Hi, everyone. My name is Austin Moeller. I'm the sustainability analyst here at Canaccord Genuity. And today, we're joined by Rory Riggs and Peter Beetham from Cibus. And so, if you could just give everyone a brief overview of the company, and talk a little bit about gene editing.
That could be awesome. So we're leaders in gene editing in agriculture. We all know that gene editing is a pretty well-established science. The difference is, in agriculture, it's an industrial science as opposed to human applications. So what we do is we change the expressions of genes to put attributes in seeds that make the crops easier to farm. Our goal is to take farmers and make them more efficient, and it's really the industry Monsanto started. Monsanto put these traits in, herbicide-resistant traits. It's the bread and butter of all the GMO crops. The problem was that GMO crops used foreign materials, and they were effectively banned in a lot of places around the world. It made it too costly to develop. So we're the new generation.
We're the generation that can make changes, that doesn't use foreign materials, and we're going to be regulated as conventional breeding. Cool.
Excellent. And so can you just go into a little bit more detail about gene editing versus genetically modified plants and the differences in the regulatory regimes around both?
So I'm going to give the snapshot, and then let Peter—Peter always gives the detailed answers that are more accurate than mine. But the first idea that everybody's grappling onto is indistinguishable from nature. Are you indistinguishable from nature? And if you are, we're going to regulate you like nature, and that's the guiding thing. When Europe passed their rules, it wasn't just gene editing was safe. We have something called oligonucleotide-directed mutagenesis, which is a fancy word for a type of editing, and Europe put that in their headlines. That goes, "This is safe," which is pretty cool. Do you want to?
So, yeah, let me try. I think the thing about GM versus gene edited is I look at GM or GMO as Windows 95. It was great in 1995, but we're in 2024. So, you know, what they did with GMO was they took genes from another organism and transformed it into a plant or a crop. And it was really exciting technology. It was—it's been hugely valuable, still hugely valuable, but it was really the Holy Grail, was to be able to go in and actually edit the genome. And so as Rory said, to make things indistinguishable from what can occur in nature. The plants have an amazing ability to have characteristics that have great variability. You only have to look outside from trees, to shrubs, to bushes, to flowers. Genetically, they're really diverse.
The beauty of gene editing is being able to sort of use what's already in the plant to provide it with new characteristics by just making small, very small changes to their genome, which we call editing.
Could you talk about how Europe, Canada, and the U.S. recently concluded that they consider gene editing to be indistinguishable from plant breeding?
The proof's in the pudding. You know, the cool thing is now that we're editing, and we've got it down now that if we... We have this thing called a single cell, and it grown into a plant, and if you send me your seed, I can put a trait in 12 months and give it back to you. Is that pretty cool? The speed at which you do. But all the customers want to make sure that when we do it, there's a quality control, that they can prove that the only thing we changed in the seed was the things they wanted to. And so they've all adopted onto this language that says that these things are indistinguishable, and U.S. did it a long time ago.
They have something called "Am I Regulated?", and we have, like, 18 products through that, and nobody else has more than, like, 3. And Europe, Parliament voted for it, and they're just sort of working through the working process, but it's pretty cool, I think.
Yeah, the only thing on that is just that's on the back of what we just described about gene editing. I mean, it's indistinguishable from what can occur in nature and what comes out of plant breeding programs. So, you know, Cibus has been around for a long time, and we've been working with the regulatory agencies around the world because they've really wanted to harmonize. As Rory said, you know, we filed a long time ago in the U.S., and clearly were shown to be non-GMO and therefore regulated just like a normal plant breeding variety would be. And so what was really important as you looked at other countries around the world is that they wanted to harmonize that because they understand that trade is important in agriculture.
They understand that getting new characteristics or new traits into their major crops in their countries improve productivity. So there is a real push globally within the industry to harmonize things. And what we've seen over the last 24 months, particularly, is that harmonization. Just in the last two years, at least 18 countries have agreed on policies for gene editing, which is a great thing for all of us.
