Good day, and welcome to the Cibus Third Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, today's event is being recorded. I would now like to turn the conference over to Carlo Broos, Chief Financial Officer. Please go ahead.

Thank you, and good afternoon. I would like to thank you for taking the time to join us for Cibus third quarter 2024 financial results and business update conference call and webcast. Presenting with me today is Rory Riggs, our Co-Founder, Chief Executive Officer and Chairman; and Mr. Beetham, Co-Founder, President and Chief Operating Officer. Before we begin the call, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to Cibus SEC filings for a list of associated risks. This conference call is being webcast. The webcast link along with our press release and corporate presentation are available on the Investor Relations section of cibus.com to assist you in your analysis of our business. With that, I would now like to turn the call over to Mr. Riggs. Go ahead, Rory.

Thanks, Carlo, and good afternoon, everyone. Before I begin, I'd like to recognize Carlo's participation on today's call as our Chief Financial Officer. Carlo has stepped in for Wade King following Wade's leave of absence. Although Carlo was new to the investment community, he is a skilled financial leader who brings nearly 14 years of experience at Cibus alone and decades in a variety of roles, including his role as Head of Finance for the EMEA region and CFO for Netherlands and Belgium at Syngenta as well as his work and audit during his early years at Deloitte. We are grateful for his ability to seamlessly step in for Wade and look forward to his contributions as a member of our executive team as we look ahead to the future as a commercial enterprise. With that, I'd like to begin today's call with a high-level update on our business activities this quarter and year-to-date. Following my remarks, Peter will provide more detail on our recent developments and how we are progressing within our crop platforms. Carlo will then conclude with the financial discussion. As we reflect on the first nine months of 2024, it's clear that this has been a transformative period for Cibus as we evolve from an R&D-based business to the first commercial gene editing company in the industry. This continued transformation from an R&D-focused company to the first commercial stage gene editing company was essential to the streamlining of our organization to more efficiently focus our efforts on executing on our product launches with our herbicide-resistant traits in rice and traits for Pod Shatter Reduction in canola, while maintaining the ability to capitalize on our positive progress in developing our soybean platform and advancing our traits for Sclerotinia resistance and herbicide tolerance, our H2 traits. Our evolution…

Thank you, Rory, and good afternoon to everyone. The last quarter and the first nine months of this year have highlighted our strong advances in gene editing globally for important traits and important crops. As Rory mentioned, our Cibus team is focused on our product launches. We are streamlining our processes as we leverage efficiencies and synergies for our semi-automated trait development process. We are ending the year well positioned to achieve several important milestones. Before I summarize our advancements, I want to highlight the critical importance of our leadership in the agricultural gene editing industry. Just this past week in Iowa at the World Food Prize keynote address by Dr. Dongyu, the Food and Agriculture Organization of the United Nations Director General, he identified some of the immediate challenges we face with rising food and security, and he clearly advocated for how important gene editing will be to solving these challenges. To quote Dr. Dongyu, gene editing technology accelerates the breathing process significantly. It's faster than traditional breeding methods. It improves resistance to pests, diseases and environmental stresses. This includes tolerance to high temperatures, droughts, floods and salinity, among others. For us at Cibus, it is abundantly clear that there is a global movement and a call to action for gene editing to be incorporated into seed company breeding programs. Cibus has been developing the fundamentals of gene editing from the ground up for over two decades. We are well positioned to capture this moment as we continue our transition to a commercial-stage gene editing company. As we explained in our last quarterly update, this past year has seen an expansion of our rice seed company customer base. Today, I'd like to use our rice platform as a case study to demonstrate what's possible with gene editing in agriculture…

