Cibus, Inc. (NASDAQ:CBUS) Q4 2024 Earnings Call Transcript

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Overview

The earnings call reveals concerns about financial instability, leadership transition, regulatory challenges, and competitive pressures, which overshadow the positive aspects like improved net loss and cash balance. The Q&A section highlights uncertainties in EU regulations and commercialization timelines, which could impact future revenue. Despite management's optimism, the market may react negatively to the lack of clear guidance and potential financial sustainability issues.

Key Financial Performance

Cash and Cash Equivalents $14.4 million as of December 31, 2024; no year-over-year change mentioned.

R&D Expense $12.4 million for Q4 2024, down from $14.2 million in Q4 2023; a decrease of $1.8 million primarily due to lower non-cash stock compensation expense and cost-saving initiatives.

SG&A Expense $6.8 million for Q4 2024, unchanged from Q4 2023; no year-over-year change mentioned.

Net Loss $25.8 million for Q4 2024, improved from a net loss of $277.2 million in Q4 2023; the prior year included a non-cash goodwill impairment charge of $249 million, and excluding this charge, the net loss improved by approximately $2 million due to cost reduction efforts.

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Operating Highlights

Herbicide Tolerance Traits in Rice: Cibus is generating commercial interest in herbicide tolerance traits in rice across multiple markets including the U.S., Uruguay, Colombia, Brazil, and Asia.

Pod Shatter Reduction in Canola: Cibus has developed a productivity trait for Pod Shatter Reduction in Canola, improving yield protection against adverse weather.

Sclerotinia Resistance in Canola: Cibus is advancing its Sclerotinia resistance traits in Canola, with multiple modes of action being developed.

HT2 Traits in Soybean: Cibus successfully edited soybean cells for HT2 traits, enabling expanded development of its soybean platform.

Global Regulatory Environment: Recent EU legislation is expected to harmonize the regulatory landscape for gene editing, allowing gene edited products to be treated similarly to conventional breeding.

California Rice Commission Approval: Cibus received approval for planned field trials with advanced rice traits in California, marking a significant milestone.

Cash and Cash Equivalents: Cibus reported cash and cash equivalents of $14.4 million as of December 31, 2024, expected to fund operations into late Q3 2025.

R&D Expense Reduction: R&D expenses decreased to $12.4 million in Q4 2024 from $14.2 million in the previous year due to cost-saving initiatives.

Leadership Transition: Cibus is undergoing a leadership transition with Peter Beetham stepping into an expanded role as Interim CEO, emphasizing continuity in strategic direction.

Focus on Gene Editing: Cibus is transitioning from an agricultural trait development company to a commercial trait company, focusing on gene editing technologies.

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Risk or Challenges

Earnings Miss: Cibus, Inc. reported an EPS of $-0.87, missing expectations of $-0.68, indicating potential financial instability.

Leadership Transition: Recent leadership changes may create uncertainty in strategic direction and operational execution.

Regulatory Environment: Pending EU legislation on gene editing could impact market access and regulatory compliance, posing a risk if not favorable.

Supply Chain Challenges: The company faces challenges in commercializing traits due to the need for collaboration with seed companies and successful field trials.

Market Competition: Cibus operates in a competitive agricultural technology market, which may pressure pricing and market share.

Financial Sustainability: With cash and cash equivalents at $14.4 million, there are concerns about funding operational expenses beyond late Q3 2025.

R&D Investment: R&D expenses were $12.4 million, indicating a significant investment that may not yield immediate returns, impacting financial health.

Economic Factors: Global agricultural challenges and economic conditions may affect demand for Cibus's gene-edited traits.

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Guidance & Outlook

Leadership Transition: Cibus is undergoing a leadership transition with Peter Beetham stepping into an expanded role as Interim CEO, emphasizing the company's strategic direction remains on track.

Gene Editing Technology: Cibus is focused on transforming from an agricultural trait development company to a commercial trait company, leveraging its proprietary Rapid Trait Development System (RTDS) for gene editing.

Commercialization of Traits: Cibus is advancing its commercialization efforts for herbicide tolerance traits in rice and canola, with significant interest from seed companies and ongoing field trials.

Global Regulatory Environment: Recent advancements in global regulatory frameworks, particularly in the EU, are expected to enhance the commercial opportunities for Cibus's gene-edited products.

Sustainable Ingredients Program: Cibus is advancing its Sustainable Ingredients program, focusing on low carbon ingredients and biofragrances, which represent adjacent market opportunities.

Financial Outlook: Cibus expects existing cash and cash equivalents of $14.4 million to fund operations into late Q3 2025, with ongoing cost-saving initiatives.

Revenue Potential: Cibus anticipates potential annual trait royalties per acre in the range of $10 to $15, representing a substantial market opportunity.

Future Milestones: Key milestones for 2025 include completion of EU legislation, operational soybean platform development, and continued field trials for various traits.

Market Expansion: Cibus aims to capture significant value as regulatory frameworks evolve, particularly with gene-edited traits moving into customer germplasm and field trials.

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Shareholder Return Plan

Cash and Cash Equivalents: $14.4 million as of December 31, 2024.

Net Proceeds from Registered Direct Offering: $21.6 million received thus far in 2025.

Expected Funding Duration: Existing cash and cash equivalents will fund planned operating expenses and capital expenditure requirements into late third quarter of 2025.

R&D Expense: $12.4 million for the fourth quarter of 2024.

SG&A Expense: $6.8 million for the fourth quarter of 2024.

Net Loss: $25.8 million for the fourth quarter of 2024.

Improvement in Net Loss: Improved approximately $2 million year-over-year.

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Key Q&A

Q:Could you maybe just start by unpacking a little bit what the EU decision means in terms of the milestones or timeline for you to have commercial products with a customer in Europe?

A:The EU decision is crucial for our business as it allows for the advancement of new genomic techniques. The EU Council's ratification of the text will help accelerate our customers' programs and ensure a clear path to cultivation.

Q:Can you just talk a little bit about the degree to which the current draft of the EU law lets people patent the genetic modifications?

A:The EU Council advocates for transparency in patenting, ensuring seed companies disclose the patents behind their products, which is a strong position for the seed industry.

Q:Has the timing of the commercialization dates for any of the products in your investor deck changed at all from last quarter? Is everything on track?

A:Everything is on track, especially with the HT2 trait and Sclerotinia tolerance for canola, which are crucial this year.

Q:Do you expect your current cash balance and consumption to be at sufficient levels, where you can advance all of the traits that you’re currently developing?

A:Yes, we are confident in meeting our cash requirements and advancing all milestones.

Q:Should we expect meaningful revenues in 2026 from the biofragrance or maybe one of the partner-based revenues?

A:We are excited about the progress in our biofragrance work and expect to see revenues in 2026.

Q:Are you already in touch with the potential customers in Europe?

A:Yes, we are working closely with European customers on Sclerotinia tolerance and other traits.

Q:Are the cost cuts already at the level that we should expect going forward or are you expecting further cost optimizations?

A:We believe there are additional savings to be realized as we refine our processes.

Q:Have you identified any priority traits and crops that you intend to spend the most resources on in your ramp to commercialization?

A:We are focused on three crops and five traits, particularly rice, canola, and soybean.

Q:Are we still assuming 2026 for the first royalties from Canada and how about from the EU?

A:We maintain our guidance of revenues from canola and winter oilseed rape between 2026 and 2028.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the specifics of the commercialization timeline for certain products, particularly in relation to the EU regulatory changes and their impact on revenue timelines.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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