And let me add, even the Greens are supporting it, and the reason the Greens are supporting it is because we get rid of chemicals. They're saying: "If you can do this, why don't you, why don't you approve this, and then we'll focus on getting rid of the fungicides, insecticides, and herbicides?" Good.
Can you discuss how accurate the Trait Machine process is in making individual edits down to specific letters in a genome?
... Yeah, this is one where I'm gonna give the 40,000-foot view, and then Peter. But he's finally been able to do it. What Peter and his team can now do, if you come to us, and you just have three changes you wanna make, or four or five changes, my team, or Peter and his team, can really, in days, figure out how to make the edits in gRNAs and make the edits. It's really amazing how quickly they've gotten to make those. They seem imperceptible changes, right? But if you can make these small changes overnight, it's really an amazing breakthrough.
Let me frame it this way, because-
Thanks
... in nature, every time a cell divides, it makes mistakes. And but it's very good at correcting itself, and so that, using that, correction or DNA repair machinery, we've been able to really make it very precise. Because it has to be precise. You wanna make sure that your genes actually code the right way. So using that, system, we've developed this, our reagents that will line up on a genome and essentially make those very precise edits under this, what Rory mentioned before, this oligonucleotide, which we call the gene repair oligonucleotide, which is a small snippet of DNA that just lines up like the red squiggly line when you're using Microsoft Word and you misspell something. You right-click it, and it spells it correctly. That type of correction is what we do at a genome level.
Just to give you the, you know, the context of that, it's one of the smallest plant genomes is around 3 billion bases, and we're making 1 or 2 bases changes only in that whole 3 billion. That gives you an idea, but that's enough to provide a new characteristic. It's pretty cool, actually.
I think it's also cool. They talk about conversion rate. You read the papers, it's like one in a million things actually get edited, and we're doing, like, sometimes 50% conversions. We're doing on regularly for our, for manufacturing, 5% and 10% conversions. That's why we can do it so accurately. Right. To you. Go ahead.
Wow! When is the European Parliament legislation expected to go into force following that amendment process that they have?
Yeah, that's the most asked question by investors: is how quickly that gets through. The European Parliament passed it. They passed a law, so it doesn't go back to it, but there's a triumvirate that has to happen, and the Polish government, for some reason, is holding out for money, and so we're waiting for them to get bought off to come in between. But it'll happen in the next... We don't know exactly when it happens, but there's a debate between one member. It's not about our stuff. It's just about politics, which is pretty cool. But what we tell people is, it should happen by early next year.
Right, and as you mentioned, the core language that was already agreed to in the bill, that's not changing.
That's not changing.
Yeah.
The things that are gonna change, agree on, are things that aren't gonna impact us.
Can you discuss the specialty ingredients and fragrances opportunity? And when do you expect the launch of the first sustainable ingredients?
It's pretty cool. Soybeans are really big oil. The oils are pretty big, and so the idea is that, and we're being funded for this, that we're gonna be able to change the soybean oil to mimic lauric oils or palm kernel oils and palm oils, which is pretty cool. So you're gonna be able to grow palm oil in a soybean field, which is neat. And another big area is called fragrances. The fragrances, they've never had natural fragrances because it takes so many roses to make rose oil, so we've, we're really good at editing yeast too, and so we're gonna ship our first bio-fragrances this year, we think, in small orders, but it's gonna come out in a reasonably quick frame.
We can't do our sustainable ingredients until we get our soybean platform done, but that'll happen sooner or after.
Excellent. Can you discuss the HT1, HT3 traits that you've developed and, and what customers have already signed on to incorporate those traits into their elite germplasm?
