Cibus Inc (CBUS) 2018 Q3 法說會逐字稿

Greetings, and welcome to the Calyxt Third Quarter 2018 Financial Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Simon Harnest, Vice President of Corporate Strategy and Finance. Simon, please go ahead.

Thanks a lot, Kevin, and thank you, everyone. Welcome, and thank you for joining us for Calyxt Third Quarter 2018 Financial Results Conference Call. Joining me on the call today with prepared remarks are Jim Blome, our newly appointed Chief Executive Officer; Manoj Sahoo, our Chief Commercial Officer; and Eric Dutang, our interim Chief Financial Officer.

Yesterday evening, Calyxt issued a press release reporting our financial results for the 3 months ended September 30, 2018. This press releases is available on our website at www.calyxt.com. As a reminder, we will make forward-looking statements regarding financial outlook in addition to regulatory and product development plans. These statements are subject to risks and uncertainties that may cause actual results to differ from those forecasted. A description of these risks can be found in our most recent Form 10-K on file with the SEC.

And with that, I would like to turn the call over to Jim.

Thank you, Simon. My name is Jim Blome, and I'm the newly appointed CEO of Calyxt Inc. I'm delighted to be here today and would like to provide a brief summary of my background, and to share my views on Calyxt's position and why I chose to join Calyxt in October.

I was raised on a family corn and soybean farm in Central Iowa and ag technology remains my life on passion. My 30-year professional career includes management positions in FMC, Agriliance, Sumitomo Chemical and Bayer. In my most recent position, as a CEO of Bayer CropScience's North American business, I was responsible for the crop protection business, the canola and cotton seed businesses as well as the USA's fastest-growing soybean seed business.

I spent the last 2 years as the Commercial Workstream Leader for the Bayer Monsanto North American commercial integration. Bayer divested significant assets including their North American seed businesses and selected crop protection businesses to comply with the government remedies and to finalize the Monsanto acquisition. As a result, I was available to join Calyxt.

I chose Calyxt as my next opportunity, because of the strong TALEN technology foundation, the world class scientists and lab facilities, the clean license to operate, and the extensive intellectual property assets. TALEN is sound, proven science with very broad applications. I was also attracted by Calyxt's mission to be the first company to commercialize this technology with near term events to publicly demonstrate the business plan. The opportunity to commercialize leading edge technology and to own the first mover advantage in this space, provides a strong talent magnet to build upon our leadership position.

In addition, Calyxt's development pipeline addresses consumer demands for the healthier diets, food supply transparency and improved taste. Calyxt technology will also provide valuable solutions to food companies, who have customer and shareholder commitments to improve the sustainability by reducing inputs and waste.

At Calyxt, we believe many of today's growing health problems, like obesity, allergens and diabetes are directly related to how we eat, and we are building a company that help us all eat healthier. We are improving the health equalities of food and feed by applying our proven technology.

I'm pleased to share with you today that over the last quarter, we have put every element and infrastructure in place for successful commercial launch of our high-oleic soybean product, a clear goal for Calyxt in 2018.

Our key accomplishments for 2018 include; to date, we have successfully harvested over 90% of our 17,000 acres planted in 2018. In the last few weeks, we have contracted over 17,000 acres for the 2019 growing season. We're already surpassing the total acreage of 2018 with the goal to double this acreage in size in 2019. We've established a supply chain with oil crushing and refining contracts, not just to cover this year's harvest, but to provide ample room for growth.

We are in discussions with over 30 food companies with 3 companies already in advance contracting discussions. One of these 3 potential food customers has the ability to purchase our entire 2018 oil supply.

We have successfully harvested our high-fiber wheat field trials paving the road for commercial field planning. And we are finishing this quarter with a cash balance of over $101 million, providing a solid basis for next year's expansion. And looking ahead, our key 2019 milestones include, a successful commercialization of our high-oleic soybean business, highlighted by our growing food company relationships and our first food ingredient sales.

The optimization of our established soybean identity preserve supply chain and building the foundation for our wheat identity preserve supply chain. The progression of our high-fiber wheat development project and the identification of additional soybean and wheat development internal projects and strategic alliances to utilize the industry's leading identity preserve supply chains. And finally, the continued advancement of our announced pipeline development plans.

With that, I'll pass the call over to Manoj Sahoo, our Chief Commercial Officer, who will provide the details on our commercial update. Manoj?

