Yield10 Bioscience Inc (YTEN) 2014 Q1 法說會逐字稿

Good afternoon and welcome to Metabolix's first-quarter 2014 conference call. Today's call is being recorded for Internet replay. (Operator Instructions).

I will now turn the call over to Ms. Lynne Brum, Metabolix's VP of Corporate Communications. Please proceed, Ms. Brum.

Great. Thanks, Jen. Good afternoon, everyone. Welcome to the Metabolix first-quarter 2014 conference call. If you do not have a copy of our first-quarter news release which was issued earlier this afternoon, one can be found in the investor relations section of Metabolix.com. In addition, slides accompanying the presentation are available on Metabolix website on the events and presentations page in the IR section.

Please turn to slide two. Please note that as part of our discussion today management will be making forward-looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. Investors are also cautioned that statements that are not strictly historical constitute forward-looking statements and such forward-looking statements are subject to a number of risks and uncertainties that could cause the actual results to differ materially from those anticipated.

These risks include risks and uncertainties detailed in Metabolix's filings with the Securities and Exchange Commission including the earnings release filed this afternoon and the Company's most recent 10-K. The Company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this conference call.

On the call with me today are Joe Shaulson, President and Chief Executive Officer; Johan van Walsem, Chief Operating Officer; Joe Hill, Chief Financial Officer and Ollie Peoples, co-Founder and Chief Scientific Officer.

With that I would like to turn the call over to Joe Shaulson. Joe?

Thanks, Lynne. Hello, everyone and thanks for joining us today. Given that our fourth-quarter call was just a short time ago, our prepared remarks this afternoon will be brief. Please turn to slide three.

As we discussed during our fourth-quarter call, securing financing for the execution of our business plan is our highest priority. Although we do not have anything to announce today we are working every day towards the achievement of this goal.

You will recall that our financing plan is to raise $50 million to $60 million over the next 12 to 15 months. To that end we are looking at a variety of different structures ranging from smaller staged financings to larger more comprehensive solutions. While we are not in a position today to say how this will all play out, what we do know is that we intend to complete at least the first phase of our financing by the end of June and that we plan to use the capital we raise to execute our business plan and to build an intermediate scale specialty polymers business that serves as the foundation for our longer-range plans and future growth of our business.

Please turn to slide four. Our strategic priorities remain unchanged, get our biopolymer manufacturing up and running in 2015, intensify product and applications development with customers, keep leveraging our technology to advance our strategy, keep looking to capture value from chemicals and crops and never forget that we are a customer focused specialties business and that we need to think and act like one in everything we do.

Now a few words about the business. As discussed during our last call, one area of great promise for PHA additives is as a processing aid for flexible and rigid PVC. In this area we have recently progressed with a couple of customers to tonnage scale trials, a significant step in the commercialization of our product in PVC applications.

We also talked about using our PHA biopolymers in latex form as a thin barrier coating for paper and cardboard. Although there is still a lot of work to be done here we have seen tremendous interest from major industry players since we started working on applications with customers just a couple of months ago.

Why is there such interest? Because our PHA latex offers the potential for truly repulpable coated paper and cardboard. What I take away from these recent developments is that our business strategy is on point and beginning to pay off.

With that in mind I am sure some of you are frustrated with our progress on financing. I get it and I look forward to putting it behind us because I am really excited by what I am seeing in the business and I can't wait to redirect the time I've been spending on financing to execution of our business strategy. For me it helps to remember that no news does not mean no progress and we plan to build on the progress we have made to complete the first phase of our financing before the end of June.

With that, I will turn the call over to Joe Hill for a review of our quarterly financials and then we will take some questions. Joe?

Thanks, Joe, and thank you all for joining us today. I will now focus on the financial results for our first fiscal quarter ended March 31, 2014. As always, we manage our finances with an emphasis on cash flow and deploy our financial resources in a disciplined manner to achieve our key strategic objectives and to maximize value from our technology and product portfolio. We have maintained this focus and ended the fiscal quarter with $10.4 million in unrestricted cash and investments.

I would now like to take you through some of the highlights of the financial results. Turning to slide five, I will first review product orders and associated revenue recognized.

Product revenue for the first quarter of 2014 was $500,000 which primarily represents revenue deferred from Q4 product shipments. We shipped and built $600,000 of products in Q1 2014, nearly all of which will be recognized in Q2 2014 in accordance with our revenue recognition policy. By way of comparison during the first quarter of 2013, the Company recognized $800,000 of product revenue.

We continue to hold significant product inventory in the form of resins and blended material which we are using together with poly production of newer materials to support market development with customers and prospective customers.

Cost of product revenue has increased from $600,000 in the first quarter of 2013 to $700,000 in the first quarter of this year. The increase of $100,000 was primarily attributable to selling new product formulations with higher manufacturing costs basis in the first quarter of 2014.

Cost of goods sold also includes the cost of sample inventory shipped to prospective customers, warehousing and product packaging costs and certain freight charges.

Turning to slide six for a review of financial results, you will notice that in the first quarter of 2014 research and development expenses were $4.9 million which is consistent with Q1 2013. Selling, general and administrative expenses were $300,000 higher in Q1 2014 versus Q1 2013. Net loss for the first quarter was $8.2 million or $0.23 per share when compared to a net loss of $6.8 million or $0.20 per share for the first quarter of 2013.