Yeah, that's the coolest. The bread and butter of the GMO industry is herbicide management. It changed how you farmed. You used to have to spray all this herbicide all over the field and then plant afterwards, and but these herbicide traits did, is allowed you to spray the crop, so during the season, you could pinpoint where the weeds are and kill them. 90% of all soy, corn, bean, cotton have this trait, and none of the others do. And so the whole focus is crops like rice, which wasn't a GMO crop, they never had the benefit of these herbicide traits. So we already have 40% of the industry. We think we'll get to 80, like everybody else, and so Nutrien's a big user.
Nutrien, in their press release, they were, they're excited not only to that, but the future of our business is collaborations with people like Nutrien, that we'll give you these seeds, and then we'll start giving you more and more herbicides and more and more things as you go. And in Latin America, Fedearroz and Interoc are two of the biggest guys, and we've already signed them up, and I think, I think what we tell people is by the end of this year, we'll sign up a large part of Latin America, which will get us, you know, to 50%-60% yield, you know, and-
Let me add a little bit of science to the background of this, 'cause it's
I'll get it cleaned up.
That's, you know... One of the things about herbicide tolerance is we've learned a lot through crops where herbicide's been sprayed a lot. Because what happens is the weeds become tolerant to the herbicide over time, and when that happens, guess what? The deep genome's changed a little bit, and so we learn from that, so to then put those edits into the crops where you do use a different herbicide. And as Rory said, it's a mainstay for all the major crops, so now they have stacked traits. And so we just recently did a release on the fact that HT1 and HT3 is something we can stack. We can stack our herbicide tolerances together and provide a better solution for farmers, so they can manage that resistance, they can manage their weeds.
And so when you think about herbicide tolerance, it's about using less chemistry to have the same weed control and a solution package that allows them to manage that resistance.
The biggest economics of this is, corn and soybean are 200 million acres, 300-400 million. These traits are on hundreds of millions of acres, and they're still getting $10-$15 an acre. So they're... Rice, look how big rice and wheat are with these new platforms. So the idea is this is like, this should be our bread and butter.
Peter, can you go just into a little bit more detail on what the field trial results were from the stacked gene editing?
So the-
Thanks.
We're excited by that because it was the first time we'd stacked them. And the initial results clearly show that using that stack, you can get a very clean field. In other words, we can get all the weeds that are the major issue for farmers, and not kill the crop when it has the two traits in there. Again, it's this optionality for farmers to manage their weeds. And so instead of, you know, having to use a lot of series of sprays to control their weeds, it allows them to do a much simpler version in a one-shot, season-long control of their weeds. And that is, you know, exciting to us for lots of reasons.
But the idea that we can stack multiple gene-edited traits is also a first for this area.
That's very exciting. What can you tell the audience about the U.K. trials with elite customer germplasms, and when results might be expected from that?
Thank you.
So the, again-
Thank you
... you know, one of the things about Cibus, when you're developing traits, you've got to get it into the field and test it, and show your customers how it works in their genetics sometimes, and some of the example genetics we have as well. In the U.K., this is the first year we've been able to do what's known as winter oilseed rape, which is the canola equivalent in Europe, with our pod shatter reduction trait. And we've, we're harvesting in a few weeks now, and we'll have data in, you know, Q3 to present. But, you know, that's the... It is the first time we've done trials in the U.K..
What's important about that is a lot of that is done, and the European seed companies that we're partnered with or customers get to see it in their environment, and that's a really good thing for the future for that particular trait.
And crop.
And just on rice, you've mentioned that there's no other significant players in the gene-edited rice market, correct?
Yes.
Can you discuss what you expect the margin profile from plant royalties to be once they're brought on, once things are brought online in that 2026 to 2027 timeframe?
Yeah. We've said as we mature, we're gonna be an 80%-90% margin business. We don't really see our burn increasing at all, and these royalties flying on. When we change somebody's seed and give it back to them, we have no more costs, so they pay for all the costs of upgrading. We just get royalties per acre, and so your margin is about how big these royalties get to. It's really... I started a company called Royalty Pharma, where we made this industry, this royalty business for drugs, and this is gonna be even bigger industry than plants.
