Earnings Call Transcript - STKH Q2 2021

Operator, Operator

Ladies and gentlemen, thank you for standing by. Welcome to the MeaTech First-Half 2021 Results Conference Call. All participants are currently in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. As a reminder, this conference is being recorded. You should have all received by now the company's press release. If you have not received it, please contact MeaTech's Investor Relations team or view it in the news section of the company's website. I would now like to hand over the call to Ehud Helft of Edison. Mr. Helft, would you like to begin, please?

Ehud Helft, Investor Relations

Yes. Thank you, Operator. Welcome to the 2021 MeaTech's first-half results conference call. I would like to also thank management for hosting this call. Let me introduce the management team who will be on the call with us today. Sharon Fima, MeaTech's CEO and CTO with over two decades of experience in hi-tech, including the 3D printing industry; Omri Schanin, Co-Founder of MeaTech and Deputy CEO, a seasoned entrepreneur overseeing MeaTech's ongoing operations; Guy Hefer, CFO, managing MeaTech's financial activities; and Simon Fried, Head of Business Development, overseeing and developing MeaTech's business strategy and opportunities. We will provide a brief introduction, discuss some of the key recent highlights, and then move over to Guy for a short financial summary. This will be followed by the Q&A session in which all of MeaTech's management will participate. Please be advised that certain information discussed on this call will contain forward-looking statements. While forward-looking statements are made in good faith, they are not guarantees of future performance. They are subject to known and unknown uncertainties and risk factors detailed from time to time in the company's filings with the SEC. MeaTech assumes no obligation to update any forward-looking statements or information, which speaks as of the effective date. The full Safe Harbor Provision is set forth in the press release we issued earlier today, available on MeaTech's website. And with that, I would now hand over the call to the company Co-Founder and Deputy CEO, Omri Schanin. Omri, go ahead please.

Omri Schanin, Co-Founder and Deputy CEO

Thank you, Ehud. I would like to welcome all of our investors and analysts on this conference call. This is our first results call since our listing on NASDAQ in March earlier this year. Listing on NASDAQ was an important milestone for us, making MeaTech the first cultured meat company to be publicly traded in the United States. This was a significant step toward achieving our goal of leading the cultured meat revolution that is gathering momentum globally. It will be a long but very exciting journey, and we believe this is the only way forward long-term if we are to save our planet. We're confident in our ability to lead, deliver, and ultimately achieve our goals. I would like to focus on the overall progress we have made so far in the first half of 2021 and then discuss our goals for the second half of 2021 and beyond. Our vision is to create the technology for cultured meat production for a range of products, including 3D bioprinted tissue. Within this growing competitive sector, MeaTech is positioning itself as the leading company, being the only one developing an in-house high-throughput 3D bioprinting system for industrial scale manufacturing. We are focusing on three main areas: First, developing our capabilities to produce cultured meat ingredients such as chicken, beef, and pork; Second, enhancing our 3D bioprinting technology for turnkey production of multi-species premium products; and third, full-size development for a non-printed hybrid product, which is composed of both plants and cultured meat ingredients. These products are expected to hit the market first. We're also working towards regulatory approval in selected markets. For those of you who actively follow us, you can see that we have had a busy 2021 and we are delighted with our progress to date. The key strategic events to date include broadening our portfolio from cultured beef to cultured chicken and pork. The year started with our acquisition of Belgium-based Peace of Meat in February 2021, bringing advanced cultured avian technology such as cultured chicken fat production. This also provided us with a launchpad into key European markets. MeaTech also commenced development activities on hybrid foods, representing a significant step towards the commercialization of cultured products. In May 2021, we announced our plan to establish a pilot manufacturing plant in Belgium in 2022. This will enable us to scale up the production of cultured chicken fat to enter in front of potential industrial collaborations. Further broadening of our product portfolio commenced in July 2021, after the first half of the year ended, when we initiated activities for cultured pork production. Pork is not only highly complementary to our existing beef and chicken product lines, but it also significantly expands our potential addressable market. Today, pork is the most widely consumed meat across the globe. Last month, we announced that the Israeli food retail and meat-producing company, Tiv Ta'am, signed a non-binding letter of intent with us to cooperate in the joint development and marketing of cultivated meat products. The goal of our cooperation is to establish a cultivated meat production facility, as well as allocate distribution and marketing rights to Tiv Ta'am for the product in Israel or elsewhere in the world. Regarding our capital market activity, as mentioned earlier, we had our NASDAQ IPO in March 2021, where we raised $28 million mainly from U.S. investors. I would like to take this opportunity to thank our new investors for their belief in our strategy and welcome them to our journey. In May 2021, we decided to voluntarily de-list from the Tel Aviv Stock Exchange. Our shares were de-listed in early August, leaving NASDAQ as our only public listing. We believe this move signals our strategy of becoming an internationally focused company, allowing us to better position our investor and public relations efforts on a global footing. In summary, we are thrilled with our progress to date. We expanded our portfolio from beef to chicken products, and initiated the development of cultured pork technologies, all of which significantly expand our total addressable market, with a strong increase in revenue potential. Additionally, establishing a pilot plant, which will initially focus on hybrid foods, lays the foundation for the productization of cultivated meat. Our near-term goal is to establish a pilot plant in Belgium during 2022 to commence cultured chicken fat production. We are also planning and are on track with the important milestone of printing 100 grams of complex tissue this year, composed of both cell-based beef muscle and fat, using our proprietary 3D bioprinting technology. We will update you as soon as we meet our milestone. From a broader perspective, our goals include leading the current and future agricultural revolution by making tomorrow's meat abundant, sustainable, and highly efficient to produce. Today, we continue to develop a broad range of cultured meat technologies, creating potential alternatives to conventional factory farming of beef, chicken, and pork. Our mission is to provide consumers with a comparable meat experience to eating livestock-farmed meat, with a production method that is significantly more sustainable, efficient, and humane. I believe the steps we have already taken in 2021 have brought us closer to this goal. We look forward to continually updating you as we advance. This concludes my summary; over to you, Guy, for the financial.

