gross margin, as adjusted, a non-GAAP measure, was negative $1.2 million, or negative 49 percent, as compared to negative $1.5 million, or negative 63 percent, as reported under GAAP. See below under the heading “Use of Non-GAAP Financial Information” for a discussion of gross margin, as adjusted, and a reconciliation of gross margin, the most comparable GAAP measure, to gross margin, as adjusted.
• R&D expenses were $2.8 million in the first quarter of 2020, an increase of $568,000 from the first quarter of 2019, driven by $284,000 of additional personnel costs, $123,000 of incremental professional fees, and $78,000 of higher non-cash stock compensation expenses.
• Selling and supply chain expenses were $1.6 million in the first quarter of 2020, an increase of $676,000 from the first quarter of 2019, driven by $879,000 of additional personnel costs including $273,000 of Section 16 officer transition expenses, and $123,000 incremental allocated expenses for facilities and information technology expenses, partially offset by $314,000 of lower non-cash stock compensation expenses due to the forfeiture of awards.
• G&A expenses were $4.7 million in the first quarter of 2020, an increase of $558,000 from the first quarter of 2019, driven by $392,000 of incremental professional services expenses and increased depreciation expense.
• Net loss was $11.1 million in the first quarter of 2020, an increase of $3.7 million from the first quarter of 2019, driven by the changes in gross margin and operating expenses described above. Net loss per share was $(0.34) per basic and diluted share in the first quarter of 2020, an increase of $(0.11) per basic and diluted share from the first quarter of 2019.
• Adjusted EBITDA loss, a non-GAAP measure, was $8.2 million in the first quarter of 2020, an increase of $2.6 million from the first quarter of 2019, driven by the changes in operating expenses and the increases in negative gross margins described above and a $570,000 decrease in interest expense driven by unrealized losses on short-term investments. See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted EBITDA and a reconciliation of such measure to net loss the most comparable measure calculated under United States GAAP.
• Net cash used in the first quarter of 2020 was $12.6 million compared to $9.6 million in the first quarter of 2019, driven by the increase in net loss of $3.7 million partially offset by a net decrease in cash flows from operating assets and liabilities, primarily the result of the higher cash payments to suppliers and related parties in the first quarter of 2019.
• Cash, cash equivalents, short-term investments and restricted cash totaled $47.4 million as of March 31, 2020.

COVID-19 Update

“Due to the COVID-19 crisis, we have observed changes in demand across the oil markets and declines in the exchange-traded prices for both oil and meal,” said Bill Koschak, Calyxt’s CFO. “As a result, we paused our crush and refining schedule and expect product sales efforts in the second quarter to shift to the second half of 2020. We are pursuing sources of cash through high margin collaboration agreements and licensing opportunities and are taking further action to increase financial flexibility and liquidity, including reviewing operating expenses, deferring purchases of grain in the fourth quarter to the following year, and postponing non-essential capital expenditures.”

“In April 2020, we received a $1.5 million loan under the Payroll Protection Program implemented as part of the CARES Act. After a thorough management review, we determined that the current economic uncertainty made the loan necessary to support our ongoing operations and allows us to continue employing our team members through this unprecedented time. As a result of these actions we expect our 2020 cash usage to be between $30 million and $34 million, lowered from our prior estimate of $34 million to $38 million. The lower use of cash in 2020, which we expect to continue into 2021, is expected to extend our cash runway into late 2021. We continue to evaluate additional strategies to further reduce our cash usage.”

“We also have sold out of seed for the 2020 crop, with seed distribution for 2020 spring planting underway. Deliveries of seed are on schedule and we continue to monitor the distribution network and to develop contingency plans for growers to receive their orders, including the five new varieties we are launching this spring,” concluded Koschak.

2020 Financial Guidance Revisions

On March 5, 2020, Calyxt issued 2020 financial guidance for revenue, adjusted gross margin, and cash usage, which did not take into account the impacts of the COVID-19 pandemic. Due to the high degree of uncertainty created by the COVID-19 pandemic and the challenges of accurately predicting the specific extent or duration of the impact of COVID-19 on operations and financial results, Calyxt is withdrawing guidance for 2020 revenue and 2020 adjusted gross margin. In addition, taking into account anticipated reductions in cash expenditures, timing of grain purchases in the fourth quarter, and the proceeds from the Payroll Protection Program loan, Calyxt now expects cash usage in 2020 to be in the range of $30 million to $34 million, a reduction from previous 2020 cash usage guidance of $34 million to $38 million.

Website: http://www.calyxt.com

Published: May 7, 2020