Thank you, Jim. I will be summarizing the commercial section in 3 parts: Part 1, will be an update on farmers 2018 harvest and 2019 contracted acres. Part 2, status of the supply chain, especially crushing and refining to enable successful launch. Part 3, progress on food company engagement and additional color on target markets and size of the opportunity. I'll also give some color on the time line on the launch of our new high-oleic soybean varieties.

On the farmer side, we have made very good progress. Out of the 17,000 acres planted in 2018, we have harvested 90% of the acres. We expect the harvest to be completed as early as next week. To enhance the growing experience, our team of agronomists provided grower-specific herbicide recommendations to control wheat, given the fact that our high-oleic soybean is a non-GMO variety, and we train farmers in best practices in our identity preserve protocols. We're excited to inform that100% of our grain we have received in 2018 has met our quality requirements for advantageous presence, which is the GMO content, and [trend] purity which is a high-oleic purity. This is a key driver for our business model, and is part of our head start in developing a proprietary network of growers with a 100% identity preserve supply chain.

On the contracting side, we are thrilled to say that, as we are speaking, we have already crossed last year, which is 2018's 17,000 acres. And this is just a few weeks into grower negotiations. With 5 months ago, we will continue to enroll high-quality growers for 2019 contracts with a goal to at least double our acres from 2018 and then take thoughtful considerations for any additional growth in certain regions.

On an average, growers have increased their committed acres till this date by 1.8x compared to 2018. We anticipate average acres for farmer to increase from last year's average of 220 acres. We also expect that we'll be slightly increasing our share of soybean acres for growers from last year's 17%.

The premium program for 2019 is very similar to 2018. We have though added a volume slack for growers, committing more than 1,000 acres. With regards to target geographies, we continue to focus on expanding our grower base in the upper Midwest region with specific focus on South Dakota, Minnesota and a little bit of Iowa and Nebraska, while we are developing new varieties to cover regions beyond this in line with our growth projections.

Coming to the Section 2, we are pleased with the progress on our supply chain. Our supply chain is well positioned for our growth and scale up. We executed a total processing agreement with American Natural Processors, a leading provider of innovative non-GMO and organic crushing and processing of oils. We also executed a refining agreement with KemX, another leading provider of organic processing of oils with the capacity to refine up to 115 million pounds of oil per year. After harvest is complete, we intend to start crushing in coming weeks to make high-oleic soybean oil available for commercial launch.

Section 3 is about food company engagement. In just past 3 months, we have increased the engagements to a total of 30 food companies, which is a 50% increase. Of these 30 engagements, 3 companies are in active purchasing negotiations. This includes a global consumer packaged goods brand, with the ability to easily take 100% of our current production volume of high-oleic soybean oil. But we have taken a strategy to develop a portfolio of food company relationships across multiple end users to support year-on-year increase in acres contracted over last -- over the next 2 to 5 years. We plan to complete the price volume negotiation in the coming weeks, finalizing both spot purchases as well as possible annual supply agreements with these food companies.

With our high-oleic soybean oil, we are focusing on the premium oils segment. This market segment has grown by over 60 years in the last 15 years, and today represents over 1/3 of the fraction oil market in United States.

In 2017, the premium oils segment was estimated at a total of 14.5 billion pounds. This segment has been growing at a healthy rate of 5% to 6% annually. We are coming into this market segment with a very unique value proposition for our high-oleic soybean oil.

First, its health profile. Our oil is completely trans-factory with no partially hydrogenated oil. With 20% less saturated fat and 3x the monounsaturated fat compared to commodity soybean oil. It is also gently processed, i.e., it is expeller or mechanically processed. This means our processing is chemical free and done in organic refining facilities, resulting in an oil which has much higher naturally occurring antioxidants.

Second part of our value proposition. It has 3x of fry life of commodity soybean oil, thereby reducing waste and better in terms of sustainability and providing a potential economy benefit. Third, it has a labeling advantage. Our oil is considered nonregulated by USDA, which is, it is not regulated as a GMO, which carries certain labeling benefits for our customers, and hence, a premium potential. Fourth, it is refined at SQF Level 2 facilities, which are known with very high standards of food safety.

