Moolec Science SA (MLEC) 2024 Q2 法說會逐字稿

Good morning, and welcome to Moolec Science's second quarter 2024 conference call. My name is [Stephanie Shevkov] of ICR Strategic Communications and Advisory. (Event Instructions) Please also note that today's session is being recorded.

Today, Moolec announced its second quarter fiscal year 2024 business highlights. The document is now available on the company's investor relations website, ir.moolecscience.com.

This morning you will be hearing from Gastón Paladini, Chief Executive Officer and Co-Founder of Moolec Science; together with José Lopez Lecube, Chief Financial Officer; and Amit Dhingra, Chief Science Officer; Henk Hoogenkamp, Chief Product Officer will also be joining the subsequent question and answer session to be held immediately after the business update remarks.

In today's call, we will be referring to a presentation that is available on the company's investor relations website. Moving on to slide 2. This conference call is mainly for informational purposes. And during this call, the company will be making forward-looking statements regarding future events and results, which are not historical facts and include, but are not limited to statements about the company's beliefs and expectations.

Forward-looking statements involve inherent risks and uncertainties. Further information regarding these and other risks are included in the company's annual report on Form 20-F filed with the SEC, also available on the company's investor relations website.

Now moving to slide 3, I would like to turn the call over to Moolec's CEO, Gastón, please go ahead.

Thank you, Stephanie, and good morning, everyone. I am glad to present to our attending audience our latest business update. As we have been doing over the last couple of conferences, today's agenda will address three different topics. First, I will give a quick review of Moolec's strategic pillars for value creation. Second, Amit will walk you through our latest scientific and operational developments. And finally, José will present our financial highlights from Q2.

Here, I would like to take the opportunity to reintroduce our framework for value creation. Let's move now to slide 5. This framework not only organize, but also illustrate the way in which we are creating value for all of our stakeholders. We have refined our current business strategy into four foundational pillars. Allow me to provide a more detailed overview.

Number one, product development. This pillar includes research and development, product creation, and improvement, and associated processes to ensure the highest standard of food and the environmental safety and quality. Our primary focus is on developing disruptive solutions using innovative technology for the (inaudible)

Number two, patent portfolio. Our strategic objective is to evolve into an IT powerhouse. R&D is (inaudible) our portfolio and will incorporate a wide spectrum of patents that covers methods, processes, and application. We're continuously screen that market to identify the most valuable geographic areas where our IP efforts, ensuring our assets are aligned with market demands.

Third, regulatory pathway. We possesses deep knowledge and expertise in navigating regulatory approval processes such as those with the FDA and the USDA in the United States, among, of course, other territories as well. Our objective is to navigate the regulatory landscape in which (inaudible) efficiently, maintaining compliance while minimizing time to market.

Number four, strategic alliances. Building a strategic partnership with leading industry players is crucial to accelerate and complement our business. These alliances are pivotal for the exchange of technology, expertise, and industrial processes, ultimately enhancing our competitiveness in the market. This framework is our roadmap for planning and execution, providing a comprehensive and focused approach to achieving our overall objectives.

Before I hand over to Amit to discuss operational progress, let's move to slide number 6, where we will examine the status of our pipeline. As illustrated, most of the project maintain their status. We notable internal progress in GLASO and SOOY1.

However, I would like to highlight the exceptional advancement in the year one project, specifically in progression in product development. Now I leave you with Amit Dhingra, Moolec's Chief Science Officer, who will provide a full overview of our technical and operation advancement.

Thank you, Gastón. Greetings to all of you. We will move now to slide 8. I'm excited to present our technical and operational milestones. We continue to make progress on our Piggy Sooy platform. We are getting ready to harvest the fourth generation or T4 seeds in April this year.

In the meantime, our team performed analysis on the stability of the foreseen myoglobin gene. The gene is no longer segregating, which means that it is genetically stable in the selected lines. I'm also excited to share that the integration of the bovine myoglobin gene has now been confirmed in several first-generation T1, or second generation T2 seeds, indicating that the myoglobin gene is being stably integrated across the generations.

Moving now to slide 9, I'm excited to provide an update on Moolec's prototyping division using our novel yeast platform. Our objective is to identify high-value applications for a yeast strain that's new to the food industry. This platform not only finds value for a novel microorganism, but also paves the way for future target molecules to be economically viable by distributing overhead costs across multiple products.

