Lynne Brum - VP, Planning and Corporate Communications Oliver Peoples - President and CEO Kristi Snell - VP, Research and CSO

James Jang - Maxim Group

Greetings and welcome to the Second Quarter 2018 Financial Results and Business Update Conference Call for Yield10 Bioscience. During the call, participants will be in a listen-only mode. The presenters will address questions from an analyst today. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to your host, Yield10 Vice President of Planning and Corporate Communications, Ms. Lynne Brum.

Thank you, Tim and good afternoon everyone. Welcome to the Yield10 Bioscience second quarter 2018 conference call. Joining me on the call today are President and CEO, Dr. Oliver Peoples; Vice President of Research and Chief Science Officer, Dr. Kristi Snell; and soon to be joining us Chief Accounting Officer, Chuck Haaser. Earlier this afternoon, we issued our second quarter 2018 news release. This release, as well as slides to accompany our presentation today, are available on the Investor Relations section of our website at yield10bio.com. Let’s now turn to slide two. Please note that as part of our discussion today, management will be making forward-looking statements. These statements are not guarantees of future performance and therefore, you should not place undue reliance on them. Investors are also cautioned that statements that are not strictly historical, constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause the actual results to differ materially from those anticipated. These risks include risks and uncertainties detailed in Yield10’s filings with the SEC, including the company’s most recent 10-K. The company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this conference call. And now, I'll turn the call over to Oli.