Lastly, it is grown and processed in the United States with a 100% flexibility and identity preservation. We believe this unique value proposition and our first mover advantage, it is achievable goal to capture 4% to 6% of the premium oil market by supplying to just 30 to 50 food company customers.

The different oils segments, which are potential customers are currently evaluating Calyxt high-oleic soybean oil applications has increased in the last quarter to 9 different areas. To summarize which the segments are: first, baked goods; second, salty snacks; third, cereals; fourth, emulsifiers; fifth, meat replacements; sixth, not spreads; sixth, pet foods, eight -- seventh and eighth, are salad dressing; and ninth is fried.

I also wanted to provide some additional color in 3 additional market segments we have engagements with food companies and value proposition of Calyxt high-oleic soybean oil for these segments. The first segment is salty snacks, a segment which was estimated at $11.2 billion in 2018. And as per industry analyst, it is expected to grow by 28% to $15.3 billion in 2022. We believe the core opportunity for our high-oleic soybean oil is based on the labeling benefits for our oil customers.

With our oil, brands can claim a reduction of saturated fat by 20% versus commodity soybean oil, while increasing the oleic content by 3x, which is generally considered heart healthy. At the same time, our oil maintains the neutral test and flavor sought by these customers for the snack applications.

The second opportunity is non-dairy creamers. The global market size for this segment was estimated at $6.2 billion in 2015. In The United States, the market is dominated by 2 global consumer packaged goods companies, which have between 60% to 70% of the market share with 30% being held by private label and store brands. With the use of our oil, we could significantly expand the shelf life of non-dairy creamers as our product has 3x the oxidation stability versus other commodity oils. The third opportunity is nutritional bars and snacks. This segment saw rapid growth of 20% between 2012 and 2017. The current market size is $6.9 billion in United States, and is expected to grow by 13% between 2017 and 2022. Here, Calyxt high-oleic soybean oil would provide added benefit to this products, which include better oxidation stability, hence, longer shelf life, all the while providing a potential labeling benefit from being labeled as a non-transgenic product with 100% traceable origin.

That summarizes the high-oleic soybean commercialization and color -- additional color on it. On the new soybean varieties, we are making excellent progress on bringing these additional varieties online. Approximately 800 lines were planted this spring in United States. We are in the process of selecting the most promising lines, which will be bulked up in South America to take advantage of the contra season. We remain on track to add 2 to 4 additional high-oleic varieties by the year 2021. The expected maturity group for these varieties would range for low-1s to high-2s. This would allow us to expand regions in which high-oleic soybean oils can be grown by our farm growers, i.e., we can go up north as well as south and also increase share of Calyxt high-oleic soybean in the existing growers portfolio.

With that, I would like to hand the call back over to Jim. Jim?

Thank you, Manoj. I'd like to give you a brief update on our product portfolio outside of the high-oleic soybean.

Our high-fiber wheat. We successfully transition high-fiber wheat to Phase 2 and completed our field trial harvest for the world's first gene-edited consumer-focused wheat product. We had already proven the increased fiber concept when our greenhouse grown trials demonstrated 3x the fiber of commodity light wheat flour. In the coming months, we will be testing to confirm our field-growing trials, replicate this 3x fiber results seen in our greenhouses.

Additionally, we will test the field-grown derived wheat flour in further studies to characterize the food applications desired by the food industry.

We will also be bulking up seeds and crossing into elite germplasm in preparation of the potential 2020-2021 commercial launch of the product. We are indeed very excited about our wheat product, as it will provide valuable opportunities for our food company customers to value differentiate their products in the consumer markets.

Second, the improved quality alfalfa. Improved quality alfalfa product is the first ever alfalfa product to receive the nonregulated distinction from the USDA. Calyxt alfalfa offering increases the efficiency of alfalfa as a key protein seed source for animals by improving our alfalfa's digestibility. The result is a more efficient feed resource that significantly improve the economics and sustainability of our customers businesses.

Before handing the call over to Eric for an overview of our financials, I just wanted to highlight some key talent additions to our commercial and supply chain teams. We have been successful attracting strong talent with domain expertise and proven execution skills.

