Filing summary
Entity discrepancy: The request identifies Cibus, Inc., but the supplied Form 10-Q is for Calyxt, Inc. (Nasdaq: CLXT), a majority-owned subsidiary of Cellectis. This summary reflects the filing provided, not a Cibus filing.
Business context and reporting period
Quarterly report for the three and six months ended June 30, 2018. Calyxt develops gene-edited crops and was focused on advancing its pipeline and preparing to commercialize high-oleic soybeans. The company reported no product sales; revenue came from research and development agreements. Cellectis owned approximately 70.2% of Calyxt at quarter-end.
Financial performance and position
Amounts below are in U.S. dollars; financial statement figures are in millions except per-share data.
| Metric | Q2 2018 | Q2 2017 | First half 2018 | First half 2017 |
|---|---|---|---|---|
| Revenue | $0.196 | $0.223 | $0.207 | $0.278 |
| Operating expenses | $7.688 | $3.463 | $11.995 | $6.307 |
| Operating loss | $(7.492) | $(3.240) | $(11.788) | $(6.029) |
| Net loss | $(7.576) | $(3.395) | $(11.946) | $(6.227) |
| Basic and diluted loss per share | $(0.25) | $(0.17) | $(0.41) | $(0.32) |
| Cash used in operating activities | Not stated for quarter | Not stated for quarter | $(8.828) | $(4.063) |
Balance sheet at June 30, 2018: Cash and cash equivalents were $105.620 million; current assets $107.197 million; total assets $128.841 million; current liabilities $5.042 million; total liabilities $22.602 million; and stockholders’ equity $106.239 million. Finance lease obligations and other long-term liabilities were $17.444 million. The filing does not provide a separate conventional debt total. Cost of revenue was zero in both comparison periods, so a conventional gross margin is not meaningful.
Changes versus prior comparable periods
- Q2 revenue declined 12.1%; first-half revenue declined 25.5%, reflecting the company’s decision to reduce subcontracted R&D and focus on in-house product development.
- Q2 operating expenses more than doubled, rising 122.0%; first-half operating expenses rose 90.2%. R&D and selling, general and administrative costs both increased, including higher personnel and stock-based compensation costs.
- First-half net loss widened 91.8% to $11.946 million. Operating cash use increased to $8.828 million from $4.063 million.
- Cash rose from $56.664 million at year-end 2017 to $105.620 million at June 30, 2018, primarily due to the May follow-on offering. The company raised approximately $57.0 million net by selling 4,057,500 shares at $15 per share; Cellectis bought 550,000 of those shares.
- Property and equipment, net, increased to $21.337 million from $14.353 million, alongside completion and capitalization of the new headquarters and laboratory.
Outlook, risks and unusual items
- Management expected to begin commercializing high-oleic soybeans by the end of 2018. Phase III work included commercial-scale pilot production, supply-chain and inventory development, and customer testing. This was a forward-looking expectation, not a reported completed launch.
- Management expected cash on hand to fund operations through late 2020, while cautioning that this estimate depends on assumptions and actual cash use could be faster. It expected continuing losses and rising expenses, and may need additional financing.
- Operating risks include product-development and field-trial uncertainty, regulatory changes, commercialization and supply-chain execution, weather and seasonality, commodity-price exposure, dependence on third parties and Cellectis, and the need for additional capital. The filing states no material change in risk factors during the period.
- Forward purchase commitments for seed and grain were approximately $7.7 million, versus $1.6 million at year-end 2017; these were not recorded as liabilities because delivery had not occurred. Forward-contract derivative liabilities were $363,000 at June 30, 2018, versus $4,000 at year-end, principally affected by more farmers and bushels and lower soybean futures prices.
- The new headquarters is subject to a 20-year finance lease, with four five-year extension options and current annual base rent of approximately $1.4 million. Cellectis guarantees the lease, subject to stated termination conditions; Calyxt has agreed to indemnify Cellectis if its ownership falls to 50% or less.
- A dispute with Bayer over a TALEN technology license was settled in May 2018. The agreement terminated the license, required destruction of covered technology and information, and required Bayer to abandon related patent applications.
- One customer accounted for 99% of Q2 2018 revenue and 98% of first-half revenue. Revenue concentration is therefore substantial.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is Calyxt, Inc., not Cibus, Inc.
- Check whether high-oleic soybean commercialization occurred on the timeline management anticipated and what regulatory, production, customer, and sales milestones were achieved.
- Monitor cash burn against management’s late-2020 runway estimate and assess potential financing needs and dilution.
- Review the scale and terms of the long-term headquarters lease, lease obligations, and unrecorded forward purchase commitments.
- Assess customer concentration and the development of recurring or product-sale revenue as legacy R&D contract activity declines.