Evogene Ltd (EVGN) 2022 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Evogene's Third Quarter 2020 Results Conference Call. All participants are present in irony note. {Operator Instructions) That said, I would now like to turn over the call to Ofer Haviv Evogene's CEO. Ofer, please go ahead.

Thank you for joining our conference call discussing and providing an update on our activities in the third quarter of 2022. We’re focusing today's review will be on 2 topics. The first one, Evogene’s current financial status and our plans is to strengthen it and the second one, update on directed-achievements of our subsidiaries. Following my review, Yaron Eldad, our CFO, will provide the financial summary.

After that, we will open the Q&A session. As you all know, financial markets are currently very volatile and company evaluation, especially in the Balfour Sartor, have fallen very significantly over the past 1.5 years or so. I want to highlight that Evogene has and will continue to successfully navigate those difficult times despite the many challenges. Beyond that, the activities of our subsidiaries are adverting nicely and strengthened our belief that each generate significant value for the Evogene book -- to advance our cash position, as of end of the third quarter, we had a consolidated $38 million on Evogene's balance sheet. We expect that based on our business plan, it will be enough and (inaudible) late 2024.

The strategic step, we continue to pursue many fundraising for our subsidiaries and collaborations with nondilutive payments, we believe will ultimately extend this runway out further. With respect to fundraising for the subsidiaries, we are working hard to identify and bring value-adding partners and investors. This would achieve several words at the same time. Any investment at a subsidiary level brings a new source of capital to the subsidiary and lowered the demand on Evogene balance sheet, enabling us to extend our cash resources. It brings a value-adding partner to the subsidiary, which has a strong share in the ultimate success and upside of that subsidiary. And for Evogene specifically, the valuation at which the investment is made, allow us to identify shareholders' value by demonstrating its inherent financial value and image holding in it.

In parallel, we are pursuing collaborations for both Evogene and its subsidiaries, the basis of which are the tech engines for Evogene and the product under development for the subsidiaries. Such collaborations will include a revenue stream of nondilutive payments as well as extend Evogene’s potential market and establish market access for the product of our subsidiaries. I would like to now continue with an update on our subsidiaries. Starting with Lavie Bio, our subsidiary is focusing on developing at biological, utilizing Evogene's MicroBoost AI tech engine.

A key event during the third quarter was the investment into Lavie Bio by ICL a leading $11 billion New York listed global minimal company. ICL provides Lavie Bio with a $10 million investment of new capital for development activities. For Lavie Bio, ICL is much more than just an investor. The investment is part of the collaboration that will strongly broaden its product pipeline. I would like to repeat a statement made by ICL in the recent conference call with regard to the investment in Lavie Bio. Lavie Bio's unique approach, leverage big data and advanced artificial intelligence and our collaboration with them focused on developing Nobel prize (inaudible) products to enrich fertilizer efficiency.

Combining Lavie Bio and biological experience and cutting-edge technology with ICL advanced knowledge of fertilizer use and farmers need will help facilitate the development of new and innovative products for the agriculture-industry. I shared our vision that by combining Lavie bio's analogical expertise, Evogene’s MicroBoost AI technology with ICL fertilizer experience, the goal of our collaboration is to create a new type of bio-stimulant products to enrich fertilizer efficiency, a product which will be highly synergistic with ICL's existing product portfolio. This is the second leading global player to which Lavie is now partnered with. The other being Corteva and new listed $46 billion major agriculture company.

This quarter, Corteva and now ICL are fully aligned with us and all have a strong interest in Lavie Bio’s long-term success and growth. The ICL investment, combined with the fact that Lavie is now at the commercialization stage with its first product, (inaudible) enables us to reduce Evogene's financial resources focused on Lavie Bio. At the same time, it ensures that Lavie Bio is moving ahead at a full speed and have their resources to meet its full potential in line with our long-term strategy.

In October, Lavie Bio submitted the registration package to the United States EPA, the Environmental Protection Agency for LAV311. It's novel bio-fungicide product which is the final step prior to commercialization. LAV311 is a bio-fungicide, targeting foot Roth and powered based on novel bacteria, naturally presented in nature, which was selected utilizing Evogene’s MicroBoost AI. The standard time line registration tends to take 18 months, and we hope to soft launch for the 2024 growing season, pending the regulatory approval. All in all, especially in times of food security, increasing prices and macroeconomic uncertainty, Lavie Bio brings a strong solution to enhance global food quality, agriculture sustainability and increased productivity. I believe that Lavie Bio is in the right place at the right time and can attract strong value-adding investments even during the challenging times. Moving on to Biomica, our subsidiary, focusing on developing drug based on human microbiome, leveraging our MicroBoost AI tech engine.

