Cibus, Inc. (CBUS) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call shows mixed signals: a slight revenue increase and reduced expenses are positives, but reliance on partner-funded programs and economic uncertainties pose risks. The Q&A reveals cautious optimism, with management avoiding specifics on key projects. The recent public offering improved cash reserves, but the stock may remain neutral due to uncertainties and lack of strong catalysts.

Key Financial Performance

Revenue $933,000 for the second quarter, compared to $838,000 in the year-ago period, reflecting increased activity in partner-funded programs.

Research and Development Expense $12.2 million for the second quarter, compared to $13 million in the year-ago period. The $800,000 decrease is primarily due to cost reduction initiatives.

Selling, General, and Administrative Expenses $6.6 million for the second quarter, compared to $9.3 million in the year-ago period. The $2.7 million decrease is primarily due to cost reduction initiatives.

Net Loss $26.6 million for the second quarter, compared to $28.5 million in the year-ago period.

Cash and Cash Equivalents $36.5 million as of June 30, 2025, with an additional $27.5 million in gross proceeds raised from a public offering in June.

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Operating Highlights

Rice Herbicide Tolerance Traits (HT1 and HT3): Potential annual royalty revenue of over $200 million. Targeted launches in Latin America in 2027 and the U.S. in 2028.

Biofragrance Products: Nominal revenues expected to begin in 2026. First stage scale-up of two products completed this quarter.

Altered Lignin Alfalfa: FDA cleared for U.S. commercialization. Offers improved digestibility for livestock and greater harvest flexibility.

Latin American Market Expansion: Signed agreement with Semilano, a Colombian rice seed company. Represents fifth customer in the Americas.

Global Regulatory Developments: Positive regulatory progress in Ecuador, North and South America, India, and parts of Asia. EU regulatory discussions progressing.

Cost Reduction Initiatives: Annual cash usage expected to reduce to $30 million by 2026. Reduction in force announced to streamline operations.

Revenue Growth: Revenue for Q2 2025 increased to $933,000 from $838,000 in Q2 2024, driven by partner-funded programs.

Focus on Core Revenue Drivers: Streamlined focus on rice herbicide tolerance traits and sustainable ingredients programs to maximize near-term opportunities.

Partnership-Driven Approach: Engaging partners for funding and market access for productivity traits like canola and soybean.

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Risk or Challenges

Regulatory Delays: The EU trialogue discussions on gene editing regulations have extended beyond their initial target date, creating uncertainty in regulatory timelines and potential delays in market access.

Capital Constraints: The company is focused on managing cash usage and has implemented cost-saving initiatives, including a reduction in force, to extend its cash runway. However, limited capital resources may restrict the ability to pursue robust development efforts for broader trait portfolios.

Market Penetration Challenges: While there is growing interest in gene-edited traits, the company faces challenges in penetrating markets that have historically lacked access to advanced weed management solutions, particularly in Latin America.

Dependence on Partner-Funded Programs: The company relies heavily on partner-funded programs for revenue generation, which could pose risks if partnerships do not materialize as expected.

Operational Streamlining Risks: The recent reduction in force and streamlined operational focus may impact the company's ability to execute on broader strategic objectives and maintain workforce morale.

Economic and Market Uncertainties: The company operates in a highly competitive and uncertain market environment, which could impact its ability to achieve revenue targets and sustain long-term growth.

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Guidance & Outlook

Revenue Projections: Cibus anticipates initial revenue generation beginning in 2026, with meaningful commercial expansion thereafter. The company projects approximately $200 million in potential annual royalty revenue from its rice herbicide tolerance traits (HT1 and HT3) by 2027-2028.

Rice Herbicide Tolerance Traits: The HT1 and HT3 traits are on track for initial launches in Latin America in 2027 and the United States in 2028. These traits are expected to generate significant royalty revenue and open further opportunities in the global rice feed market.