Our new Supply Chain Manager from Cargill has extensive experience in managing the fats and oil supply chain as well as implementing traceability and he adds further depth to our Supply Chain Management Team. Our new Food Sales Manager has strong history in specialty food ingredient sales and has valuable customer relationships and experience from her time at Kerry Ingredients and DuPont H & M. Our new Food Applications Director has more than 15 years of experience with General Mills, a large CPG company, in addition to his food ingredient industry experience. We plan to double our field agronomy team as a result of the extremely positive feedback from our 2018 growers who valued their agronomic advice during the soybean growing season. We see agronomy support as a valuable differentiation for Calyxt's conventional soybean system. We also expect other future team additions to progress our commercialization and the expansion of our supply chain.

With that, I would like to hand the call over to Eric Dutang, our Interim CFO, for an overview of our financials.

Thank you, Jim. I'm pleased that we continue to manage our cash position and cash burn in a measured and disciplined approach. Calyxt successfully completed a fall income of $61 million before underwriting discounts and commissions in May 2018 and received $2.1 million cash inflows from stock option exercises. The cash burn, excluding financing activities was $14 million for the 9 first months of 2018. Our cash balance at the end of this quarter was a healthy $101.8 million. We expect our current cash position to be sufficient to fund operations to late 2020.

Our cash expense in the first 9 months of 2018 can be characterized by 3 buckets: The first bucket of cash expense is to support our product pipeline and with our industry-leading portfolio of intellectual property. About 30% of the cash spent in the first 9 months was for growing the product pipeline. The second bucket of cash was to prepare for the launch of our high-oleic soybeans. Our commercial team has successfully sold 17,000 acres of high-oleic soybeans beginning 2018.

These activities include fixed sales, brand deliveries, agronomy logistics and commercial supports and commercial note activities with potential high-oleic soybean oil customers. The remainder of our cash is spent on general and administration activities. The team successfully managed the construction and furnishing of our state-of-the-art facility, with its generating laboratory, a food demo kitchen and offices. The new facility is completed in an inflection point in our development as it will accelerate our R&D productivity and showcase our capabilities to produce healthier food ingredients.

I'm pleased that the team continues to execute this strategy with extreme financial discipline. In the first 9 months of 2018, we had a net operating loss of $19.4 million, which include a total noncash stock option expense of $2.9 million. For the remainder of 2018, we anticipate we will incur working capital needs for grain purchases and capital expenditure for equipments for the new facility. To outcompete these goals, we guide to a cash burn of about $2 million per month on average in 2018. In parallel, we have engaged discussion with financial institutions to provide values, financing alternatives to front working capital and capital expenditures in 2019. We will share more details on these financing alternatives in upcoming quarters.

With that, I would like to pass the call back to Jim for closing remarks.

Thanks, Eric. As 2018 comes to a close, we reflect on an important year for Calyxt, as we continue our exciting transition from an R&D platform company to a commercial entity. We are on the cash of our first food ingredient sales. These first sales will solidify our leadership position and differentiate Calyxt from the other R&D platform-only companies. We are off to a very good start for 2019 by contracting more than 17,000 acres of high-oleic soybeans, which already exceeds our entire total 2018 acreage. And with more than 5 months remaining to sign-off growers before 2019 soybean planning commences, we expect to more than double our 2018 actual.

Our financial and development plans are on track, and we are excited to be a healthy food-ingredient company. Back to you, Simon.

Thank you very much Jim and team. With that, I would like to open the call for any questions you may have.

(Operator Instructions) Our first question is coming from Adam Samuelson from Goldman Sachs.

I guess, my first question and I apologize if I missed this in the prepared remarks. Was there, do you have any additional clarity on what the realize yields were this year with the soybean crops in the fields?

Manoj?

So far from the harvest we have done, the yields have ranged somewhere between from 40 to 55, and it varies with the region or the counties we have planted in, which is in line with our expectations.

Okay. That's very helpful. And then on the 2019 plan, just to be clear, is the target to double? Or the target to more than double the present acres on the high-oleic soybeans?

The target is to double. But we will absolutely have the seed capability desire to go beyond that. We're spending time carefully placing with agronomic advice finding the strategic growers that really have the stewardship capabilities. And if we find more of those, we will continue to grow.

Okay. And then just one finally, from me, maybe this is for Eric. Can you talk about some of the different financing options that you're looking at such as financial working capital moving forward? Just give us some ranges of expectations that you actually execute on those agreements in the next 12 months and any sense of what those might look like.