Thanks Lynne. Good afternoon everyone and thanks for joining our call today. Please start to slide three and let's cover a few financial highlights starting with the balance sheet. We ended second quarter 2018 with $9.7 million in cash, cash equivalents, and short-term securities. Net operating cash usage for the second quarter was $1.9 million, reflecting the impact of somewhat lower grant revenue as well as the completion of restructuring expenses. This is level with the $1.9 million in net cash usage we reported in the second quarter of last year. We continue to have no debt on our balance sheet. We estimate net cash usage for the full year 2018 will be approximately %9 million to $9.5 million and this range includes payments totaling $500,000 we completed in the first half of 2018 for our final restructuring cost. We expect our cash on hand, together with revenue expected under current government grants, to support our operations through a number of technology proof points into mid-2019. Let's now review the quarterly operating results. We reported a net loss for the second quarter of $2.4 million or $0.24 per share. We reported $0.3 million in grant revenue, $1.3 million in R&D spend, and $1.5 million in G&A spend. Last fall, we announced our participation on a new DOE grant to increase oil in Camelina. Due to the timing of the contract, in second quarter we recognized accumulative revenue of $236,000, including $108,000 for our work performed through March 31st, 2018. For more details on our financial results, please refer to the earnings release. Now let's turn on to slide four to go over recent accomplishments. Yield10 is developing gene trait technologies for food and feed crops to produce higher yields with lower inputs of land, water, and fertilizer. I'm often asked by investors about the name Yield10. The name was based on our mission, step change increases in the yield of major crops and a rough estimate of the value of increasing yield of canola and soybean in North America. [Indiscernible] of per acre increase in yield for both crops, we generate around $10 billion per year, hence the name Yield10. A simple concept, but not easy to achieve. Having said that, we have continued making solid progress so far in 2018. Our accomplishments this quarter relate primarily to advances we've made in R&D. Kristi will elaborate on these, but here's the high level view. Our field tests were successfully planted in second quarter. These include testing versions of C3003 in Camelina and canola, to evaluate events for increasing seed yield and small plots of soybean to perform seed bulk for soybean field studies planned in 2019. In addition, we are field testing our first genome edited plant in the U.S. The goal of our field testing program is to provide us with data and proof points that will enable us to optimize genetic constructs and choose the best constructs plus events for our commercial development. We signed a global exclusive license with the University of Missouri for oilseed technology and traits, we have named C3007 and C3010. We also named the inventor of the technology, Dr. Jay Thelen, to our Scientific Advisory Board. Yesterday, we announced we have secured a research license to CRISPR-Cas9 technology from the Broad Institute and Pioneer, which is part of Corteva Agriscience, the Agricultural Division of Dupont. In the first quarter, we completed the key genome editing milestone with the combined edit of three oil traits in Camelina. In second quarter, we submitted a letter to USDA for seeking non-regulatory status for the products. If we receive the designation from USDA-APHIS, we plan to conduct our first field test with this trait combination in the U.S. in 2019. Our team published a research paper in the peer-reviewed journal Plant Cell Reports, detailing work with our Camelina platform and highlighting some early work we conducted with a complex, multi-gene trait that produces significant increases in seed yield. This work was also highlighted in the presentation by Dr. Franks Skraly, outlining our approach, using metabolic modeling to project yield impacts of new traits. This work, together with research published earlier this year, illustrates the unique approach we are taking to discover yield traits for commercial crops. As our recent accomplishments suggest, we are on track on the R&D front and will continue to focus on achieving the key corporate milestones we've laid out for 2018. Let's now turn to slide five, our technology platform. Increasing crop yield is an extremely complex R&D problem. The majority of traits deployed in commercial role crops provide protection against insects and weed pests, providing a means to protect yield, but not to address making the plant higher-yielding. After the first wave of biotech discoveries, followed by the beginning of the DNA sequencing in genomics era, the industry focused on identifying and screening thousands of individual plant genes. Unfortunately, this endeavor has not yet delivered new commercial traits. Having said that, over the last 20 years, the industry and academia has generated billions of data points from crop genomics, large transformation pipelines, metabolomics, and advanced molecular breeding technologies. We now have to develop computational tools to convert that type of big data into actionable gene targets. At Yield10, our approach is based on our unique [Indiscernible] experience. Here we are leveraging our expertise in metabolic engineering, flux modeling, and gene regulatory modeling, combined with our Camelina fast field testing program. Our goal is to -- in developing a green platform is to be able to convert big data into actionable gene modifications. As you all know this, with any new modeling capabilities, we need to put data our levers to challenge those models. Here we are fortunate to have a pipeline of exciting novel traits, which provides just such data. Let's now turn to slide six to review genome editing in agriculture. Genome editing is a potential game-changer in the agricultural space and has been in the news in 2018, as policies in the U.S. and EU have been substantially clarified. In March, the USDA released a statement saying that genome editing is equivalent to techniques traditionally used by plant breeders to generate beneficial traits. And as such, does not carry additional risks require in use of USDA oversight. In contrast, in July the EU core drove the opposite direction, indicating that they view genome edited plants as genetically modified. While the EU ruling was disappointing and in odds with the science, it wasn't entirely unexpected, given the stance of the EU has historically taken on GM crops. I'll remind you that Yield10 is focused on large acreage crops grown in North America and then jolt-up outside of the EU. These are currently all GM. As a sidebar, despite the EU stance on GM crops, the EU is the largest importer of GM -- meal used for animal feed, as the EU is short in protein production. We pursued the CRISPR licensed for quite some time and were pleased to see that Broad and Pioneer began offering licenses on their combined IP portfolios late last year. Yesterday, we announced the signing of the license with Broad Institute and Pioneer. Pioneer is part of Corteva, the Agricultural Division of DowDupont. Given their expanding work in genome editing, we made the decision to secure this research license with the option to convert to a commercial license. We view CRISPR as an important tool for accessing new traits and one that can significantly reduce the timeline and costs for new trait development and commercial deployment. For example, consider the case where CRISPR is used to create a deletion of the gene that causes inactivation of that gene, resulting in more oil in an oilseed. Something we're working on. This plant can be developed in the lab, progressed with a non-regulated process, then tested in the field. If the performance is acceptable, the plant could then go into the commercialization pipeline. So, it's pretty straightforward, meaning sector can now go after more incremental traits. GMO traits are more complicated to test, mainly, because of the nature of the events process followed by a more complex regulatory process. Though GMO traits have to have high volume. Yield10 has embraced CRISPR as a genome editing tool, but the real value in our platform is the discovery of new traits to develop. And that's where our green technology platform comes in. With our technology platform, we have discovered a pipeline of potential new traits to increase seed oil, seed yield, oil content, and biomass. Let's now turn to slide seven and I'll go over our pipeline of traits. The table in this slide shows our traits in development. We have CGO traits, such as C3003, which, based on an oligo gene we have used, we are focused on today, maybe regulated and our focus is on large acres GM crops. Later this year, we expect to generate additional proof points for C3003 trait in Camelina, canola, and soybean. We are currently testing potential plant alternatives to this oligo gene. Another trait I'd like to mention today, discovered from our work in C3003, is C3004. Although it hasn't been mentioned much in our recent presentations, we've been quietly working on C3004. Based on recent growth chambers all with C3004 in Camelina, we now plan to evaluate plants for boost studies in our 2019 field test program and accelerate its introduction in canola and soybean. Work is underway to file an additional patent application before provide an update to be on [Indiscernible] under the research license we signed last year. We're excited to see more of about this trait, including another view of the results and next steps in the weeks ahead. In addition, we have two categories of genome editing traits in our pipeline. Our oil-enhancing traits and the C4000 series of consistent factor genes. A number of the C4000 series are very exciting on their right and have enabled us to identify combinations of other transcription factors, which can be modified by genome editing to improve crop performance. Our key objective with these activities and the development of the green platform is to generate revenue by providing R&D services to the ag sector. Across all of those areas we see opportunities for licensing our partnerships as we demonstrate the value proposition of our traits and technology platforms. With that, I'd like to turn the call over to Kristi for an update on our R&D process. Kristi?

