Calyxt, Inc. — Form 10-Q for the quarter ended September 30, 2018
Entity note: The filing identifies the registrant as Calyxt, Inc. (Nasdaq: CLXT), not Cibus, Inc., as stated in the request metadata. This summary reflects the filing provided.
Business context and reporting period
Calyxt is an early-stage agricultural biotechnology company developing gene-edited crops, including high-oleic soybeans, high-fiber wheat, and disease-resistant wheat. It reported results for the three and nine months ended September 30, 2018, compared with the same 2017 periods. Cellectis owned approximately 70% of Calyxt at quarter-end. Calyxt had not generated product sales; reported revenue was primarily from research and development agreements.
Financial results and liquidity
| Metric | Q3 2018 | Q3 2017 | Nine months 2018 | Nine months 2017 |
|---|---|---|---|---|
| Revenue | $27,000 | $44,000 | $234,000 | $322,000 |
| Research and development expense | $3.3 million | $6.4 million | $7.5 million | $9.2 million |
| Selling, general and administrative expense | $4.4 million | $6.6 million | $12.2 million | $10.1 million |
| Operating loss | $7.7 million | $12.9 million | $19.5 million | $19.0 million |
| Net loss | $7.5 million | $12.9 million | $19.4 million | $19.1 million |
| Basic and diluted loss per share | $0.23 | $0.51 | $0.65 | $0.89 |
- Revenue was negligible and declined as Calyxt reduced third-party research work to prioritize in-house product development. Cost of revenue was zero; conventional product margins are therefore not meaningful.
- Q3 operating and net losses narrowed year over year, largely because the 2017 comparison included substantial IPO-related stock-based compensation. Excluding stock-based compensation, both R&D and SG&A costs increased in Q3 2018, according to management.
- For the first nine months, operating expenses rose 2% and net loss widened slightly. SG&A increased, including higher intellectual-property, professional-services, personnel, facilities, and commercialization spending; lower stock compensation partly offset those increases.
- Cash and cash equivalents were $101.8 million at September 30, 2018, plus $50,000 of restricted cash. Cash used in operations was $13.6 million for the nine months, versus $6.0 million in 2017. Investing activities used $0.8 million; financing activities provided $59.6 million, principally from the May follow-on offering.
- Total liabilities were $24.4 million. Finance-lease obligations and other long-term liabilities were $17.4 million, including a reported $17.2 million financing obligation for the headquarters. No principal payments were due within the following 12 months. The lease is a 20-year commitment, with current annual base rent of about $1.4 million.
- Working capital was approximately $96.1 million, calculated from reported current assets of $103.0 million less current liabilities of $6.9 million. No material tax expense was recorded; deferred tax assets had a full valuation allowance.
Material changes and unusual items
- Cash increased from $56.7 million at December 31, 2017, primarily reflecting the May 2018 follow-on offering, which generated approximately $57.0 million in net proceeds. The offering issued 4,057,500 shares; Cellectis bought 550,000 of them.
- Property and equipment rose to $21.3 million from $14.4 million, reflecting completion and equipment of the new headquarters and research facility. The company recorded the sale-leaseback arrangement as a financing obligation rather than a sale for accounting purposes.
- Forward purchase commitments for seed and grain were approximately $7.3 million, compared with $1.6 million at year-end 2017; these commitments were not recorded as liabilities because delivery had not occurred. Related forward-contract derivatives were a net liability of $413,000 at quarter-end, versus a net liability of $1,000 at year-end; values may fluctuate with soybean futures prices.
- A dispute with Bayer over a research and commercial license was settled in May 2018. The agreement was terminated, and Bayer agreed to destroy covered technology and abandon related patent applications.
Outlook, commentary, and risks
Management expected to begin commercializing high-oleic soybeans by the end of 2018 or early 2019, subject to development, production, supply-chain, customer-testing, and market execution. The planned model involves purchasing qualifying grain from farmers and selling soybean oil and meal. Management estimated existing cash could fund operations through late 2020, while cautioning that this forward-looking estimate could prove wrong. The company expected losses and expenses to continue, potentially increasing as it advances research and establishes commercialization capabilities; it did not provide numerical earnings or revenue guidance.
Key risks include the lack of commercial products and operating history, continued cash burn and possible need for additional capital, regulatory uncertainty, acceptance of gene-edited foods and crops, agricultural seasonality and weather, commodity-price exposure, reliance on third parties and Cellectis, and intellectual-property protection. Calyxt reported no material changes to its previously disclosed risk factors. Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported.
Investor verification points
- Confirm the filing entity: the supplied filing is for Calyxt, Inc., not Cibus, Inc.
- Check subsequent evidence of the high-oleic soybean launch, regulatory status, customer demand, and commercial production plans.
- Track operating cash burn against management’s late-2020 runway estimate and assess potential financing needs and dilution.
- Review the headquarters lease, Cellectis guarantee and indemnity terms, and the $7.3 million forward purchase commitments.
- Monitor derivative exposure to commodity prices, customer concentration, and the effect of Cellectis-related services and ownership.