Moolec Science - Q4 2023

Transcript

Martin Tarasiuk (Head of Investor Relations)

Good morning, and welcome to Moolec conference call. My name is Martin Tarasiuk, and I'm Moolec head of Investor Relations. During this conference call, all participants will be muted. After management's remark, there will be a question and answer session. Please also note that today's session is being recorded. Moolec announced today its fourth quarter fiscal year 2023 business highlights. The document is now available on the company's Investor Relation website at ir.moolecscience.com. This morning, you will hear from Gaston Paladini, Chief Executive Officer and co-founder of Moolec Science, together with Amit Dhingra, Chief Science Officer, and Jose Lopez Lecube, Chief Financial Officer and Director. Henk Hoogenkamp, Chief Product Officer, Martin Salinas, Chief of Technology, and Catalina Jones, Chief of Staff and Sustainability, will be joining for the Q&A. In today's call, we will referring to a presentation that will be available on the company's investor relation website.

The conference call is mainly for informational purposes only, and during this call, the company will be making some forward-looking statements regarding future events and results. Statements that are not historical facts, including but not limited to statements about the company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risk and uncertainties. Further information regarding this and other risks will be included in the company's annual report on Form 20-F filed with the SEC, later also available on our investor relations website. Now, I would like to turn the call over to Moolec CEO to comment on our business and recent developments. Gaston, please go ahead.

Gastón Paladini (CEO)

Thank you, Martin. Hello, everyone. I'm thrilled to present our annual business update conference call. I want to thank you all in advance for your interest and support. This year has been truly transformative for our company due to all the milestones we were about to share. I would like to start outlining today's agenda on slide three. First, let me reinforce your understanding of Moolec opportunity. Second, our Chief Science Officer, Amit Dhingra, will walk you through our latest scientific and operational progress. Third, Moolec Chief Financial Officer, José López Lecube, will explain the recent capital raise event from strategic investors from a finance and value creation perspective. Let's move now to slide five. Let me start with the current context. On top of global food security crisis, the main concerns of the animal protein production sector can be summarized in four.

First, environmental pressure from consumers and governments due to climate change, and we couldn't agree more. The planet is suffering from the current linear production system. Second, pests and diseases causing worldwide concerns due to confined animals, such as swine flu and avian influenza. Third, feed to meat conversion inefficiency, considering the amount of natural resources used to produce one kilo of meat. And finally, animal cruelty, claimed to be one of the most important concerns for young consumers. The emergence of new technologies for food is the result of a world demanding better sustainable answers. Moving now to slide six, I would like to share once again our purpose and mission. Moolec is a science-based food ingredient company focused on the use of molecular farming technology. We promote the use of science in food. This cutting-edge technology addresses the key challenges faced by the food industry.

Moolec's mission is to create unique food ingredients by engineering plants with animal protein genes. Let's now turn to slide seven, where I will explain our solution. As a general parameter, approximately 40% of the cropland in the world today goes to feed livestock. Our molecular farming platform allow us to tweak the traditional agricultural value chain, solving the feed to food conversion inefficiency. We take the animal out of equation by inserting only the DNA genes of animal proteins inside the seeds of the main plants used in the food industry, using genetic engineering. Then, we grow the crops, keeping the native proteins of the plant, with the addition of these animal proteins to develop enhancing ingredients. This technology has already been proven in other industries, like, pharmaceuticals and in agribusiness. Moolec is a pioneer in using this tech in the food industry.

Furthermore, it has obtained approvals for specific plans from globally renowned regulatory agencies, including the USDA, APHIS, and FDA, certifying the safety of crops and initial products. Let's now move to slide eight, where I will show in numbers the massive opportunity. It's crucial to reiterate the incredible opportunity that lies ahead for Moolec, which is equivalent to nearly $1 trillion in total addressable market. What's truly significant to score here, as shown in the pie chart on the left, is that our scope extends beyond the alternative protein market. With our ingredients, we expect to supply traditional meat processors worldwide, which make up approximately 90% of the total addressable market. Let's now move to the next slide, where I would like to dedicate a few minutes to where the company's strategic global operations are. We're a global company with a presence in a strategically selected location

where we leverage cutting-edge R&D and scientific experience, as well as benefit from optimal natural conditions for crop development and operational and production advantages. Overall operational hubs, I want to point out that the heart of our crop science endeavors lies in the United States. Moolec has recently set up a new Moolabs with Chief Science Officer Amit Dhingra leading the plant molecular farming team, a Moolec-owned plant molecular biology laboratory at College Station, Texas, near Texas A&M University. Now, I will move on to slide 10, where I would like to explain the framework of Moolec's strategic pillars for value creation. We have established a framework to categorize our current business strategy into four core pillars. Let me provide a more detailed overview. Product development.

