Business context and reporting period
Filing identity discrepancy: The supplied filing is Calyxt, Inc.’s Form 10-Q, not a Cibus, Inc. filing. It covers the quarter and nine months ended September 30, 2020; the summary below reflects Calyxt’s filing.
Calyxt is an agricultural biotechnology company commercializing gene-edited plant products. In August 2020, it advanced a streamlined soybean strategy focused on seed sales and partners’ processing and commercialization capabilities, while winding down parts of its prior supply-chain model. Its majority owner, Cellectis, held 68.3% of shares at quarter-end.
Financial performance and position
Amounts are in U.S. dollars; financial statement amounts below are rounded to millions.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $5.2M | $3.0M | $9.9M | $3.5M |
| Gross margin | $(1.8)M (-35%) | $(0.6)M (-19%) | $(6.3)M (-64%) | $(0.3)M (-9%) |
| Operating loss | $(9.2)M | $(10.7)M | $(30.8)M | $(27.7)M |
| Net loss | $(9.5)M | $(10.7)M | $(31.4)M | $(27.4)M |
| Basic and diluted loss per share | $(0.29) | $(0.32) | $(0.95) | $(0.84) |
| Cash used in operating activities | Not provided for quarter | Not provided for quarter | $(31.0)M | $(24.7)M |
Q3 revenue rose 77% year over year, while nine-month revenue rose 181%. Most 2020 oil revenue came from one customer buying oil as an alternative to synthetic fluids; Calyxt expected to fulfill that customer’s remaining orders in Q4 2020. Q3 net loss improved year over year, but nine-month net loss worsened. The company reported adjusted EBITDA losses of $7.1M for Q3 and $21.8M for the nine-month period; these are non-GAAP measures.
At September 30, Calyxt had $7.2M of cash and cash equivalents, $20.8M of short-term investments, and $1.4M of restricted cash, totaling $29.4M. Current liabilities were $7.9M. Financing lease obligations totaled $18.4M, and long-term debt was $1.5M from a Paycheck Protection Program loan. The loan was due in April 2022 and bore 1% interest; Calyxt applied for forgiveness of principal and accrued interest on October 21, with no assurance of forgiveness.
Total assets were $62.5M and stockholders’ equity was $34.9M. After quarter-end, Calyxt completed a $15.0M registered direct offering, receiving $14.0M net proceeds. Management said cash, investments, and restricted cash, taking account of the October financing and other assumptions, were expected to fund operations for at least 12 months and into the second half of 2022.
Material changes and unusual items
- Q3 cost of goods sold included $1.1M of commodity derivative losses and a $0.2M increase in inventory valuation adjustments. For the first nine months, inventory net realizable value adjustments were $4.4M, including write-downs of excess seed produced for 2020 plantings.
- Year-over-year gross margin comparisons were affected by accounting presentation: certain grain costs were expensed as R&D in 2018 but capitalized into inventory beginning in 2019. Calyxt also reported 2020 hedging losses in cost of goods sold.
- The August strategy change generated $0.4M of restructuring charges in Q3, partly offset in operating expenses by a $0.9M non-cash stock-compensation recapture. The company expected up to $0.3M more severance-related expense through Q2 2021 and about $0.6M of transition expenses while winding down the former strategy. Contracted grain purchases and related wind-down were expected to conclude in late 2021.
- Noncancelable commitments to purchase grain and seed were $30.8M at quarter-end, based on current market prices and estimated yields; these amounts were not recorded as liabilities because delivery had not occurred. The commitments had decreased from $50.9M reported previously.
- Operating cash use increased to $31.0M from $24.7M for the comparable nine-month period. Management expected Q4 operating cash use to be higher than the first nine months because of working capital needs for grain purchases.
Outlook, commentary and risks
Management expects continued operating losses for several years and said revenue is not yet sufficient to support operating capital needs. The company expects R&D to be its principal area of expense, with selling and supply-chain costs expected to decline as the streamlined model is implemented. It may need additional financing, and management cautioned that pandemic-related market uncertainty could make financing difficult or unavailable on acceptable terms.
COVID-19 had not materially delayed R&D or seed distribution, and Q3 supply-chain disruptions had not materially affected operations. Calyxt nevertheless warned that renewed pandemic disruption and broader economic uncertainty could affect operations and access to capital. High-fiber wheat field trials had suffered crop losses following improper aerial chemical applications by third parties; surviving material was undergoing validation, with possible adverse effects on product quality, launch scale, and regulatory timing. The company said it was pursuing available recourse. Commodity prices are also a material exposure: management estimated a 10% futures-price movement would affect financial condition by approximately $1.6M in the opposite direction.
Calyxt reported no material pending legal proceedings, no material changes to previously disclosed risk factors, and effective disclosure controls as of September 30, 2020.
Important facts for investors to verify
- Confirm the intended issuer: this source is a Calyxt 10-Q, not a Cibus filing.
- Track whether the soybean seed-focused strategy improves gross margins and reduces cash use, especially after the transition and grain-contract wind-down.
- Assess dependence on the single oil customer and the timing and economics of grain and meal sales.
- Monitor inventory write-downs, remaining purchase commitments, and commodity-hedge results.
- Verify PPP loan forgiveness and whether management’s stated cash runway remains supportable after operating cash use and planned spending.
- Follow high-fiber wheat validation, regulatory timing, and consequences of the third-party field-trial damage.