Now onto the balance sheet, turning to slide seven. As we look at cash usage you can see at the bottom of the table we had unrestricted cash and investments of $10.4 million as of March 31, 2014. This compares to $37.7 million at March 31, 2013. For the first quarter, net cash used in operating activities was $9 million as compared to the fourth-quarter 2013 where total cash usage was $6.4 million. This represents a planned increase in net cash usage of $2.6 million which was mainly attributable to the timing of accrued annual variable compensation payments of $1.7 million and timing of accounts payable disbursements. This compares to the first quarter of 2013 where total cash usage was $8.5 million. Ignoring one-time cash usage items as highlighted on this slide, normalized cash usage increased in Q1 2014 over Q1 2013 by $500,000 mostly driven by increased inventory build for formulated products.

We are focused on strengthening our balance sheet and we will during 2014 require significant additional financing to continue to fund our operations and to support our capital needs. Based on our current plans and projections which remain subject to numerous uncertainties, we intend to raise $50 million to $60 million over the next 12 to 15 months. The timing, structure and vehicles for obtaining this level of financing are under consideration by the Company and it may be accomplished in stages.

Failure to receive additional funding by the end of June 2014 will force us to delay, scale back or otherwise modify our business, operating plans and/or pursue strategic alternatives. Strengthening our balance sheet is very important and is a top priority.

Now let's open the call to your questions.

(Operator Instructions). Laurence Alexander, Jefferies and Company.

Good afternoon and apologies for the background noise if it is coming through. Two questions.

First, can you give a sense for how the depth of your process, that is are you really focusing on just one or two partners or do you have several avenues for the same goal? And so if you can give us a sense for how many layers there might be.

Secondly are your counterparts people who are looking for specific performance hurdles to be realized, so are they testing products and waiting to see the results or is this purely just a debate about structure and goals of whatever arrangement is being set up? Can you just give us some flavor on that? Thank you.

I guess what I would say is that we are very busy. There is a lot of activity around the financing and we are talking to a bunch of different people about a variety of different structures. The focus has really been about the long-term business plan and making sure that we are securing the capital that we need to execute it and we are focused specifically on counterparties who share that interest.

I can't really say much more about where we are in the process other than to say that we are very active and very busy.

Can you just give some detail on whether any of these counterparties are the counterparties who were being negotiated with previously six, nine months ago or are you seeing sort of a churn in the mix of counterparties?

I don't know that I can really comment about that. I don't think we talked six or nine months ago about who we would have been talking to about financing. We are talking to folks who are strategically interested in the business. They like the business plan. They are interested in what they see and they see it as a strong investment opportunity and that is where our focus is.

And then I guess just lastly when we get to the July, the next update, how much detail do you expect to be able to give at that point or would it just be a matter of saying that you have hit a certain set of milestones and more needs to come? Can you just give us a sense for what point people think the clouds shall lift and your focus will shift back to operations?

Right now our focus is balanced between financing and operations. I am looking forward to the point in time where the balance shifts more to the operations than where it has been for the past couple of months. But I would say that our plan is to complete at least the first phase of financing by the end of June and we would expect to have a full set of information for investors about what that financing looks like when we announce it. And to complete it by the end of June, it means we have to announce it by the end of June.

Thank you.

(Operator Instructions). JinMing Liu, Ardour Capital.

Thanks for taking my question. First is regarding financing. Are you getting any support from your current shareholders?

So like I said, we are not really talking about who the counterparties we are in discussions with and we will have an opportunity to talk about that when we have a financing to announce.

Okay. Fair enough. So just by looking at your operating expense, it still looks very high given what is happening so two questions here. One is what your emergency plan here? How much you can save by cutting your operating cost you'd say if somehow the financing got delayed? Secondly, once you get the at least first stage of financing in place, are you going to lower your operating expenses?

So our focus, JinMing, is on executing our business plan and to execute our business plan we need to execute our financing plan and that is what we are focused on. We have a lot to do over the coming year and we are staffed to accomplish that. I think that we have been staffed to accomplish that for some time and we have been -- so for example we have plans to move forward with manufacturing for some time and we are staffed to move forward with manufacturing and we haven't done that to date. But we are going to do that. That is our plan for the next year and as we do that we need the resources that are on staff to pull that off.

As we work on the commercial development activities that we are involved in where we are seeing really exciting progress, we need more resource that we have had historically because the effort is much more intensive than the approach that we have taken historically.

So our focus is not really on cutting resource, it is on executing our business plan and executing our business plan means executing our financing plan. That is what we are focused on.

Okay. Operational wise, can you give us some idea how much of your shipped products go into the additives applications versus traditional biopolymer applications?

So we are starting with relatively small numbers at roughly $600,000 of product shipments in a quarter and we wouldn't want to get down into detail on where product is going. What I can say is that some of the product is going to additive applications. And as I mentioned in my prepared remarks, we have got a couple of customers now that have progressed to tonnage scale product trials in additive type application so that is something that we do expect to see increase over the coming quarters as we continue to push forward with those application development efforts.

Okay. One last question from me. Is your current financing situation affecting your getting business?

No, I don't think it is affecting us getting business. We live in the real world, people are aware of it, they are concerned about it. We are telling our story, our business plan. They are intrigued by the products that they are sampling and working on applications development with. So we have been able to manage that so far and like I said, our plan is to put the first phase of financing behind us in the coming month and a half and that will certainly help us to continue that initiative with the customers.

Okay. Thanks a lot.

You are welcome. Thanks for your questions.

Thank you. I would now like to turn the floor back to Joe Shaulson for any closing comments.

Thanks again everyone for joining us today and thanks also for your continued support in Metabolix. We look forward to talking with you again soon and wish you a good evening.

Thank you. Ladies and gentlemen, this concludes this afternoon's teleconference. You may disconnect your lines at this time. Thank you for your participation.