Guy Hefer, CFO

Thank you, Omri. It is important to note that we are currently an early-stage company developing novel and radical new technology. At this time, we are in the active investment stage and are not generating revenue. Also, it is worth mentioning that we concluded the acquisition of our Belgian subsidiary, Peace of Meat, in February 2021, and the results have been consolidated since that date. Looking at our operating expenses for the first half of 2021, R&D expenses totaled $2.1 million, compared to $0.9 million in the same period in 2020. The increase reflects our expanded investments in research and development capabilities. Our operating loss for the first half of 2021 was $6.8 million, compared to $13 million in the same period in 2020. I note that in 2020, we had $10.1 million in public listing expenses in connection with MeaTech's reverse merger into a TASE-listed shell company. Within our operating expenses, non-cash share-based compensation totaled $2.3 million, compared to $1.6 million in the same period in 2020. Total comprehensive loss for the first half of 2021 was $7.7 million, or $0.06 per ordinary share, compared to $13.2 million or $0.26 per ordinary share in the same period in 2020. Cash and equivalents at June end 2021 increased to $30.6 million, compared to $13.6 million at year-end 2020. The increase is driven mainly by the NASDAQ IPO in March 2021. Cash flow from operating activities was a negative $5 million, compared to negative $1.5 million in the same period in 2020. Non-current assets increased to $14.1 million as of June end 2021, up from $3.6 million at year-end 2020, driven mainly by the consolidation of Peace of Meat. Total assets increased to $46 million as of June end, up from $17.5 million at year-end 2020. Total capital reached $43.8 million as of June end 2021, up from $15.6 million at year-end 2020. That concludes the financial summary of this results call. The entire MeaTech team would like to turn it back over to the operator now to begin the Q&A session.

Operator, Operator

Thank you. The first question is from Joe Sal. Please go ahead.

Unidentified Analyst, Analyst

Yes, thank you for the opportunity. My name is Joe Sal. I'm really interested in your company. I've been in the culinary business for years, and I see a future for this kind of technology. My question is, is there any interest in bringing any technology to the United States and having a large production or building more factories? This way, people can see, I guess, some more advertising of what's going on in the future with the food industry? That's my question.

Omri Schanin, Co-Founder and Deputy CEO

Thank you for your question. I'll pass this on to Simon Fried, the Head of Business Development.

Simon Fried, Head of Business Development

Hello, Sal, thanks for the question. I think it's absolutely the kind of future that we aspire to see for this industry, and certainly on behalf of MeaTech. When we look at the U.S., it's clearly the major market we are focusing on, among others. However, as the company is currently in the R&D stage and we're building out the technology with our first pilot plant, which is being planned to be established next year in Belgium, we would certainly expect to see, as the technology matures and proximity to market increases, the space would also be offered.

Unidentified Analyst, Analyst

Okay, thank you.

Simon Fried, Head of Business Development

Thank you.

Operator, Operator

The next question is from Michael Shlisky from D. A. Davidson. Please go ahead.

Michael Shlisky, Analyst

Hello, guys. Can you hear me okay?

Omri Schanin, Co-Founder and Deputy CEO

Yes.