This pillar includes research and development, product creation and improvement, and associated processes to ensure the highest standard of food and environmental safety and quality. Our primary focus is on developing disruptive solutions using innovative technology for the food industry. Patent portfolio. Our strategic objective is to become an IP powerhouse. Our portfolio will incorporate a wide spectrum of patents that covers methods, process, and applications. We continually screen the market to identify the most valuable geographic areas for our IP efforts, ensuring our assets align with the market demands. Regulatory pathway. We have profound understanding and expertise in regulatory clearing processes, such as in the United States with FDA and USDA, and other territories as well. Our goal is to navigate the regulatory landscape fast and efficiently, ensuring compliance while minimizing time to market. Building strategic partnerships with key industry players is integral to accelerate and complement our businesses.

Alliances facilitate the sharing of technology, expertise, and industrial processes, ultimately enhancing our competitiveness in the market. This framework stands as our guidance structure for planning and execution, ensuring a comprehensive and focused approach to achieving our goals. I will now give the call to Amit.

Amit Dhingra (Chief Science Officer)

Thank you, Gaston. Now, I will move on to the scientific and operational progress section of today's agenda. Let's go to slide 12. Here, I would like to elaborate on PiggySooy. The company has developed a unique, successful, and patentable platform for the expression of highly valuable proteins in seeds of economically important crops, such as soybean. The soybean platform is now rebranded under the trademark PiggySooy. The platform could eventually be used to produce a broad variety of proteins of interest, servicing a wide range of industries besides the food industry, such as pharma, cosmetic, diagnostic reagents, and research. As I mentioned earlier, we achieved a very high expression level of the animal protein of interest, reaching 26.6% of total soluble protein. This is approximately equal to 10% of the whole bean.

This was four times above our projections and represents a major accomplishment in expressing animal proteins in soybean seeds. Once we completed the collection of all the experimental data regarding the outstanding levels of expression, we transitioned our provisional patent, filed in June 2022, into a utility PCT patent application. Let's move to the next slide, where I would like to compare a standard soybean seed with a soybean from the PiggySooy platform. On the left, you'll notice a conventional soybean seed represented in gray. On average, the seed contains 35% protein, 17% oil, which is a valuable byproduct, 31% carbohydrates, 13% moisture, and the residual 4% as ash. Now, on the right, highlighted in pink, you'll find our innovative PiggySooy soybean. It also has 35% protein content, but with an exciting addition.

Of this total protein, approximately 10% is represented by the animal protein, which translates to approximately 26.6% of the total protein content. This addition of the animal protein not only elevates the nutritional value, but is also expected to enhance flavor, color, and functionality when used as food ingredient. So what is the impact of achieving the high level of expression of animal protein in PiggySooy? I will summarize that in the next slide. High expression levels benefit the entire value chain. These advantages can be categorized into three key areas. First, it improves business economics. High expression levels have a profound impact on our business economics.

This is primarily attributed to two key factors: the potential to command higher prices, up to a certain threshold, due to the increased animal protein content in our products. Reduced material requirements for producing our end product, specifically texturized vegetable protein, resulting in lower operational costs. Second, it reduces execution risks. High expression levels play a crucial role in minimizing execution risks at various stages of our operations. During the development of transgenic events, they offer improved projections for the stability of protein levels across generations. In downstream processing, they reduce the risk of protein loss, particularly animal protein. Third, it increases sustainability footprint. High expression level contributes significantly to our sustainability efforts in two key areas: improves our molecular farming technology drivers, it drastically reduces consumption of land, water, and generating less CO₂ emissions.

These advantages not only strengthen Moolec's competitive position, but also align with our commitment to sustainability and innovation. In the next slide, I would like to discuss the developments related to GLA Safflower Oil. We are currently in the process of scaling up our operations and moving closer to commercialization. As shown in the graph on the right, our production in 2022 was less than a hectare. Presently, we have successfully harvested 35 hectares with an impressive yield of 1.8 ton per hectare. This exceeds average yields by approximately 50%. Equally significant is our ability to maintain expression levels at 60% from the previous harvest, which notably exceeded our initial expectations by 10%. Looking ahead to the next season, we anticipate planting between 100-350 hectares.

The exact size will depend on our strategic allocation of seed resources, some of which will go for seed multiplication, and the remaining for crushing, which supports our sampling and business development efforts. In 2025, we have ambitious plans to harvest, crush, and market the 2024 GLA seed. Currently, we are actively engaged in discussions with potential clients and partners to expand and advance our business. This will result in risk reduction as we prepare to launch our inaugural molecular farming product. Moreover, it represents a crucial step towards diversification in terms of our product portfolio, as well as resilience against potential challenges in weather and geography. In the next slide, I would like to summarize the progress made on Moolec pipeline.