Specifically, we have found traits in this yeast strain, which allowed us to adapt standard processing techniques to produce an iron supplement that's novel to the market. Preliminary data is promising, indicating that the supplement could approach the efficacy and cost efficiency of traditional animal derived nutritional supplements, particularly in terms of iron absorption. Our regulatory pre-submission meeting was held with the FDA. We feel encouraged to continue our efforts.

On to slide 10. Our immediate focus is on scaling our production. We plan to produce successive batches at the pilot level, ultimately increasing the capacity to 1,000 liter batches. These larger batches will allow us to create standardized prototypes, which will be thoroughly characterized.

The insights gained from the characterization will be instrumental in finalizing our safety dossier and more precise cost competitions. Additionally, we aim to leverage any surplus material by offering or samples to potential partners and stakeholders.

Now I will pass on the presentation to my colleague and our CFO, José. Thank you.

Thank you, Amit, and good morning to everyone. It is a pleasure to be providing this business update of Moolec for the second quarter of fiscal year 2024.

Today, I would like to take some time to review our latest highlights with regards to revenues, expenses, and cash utilization. Please keep in mind that all figures mentioned today are in US dollars, unaudited and based or derived from IFRS unless otherwise stated.

Let's move on now to slide 12. Before we deep dive into the numbers, I would like to point out that in this quarter financials, we are also introducing normalized figures that exclude the effect of the application of IAS 29 accounting in our Argentine subsidiary, which has the Argentine peso as functional currency.

For those of you not familiar with IAS 29, it is an accounting adjustment applied in hyperinflationary economies, which utilizes the end of period exchange rate to convert revenues and expenses into US dollar. For this period, given that the Argentine peso was devaluated 125% in the last 15 days of the quarter, it affects our as reported numbers in a way that we understand does not reflect the evolution of the underlying business.

Moolec subsidiary is located in Argentina, but the business mostly operate in US dollars given its product export nature and its raw material procurement needs. In this sense, we believe that normalized revenues and COGS, excluding the IAS 29 effect, better reflect the reality of the business.

Moving on now to the performance of the operations. During the second quarter, we continued originating soybean efficiently and delivering a sustained coverage of the existing commercial geographic footprint.

Normalized revenues and other income, excluding IAS 29 effect were around $1.7 million, generally in line versus last quarter with a slight decrease in volume. On the other hand, as reported revenues and other income were approximately $0.5 million. As mentioned before, this decline is mainly due to the application of IAS 29 accounting.

In terms of COGS, excluding IAS 29 figures decreased versus last quarter, mainly due to lower value of inventories of our subsidiary in Argentina as a result of the devaluation of the local currency at the end of the period.

SG&A expenses have remain generally in line with our historical track record with no significant changes, continuing an efficient trend of low expenditure while supporting the company's progress. In particular, R&D expenses increased slightly quarter over quarter, but partially offset by lower admin and marketing expenses.

Cash utilization was approximately $4 million, which remains in line with our historical track record of controlled cash expenses, and it also includes around $2.7 million in non-recurring payments associated with transaction expenses.

Finally, during December 2023, Moolec raised an additional $1 million through the issuance of the convertible note with farmers. The terms and conditions were the same as the previous capital raise closed with strategic investors Grupo Insud and Bioceres Crop Solutions for $30 million.

We are very pleased with the incorporation of these strategic investors, most recently farmers who will be instrumental not only in our funding health, but also contribute to supports Moolec product growth and commercialization in the near future.

I will now turn things over to Stephanie for the Q&A portion of our call. Thank you.

(Event Instructions) Before we take questions from the live queue, we have received a few questions via email.

So first question for management, in the business update, you highlighted SOOY1, 10 T3 events and that the T4 seeds will be harvested in April. What do you expect or hope to see in the T4 seeds and what is next for your soy product?

Well, thank you, Stephanie and thank you for the question. Good morning to everyone. I'm one very happy to come to have a SOOY1 on track. I will leave the floor to Amit Dhingra to fully explain what is next, our following steps. So moving from T1 seeds to T4 onwards.

So Amit, could you please explain the further details of this project?

Certainly. Thank you, Gastón. Good morning, everyone. So there are two parts to this as we are moving towards T4 seeds, there's the scientific part that we continue to perform quality control to look at the expression levels as well as the integration of the (inaudible) movement on one side.

And secondly, we will have enough seed this time now to start utilizing it for downstream, and we will be passing on a lot of that seed material to my colleague, Henk, who is the Chief Product Officer, and he can elaborate on that how will the seed be utilized in various applications. Over to you Henk.