Thanks Oli and hello everyone. In my presentation today, I will describe some of the recent advancements in our R&D pipeline. Please turn to slide number eight. When our lead trait gene, C3003 is introduced into plants, it enables plants to be more efficient at capturing carbon through photosynthesis, resulting in higher seed yield. This activity involves a unique biological transporter mechanism that, we believe, has the potential to improve yield in a wide range of C3 crops, which includes crops such as soybean, rice, and canola. The 2018 field test program is the third season of field test for the C3003 traits and are more extensive. We are evaluating several generations of C3003. The main objectives of this study are; one, to test second-generation C3003, which includes Gen 2.0 and Gen 2.1, designed for seed-specific expression of gene in Camelina. Two, to repeat testing of first-generation C3003 in canola, designed for expression throughout the plant and to test for the first time Gen 2.0 in canola. And three, to bulk up pure soybean seed from Gen 1 and Gen 2.0, C3003 plants for use in our 2019 field testing program. We completed planting at our test sites as announced in the second quarter. Initially, we had some challenges with the weather, where some field test flights experienced an early heat wave during emergence of the plants. The team responded quickly, made some adjustments, and the studies are on track. At this point, plants are back to flowering stage and are setting seed. I anticipate that we will harvest the trials by the end of September and will begin seeing data from the studies in the fourth quarter. We are also conducting our first field test for the genome edited plants, Camelina with editing of the C3008a trait. This trait acts downstream of oil biosynthesis and reducing its activity may lead to reduction in oil turnover. This trait is part of the triple combination trait stack we have designed to boost oil content in oilseed crops. In the field, we will monitor the performance of the C3008a plants and collect data on oil content and oil composition. This field test is being conducted at a site in the U.S. Let's now turn to slide number nine. Soybean is an important target for C3003 and we have been working with an academic collaborator in Canada to develop soybean plants transformed with Gen 1 and Gen 2.0 C3003 constructs. Additional Gen 1 and Gen 2.0 in soybean lines are been progressed for further study by our academic collaborator. We are pursuing this work independently from Bayer/Monsanto, that has fully supported their activities with C3003 this year. Earlier in the call, Oli mentioned our work with C3004, this trait is also included in the Bayer/Monsanto agreement, but Yield10 still had some work to do to complete our understanding of its possible role and how best to use it in combination with C3003. Our work with this trait in Camelina has now provided the first steps of data, which will be used to complete a new patent application prior to updating Bayer/Monsanto. We are now bulking up some of the Camelina line from these studies to conduct our first field test with C3004 in 2019. We expect to provide additional information on this work sometime in the weeks ahead. I'd like to now provide an overview of our traits and development to boost oil content in oilseed crops. Please turn to slide 10. We believe there are compelling market opportunities around specialty oils and we are advancing approaches using genome editing for optimizing oil content in oilseed crops. These traits will also have the potential to stack with other traits for changing oil composition, such as high oleic and Omega fatty acid-containing oils. We are currently working on five gene targets, involved in oil biosynthesis and are building IP around these targets. The position of each of the targets in the oil biosynthesis is shown on the illustration on the right of the slide. We are currently evaluating the edited C3008a trait in field tests this year. Earlier this year, we completed genome editing of the Camelina line, edited for C3008a, C3008b, and C3009 to boost oil synthesis. Today, we announced that we have filed an "Am I regulated" letter with USDA-APHIS to obtain non-regulated status for this trait with the agency. Pending clearance of this trait, we are planning to test this combination in field tests in the U.S. next year. We are also working with technology from the University of Missouri, for which we signed an exclusive license and are editing C3007 in both Camelina and canola. We hope to start editing the C3010 trait soon. Our objective is to create edited lines and submit them to USDA-APHIS through their "Am I regulated" process to enable non-regulated status for the traits to simplify the process of field testing these traits. We believe this work focused on boosting oil content is promising and believe it represents an important opportunity for licenses and collaborations. Let's now turn to slide 11. At the end of 2017 and the beginning of 2018, we submitted three research papers, related to our technology to peer-reviewed journals. In the second quarter, we published a third research paper. It describes our development and use of Camelina as a model crop for developing novel yield traits. This paper is published in the journal Plant Cell Reports and I will go over some of the data in the next slide. Taken together, these publications illustrate the insights we have around tackling crop yield. In proof-of-concept experiments in Camelina, using complex genetic constructs, we can have shown, scientifically, that yield -- seed yield can be doubled. We are working to translate insights from these plants and studies into simpler strategies that can be deployed into Canola, soybean, and corn. Let's now turn to slide 12. Shown on slide 12 are the key data sets contained in two of our recent papers. The data on the left shows yield data generated in Camelina when we introduce the complex multi-gene route for increased carbon capture into the plant. At a recent American Society of Plant Biologists Meeting, we reported that our modeling predicts a theoretical yield increase of 112% when plants are engineered with this novel pathway. We reported in the article published in Plants Cell Reports, that our experimental data generated in Camelina ranged from a 73% increase to a 128% increase of seed yield over controlled plants consistent with the yield increase predicted by our modeling. While it would not be feasible to develop and commercialize this complex system, it does tell us that there is room for substantial improvements in yield, beyond the single or low double-digit increases typically observed. This study appeared to be a one-off scenario. On the right side of the slide, the work we've published with transcription factors in the journal, Plant Science, is shown where increases in biomass yields of up to 160% over wild-type controlled plants were observed. Coming back to Yield10's mission of developing new traits that produce step change in yields, we are targeting 20% increases in canola and soybean and 10% in corn. Our proof-of-concept work in Camelina, in switch graph, show that novel yield traits can potentially deliver larger increases. To summarize, our R&D seems to be positioned for a very productive year in 2018 and is focused on generating proof-points that guide the development of our novel traits. I'll look forward to updating you as the year progresses. Oli, back to you.