Given that a lot of the opportunities are not expected to start royalty generation until the 2026 to 2027 timeframe, what do you expect your, your cash burn to be, between now and, and full commercialization?
We've been pretty consistent. We have a burn right now of about $5 million a month. We're consolidating operations early next year, so that'll come down a little bit. And that is roughly $55-$60 million a year, is what we think our burn's gonna be until you start seeing cash flow comes in.
It's significantly less complicated to get approvals for gene edits than a traditional drug approval, correct? You've talked about how many of your edits have already been observed to work, and this is why customers have already come forward and requested to have traits inserted into their elite germplasm, right?
Yeah. So in our business, seed companies come, we do thing, these field trials. Like, the herbicide field trials are pretty cool because you show them next to next, and when you spray a crop that doesn't have a herbicide, everything's dead. So it's a pretty clean trial. And so that's your approval. It's basically just looking at a field trial. We don't really have FDA approval. We have varietal filings. They wanna know how your technology was done, but your FDA is the customer, and then they do that. And then when we have something, every time we edit their crops, right after we do it, we give them back their seed.
We do a joint field trial with them to prove that it does what it's supposed to do, and then they put Cibus Powered, you know, non-GMO on their bag, which is pretty cool. And so those are the customers, which is a great place to be, personally.
Is that also true in other countries outside the U.S., or are there different processes involved in different regions?
Everyone's a little bit different, but they're all still just varietal filings are different. You know, once they make these regulations, you know, U.S. has a certain filing, and they all have different ways of saying, you know, "How did you do the edit? If you did it that way, we're not gonna regulate you." And they all have different ways of how to make you file for that. Is that fair?
Yeah. Let me give you a specific example. In Europe, they use what they call DUS: distinct, unique, and stable. So every variety that goes into the marketplace, the industry has registration and quality assurance, essentially. You know, there's if you look at any of the Euroseeds graphics on LinkedIn, they have some great graphics of showing why good quality seed's important. But that's something that's very standard in the industry. So once we have handed over their genetics back to the customer with their trait, they just, they go through that process routinely every year. So that's a specific example.
As Roy said, you know, some countries are a little bit different, but in all cases, it's, you know, it's all about quality, and a variety registration, or hybrid registration, depending on what seeds you're dealing with.
What can you tell us about the growth chambers and hydroponics facilities that were obtained during the acquisition of Calyxt?
Well, one of the big benefits of Calyxt was, first of all, the patent change in gene editing, which was 2015 is when you went from first to invent to first to file. The really important patents in gene editing were first to invent, and the two of us had, like, 90% of the patents pre-2015. So the first thing we got was this amazing bevy of patents. And secondly, we got 1,100 acres, and we got a 50,000 sq ft facility and with growth chambers, but also we got 24 brilliant cell biologists, so it was a great acquisition of things. Growth chambers are the new world. That's how all things are being validated now and regulated, so having a couple of them was worth a lot to us.
Let me add a little bit to that because I think, you know, that was one of the things that was really important to us to understand what to edit. Sometimes you have to look at the variation, genetic variation within a controlled environment. And so, for us, getting, you know, greenhouse space and controlled environments for testing what we are going to edit, but then also test once it's edited, so there's a pre- and post-production is a really big part of our process. And that, having that is online, and the size of it that we have up in Minneapolis was really advantageous to us. They also have that 11-acre site, which allows for quite a bit of expansion if we need it.
Right now, what we tend to do when with what we call our Trait Machine is our ability to through semi-automation is to be able to scale on a, you know, in an area that's not much bigger than this conference room. You know, this is not something that you need 400,000 sq ft for. So, you know, that plus the growth facilities was a real boon for us, thinking about our future for the next few years.
Hmm. Thanks, Ben.
Do we have any questions here from the audience at all?
A couple questions.
Sure.