Thank you, Amit. Good morning, everybody. So of course, I'd like to add with that I'm very excited that we're getting more seeds to start the actual development processes on (technical difficulty) But also sparing some seed to start sending to our most important pre-commercial customers.

So first of all -- second of all, I also like to say is that the efforts are led by a I need to scale up the seeds that will also yield in growing amounts of samples that are available for our customers so that we can scale along with them. So this means that the sampling process has begun and we're very confident that we can meet the needs of (technical difficulty)

Great. Thank you for your answer.

The second question that we have through e-mail, it says in this quarter's presentation you highlighted your yeast product, YEEA1. Can you help us better understand your next steps there? What final steps are needed to enter commercialization and help us understand that opportunity? What kind of customers or market size are you seeing?

Well, thank you, Stephanie, and thank you for the question. So continue talking about our pipeline status and the next step. So I'm happy to say that Henk Hoogenkamp is leading this specific project in Europe, (inaudible) basic in Europe. So can you please explain the details of YEEA1 and also highlighting, of course, the market opportunity that is very excited. Oh Henk, go ahead.

Thank you, thank you Gastón, also thanks for the question. Basically our immediate priority is to scale up our process, which is planned in the coming quarter and the scaling up will yield a characterized prototype. So this is a prototype that can be used for the further refinement of our (inaudible) further understanding of the characteristics and any excess samples can be shared with our potential customers in the pre-commercial process seeds.

Parallelly, we are having continuous regulatory refinements and consultations, as Amit already mentioned in the presentation. This is really important because everything that we try and do is always try with full regulatory compliance in mind or finding the path of least regulatory resistance.

In terms of the markets, our initial target is the iron supplementation, but also fortification market, which has a rough size about $1 billion. Of course, is market access is something that's really important to us. So it's also worth noting that our strategic partner, Grupo Insud who is not only providing the industrial capacities to scale up and to produce to seed and fully compliant qualities, they also have access to the market through this portfolio -- through their portfolio companies.

So this is actually a fairly closed loop in terms of from beginning to end, from product idea to production, to potential market access. And that's what we're really laser-focused on right now to close the gap.

Great. Thank you. So we are going to be taking questions from the live queue now.

Thomas McGovern, Maxim Group. (Event Instructions)

All right, guys. Thanks for taking my question. So yeah, first question is related to the Gulfood trade show and those associated 50 qualified leads, you mentioned in the press release. So I was wondering if you could just give a little bit more detail on that, you know, kind of where those qualified leads are at?

And then maybe if you could talk a little bit about which ingredient products specifically those leads are interested in purchasing. Thanks.

Sure. Well thank you, Thomas, for the question. I will take the second one and Henk will elaborate on the Gulfood trade show because he was -- he attended the show personally in Dubai. Well the ingredient approach our soy-based meat analogs mostly. They had been developing new (inaudible) and improvements of our current products.

So mostly we use Gulfood trade show to present these innovative and new samples. But nobody better than Henk to fully explain the show and to give you some insight and good info about what happened there in Dubai. Henk?

Thank you. So also thanks for the question. In this case, the Gulfood is a very -- is one of the leading shows for people all over the world (technical difficulty) Also it's a really important show where really ingredients are showed not only for, let's say, niche applications, but for the large market, in this case with meat replacement.

And the meat replacement market is not in terms of plant-based, for the plan at this moment, but it's basically the huge market to target to make meat affordable. And that's where currently our meat replacements are selling into the market into, I believe, currently 11 countries worldwide.

And this shows where people aggregate. So what do we have an innovation or at least iterative improvement all the way up to an innovation, this is a show where you show you demonstrate this in person. You talk to customers live, you get live feedback, you start to talk to them, and what their problems are in terms of either from pricing, all the way to texture, to function applications.

And here's where you get, yeah, the live feedback is very valuable. And in that sense also, it is the best place to find qualified leads in terms of new markets, which we haven't had access before. And it's not only about showing the commodities that we have currently in the market, but also our path to specialties, which we're currently developing, to have a real-time sense of how it's being received by these potential new markets that we're trying to access.

All righty.

(inaudible) response. So my second question relates just kind of more generally to the commercialization of several of your planned products. So you know, in the past, you guys have discussed plans to kind of start to ramp up or fortify your sales and marketing efforts ahead of these commercial launches.