Back in July, the first patient was built in Biomica's Phase I clinical trial for BMC128, Biomica's microbiome-based immune oncology drug candidate, a Trumbull Health Curve campus in Hysan, Israel. In recent weeks, we have now progressed to the serve patients out of 12 -- the trial is designed primarily to evaluate the tasting and tolerability of Biomica's BMC128. -- a consortium of microbes selected utilizing Evogene MicroBoost AI tech engine in combination with an immune checkpoint inhibitor in cancer patients. As the trial is open label, we expect preliminary results and a data readout in spring 2023 that the first few patients concluded their treatment programs. We are targeting to complete the trend in the later part of 2023.

We are greatly encouraged with the positive progress we are seeing in the broadened human microbiome drug-based industry, given the recent announcement made by service and Ferring with regard to the advancement in the regulatory process of the candidate (inaudible) by the FDA. Moving on to Canonic, our subsidiary focusing on developing many cannabis product, leveraging generator AI test engines. In September, the company announced the launch of its second-generation product with higher level of CHC and unique [tertment] profile. These new and improved products were the part using genetic markers, which our generator AI tech engine identified. In October, the sales of these products was initiated in the (inaudible) market with 2 new brands: synergy and combo, both with 24% TAC, while the maximum percentage of the TC allowed in Israel is 24.4%. The market feedback in Israel so far has been excellent. THC is the primary synactive ingredient in cannabis. -- surfing or plant compounds known to provide relief for many medical symptoms, including panels, anti-inflammation, anti-utility, antidepressions and more. They also influenced the Roma and the spend of cannabis florets.

In addition, in September, we announced a license agreement with a Portuguese cannabis cultivation company, Rovida for the consolidation in Europe of 2 of our new Cannabis line. Under the agreement, Rovita will cultivate market and sell products based on those varieties and will take economic royalties. Rovita has been our partner for cultivation and testing of our cannabis varieties in the EU throughout 2022. Their interest in broadening our relationship to a new stage is a testament to the quality of canonic varieties and to go visas belief in the commercial potential of our trend in the European market. Europe is a key trade market for economic with total medical cannabis market sales estimated at approximately EUR 400 million, while still at an early stage in its growth cycle. Finally, last week, we announced a change in leadership at Canonic.

Dr. Armand Heiman, CEO of Canonic, will leave the CEO position at the end of the year. He will continue to serve Canonic’s a member of the Board of Directors. -- now has been with economics since the beginning and was instrumental in developing our incredible market-leading products, and we are thankful we will continue to play a role from the Board level. Tamica appointed a alone who also serve as Evogene current Executive Vice President, Business Development; as Canonic's new CEO effective January 1, 2023, in power to is word in epogen. -- economic expense in sales in Israel and globally. I believe that young strong business development background and broad experience will enable Canonic to move on to the next stage in its growth in sales and development. To conclude my review on the subsidiaries, I would like to highlight Castera, our customer fee technology developer and focus on the latest announcement we released just a few days ago.

Plattel Oil and its derivatives have a wide range of users today in a growing $1.2 billion market worldwide. Applications include oil for lubricants, industrial human health, such as cosmetics and plastic polymers giving it high durability and elasticity and store for biofuel. Global demand for biofuel is increasing. As we look to replace fossil fuel with biofuels, such as those drugs from castor beans, we will see an increase in the demand for castor oil. Castor beans had high oil and energy content and giving extensive environmentally friendly cultivation practices, which can serve as an effective source for the biofuel industry. The (inaudible) announcement informed it has signed a long-term exclusive production and distribution agreement with Titan Caspar, A Zambian cultivator and distributor of castor oil. This agreement is the first and mean important step in leveraging Castera technology into the African continent. Titbi provides Castera royalties on the sale of its castor oil products, which are expected throughout Zambia and the surrounding Southeastern Africa region, starting in 2023.

In summary, -- as the group, we have met several important milestones in the past few months and the inherent value of our subsidiaries continued to increase. It shows that our hard work in building, investing in and strengthening our subsidiaries, all of which are leveraging our underlying computational predictive biology tech engine is the right strategy and is creating value. At the same time, our cash position is strong, and we believe is more than adequate to weather the current capital market volatility. Our midterm target is that each subsidiary will have its own financial resources to support its activities until its success while its Evogene in addition to being a major shareholder, we will continue to play a major role in maintaining and building the competitive advantages through our tech engines. In parallel and just as importantly, we are targeting and exploring the potential to establish new partnerships and activities that can penetrate from our technology. We hope to highlight more successes in the coming quarters. That ends my summary. And now over to Yaron for the financial review, Yaron...