Since the investment and strategic participation from Grupo Insud, a biotechnology and life science player, the current yeast pipeline has been consolidated to focus on a single and more robust yeast project, which targets the nutraceutical supplement market, in addition to the non-meat food ingredients market. This decision was prompted by the outstanding performance in year one, as well as the advancements made on the regulatory front. Furthermore, in our meat replacements program, we've made significant progress in our R&D efforts, transitioning the Soy1 project from the transformation phase to development, which includes T2 seeds propagation, and T3 seeds, which will be harvested in November of 2023, and also advancing on the regulatory front. The RSR for soybean was submitted to USDA-APHIS. Let's move on to slide 17, where I would like to comment on Moolec capabilities buildup.

As stated before, we have recently set up Moolabs, our plant molecular biology lab, laboratory in College Station, Texas, in a research incubator lab operated by Texas A&M University. The company will be able to perform a significant part of R&D and services related to plant biology projects in this lab. This will result in reduced costs, a clear chain of custody, quick implementation of decisions, higher control standards, and improved quality of work. The company expects these new facilities to accelerate and streamline the development of the molecular farming platform. In addition, our food science hub, strategically located in the Netherlands, is equipped to handle both low and high moisture extrusion services, protein transition assessments, and evaluations for meat replacement applications. Furthermore, as many of you are aware, our recent deal with Grupo Insud has granted us access to scale-up capacity.

These facilities provide us with invaluable resources for both research and operational services, allowing us to develop products across various locations. Additionally, our deal with Bioceres has brought product traceability and access to a vast network of growers specializing in identity-preserved, drought-tolerant HB4 soybeans. These soybeans are cultivated by over 100 producers who practice regenerative agriculture, thereby minimizing water, carbon, and chemical footprints. Finally, we have our industrial and commercial R&D center. We are actively engaged in the development of soy-based food ingredients, pioneering new recipes for the next generation of meat substitutes, and instituting rigorous quality and food safety protocols. On the next slide, I would like to elaborate on this R&D center. Our primary goal has been to optimize our operations, fine-tuning every process to achieve greater operational efficiency. Simultaneously, we've been channeling our efforts into product development, aiming to produce less commoditized, high-value products.

We've been dedicated to consolidating and strengthening our teams. We recently welcomed a new general manager with vast industry experience, who will play a pivotal role in unifying our teams and driving our strategic initiatives forward. It's also essential to highlight an external factor that has significantly impacted our operations. During the fiscal year 2023, we faced one of the most severe droughts in our country's history, coinciding with our acquisition. This drought led to a decrease in soybean availability, resulting in higher prices. These conditions are likely to persist until the next harvest, which is expected around May, June 2024, nearing the end of financial year 2024. In response, we've intensified our focus on resource efficiency and resourcefulness in securing raw material. Thank you for the opportunity to share this update, and now I would like to pass the baton to Jose.

José López Lecube (CFO)

Thank you, Amit, and good morning to everyone. It is a pleasure to be providing this annual business update of Moolec Science. Today, I would like to take some time to review our latest news, achieving an important capital raise with strategic partners. Amid a challenging financial market, we see great value in deepening our relationships with well-established players of the biotech and life science industries. As we go through the following slides, please keep in mind that all numbers mentioned today are in US dollars and based on IFRS, unless otherwise stated. Let's now turn to slide 20. We recently raised $30 million in cash and in-kind contributions from two strategic players, Grupo Insud and Bioceres Crop Solutions. In the following slides, we will go over the details of both transactions materialized through convertible notes.

However, for now, I would like to share the main objectives that we were looking to achieve by this capital raise. Our intention was to secure deals that would not only increase our liquidity, but also enhance our capabilities and resources. At the same time, we were looking for deal structure terms that were well aligned with the evolution of Moolec Science's technology. We believe we have achieved this. This capital raise comprises cash proceeds of $10 million and $20 million in the form of in-kind contributions that will allow us to accelerate our product development and incorporate traceability to our value proposition for customers. Finally, we believe that the convertible note terms are well aligned with Moolec Science's business model evolution. The flexibility for Moolec Science to pay at conversion in shares or cash provides healthy optionality, which helps to maintain an adaptable financial position.

At the same time, a maturity of 3 years out and a strike at $6 per share aligns financial commitments with the evolution of the R&D projects and product pipeline. I would like now to go over the convertible notes subscribed by Grupo Insud. It is important to highlight first, that we are thrilled to count with Grupo Insud as an investor, as it is an important global participant in the life sciences and biotech industries in over 40 countries. As a result of this participation, Grupo Insud will contribute $10 million in cash, which will be utilized to continue developing our R&D projects and funding general corporate expenses. In addition, Grupo Insud will provide credits to access their state-of-the-art capabilities and operational services in different locations. The result of this agreement will enable us to accelerate our product development and go-to-market timeline and strategy.