Michael Shlisky, Analyst

All right, great. Guys, thanks for doing this call and taking my questions. I want to quickly ask about the Peace of Meat acquisition. I wasn't sure how this was going to work. Was your company already involved in avian protein before you bought them? And maybe secondly, did their efforts and products have anything to offer to the other types of protein? Could their technology work elsewhere? Are you finding ways to integrate what they are doing on the avian side with what you're doing with other protein types?

Omri Schanin, Co-Founder and Deputy CEO

Thanks. And I'll let Simon answer that as well.

Simon Fried, Head of Business Development

Yes, hello, thank you for the question. The acquisition was an opportunity for us to upgrade our technology on the avian cell side. We have previously announced activities under the name of chicken tech, and those have been folded into our activities now in Belgium under the banner of Peace of Meat. This is a continuation of the earlier work we had done here in Israel. We hope to bring those technologies to bear not only in our core focus with Peace of Meat, which is the production of cell-based chicken fat but also in the bioprinting activities we are developing here in Israel.

Sharon Fima, CEO and CTO

I will add to that that the systems we are developing regarding the 3D bioprinting systems will eventually be able to print a variety of species. So, not only beef, which is why the development in Peace of Meat can be complementary to our 3D printing development.

Michael Shlisky, Analyst

Okay, got it. I also want to ask about the cash burn situation. I mean, Guy, you mentioned that you had over $40 million of capital. If I'm wrong, correct me. But can you give us an overview of what the cash burn might be in the back half of the year?

Omri Schanin, Co-Founder and Deputy CEO

Okay. So, I will let Guy answer that question. Guy?

Guy Hefer, CFO

Thank you, Omri. Regarding our first six months, the cash from operating activities showed a negative cash flow of roughly $5 million or an average of $850,000 per month. Going forward, we expect the cash burn from operations to double on average, reaching $1.8 million per month on the group level. That's roughly the cash burn we expect.

Michael Shlisky, Analyst

And in the first six months, did that include Peace of Meat? Is that all combined, or does it only account for the period so far?

Guy Hefer, CFO

Yes, as we mentioned, the financial statements now include Peace of Meat, starting from March 1, which is the consolidation date.

Michael Shlisky, Analyst

Got it. Thank you so much, I appreciate it.

Guy Hefer, CFO

Yes, thank you.

Operator, Operator

The next question is from Robert Moskow from Credit Suisse. Please go ahead.

Robert Moskow, Analyst

Hi there. Forgive me if you've covered this already, but I was hoping you would give a bit more detail on FDA regulation in the U.S. What kind of process are you in the midst of to get approvals? Is it tougher in the U.S. than in other countries, or at what stage are you in each of the countries you want to launch in?

Omri Schanin, Co-Founder and Deputy CEO

Thank you. Simon, you can address that, please?

Simon Fried, Head of Business Development

Yes, hi. The regulatory landscape is one that's unfolding, as very few regulators have provided detailed guidance on the exact process. Therefore, from MeaTech's perspective, we are working with consultants and reviewing the applicability of various regulations to ensure we are well-prepared when the guidance comes through. Regarding the U.S., the regulatory landscape is slightly different, as it is governed both by the FDA and USDA. The FDA handles the harvesting of cells, while the USDA regulates the downstream processes post-harvesting. The exact requirements from these agencies have not been fully disclosed yet. Thus, our approach is to prepare as best we can and wait for more detailed guidance.

Robert Moskow, Analyst

If you are waiting for more details, are you assured that there are divisions within those agencies that are actively working on this to provide you with more guidance? Is it a priority, or is it not a priority for those agencies?

Simon Fried, Head of Business Development

Our impression is that it's very much a priority. This applies to the EU as well as several Asian markets. It's well-known that Singapore, for example, was the first jurisdiction to give regulatory approval for the sale and consumption of cell-based meat products back in September last year. From our interactions with regulators in both Europe and in the U.S., the regulatory stance is quite positive. This matter is seen as urgent, and the sustainability-based aspects of this industry are compelling and receiving due attention.

Robert Moskow, Analyst

Great. Okay, thank you.

Operator, Operator

There are no further questions at this time. Before I ask Mr. Sharon to proceed with his closing statement, I would like to remind participants that a replay of this call will be available by tomorrow on MeaTech's website.

Sharon Fima, CEO and CTO

Yes, thank you. On behalf of MeaTech, I would like to thank all of you for your interest in our business. We look forward to speaking with you again in our annual results call and updating you on our progress. If anyone would like to speak with us in the meantime, please reach out to our IR team, and we will be happy to assist you. Thank you, and good day.

Operator, Operator

Thank you. This concludes MeaTech's second-quarter 2021 results conference call. Thank you for your participation. You may now disconnect.