Yes. So the discussion with banks and about create facilities and working capital financing, it's too early to talk about it, but we are working on it for 2019. But right now, we don't have to -- we can finance the working capital for the 2018 and 2019.

Our next question today is coming from Daniel Jester from Citi.

So maybe just to step back a little bit and take a 30,000-foot view. Can you just talk about how much high-oleic soybean acreage for the entire industry you think was planted in 2018, just so that we can kind of size where you are? And then where do you think that market grows in totality in 2019? Some of your GM competitors have some products as well. So I'm just wondering from an industry-wide perspective, and how are you guys seeing the market this year and into next?

Dan, I'm happy to give you a little bit color. This is -- there is no published USDA statistics, which you can rely upon, because USDA looks at total soybean acres, which was 80 million acres for 2018 planting. The harvest is going to be slightly less than that. Overall, if you look at high-oleic market, because it's soybean and broader fats and oils, and then the high-oleic market, which consists of soybean, which is GMO; canola, which is also GMO; and sunflower, which is all conventional, which is non-GMO. So these are the 3 major high-oleic markets there. And now, if you look at markets of soybean among the high-oleic, now I'm thinking completely aloud. I don't have any statistics, I'm expecting it to be little less than 1/3. High-oleic canola is a lot more prevalent, but it is again important. Now there were statistics by United Soybean Board, which kind of summarized the high-oleic soybean to be somewhere between 400,000 acres to 600,000 acres. But there has been no confirmation of those statistics, and the forward-looking projections are kind of more a guesstimate than it. So overall, I think the market as I said in my prepared remarks, the premium oils segment has been growing 5% to 6% versus the commodity segment, which is growing at 1% to 2%, which is 3x the growth. So we expect this segment to grow significantly overall. And we think we have a very unique value proposition for food companies and consumers overall, as why, it makes sense for especially consumers to prefer this kind of oil.

That's very helpful. And just on that, can you just maybe talk a bit about your conversations with your farmers growers about using your product versus a competitor GMO product? Are there significant differences in terms of the service that you provide or that the commercial terms which would allow you to have more competitive product than some of the other products in the marketplace?

Yes. I think there are major differentiation, of course. Growers have normally been growing for more than 20 years GMO soybeans, so it's a different agronomic sort of practices, somewhat simplify from past conventional soybean uses. So the differentiate with our growers and the value they see with us versus others, is that agronomic advice on picking the right soils to put this on, helping them break weed resistance cycles that they may or may not have on their area, and teaching them how to use conventional herbicides to grow our crop and our conventional soybeans, which are non-GMO.

Okay. And then on the oil side. I appreciate the update on your customer engagement. Can you just talk a bit about the initial feedback you've got from customers as they have been testing the oil? Anything that has been surprising on their feedback thus far?

Dan, I think, the testing has been as per plan. We -- as we said, we have engaged our food company engagements by 50% higher, which is awesome because there is demand from food companies for a premium oil, which is high-oleic. From a technical perspective, our oil has performed equally or better than other non-GMO oils available in the market. So customers are really excited. Especially from a fatty acid composition perspective, because we have 3x as much oleic acid and consumers consider oleic acid as heart healthy. So there is that kind of halo around oleic acid. At the same time, also the commercial negotiations are going on very well. As we said, we have one large consumer packaged goods customer, who can take significant volumes in fact more than 100% of our capacity and all the next coming years. But as a strategy, we have decided to engage with multiple food companies so that we can seed the market and enable year on our growth for the next 2 to 5 years. So on track, oil specifications are meeting our expectations and compares very well with other high-oleic oils available in the market.

Okay. And then just one last one for me. You talked about the $2 million month cash burn rate. Any sense about how that could step up in 2019 as you grow your acreage and as you advance your R&D pipeline?

Yes, no. Great point. It is our current plan to go about $2 million, but reasons for going that would be faster acceleration of anything that might lead for ag in our pipeline that we're finding in our characterizations, expanded acreage and then any strategic alliances that would come in and put immediate commercial opportunities in front of us that would change our current revenue plan.

Our next question today is coming from Akshay Jagdale from Jefferies.

So can I start with this high-level question for you, Jim. So as we look forward long term, what impact do you think is going to have on the plan here, right? I mean, you did a good job with summarizing the experience and all of that. But high-level, what do think -- where do you think you'll have the biggest impact in terms of commercializing or R&D, et cetera? Can you help us like big picture think through if you're successful, what do you think they've got doing? Does this mean more products and what's in your pipeline, get commercialized down the road, do they get commercialized faster and scale faster? How should we think about your impact per se?