Moreover, Grupo Insud will be contributing their participation in Micro Food Ingredients, a JV initiated with Moolec in 2021. This will strengthen our product pipeline by consolidating R&D projects. On top of the in-kind and cash contributions, Moolec will leverage Grupo Insud's expertise and global outreach. Finally, this transaction has been materialized through a convertible note, which will mature in three years' time with a strike price at $6 per share. At maturity or conversion, Moolec will benefit from the option to pay the principal plus interest in shares or cash, or a combination of both. We are very pleased that Grupo Insud is partnering with Moolec with not only favorable terms, but terms that can benefit both companies. Moving on now to slide 22, I would like to focus on the HB4 soybean supply agreement subscribed with Bioceres Crop Solutions.

I would like to mention that Bioceres Crop Solutions is a fully integrated provider of crop productivity technologies designed to enable the transition of agriculture towards carbon neutrality. Along with its HB4 drought-tolerant seed technology program, Bioceres brings end-to-end traceability for production outputs. In terms of the transaction, this soybean supply agreement will give Moolec access to approximately 15,000 tons of HB4 soybeans, with the possibility to upsize this volume. Moreover, soybeans may be delivered in different territories, which provides Moolec the potential ability to expand geographically. From a liquidity standpoint, this deal secures a significant portion of Moolec's working capital needs for the next 12-18 months with no cash expenses. Moreover, HB4 soybean, through its identity preserved farming platform, will help Moolec offer traceability to its end products, a significant step to enhance our value proposition to customers.

Gastón Paladini (CEO)

The PS soybean supply agreement will be paid by Moolec through the issuance of a convertible note in similar terms as Grupo Insud. We are very pleased that these two strategic partners are working with Moolec Science, and look forward to collaborating with both companies for years to come. I will now turn things over to Martin for the Q&A portion of our call. Thank you.

Martin Tarasiuk (Head of Investor Relations)

Thank you, Jose. At this time, our management will be taking questions. You may submit questions through the chat box, directly messaging me, or by using the hand-raising function. We ask those who would like to participate in the Q&A to right-click their image, click Rename, and enter their firm and full name before asking a question. Okay, we have our first question coming from Brian Wright, from Roth Capital, and he's saying, "Good morning. You do a good job highlighting the strategic focus for the coming year. Could you point us to expect milestones over that timeframe as well?

Gastón Paladini (CEO)

Thank you so much, Ryan, for starting the Q&A. Well, as we shared during the presentation, we have established a framework to categorize our business strategy. So Moolec has established milestones from the science and product development, intellectual property, regulatory approvals, and business development side. From the product development science and scientific progress, well, we established a milestone for the current fiscal year, will probably include scientific advancement regarding our PiggySooy platform, such as the finishing of T2 propagation for Soy1, and specifically, the level of expression analysis to be made on T2 seeds in the Moolabs in College Station, Texas. From the intellectual property side, our strategic objective is to robust our portfolio of patents. From the regulatory side, our goal is to navigate the regulatory landscape fast and efficiently.

We are making substantial progress in moving forward with our PiggySooy platform, in the USDA-APHIS, as well as the FDA conversations. From the BD and strategic alliances side, we envision continue building relationship with strategic players and potential customers.

Martin Tarasiuk (Head of Investor Relations)

Okay, we have another question coming from Thomas McGovern, from Maxim, and he asked, "Can you discuss the recent drought in Argentina? How has it impacted the molecular farming industry as a whole, and do you anticipate similar issues to persist in the coming harvesting seasons?

Gastón Paladini (CEO)

Well, thank you, Thomas. Good question. Well, Argentina has suffered one of the most severe drought in the history of the country. That's a fact. The good thing is that molecular farming does not necessarily need intensive land use, especially when you achieve high expression level, as we have, through PiggySooy, overperform milestone, high level of expression. But I really want to point out that Moolec diversified farming production in different locations, such as Argentina and also the United States. So, this is cost efficiently to mitigate the risk of unfavorable agronomical circumstances such as drought. So, we all know that it's very, very hard to predict future weather patterns, so it's crucial to stick to the plan of having two hemispheres of planting, such as, as I said, United States and Argentina, both.

Well, thank you all for joining us today on our first annual conference call. It's been an incredible year of milestone achieved and innovation, of course. I couldn't be more proud of what we have accomplished, of course, all together as a team. I want to congratulate our Moolec team, and thank you to our shareholders for their unwavering support. As we move into the next year, we are excited to build on our path and continue to deliver value to all stakeholders. Remember, if you have any additional question or comments, please do not hesitate to reach out to our Investor Relations team. Thank you so much. Have a wonderful day.