Mm-hmm.
So the seed companies will just start... That's, that's who your, your customer is, so to speak?
Yep, exactly.
They get the feedback from the farmer, and then that goes to you to edit. And are they inventory-wise, or are they ready to go? And how quick can they get an inventory up to start selling?
That's the key question. The key question is, we're making the traits, so they're not going to the farmers. They know if... Everybody in rice knows if they can get herbicide management, this is huge. It's gonna change how the world works. And so we find that these are traits that you're not gonna use in partial. They're gonna be in every seed you have. So the seed companies themselves are ready to run as soon as you get it in their trait, and you do the value. In rice, we have to wait for a chemical package, but it's gonna move very, very fast into the customers. And other traits that are partial to a customer would probably take a long time, but our focus is to find the traits that the industry just needs so that they move quickly.
But it'll take 1-2 years for them to launch, and then take them +3 years to get to some sort of saturation.
How quick after this gets started, guys, how quick can you pivot to and add a gene on to something else to, you know, keep perfecting it? Will the seed companies then just turn around or they'll sell out? You know, I don't know.
Oh, it's just, it's perfect. So this still would be weed management. In the GMO world, they have five different stack traits, and so we already know by year-end next year, we believe we'll have four different stack traits for, for, for weed management. So there's a thing called ROXY. There's a certain type of chemical you want at the beginning treatment, so you want to edit for that. So we're just going to... On an ongoing basis, our job is to not let anybody else into this business. So the way you do that is just keep adding traits in to make it very, very difficult for somebody to compete with you in terms of providing a whole weed management solution. It's really interesting.
One last final type of question.
Yeah.
... the same, it's just, it's not gonna just have wheat, wheat growing around. You get more out of it, and, you know, it's still gonna taste the same, right?
Yeah, he'd grow more. The thing, and we're focused on changing how you farm things.
Right.
We're not trying to make redder tomatoes, but, but Peter would like to. I just, I think that-
Yeah
... my job is to make it cheaper to farm.
Yeah, and I think that's... but to Rory's point, it's all about productivity. You know, if in where we're heading in, in this world, if we can make every acre more productive and make farmers more sustainable, use less chemistry, that's all to the good. But I love your question because, you know, that's our short term, and, you know, that in, in itself could be $1 billion worth of royalties.
Mm.
And so, you know, the fun part for me as a scientist is thinking of what else can we do? And, you know, non-allergenic peanuts are one. You know, we've got some interest in that, and it's doable today. That's the thing. You know, reducing gluten in wheat, gluten-free wheat. Now, they're two classic examples of health benefits that you could do with gene editing today. And that's just the tip of the iceberg. You know, we joke that our Chief Scientific Officer, Greg Gocal, has a spreadsheet of 1,000 ideas.
Mm.
It's probably more like 2,000 or 3,000 ideas, to be frank. But that's, that's the part that is really exciting about this technology. Not only can we actually make farming more productive and create a huge amount of value for the company and our shareholders, but we can also then think about what else we would do.
Wheat, wheat-free, that's such, that's world-changing, right?
Yeah.
Without that, that's-
Both of these are.
Billions.
Yeah, the applications of this industry are so huge. I always think $10 an acre × 10 million acres is a lot of money, right? And we're talking billions of acres, and so that's why Bt traits and herbicide traits, they're getting $10-$15 an acre, and they're on hundreds of millions of acres. 'Cause you get them across multiple crops. That's why I've always said I think this will be the biggest thing I do. It's just a really huge application. Peanuts, it'll change people's lives if you can do allergy-free peanuts.
Send kids to school, eating peanut butter and jellies again.
Yeah. Cool, thanks very much. These are awesome.
Well, thank you so much for coming. I know we're all looking forward to our gluten-free bread. And thanks so much, Rory and Peter, for coming and talking to us about Cibus today.
Thanks for taking the time.
Yep.
Thanks a lot, man.