Yes. Great question. Thank you, actually. What I found in my first few days at are Calyxt is my value has been added because of my farm background, my agronomic background and my 30 years’ experience in relating to growers, understanding the value pitch to growers and expanding our grower base quickly. I also have extensive relationships in the retail area in the agronomy services. So talking with them, helping build up our seed distribution plans in the future in relating and understanding their businesses, well enough to put a value proposition that's exciting to them is very helpful. I spent a lot of time in very large R&D innovation companies. So my exposure in the process is to progress projects, the evaluation and prioritization of projects. The initial screens and development experiences helping focus is wonderful laboratory of scientists who really can do all kinds of things helping bring all of that enthusiasm from these young people into something that's focused and commercialized. And then from a strategic alliances, I have really brought experiences in the industries in different industries I've been around a long time and have shared a lot of the industry associations. So those types of opportunities to have chats in the hallway or those phone calls with friends really generates ideas and potential relationships and alliances that I think could really further or jumpstart this plan that was put together before I got here.

And just as a follow-up. Perhaps this is too early to answer, but with you being on board, is this more of a food ingredient company than it as a trade company? Or that's to be determined and we'll know in time? I would love to get perspective on that.

Could you repeat the 2 choices on your question, it's either this or this?

Yes. Yes, I mean, this is broadly speaking, is this more of a food ingredient company with you in charge as opposed to farmer trade company?

Yes. We're very happy and proud to be a healthy food ingredient company and taking advantage of the consumer trends and pulling new markets and new opportunities for American growers to continue our pipeline in. Many years ago, we used to export whole soybeans to China. And they would, I mean, we would crush the soybeans and export meal through hogs and pork, and we'd export the oil to China, as they built up their infrastructure, we've started to export whole soybeans, and they capture the value on their end, even relating into the Smithfield acquisition and really moving the hogs that we used to feed here and send over there the slaughterhouse technology and everything over there. And then now you know that the issues with this year with even sending our soybeans over from the U.S. to China. So when we go into farmer communities, and we talk about this new company that's creating a new supply chain in capturing all of that value here. Introducing a new seed supplier to them they have been facing a consolidated supplier market, we really get an embrace on that end. So that part of it is exciting. But for me, it's also exciting that we have 2 sales forces, a group of agronomy sales people in the field and this new group of commercial oil and food ingredient sales people to our new customers on the food ingredient side. And I think that's where our pipeline development will come. In reverse engineering with our food companies where they see consumer demands with the consumer might like that they can't quite reach, we can talk to them about those maybe do some reverse engineering and grow a crop with American growers in our infrastructure and add value here, that will bring these new products and really solidify the systems. So we're building an identity preserve supply chain. I think it's the first and the best really, and there are a lot of uses to it. And it's really a two-pronged approach to our leadership position. High-innovation, new products, and also, optimizing the supply chain for other uses.

And a couple of questions for Manoj. Manoj congrats on some of the milestones you've had. So just to play devil's advocate a little bit, so feeds are key customers or potential customers in advanced hog, can you give us and what does that mean, does that mean are you're still on track by the end of calendar year to actually sign agreement that will result in sales? That's my first question. And I guess 3 is, even if you have one, right, it's on plan in my estimate from what you have said, previously?

Sure, Akshay. Happy to give you a color. So what does it mean. It means that all these customers have actually qualified our oil. So we have passed on the technical R&D innovation food hurdle in saying our high-oleic soybean oil is great, and it can be incorporated in the food brand. What it does, I say, of a series of commercial negotiations with regards to the price, with regards to the logistics, with regards to the volume, with regards to the nature of contracting. And that can often take sometimes a couple of weeks, even 1 month or 2. So we remain on track for these discussions. Now we're developing that pipeline of 3, but again, we will be happy with one or more. It may be the end of '18 or early 2019, the reason is that the harvest was delayed by almost a month because of the heavy rains in the upper Midwest all farmers, so farmers hundred challenging to actually harvest. So but we remain on track and very excited about our food company relationships.