Thanks Kristi and the entire R&D team. I'm confident the team will continue to make excellent progress this year and there is much more to come as we progress through the rest of the year. Let's now turn to slide 13 to review our commercial strategy. Our traits in development provide us with multiple potential paths to revenue, driven by the value proposition. For major North American commodity crops, we think we can accelerate development through working, as soon as possible, with the ag majors in their elite germplasm, using their resources, like the approach we have taken with Bayer/Monsanto for C3003 and C3004 in soybean, where we anticipate commercializing through its licensed agreements of milestone payments to Yield10 and participation in downstream economics. The next path is specialty in niche crops. There's a lot of innovation going on in this area. Here is a potential number and types of partners and types of commercial partnerships, is much larger than the handful of companies in the commodity ag seed space. The third path to commercial revenue involves our technology platforms, where we can accelerate innovation based on the green platform to predict gene combinations for crop improvement and probably have access to this capability as a service to the sector. To-date, we have accessed government grants in relationships with leading plant scientists. We plan to continue providing updates on our technology platform in future investor communications. Let's now turn to slide 14 to discuss our upcoming milestones. Yield10 is a strong pipeline of exciting crop trait technologies, which we believe will help us build significant value in the business. We will talk more about our route on C3004 in the next few weeks. In 2018, we anticipate reporting our field test results in fourth quarter. Under a research license, Bayer/Monsanto is working the C3003 in soybean, we will update them on C3004 this year. We will also continue independent development of C3003 in soybean and rice. We will continue to progress oil-enhancing traits using CRISPR genome editing, a progress of C4000 series traits in rice and corn in the months ahead. Our results to-date, as scientific publications have helped us engage in useful discussions and are expected to position us to negotiate secure ag industry collaborations, a key are of focus for us. We will continue to work we have been doing with our academic partners on the underlying science, file new patent applications on our discoveries, and expect much of our work will be published in our academic journals to be present it at scientific conferences. We are expected to be very productive in 2018 and beyond. Let's turn to slide 15 and we'll wrap-up. Our team is making good progress towards meeting our milestones for 2018. We are executing a focused program of C3003, advancing new constructs for yield traits, and we're seeing it translate from Camelina canola and soybean, important North American oil seed crops. We believe that the C3004 may add to this. Our unique approach to trait discovery has led to the identification of promising genome editing targets and will be working to further develop these targets to improve seed yield, oil counting [ph] and/or balance. Taking this altogether, we have a clear vision for our business to sign any commercial opportunity in three areas; commodity crops, specialty oils, and our green R&D platform. We plan on making steady progress towards our goal to create value for our shareholders. With that, I'd like to turn the call over to Lynne for questions.