Sustainable Ingredients Program: The biofragrance program is expected to begin generating nominal revenues later in 2025, with targeted commercial expansion ramping in 2026. The program has completed the first stage scale-up of two biofragrance products.

Regulatory Developments: Cibus expects resolution of EU regulatory discussions within the next six months, which will enhance global market opportunities. Recent regulatory approvals in Ecuador, North and South America, and parts of Asia further strengthen the commercial potential of its trait pipeline.

Capital Allocation and Cash Usage: The company aims to reduce annual cash usage to approximately $30 million by 2026, extending its financial runway while focusing on near-term revenue drivers.

Soybean Platform: Cibus has demonstrated proof of concept for its HT2 trait in soybeans, targeting a market with an estimated 125 million accessible acres and potential annual trait royalties of $10 to $15 per acre.

Canola Programs: The HT2 field trials in canola have shown promising results, generating interest from potential partners. The Sclerotinia resistance program in canola also continues to attract substantial interest due to its durable disease resistance approach.

Alfalfa Program: The altered lignin alfalfa trait has received FDA clearance for U.S. commercialization, with initial seed varieties expected to be available soon. This program exemplifies Cibus's strategy of partnering with seed companies to bring traits to market efficiently.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:What is the status of the germ plasm transfer in Rice-HT3?

A:The germ plasm transfer is for a new customer in the U.S., and multiple lines with the HT3 trait are being delivered for field trials.

Q:Is the initial revenue in 2026 reflecting the biofragrance moving from 4Q'25 into 1Q'26?

A:Yes, initial revenues in 2026 reflect the biofragrance moving from 4Q'25 into 1Q'26. Nominal revenues are expected this year as scale-up material is delivered to customers, with full commercial runs starting in 2026.

Q:Are biofragrance revenues royalty-based?

A:Yes, biofragrance revenues will move to a royalty business model starting next year, although initial nominal revenues from scale-up material are not royalty-based.

Q:What are the next steps or hurdles in the EU regulatory process for approving gene editing?

A:The EU regulatory process involves detailed committee work streams and amendments focused on labeling and patenting. Final text is expected by the end of this year, with implementation across the 27 countries likely taking two years after final text approval.

Q:What is the status of the winter oilseed gray field trials in the U.K.?

A:The trials are towards the end of the second field season, with harvest expected in August. Results will be evaluated to determine the efficacy of the traits.

Q:When will the company start seeing a reduction in OpEx to $30 million by 2026?

A:The company has already started reducing expenses, including a reduction in force after the quarter end. They are on track to achieve a net cash usage of $30 million by 2026.

Q:When will sustainable ingredients and consumer packaged goods start seeing commercial interaction and revenue scale-up?

A:Sustainable ingredients are expected to see commercial interaction and revenue scale-up towards the late 2020s. Biofragrances will scale up from 2026 through the next 18 months.

Q:What is the timeline for selling gene-edited crops into the EU?

A:Final legislation text is expected within six months, with implementation likely taking two years. Commercialization of gene-edited crops in the EU is expected by the end of 2027.

Q:How is Cibus differentiating its RTDS technology amid rising competition in gene editing?

A:Cibus uses a single-cell system for non-transgenic editing, enabling complex edits and maintaining genetic configuration. This approach is unique and offers regulatory advantages.

Q:Will the 2026 commercial ramp for biofragrance come from current or new customers?

A:The 2026 commercial ramp for biofragrance will primarily come from expanding the relationship with the current client, with potential opportunities to take on new customers.

Q:What is the royalty scale for nonallergenic crops and nitrogen use efficiency?

A:Nonallergenic crops and nitrogen use efficiency traits are expected to have a higher royalty scale compared to productivity traits, as they offer significant quality and premium benefits.

Q:Review of Unclear Management Responses

A:Management avoided providing specific pricing details for nonallergenic crops and nitrogen use efficiency traits, as well as the exact timeline for sustainable ingredients commercialization. Additionally, they used vague language when discussing the potential expansion of biofragrance customers beyond 2026.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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