And just to follow-up on that, Manoj. So what prevents that number, so 3 out of 30, right, what prevents that from being 10 or 15 today, right, at a high level? Is it [sound with] issue, there's a volume issue, but what is the 27 that aren't in advanced stages? What is the main reason why they aren't in a more advanced stage than what they are in today?

The way I would pick up it is not to prevent one needs to be true for 30 customers. First is time line. Some of these customers are very large global brands, who take a lot of time in evaluating their product, because for a company to put our oil into $10 billion brand, needs a lot of what Jim calls supply chain reliability or proven supplier base. And we have established the supply chain, but we need to optimize it, so that it is highly reliable to serve the food company brands, so that is number one. Second, is that not everybody would pay that premium, because it translates to their value proposition as a brand. So there will be a natural fall off from those 30 customers with regards to when we expect the premium oil price. At the same time, discussions with a small or medium-sized food companies, which typically supply to the Whole Foods or the Trader Joe's of the world are much quicker, and they are quick to evaluate. So we expect them to be the first or the early adopters in early 2019, hence allow us to be able to sell out our 2019, which is basically 2018 plantings and crushed into oil. And then grow the portfolio of companies to actually sustain the momentum we have got on the farmer side to be able to scale up our acres as well as the supply chain.

Okay. And one last one for you, Manoj, is just on pricing on high-oleic prices coverage. I'm sure it is difficult to talk about that specifically on a call like this. But can you just talk maybe about what is publicly available, I don't think that's well understood I mean there is GM, high-oleic varieties out there. There's plenty of other premium oils out there that have high-oleic content, so I mean you've been in the past established a decent framework to help us understand that, but can you maybe we have done some work on this? But I would love to get your perspective on like the price discovery so far and what your impressions are? To my knowledge, the pricing that you should be targeting, should be well north of where these premium oils and aggregates trade, but I'm just curious to get your perspective on that?

Thanks, Akshay, for the question. As you know, to look back probably 10 years. Because if a commodity goes up and down, the soybean oil prices commodity GMO has ranged somewhere between $0.30 to $0.33, closer towards the $0.30, given the recent correction in soybean prices following trade war with China. We expect our oils to be trading at a significant premium to the commodity soybean oil prices. Now if you look at it, basket of premium oils, ranging from olive oil to high-oleic sunflower, to even high-oleic canola, our other seed-based oils like cotton seed oil, they tend to be around that $0.50, $0.55, over the last 10 years. They move in tandem. So I think, we would continue to push our food company customers and achieve a more premium pricing, and these are non-negotiating. We are not negotiating a commodity-based pricing. This will be typically fixed-price contracts for specific volumes or annual supply agreements. We are getting good traction on even annual supply agreements early on in the process, which is a positive momentum from us.

Our next question is coming from John Baumgartner from Wells Fargo.

Manoj, I had a couple on the commercialization side. I apologized if I missed this but in the comments on the identity premiums. I think better than you expected in 2018 originally. What are you thinking about for 2019? So those premiums continue to kind of compress as the market comes to you? Or are you looking for more of flattish IDP kind of year-on-year?

John, thanks for the question. Yes, I think, we've provided some range, and we broadly were on the lower end of the range, which is positive for us. And that is because of we invested in the agronomy team. We build relationships by providing technical advice and getting the placement right in the farmers portfolio farms. We will continue to do that good work. So I anticipate the 2019 premiums to be very similar. The only difference is that, we have got some good interest from larger farmers. Hence, we added an additional premium for more than 1,000 acres. Now that would help us sign up more acres in for 2019, which is good tailwinds for us.

Great. And then just on your choices, KemX and American Natural. How did you decide to partner with them, was it largely just cost base or a differentiated ability that they are bringing to you as a customer? Why go with them versus the alternatives that are out there?

So towards that back, I think, we have been talking to multiple crushers and refiners. We used evaluation criteria consisting of a couple of items: One is the logistics and supply chain, not just for soybeans, but for the meal as well as the oil. Because the meal gets sold to feed companies or animal nutrition companies, and oil get sold to food customers. And so there was an integrated supply chain model to help us understand the supply chain optimization potential, that's number one. Number two was their technical capabilities. This is the first ever gene edited product in commercialized in the world. So we wanted to ensure that we have partners who have very strong technical abilities to be able to process our soybean into a high-quality, and still maintain that integrity, as Jim said, of 100% identity preservation and flexibility. The third thing was the potential to grow in future, so that it is not about just 2018-'19, but ability to grow, and they should have the capacity that to accommodate that growth we foresee in the coming years. And with these 3 things, KemX and ANP were the best strategic fit for us.