Thank you, Peter. Looking at our financials for the third quarter. Cash and cash equivalents were $28.8 million as of September 30, 2024. Taking into account the impact of cost-saving initiatives, once fully implemented, which we estimate will reduce our monthly cash usage by approximately 20%. Cibus expects that existing cash and cash equivalents will fund planned operating expenses and capital expenditure requirements through the first quarter of 2025. Moving to our income statement. R&D expense was $13 million for the third quarter of 2024 compared to $70.5 million in the year ago period. The decrease of $4.5 million was primarily due to lower noncash stock compensation expense and the strategic realignment and reduction in force announced during the fourth quarter of 2023, which delivered decreases in personnel costs and supplies. SG&A expense was $7.7 million for the third quarter of 2024 compared to $8.8 million in the year ago period. The decrease of $1.1 million was primarily due to lower noncash stock compensation expense. Noncash items were $1.2 million for the third quarter of 2024 compared to $9 million last year. The decrease was primarily related to the fair value adjustment of the liability classified common warrants in the third quarter. Net loss was $201.5 million for the third quarter of 2024 compared to a net loss of $34.5 million in the year ago period. The increase in net loss was due to the impairment of goodwill, resulting from a fair value assessment based on the decline of the stock price performed in the third quarter of 2024. Net loss, excluding goodwill, was $20 million for the third quarter of 2024 compared to a net loss of $34.5 million in the year ago period, representing an improvement of $14.5 million year-over-year. For additional details about the financials for the third quarter of 2024, please refer to our press release and filings with the SEC. That concludes our financial discussion. Rory, now back to you for your closing remarks.

Thanks, Carlo, and Peter, for those updates. As we've discussed, the third quarter has been pivotal for Cibus in a number of ways. The strides we're making in rice combined with the advancements in our trait pipeline, particularly in canola and the ground work we're laying for soybeans really showcase the breadth and depth of our capabilities. We're not just developing individual traits. We're building a comprehensive trade development platform that has potential to transform multiple aspects of agriculture. So thanks so much for your attention and interest. We're looking forward to updating you again next quarter as we continue to hit our milestones and advance our mission. This concludes our remarks. Operator, could you open the call for questions?

[Operator Instructions] Today's first question comes from Laurence Alexander at Jefferies.

Can you -- maybe just to start, can you just do a walk around the state of legislative or policy support for gene editing? What's happened in Europe, kind of with the discussion around rice, the degree kind of the -- right policy in place in China? Does anything need to be changed? Can you just give a quick [indiscernible]?

I totally appreciate that. In the Americas, we're pretty well set in the major countries we're launching. And in Europe, the legislation passed, but they haven't been able to get something called the tripartite agreement. And the expectations are that presence every quarter, and they're going to have a new President from Poland in January, all talk is that the new President is ready to move on this for Hungary [indiscernible] year. So, we're seeing very confident Europe is going to move and Asia. Peter, do you want to -- it changes all the time, but I think China is allowed in some form, Peter?

Yes. Let me add a little bit to that, Laurence. Thanks so much for the question. The regulatory frameworks around the world are harmonizing. There's no doubt. Just to confirm with what Rory said about the Americas, both North and South America are harmonizing a lot of their regulatory policies. It is happening in Asia as well. We're continuing to see positive movement in China and gene editing has seen as indistinguishable from what occurs in traditional breeding programs, which is really important. And I think the other side of it that Rory also mentioned, just to confirm that Europe, early next year, we see a change in the EU Council presidency. And from all accounts, that's going to be a very positive movement in that process and legislation completion in Europe, which is exciting for all of us.

And the only add to that is that for rice, which is our first big launch, all the countries we're launching in right away are all approved for us, and we're pretty excited about that.

Great. And then can you just remind on a time line for kind of when you should be seeing kind of rice commercial revenues flow through the P&L? And maybe just, I guess, rice and soy would be the two, I'm most curious about this today. But also, to what extent the gene editing platform is becoming something where partners might give you seed -- put their modifications into the seed rather than your own traits? And when would that start to show up as a revenue opportunity?

