The shares of this recently IPO’d stock have just been initiated as a ‘Buy’ at Citigroup and Jefferies, and as ‘Outperform’ at Wells Fargo.
Calyxt (CLXT)
From the Cutting Edge
Back in July, we shared news with subscribers that gene-editing company Cellectis (CLLS) would be spinning off its agricultural arm, Calyxt.
Calyxt (CLXT) is the plant-based genomic engineering arm of Cellectis. Our bull thesis on Calyxt is based largely on historical context, specifically the success of gene-editing and agriculture powerhouse Monsanto.
At a market cap of ~$389 million, Calyxt is a mere fraction of the size of Monsanto’s $52 billion valuation. Should it ever grow that large, investors today would be looking at a ~130x return. This might sound outlandish right now, but even if Calyxt were to climb to a quarter of Monsanto’s size we’re looking at an incredible return.
So far Calyxt has used its gene editing technology to develop food products near commercialization, including:
• Potatoes that you can store in the refrigerator
• Wheat that could produce flour with up to three times more dietary fiber than the standard
• Reduced trans-fat soybean oil and lower saturated fat canola oil
• Wheat, corn and rice that’s immune to the devastating powdery mildew disease
It also has many more food products in the pipeline, including:
• Herbicide tolerant wheat (a major threat to Monsanto, as it could render many of their GMO seeds and Roundup obsolete)
• Gluten reduced wheat
• New traits in corn, wheat and rice to produce higher yields
• Herbicide tolerant alfalfa, blight-resistant potatoes, and improved yield soybeans
The company is even working on technology to improve the supply chain of animal products. Perhaps most crucial, though, plants treated with their technology are NOT considered GMOs by the FDA. The reason? No foreign elements are introduced with gene editing. It’s simply a matter of identifying a gene responsible for an unwanted trait and “snipping” it away.
By contrast, gene-editing giant Monsanto makes its crops resistant to Roundup through genetic modification. Its technology involves inserting genes from other organisms, usually bacteria, to make them immune to Roundup.
Now, because the FDA wants to make sure these crops aren’t harmful, they require a lengthy review process that typically takes 13 years and costs $130 million. But Calyxt’s gene-editing technology? Well it typically takes between just three to six years and costs far less.
That means Calyxt’s products get out to the market up to four times as fast as Monsanto’s GMOs. Not to mention they’re good for the farmers AND consumers. Farmers using this company’s gene-editing technology get higher crop yields without having to douse them with Roundup. And consumers get food products with more nutrition, higher fiber and less gluten—all at a lower cost.
Aside from Calyxt’s impressive pipeline, another driving factor behind our “Next Monsanto” thesis is a flow of talent working in Calyxt’s favor. In 2016, Federico A. Tripodi was appointed CEO of Calyxt after working at Monsanto for 17 years. Tripodi served in multiple roles there throughout this career, including as program director of corporate strategy.
Then there’s Bryan Corkal, Calyxt’s CFO as of December 2016. Corkal was Monsanto’s North America Supply Chain Finance Lead. He also served as Monsanto’s Director of Investor Relations and Director of Finance for the company’s Latin America North Division.
In addition to poaching talent from Monsanto, Calyxt has an executive team with career-experience from Cargill, Syngenta, and a number of other major agriculture and genetics-related firms. Given its experienced leadership, drawing an additional parallel to Monsanto isn’t a stretch in the slightest.
The company is pre-revenue, with assets of $15.1 million and liabilities of $4.7 million leading up to its IPO. The S-1/A filing showed $3 million in cash on the books and no debt, but it’s estimated that the company raised $56 million in its IPO (72 million shares at $8.00.) The market cap is $389 million as I write.
We rate Calyxt a “Buy” under $16.50. The Risk Level is “Medium”.
Jason Stutman, The Cutting Edge, www.angelpub.com, 877-303-4529, August 22, 2017