So maybe if you can just review that and kind of give any updates on that front? And just high level kind of what your plans are for expanding your sales and marketing teams. Appreciate you guys.

Sure. Good question, Thomas. Well, this is a B2B business, Tom. And mostly food come and dietary supplement business, so that imply to deliver samples, that's the key to capture new customers and to engage potential clients.

Having said that, what we are doing is co-working with the IT departments of these potential customers. I can't reveal the names yet. But most of them are these things that specific thing takes time you know, so that's what we are doing as we speak.

Co-working with them, delivering samples, preparing more samples, and characterization and information of the specific ingredients. And then you that samples to customers. In parallel, we work specifically in commercial terms, the master supplies agreements, and in NPAs, in material transfer agreements. So that's how the plan goes. And that's what we are doing, as I say, as we speak, as I said, no.

The idea is to strengthen the commercial and sales team, since you said (inaudible) we're getting closer to commercialization. So that will be my short answer. I know José you want to expand on that.

Well sure, Gastón, thank you. Tom, what I would add here is that within the current team, there is a huge expertise in terms of the ingredient business and market. And we have that in Henk's shoulders, so we have other people in the team with a lot of years and seasoned professionals in the ingredient business.

So we believe we are having very interesting conversations, and in the way we should be having these conversations with market participants in the food business. As we get maybe closer to the commercialization of GLASO and that would be remember, you know, beginning of 2025.

Yes, you know, we might have some corporations to support that expansion in terms of the relationship specifically attached to the GLASO product. Again, I would reinforce and highlight the great knowledge in terms of commercial and in terms of expertising to the specific market that we have currently in the team that will be later this year strengthened with a people more focus on the GLASO (inaudible)

Understood. I appreciate you guys taking the time to answer my questions.

Thank you. (Event Instructions) We have one other question that is in through our e-mail.

This is for the management. What is the market not understanding adequately about your business?

Well, thank you, Stephanie. Thank you for the question. It's a good one. I will take it and probably my partners here will complement on that. I would say that there is three fact to highlight. The first one is the huge TAM on some market opportunity ahead, I'm talking about more than $8 billion TAM market, around $40 billion TAM market.

And this is of course as (inaudible) considering food meat applications and not only just vegan or alternative protein niche, this is the opportunity is huge. And also considering of course the sustainable trend.

Second part, the extraordinary yield in soy that we got with our Piggy Sooy platform. 26.6% of (inaudible) protein over total (inaudible) protein is a lot, it's huge, (inaudible) is no-brainer. So we patent it and the product is moving forward, as I may describe it before.

And third, and lastly, the third fact would be that this team that we are representing the team here, but there is a great team of PhDs, some in technologies, some professionals (inaudible) is delivering milestone and getting this product pipeline closer to commercialization.

So I will summarize these three facts to answer the question. Of course, there are more, but these are the most important ones. I don't know if my partners here who want to complement on that. But that would be my short answer.

Well, I would have thought on top of that, that in the last couple of months, I would say in the last year, year-and-a-half, this company has been delivering results that derisk the go-to-market strategy. And by delivering on the execution front, we are getting closer and closer to different stages of commercialization. First, the revenue that we're generating, second, it will be a GLASO that we mentioned before beginning of '25. And then the other products related to the molecular farming platform.

Having said that, the milestone that we have delivered in terms of science with extraordinary yields in terms of annual protein present in the plant, the progress on the regulatory front, the progress on the IP front, that all encompasses a good execution and derisks the go-to-market. So we believe that has a lot of intrinsic value and going back to your question, we believe that probably the market is not fully understanding the value of that.

Thank you, management. I would like to conclude today's call as there are no further questions at this time, and I will hand the call back to Moolec's CEO, Gastón for a few closing remarks.

Okay, yes. Okay since there are no further questions, I want to thank you all for joining us today, this conference call. We have Moolec continue to work hard on all avenues and there's a lot, as you know, and continue to be excited -- really excited about the many opportunities that we see ahead. We are working diligent with our teams and partners to execute our strategies and bringing value to our (inaudible) stakeholders.

I also want to thank and express my thanks to all the Moolec team, the Moolers, also to our partners, investors, the analysts, of course, very, very grateful for that for your continued support and helping us to spread the word to fully explain the Moolec's technology and the opportunity ahead.

Thank you for that. So thanks again for joining us today and really looking forward to updating you in the next quarter. So as I always said, the best is yet to come. Thank you. Have a good day.

This concludes Moolec's business update conference call.