That's great. And it's working on two points. I'll give a little bit for Peter. Rice, we just put a new deck out around the website, which gives you the expected launch dates for each of our traits and expected market. So that's -- we decided this quarter to make it public. And rice, the deal we did with Albaugh was really important because that starts the clock for herbicide trait. So in rice, we need herbicide field trials and launch. And so our expectation in '26, '27 in Latin America, you'll start to see some launches in Europe. In the United States, it's a little bit longer because of the EPA and number of the process but within '27, '28 is where we expect the U.S. to launch. Peter?

Yes. Just to add to that, Laurence, what's exciting for us is that the field testing this past summer and the summer before that, have really allowed us to look at the specifications around what we need for the herbicide tolerant traits in rice. And I can't stress enough how exciting it is to have Albaugh join us for the registration work for Clethodim, which is such a great herbicide. Just to add a little bit to that because Clethodim is a really important grass herbicide that is really key to killing what some of the most troublesome weeds for rice farmers in the U.S. and in Latin America. One of them is called red rice. And so it's a cousin of rice. And it's been -- it's become resistant to a lot of the herbicides that are currently used. So they can't get rid of it. They can't kill it. So that causes reduced yield, it reduces quality. And so the ability to use Clethodim to spray over the top of the rice crop allows you to eliminate the red rice. And have your crop go to full yield. And I think that's an exciting option for weed management solutions for rice farmers in North and South America. So for us, we're on track for that commercial launch of '27, '28. And we're excited to see that agreements go forward and the field trials returning the results that we expect.

So as I was saying, canola, we do think in the U.S., we expect '26 in Europe. We need for the rest of that, we need them to vote yes and then behind that period. And soybean, we do still expect in this quarter to have first proof of the platform. And then from that, we have GDM and other customers we're going to start putting the trait and launch. It will take a couple years, we do expect to have the approval to start working towards it.

And then just lastly, just in terms of like a way to maybe help ground how differentiated your solution is. Can you talk about the degree to which customers are willing to or reaching out to discuss maybe paying you more for the field trials to help you scale up your field trials as opposed to taking a slightly lower longer-term royalty? Second would be how much of your bandwidth is currently being used? And like how much -- depending on how much -- if your customers were all enthusiastic, how much more could they ask you to do? Can you just help us on those two fronts?

It's pretty exciting. I'll start then Peter finishes. It's that with each of these we are starting to edit all the crops. And this time frame we're doing is, breeding takes longer. And when they do it, they end up giving you seed that you can then planned in, we're giving them back their germplasm with the traits in it, right? And so that's what we think is going to be the system in rice. And then in the other countries, especially in soybean, we see people saying, we have other ideas, couldn't we work with you on that. And for all of our partners, I think they're all looking at us to say if you can make these time lines. And so that means that we said in our talk was that two of our traits in soybean, we've made the edits, they're going to the greenhouse, and we fully expect to have the results from that within 12 months of the edit, which is pretty cool. Is that helpful? Peter?

Yes. Let me add a little bit to that because I think Laurence's question is really important because it really speaks to the time that we need to get from an edited germplasm into the field and to launch. And I think working with seed companies, our customers and partners, we continue to get more demand. We continue to get a lot of interest from seed companies because of the seed. And I think that they've recognized that if you can do that within 12 months and get it back to them, in a really timely fashion, it fits into their breeding programs. But also then we work closely with them for doing some of the field evaluation work as soon as the edits are done. And so that, again, as we move forward and with our customers, they get that experience with us and they also get to see us delivering in a really time-bound and predictable manner. Not just a few elite genetics, but a broader base of genetics that will go into their breeding program. And I can't stress this enough, Laurence, because this is a really different paradigm. We're really educating people around why gene editing is so differentiated from traditional breeding and GMO technologies. GMO technologies were time -- took a long time, they were event-driven science and the ability to generate materials and elect genetics directly the way we do it through our single-cell methods and get it back to the customer quickly really changes the paradigm of when you're doing those field work together and validating it to get to launch. Hopefully, that's -- I've gone a little bit broader, but hopefully, that's helped to answer that question.

