Conference Transcript - BHST 2026-08-12

Susan Anderson, Analyst — Canaccord

Hey, good afternoon, everyone, and thank you for attending our conference today. I'm Susan Anderson, one of Canaccord's analysts in the consumer space. We're very excited to have here BioHarvest, and in particular, CEO and co-founder, Dr. Zaki Rakib. And with that, I'll turn it over to Dr. Zaki to go over BioHarvest.

Dr. Zaki Rakib, CEO

Well, thanks. I guess I should hope for next year the room will be packed, but I'm happy to have you guys here. My name is Zakir Aqib. I'm the chief executive officer of BioHarvest. I am also the executive chairman. I'm also one of the large investors in the company. I invested about $18 million of my own money. We love to call ourselves the industrial plant cell culture company because we're a biotech company. We're a CDMO. We've developed a horizontal technology. By horizontal, I mean it's a platform technology that is capable of catering to multiple industries. And what we do very well, better than anyone else, is to grow the ingredients, grow the molecules that are inside the plants, inside the cells of the plants. without growing the plant itself. So as much as it sounds like magic, it is magic. We don't do any genetic modification, but we're able to get the cells of the plant to express better the molecules they have inside them. I am blessed to have a strong leadership team. Some of the people here have been with us for over 15 years, covering all disciplines needed for the company to be very successful. We were incorporated in 2007. We spent a little over $100 million in developing this unique platform technology, which has been manifested in a product that we have been able to develop and bring it to the market. But mainly it is the platform technology for which we built a factory with a capacity of 20 tons. We have about 15 patents that we have registered with the process technology in terms of the unique compositions that we've created that are all cell-based. On the CDMO side, which is what the company is, I like to talk about the company in terms of a forest that is capable of producing a lot of trees. We have one tree that we are selling right now, which is one product that we are selling directly to the market, but the essence of the company is a CDMO, and we're going to be able to produce more trees, some of which are trees that have customers. And by trees, I don't mean literally, although some of the products come from trees. We have two molecules that we're developing for Tate and Lyle, which recently was acquired by Ingredient, together as a $10 billion company. We have a product based on saffron, and we have a product for the fragrance industry, a luxury high-end fragrance industry of about $15 billion. We just announced this agreement yesterday, and it's a 20-tons agreement covering 27 and 28 with a value between $20 and $30 million. So what are those industries I mentioned looking for when they deal with natural-based products? They want products that are efficacious. They want products that are natural. The economics work for them, And they want also sustainability. And for that purpose, if they're looking for molecules, nature itself is not an industrial supply chain to support that quest. And what we have brought to all those industries is the controlled industrial biology. We apply what we call programmable biology, programmable side biology, to be able to force the cell to express the ingredients that the customer we are interested in, the healthy or active ingredients. And with that, we're able to deal with the inconsistency. So from batch to batch, we're consistent, unlike nature. I mean, two bananas growing adjacent to each other will express materials differently. we have we don't we're not affected by climate we're not affected by land we're not affected by any geopolitical situation plants or the plant ingredients those molecules are grow inside large-scale bioreactors which is one of the unique features that we bring uh i said earlier so the stack is starts with programmer plant biology using the cell culture as the underlying technology which produce what we call precision botanics and why they are precision because, again, they are consistent from batch to batch. Once we lock the cell bank of any particular plant, we're now ready to produce perpetually the same ingredients without any genetic mutation or anything like that. And we do that in large-scale bioreactors that are scalable. And the business model is we develop, we produce, we sell, we get also royalties. Briefly, how the technology works, we take only a piece of this plant. We're not an agriculture company. We don't produce, we don't plant anything. We just take a piece of that plant or fruit, and then we apply our technology, which is the programmable cell biology. We apply conditions, and we force the cells to exhibit or to express what we want them more than others. So, for example, the product that we sold last year for $33 million based on red grape, The one particular ingredient called pie seeds resveratrol is amplified 100 times more than in nature and without the sugar. So we can get in one capsule of 400 milligram the equivalent of 1,000 grapes or a whole bottle of red wine without the alcohol or without the sugar. Once we have locked the cell bank, now we guarantee the consistency. Usually the first