Thanks Oli. Tim, can we now poll for questions?

Thank you. At this time, we will conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of James Jang of Maxim Group. Please proceed with your question.

Hello guys.

Hi James, how are you?

Hi James, how are you?

I'm doing well. So, it looks like everything is pretty much on track. Do you see anything upcoming for the second half of the year, which might effect, I guess, some of the testing that's going on?

Well, we can't predict the weather in the future and we can't think of what will happen in the future. But right now, the fields look pretty good. We had some issues at the start of the year, but until we actually harvest these fields and plots and essentially develop a data, that's when we'll know, right. Kristi?

Yes. I know that's the parts of the northern hemisphere were hit with some un-seasonally hot weather, so I was wondering if any of that affected of any of your test fields up in Canada?

Yes, we did experience the heatwave, which also sort of reduced the moisture in the plots, but our team responded pretty quickly. And we believe that we're -- that they're going well.

So, I know that really -- I know that will cause noise in, I guess, the data, right?

What we do is we always plant quite a few replicas, more than we need and so we may lose a couple of plots here and there, but it's not going to effect the statistic relevance of the results, because we have a lot of replicas going.

Okay, great. And just a follow with update, everything with the former Monsanto folks, now that they're there, everything is still on track, right? Nothing's changed there?

Yes. No, we've been in touch with Monsanto regarding follow-ups and some of the things we've been talking about and obviously, they're pretty busy at the moment because that deal just went through in June and being for $60 billion will probably have an impact on your availability and time. So, they're supposed to be pretty busy, but we expect to hear from them in September, based on the last call I had.

Okay, great. And in terms of, I guess, additional capital, do you think you'll we coming to the markets in the second half of the year? Or do you think -- or are you kind of okay with your current cash flow situation?

Yes. Our plan is to just focus -- we've got a lot of technology proof-points ahead of us. Obviously, we've got a lot of things going on, so I think our mission this year is to really deliver on all of our milestones and hopefully, we'll beat those milestones and add value for the shareholders. I mean that's the plan.

Okay. And last one. What are some key events that investors should keep an eye on for the back half of the year? Aside from the updates on the progress, but is there something else that we should be keeping an eye on?

Yes. There's nothing that I can provide color on at this point.

Okay, all right. Well, all right, thanks again guys.

Thank you.

Thanks James.

[Operator Instructions] If there are no further questions--

Hey, Mike--

I'm sorry Lynne.

No, that's fine Tim.

If there are no further questions, I would like to turn the conference back over to management for closing remarks.

Thanks, Tim and I'll turn it over to Oli for concluding remarks.

The Yield10 team is working hard to progressive traits to fulfill our mission to produce step change improvements to crop yield to ensure global food security. We are focused on executing on the series of technology proof-points we've outlined in our milestones. Thanks to our employees for a job well done so far in 2018. Thanks also to our shareholders for your support. And thanks to everyone for joining the call tonight. Thank you.

Thanks Tim.

This concludes today's conference. Thank you for participation. You may disconnect your lines at this time.