Maybe just -- if I can just ask one last one then is just to what extent, if you look at the total field trial validation licensing costs that a crop would entail to somebody from development to commercial sales to the farmer. It sounds as if there's -- can you give a sense for roughly how much that cost is being shouldered by your partners? Or is it like a 50-50 split? Is it 70-30? Are they putting it all on you because you still have to prove yourselves? Can you just give us a sense for like how the total cost pie is being split?

We've been pretty open that for the first edits that we've been doing for the customers. And the follow-on edits, they're all going to -- the whole point of this is you may have five or six lines in rice, you want done in soybean. They have so many different areas. And they'll pay for each edit at that point. And so we put it in there and prove we can do it, and everybody is expecting -- and all of our discussions have been to have it be a profitable business where we're changing our time and cost to be able to get this trait in their crops. Is that helpful?

So that's the goal, but are they doing that now? Or is that the goal?

They're doing it -- they're not doing in that. Right now, we're in rice. So these are the first ones in rice. So rice will be a good experiment to that. So on rice...

Probably by 2026, we should see it flip to being a profitable cost sharing business? That's the right way to think about it?

Great way to think about it. And it just means that the editing part of the business will be -- will pay for itself. And that doesn't come for the royalties you get for the trait itself. But you're totally right. Our expectation is the editing part of this business will be a for-profit enterprise and allow you to really even do things earlier on, right? And we've got it so well down that you should be able to really -- you heard us say, we'd like for people to think of us as an extension of their operations and to be able to speed up and make their things most more efficient from a cost and time.

And our next question today comes from Austin Moeller at Canaccord.

Peter and Rory. Just my first question here, can you talk about the time lines and analytical process involved in evaluating the winter U.K. field trial results and the greenhouse results for Sclerotinia resistance in the third mode of action?

That's an excellent question. It's clearly one for Peter. Peter?

Thanks, Rory. Thanks, Austin. Look, let me start with Sclerotinia and then I'll go to the other trialing. But the Sclerotinia, we are beyond excited about the fact that we can bring different modes of action. This is -- as I mentioned in my -- in the remarks, that durable resistance is all about having multiple modes of actions. So our field testing has spent -- we've spent quite a bit of time validating exactly how we evaluate the different edits and the different modes of action. So this past year, we're excited to see really good Sclerotinia infection. I don't think farmers are excited about that, but through our trial and for that purpose that was great. So we can see the differentiation between the edited and non-edited versions of our mode of action two. We are also seeing the mode of action three for us is going to be greenhouse results in the fourth quarter of this year. So that's where we are with this Sclerotinia. When it comes to the work we're doing in the U.K., again, we're working closely with our customer and partners in Europe. And in the U.K., we've done our first season trials and the PSR test had some really positive results, which was fantastic. So one of the things about the winter oilseed rape as it's called in Europe, is there's a quick turnaround. So within three or four weeks, we had to make some decisions. And it was very easy when we saw our partners' genetics with the edits be performing at a very strong level of Pod Shatter Reduction that we were able to replant those, and we'll have another full season of testing. You need to continue to have more testing to validate the trades. And so customers can get to see it in their own genetics. It's an exciting moment for us.

That's helpful. And just a follow-up, are there any updates on sustainable ingredients and fragrances and the time line there?

I can try, Peter. We're very encouraged. It's going to -- it's getting extended into next year, and we've made really good progress. And our expectations is that, that with the finishing of the soybean platform that we'll start to see results that we can announce within by year-end next year. So we're really excited about where it's going. We're doing a really good job on the edits required for these things and the work really needs soybean done, so we control it to in soybeans.

And our final question today comes from Matthew Venezia with Alliance Global Partners.