step is in any new product that we develop, that would be the one with the highest risk. But once it's done, now we can produce perpetually. The cycle is three weeks. It goes from small-scale bioreactor where we propagate the cells all the way to the large-scale ones. And then what we collect is basically we harvest mud, which contains those cells, and we dry them, and then you can do whatever you want with a powder. You can put it in capsules, you can add it to other ingredients and basically package it in whichever way you want to do the product. For validation of our process technology, we actually brought to the market this product called Vinia, which is based on red grape cells, and we've conducted clinical trials for that particular product to prove the efficacy of it, but also to prove the economics and prove the scalability of our technology. Once again, the technology benefits of using cell culture and using our botanical synthesis technology is the scalability, predictability, because you can predict up front what would be the composition and it's done fairly fast, lower cost, uh more potency in the molecules i mentioned earlier the ability to magnify the ingredients bioavailability because of the naturality and a lot of our molecule are glycosized so they are better uh to traverse the intestines uh we have controlled consistency and what's very interesting for our customers and for ourselves that any composition we have is patent protected it's very important because nature cannot produce the same composition we know we don't change the conformation of the molecules we're not applying any genetic modification but the composition is different because the ratio between the different ingredients is completely different than what nature so you need one over 100 billion of likelihood to be have nature producing the exact same composition so from a patent perspective when you have a composition connected to a process and to a utility you have a very solid patent in the last three years we've been investing heavily in in AI not only for the discovery part but for the machine learning because every time we we develop a new product think about it that we make tens of thousands of experiments and we've learned we learn from those experiences we can apply the learning from those experiments on the other products and ultimately as a cdmo we want to be able to process as many products simultaneously the for development purpose and after that of course for manufacturing purpose as we continue to build capacity and the ai is not only for machine learning purpose it's also a tool for discovery and for validation of the molecule binding to the receptors of the body if the end goal is to have something related to health and wellness so we have we are we are developing and we have already the first version of the testing to see if we are going to develop a new molecule we want to see how well it binds into the receptor for whatever indication we're looking at. So what we currently have in terms of assets, vinya is this first molecule where you see on the left the Pisces resveratrol enhancement of 100X over what's in nature. The other one that we've developed is olives and pomegranate. With 15X, the verbosicides is one of the most important molecules that is in the olive product. And for the pomegranate pgg each one of them corresponds to a certain indication the case of herbosco site for example it's well known to be effective with non-alcoholic fatty liver disease the other four projects on the right these are projects we do for customers but we are retaining some of the equity in those molecules so the one that we've announced yesterday the 20 to 30 million dollars deal Twenty seven and twenty eight is the one with this rare fragrance, which will retain 20 percent ownership of the molecule. Interesting enough, the type of molecules in this particular fragrance coming from a very exotic tree, it's the sesquiterpenes and the chromones are common. Also, some other type of fragrances that are producing in other exotic trees, but in well and are well regarded. The two molecules for tate and lyle are protein from fruits growing in Africa. And then the third category, the other category, the carotenoids that exist with the saffron, which can, as an application, saffron can go for culinary applications, can go for dietary supplement application, and also for fragrance application. And in that particular product, we retain 25 percent ownership. And the typical molecules are the saffronols, crocines, and picrocrocines, all of which are manifested and expressed in the compositions that we've developed. If you look at the stage where each and every molecule, many of them are already in advanced stage, and we will expect to start manufacture more than just vinya next year. So we have the fragrance, we'll be manufacturing also some of the saffron. The year after, we'll have five different products that we'd be manufacturing. The new manufacturing site is going to be coming commissioned in the end of 2027. We expect to start production in early 2028. From development, usually it's 18 to 24 months to move into manufacturing. We just started the CDMO business in 2025. We did $2 million in revenue. Again, not the revenue coming from the product, VINYA, which is what you have here in front of you, which we did about $33 million last