Great. And then just last question I have. In terms of your discussions with customers for your products and the HO soybean oil specifically. I mean, clearly package food has a problem growing everybody's focused on health and wellness. And we've seen your big R&D cutbacks in the packaged food companies themselves. And I guess, at this point, you're more or less focused more on the D less than the R. So I mean, are you in your discussions with customers, with potential customers? Are you hearing customers coming to you saying, "Yo, listen. We like the soybean oil but we have this other ingredient that we like to refine or improve." I mean, are you seeing any sort of like cross-pollination of ideas, where you can kind of apply TALEN's with the generation of cross that you think originally?

Yes, no, I think that is a great point. We were learning about the trends, what their challenges are and how we might meet them as a strategic partners. So we have substitutability in lot of the recipes that could change the way they program the other. We have major customers in the last weeks, sell their snack divisions, right. So they are focused on healthier options, and some of that is taking old brands and making a new health statement, and I think Calyxt present a wonderful opportunity for a partnership in allowing them to do that.

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Our next question today is coming from Ken Zaslow from Bank of Montréal.

Just 2 quick questions. One is, Jim, what strategic direction will you be doing as the new CEO? More so like, is there a strategic direction that will change? And then my second question is, I appreciate that doubling the acreage is a monumental move, it seems that your demand is actually even greater than that. Would you think about partnering with a large size conglomerate or somewhere you got to accelerate your seeds if something buys farmers? And I'll leave it there.

Great, thank you. On the -- on your first question, on strategic direction. We are very happy to be a healthy food ingredient company. So the plan that's in place giving a sharper edge to our development plans to take advantage of our expense basis in the supply chains is probably taking a precedent, so that's not new, but that's sharper. And then understanding in taking full partnership position with the food companies, and helping them explain what we can do and our opportunities in having the trust. We see trust as an important part of the food business, an important part of sharing their brand. And as we grow that, we see it as a big opportunity of being first and we think it's an opportunity for us to learn quickly and understand how to present value for them. So the strategic direction is not really going to change. But we are going to sharpen it and put a sharper commercial edge on it, which is appropriate for a company at this stage of growth coming from R&D and the commercialization. On your second question of -- is 2x the soybeans the appropriate point. We have a really important role this year in proof-of-concept in business and putting this business together, and we've achieved that. Now as we grow the 2x seems like a likely target for this year. Understanding that we are with just one soybean variety this year, we are solving that by introducing 2 to 3 new varieties for the next planting season, which will allow us to expand our acreages beyond this 2x goal. But there are certain things that walk before you run, and I think the wonderful lessons and the opportunities for optimization that we've done in doing this correctly. We have a responsibility as being the first to do it right, and we're building an industry, quite frankly, not just a company. And I think this is the proper rate, but I will take greater than 2x in 2019. Manoj, is listening to me. So I'm agreeing with you.

One last thing, I think, can you talk about this act conglomerates of like. Would you talk to a big player and have a strategic relationships? I think, yes, why not. And Jim has been part of those kind of discussions in his past life and brings most of industries and networks with him. And we will be engaging in such discussions to significantly scale up our footprint on the farmer side as we look towards growing in the coming years.

Partnering with somebody who would accelerate your seed. Let's say next year you'd be getting 2x but what about like the year after and beyond? I mean if you partner with somebody, there'd be a greater probability you could be 8x in the next 3 years, rather than a slow, I didn't mean that 2x is slow but there is a greater appreciation to monetize your first mover advantage. Is there not a concept in that? And I will leave it there.

Well, I think it's an excellent point and something that we're focused on. So as we develop in the next 12 months in those opportunities, it's just about getting our varieties in place and scaling up the seed. We have the processing capacity already identified in relationships there. So it can go very quickly with the proper products and the proper strategic alliances.

Thank you. We reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

Thank you, everyone. I appreciate everyone taking time to come in and listen to the Calyxt story. It's been an exciting year for us here. We're very proud of the commercialization milestones we shared with you, and we look forward to giving you additional updates as we progress along the next 6 months as this company grows. So thank you very much.

Thank you. That does concludes today's teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.