Firstly, I just wanted to ask about your 12-month germplasm to greenhouse and whether the evidence for that coming in HT2 and canola, whether that confirms your three- to five-year estimate for germplasm receipt to final product. And to that point, if you could speak a little bit to the benefits and drawbacks of -- I know you mentioned it briefly, protoplast regeneration as the mode for industrializing the gene editing process.

Yes. Thanks, Matt. I think that's, again, if you think back on the last nine months and what we've achieved, it is, to my mind, one of the real breakthroughs that we've had at the Company. We've talked about our Trait Machine and we're getting that operational. Some of the key technical breakthroughs you think about are the huge improvements in editing efficiency. That creates precision with our production. And what that means is that for customers gets their seeds back in their hands quickly. And so that's a speed to market. It also allows you to get multiple genetics back to different customers. And so that efficiency of being time-bound and predictable really in contrast to what I mentioned before about traditional breeding and GMO technologies. And so the ability to deliver that back to customers allows you to think through when you think that time period of three to five years, it really allows you with the customer to get to those launches very quickly. And we're talking about our weed management HT2 in North America by 2028. That's fantastic when you think about the process where we can start with customer genetics and get it to them in that sort of time frame.

Adding one thing to that, Peter. One of the things that makes us so exciting is, I think the team didn't realize how accurate and precise and time bound, they thought their work was going to be. And so for many of these traits, if you get it right, we're going to show greenhouse results, and that's going to be within a year. And so the time frame, it sort of confirms that three to five is within a reach and also gives the idea how fast you could do, especially if we were working with customers. It's really -- that's why we're so excited about this.

Great. And then just a follow-up on that same vein. Can you just compare and contrast protoplast regeneration to other forms and modes of regeneration that other competitors are using and how the Trait Machine differentiates itself from a process like what's going on at [indiscernible]?

Yes. So, Matt, I think you had that embedded in your first question, and I apologize, I didn't get to it. But protoplast system, you've heard through our remarks and our other, call it, reporting about multiple edits and multiple genes and multiple crops. And that's a lot of multiples. But when you have a single cell, the ability -- if you have a single cell method, you can deliver your reagents to make the edits. It allows you a lot of flexibility to actually do these very complex edits that we need for traits-like disease resistance. And so it really does differentiate because it's, one, you can do the complexity within a single cell. And now what's been great about the work we've done here at Cibus is the efficiency of once you do that of getting back to a fully regenerated plant and a really quick time frame. We've applied that to canola. We had lots of different traits now and we have also done it in so many different genetics. So we've now transitioned that to rice. We've done it in rice before. We're building the soybean platform, but it really differentiates from what other people are doing by not going through a single cell method. And it's their time lines are longer because of that. There's -- the differentiation is that they have to go through a segregation step genetically to get rid of some of the reagents that they've inserted into their genomes and their seeds and we don't do that. So not only is it faster and more efficient and you're able to do more complex traits, the regulatory analysis of that and the framework around the world we have a clearer path. Hopefully, that answers the question for you.

Very helpful, Peter. And then just finally, is there going to be a company, should we expect the Company in the same vein as Albaugh does. We would expect to come in to establish herbicide labeling for the Latin America region? Or is that not necessary with Albaugh at this point?

Matt, that's exactly right. We will have -- we've got a strong relationship with Albaugh. They're a global company, so we can go forward with other countries with Albaugh, first agreement is with the U.S. and then we have agreements in place where we know we can extend that.

This concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Riggs for closing remarks.

Thanks, everybody, for listening. As you can tell, we're really excited about where we've gotten to. And we had a lot of milestones to get through to this point. And we're hitting our milestones, just pretty cool to some of these things. Like the efficiency and the accuracy and time [indiscernible]. I don't think we were able to -- thought we were going to be able to quantify as much as it is now. So we think this is a very good quarter. And we really look for having even a bigger announcement over the next quarter. So thanks.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful evening.