year. Cumulatively over $100 million, it's one grape. Once again, we don't do any agriculture. We don't go to the vineyard. Just one grape that we cloned, we took the cells from, and from that point, we kept perpetually, the perpetual process. of propagating the cells and particularly that product is unique in the sense that it has gone through clinical trials we sell it directly on our website vinya.com and on amazon about 20 percent of the revenue comes from amazon what's special about this product and and the by seed resveratrol which is a molecule that is not synthesizable chemically what's unique about it is that it It improves blood flow by increasing the ability of the body to produce nitric oxide, which is a vasodilator, and reduce the amount of production of ET1, Indotel-1, which is a vasoconstrictor. And as I said, this is one tree from a forest that is capable of producing many of them. This one in particular we use as the validation to the technology, and it's been very useful to be able to attract the customers that we have on the CDMO. The goals for 2026 is to achieve $4 to $5 million in revenue from the CDMO, all of which will be development. Next year, we're going to see revenue coming from development and from manufacturing with the product that I mentioned earlier for the fragrance for which we've already signed an agreement. the uh the just diving a little bit into the uh that particular fragrance um this is an amazing what nature does it's a tree that after five years of growth gets attacked by a fungus the tree reacts to that fungus by producing those sesquiterpenes and chromones molecules that when get heated uh over a charcoal or whatever they can they generate the smell so it's either it's used for incense or you can produce oil and then oil is the base or the raw material for producing fragrances a lot of the high-end fragrance designers are using this particular material we're not at ease uh to disclose it because we're under non-disclosure agreement but it's easy for you to look at which ingredients has 15 billion dollars of market on an annual basis and which one is used in the Arabian Gulf or Persian Gulf or whatever you call it. If you look at similar opportunities in fragrances, it's amazing. It's just the beginning and I can tell you I already got a call this morning after we announced the deal of people that are interested in developing fragrances using some of the other ingredients you could see uh what sandalwood oil for example price or uh the oris absolute seventy thousand dollars per kilogram of of oil so the economics and the margins there are are substantial and very healthy for bio harvest i mentioned that earlier we're we're catering to four different industries so we have this horizontal ability to address uh we're not waiting so unlike cdmo that only focus on pharma we don't have to wait for a molecule to get through all the approval of the fda so for example fragrance there's no there's no regulatory hurdles same thing for nutrition the small regulatory hurdles for nutraceuticals and way less for cosmetics mentioned earlier the business model development we've added on the development discovery we're in early stages i mentioned the model with the binding with the uh to guarantee that whatever molecule is going to bind to whatever receptor you plan to have that and part of the deal is to get royalties on the molecules that we develop currently we're building the second factory we've raised money in november of last year sufficient to have the ability to continue with the operations but building the second factory currently based in israel in 2029 and beyond we're looking at building capacity in the u.s part of the building capacity in the u.s can be done by the customers themselves so if a customer like Tate and Lyle is planning to have 50 tons a year or more, it makes sense for me to license them the technology to build a factory at their own nickel and then collect royalties. But because each bioreactor is a unique engine, I can mix and match. Because it's the same platform technology on the same floor, I can have 5, 10, or 20 different products at various capacities running simultaneously through the production floor. I mentioned earlier the guidance. The one in the middle includes if you were to separate the CDMO from the D2C from VINIA, revenue this year would be on the CDMO between $12 and $14 million because the transaction intercompany that I produce, the powder for the D2C business that can then sell is sold directly to the consumer. Consolidated revenue guidance is $37 to $40 million. And we are projecting next year higher revenue on both, but with EBITDA profitability next year. Again, we're going to be spending money in the next 18 months not only on building the factory, but spending money on technology. We received some grants from the Israeli Innovation Authority, again, mostly in AI and computer vision. We can reduce the number of experiments by using computer vision capabilities that can detect what's inside the cells, and I don't need microscopes, and I don't need a lot of people to be able to cater to each and every petri dish among the Southerns that we're developing in every cycle. With that, I want to thank you for your attention, and I don't know if there's any questions. We have four minutes. Am I right? Is that four minutes? Any questions? Thank you