Yield10 Bioscience, Inc. (NASDAQ:YTEN): Unlocking the Potential of Camelina for Sustainable Omega-3 and Biofuel Solutions

Published on September 24, 2024 | Ticker: YTEN

Yield10 Bioscience, Inc. (NASDAQ:YTEN) is an agricultural bioscience company focused on commercializing sustainable products using the oilseed Camelina sativa as a platform crop. The company is pursuing two distinct Camelina seed oil products - one for the growing omega-3 fatty acids market and another as a low-carbon intensity feedstock oil for biofuels.

In 2023, Yield10 made significant progress in establishing a closed-loop Camelina oil value chain, from seed genetics to final oil product. The company reported annual revenue of $60,000 in 2023, primarily from government grants, and a net loss of $14.5 million. Operating cash flow for the year was negative $10.1 million, with free cash flow of negative $10.1 million.

For the fourth quarter of 2023, Yield10 reported a net loss of $3.3 million, compared to a net loss of $3.3 million in the prior year period. R&D expenses were $2 million in Q4 2023, while G&A expenses were $1.4 million. The company ended the fourth quarter with $1.1 million in cash and cash equivalents.

Business Overview

Yield10's two-pronged strategy focuses on developing Camelina varieties for the omega-3 fatty acids market and the biofuels market. The omega-3 product is targeted at the growing demand for sustainable sources of EPA and DHA, which are currently sourced primarily from ocean-harvested fish and krill. Yield10's engineered Camelina can produce these essential omega-3 fatty acids at levels comparable to fish oil.

The biofuels product, on the other hand, aims to provide a low-carbon intensity feedstock oil for biodiesel, renewable diesel, and sustainable aviation fuel. Camelina's features, including winter varieties and a short growth cycle, make it suitable for integration into crop rotations and double cropping on millions of acres in North America.

Omega-3 Market Opportunity

The market for omega-3 products, including aquafeed, pet food, human nutrition, and pharmaceuticals, is large and growing. Aquafeed, the largest market by volume, consumes around 75% of total fish oil production, mainly for salmon, and is growing at 3% per year. The market for human nutrition omega-3 products is growing around 7% per year.

However, the supply of traditional fish oil sources is expected to remain flat, leading to a projected omega-3 supply deficit of around 500,000 tonnes per year by 2030. Yield10's engineered Camelina, capable of producing EPA and DHA omega-3 fatty acids, represents a sustainable, scalable, and cost-effective solution to address this growing supply gap.

Regulatory Approvals and Commercialization Milestones

In 2023, Yield10 made significant progress on the regulatory front, obtaining approvals from USDA-APHIS to grow its genetically engineered Camelina varieties, including those with herbicide tolerance and omega-3 traits. The company also expects to announce EPA approval to add Camelina to the label of a glufosinate herbicide product soon, completing the U.S. regulatory requirements for large-scale planting and herbicide use.

For the omega-3 Camelina, Yield10 plans to seek regulatory approval in Chile, a major market for omega-3 oils, in 2024. The company aims to deliver its first omega-3 product samples and execute a commercial license with Rothamsted Research, which developed the underlying technology, in 2024. Yield10 also intends to progress partnership and offtake discussions for its omega-3 Camelina products.

In the biofuels market, Yield10's strategy has shifted to focus on providing R&D services and licensing its advanced Camelina technologies to third parties, such as the recently announced agreement with Vision Bioenergy Oilseeds. This approach is designed to enable better-resourced partners to invest in accelerating grower adoption of Camelina and establishing large-scale value chains.

Financials

Yield10's financial performance in 2023 was marked by a net loss of $14.5 million, compared to a net loss of $13.6 million in the prior year. Revenue for the year was $60,000, down from $500,000 in 2022, as the company's government grant funding came to an end. Operating cash flow was negative $10.1 million, with free cash flow also negative $10.1 million.

As of March 31, 2024, the company held $1.1 million in cash and cash equivalents. Yield10 has a short-term convertible note outstanding of $1 million with MPC Investment LLC, an affiliate of Marathon Petroleum Corporation, that is expected to mature in August 2024 unless converted to equity or retired earlier.

The company's management has identified the evaluation and pursuit of different funding strategies, including public and private placements of equity and/or debt, licensing and collaboration arrangements, and strategic alternatives, as a top priority to secure the required funding for its operations in the near term. Yield10's ability to continue as a going concern is subject to its success in obtaining additional financing.

Risks and Challenges

Yield10's success is subject to various risks, including its ability to secure additional funding, execute on its commercialization plans for omega-3 and biofuels products, and navigate the regulatory landscape. The company's reliance on Camelina as a platform crop also exposes it to risks related to the adoption and scale-up of Camelina production.

Outlook

Despite these challenges, Yield10's progress in 2023, including the establishment of a closed-loop Camelina oil value chain and the achievement of key regulatory approvals, positions the company well to capitalize on the growing demand for sustainable omega-3 sources and biofuel feedstocks. The company's focus on partnerships and licensing agreements in the biofuels market, while prioritizing the commercialization of its omega-3 Camelina products, represents a prudent strategy to navigate the current industry dynamics and unlock the potential of its Camelina platform.

Conclusion

Yield10 Bioscience is at a pivotal juncture, with its Camelina-based solutions addressing two significant market opportunities - the growing demand for sustainable omega-3 fatty acids and the need for low-carbon intensity biofuel feedstocks. The company's progress in 2023, including regulatory approvals and the establishment of a Camelina oil value chain, lays the foundation for its future growth. As Yield10 continues to execute on its commercialization plans and secure the necessary funding, the company's unique position in the agricultural bioscience landscape warrants close attention from investors.

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