Thank you, Ofer. I will now provide the financial summary. Evogene continues to maintain a solid financial position for its activities with approximately $38 million in consolidated cash, cash equivalents and marketable securities as of September 30, 2022. Approximately $12 million of Evogene’s consolidated cash is appropriated to its subsidiary, Lavie Bio. We do not have any bank debt. During the third quarter of 2022, the consolidated cash usage was approximately $7.3 million or approximately $4.7 million, excluding Lavie Bio. To date, in the first 9 months of the year, our consolidated cash burn was $25.9 million, which included $3.3 million from the impact from foreign exchange and the decrease in market value of marketable securities on Evogene's balance sheet. For the full year of 2022, excluding the impact from foreign exchange differences and the change in market value from marketable securities, we expect our consolidated cash burn rate to be in the range of $27 million to $28 million. We are aiming to reduce the cash burn in 2023 and are currently building our budget. We hope to provide you with more color in our next conference call in February of 2023.

I would like now to highlight some specific items on the P&L. Revenues for the third quarter was $466,000 in comparison to $151,000 in the same period the previous year and were primarily due to revenues recognized the collaboration agreement of one of our subsidiaries. R&D expenses for the quarter, which are reported net of nonrefundable demands received was $5 million in comparison to $5.8 million in the same period the previous year. The main contributors to R&D expenses will alibis activity, supporting the production and commercialization of its inoculant product and Biomica's ongoing Phase I trial. Business development expenses were approximately $0.9 million for the first quarter of '22, 2022 in comparison to $0.8 million in the same period the previous year.

G&A expenses were $1.6 million in the third quarter of 2022 in comparison to $2 million in the same period in the previous year. Operating loss for the third quarter of 2022 was $7.1 million in comparison to an operating loss of $8.6 million in the same period in the previous year. The net loss for the first quarter of 2022 was $7.2 million in comparison to a net loss of $8.3 million in the same period in the previous year. As Ofer mentioned, our business plan is to pursue strategy to strengthen Evogene's consolidated cash position, ensuring our subsidiaries are well capitalized. With that, both Ofer and I would now like to open the call for any questions you may have. Operator...

Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session (Operator Instructions) Please stand by while we poll for your questions. The first question is from Kristen Kluska of Cantor Fitzgerald.

So the first one I had is, if you could please elaborate more on your business plan, what specifically are you changing or deprioritizing in order to extend your cash balance now for 2 years? And could you speak to with subsidiaries in particular, you think there could be some near-term opportunities for nondilutive fundraising, whether that's your partnership or other items?

Thanks, West. This is Ofer. I will start by addressing the second part of your question. So, I think that in the short term, so on the companies that there are more better position for fundraising is Biomica. But I believe that next year, I'm expecting that as another 2 companies will be on the road for additional fundraising. I think that the amount of money we probably it's nice, what we raised the $10 million, but we should target for a higher amount. And I think that also economic or a plan should start the process of fund raising as well. So, for the short term, I will put more emphasis on Biomica. -- but midterm, I think that another company should initiate the process of the fundraising. This is with respect to find it in respect to nondilutive for retrans, I think that atelier, there is the company such as Alan and BigBio also colonic they are in a good position to move forward with it. And also, Caterra as I mentioned lately, this field of cantina, again, very interesting due to increased demand in the area of biofuel. The first question was related, can you remind me what was it what the activity means we are planning to reduce.

So, I think that with respect to the activity that we're going to reduce that -- if you remember, as you probably remember, according to our business plan, we are all the time looking for a new activity, new initiatives that can benefit from our technology. So, this is probably something that we will reduce significantly the level of activity, meaning the business development and maybe developing technology, which could be relevant for new filter activity. So, this is probably we are going to put on hold, and we will focusing mainly on our existing activities and put them further. As an example, in the past, we have an activity focusing on producing protein in plant to replace the ag protein. This is a small port activity that we conduct in Evogene. But probably now this is an example that probably will put it on hold until we will have additional financial result to expand our activity. So -- and when you're talking about the companies such as Aviva, Veronica and also can.

So, we are not going to increase the budget, but we are not going to be does significant. We are not going to refuse it. Canonic, as an example, probably we are going to focus more on the commercial activity. The main reason is that what we succeed to build until now is quite amazing in the research level, and we have some very, very promising Barasi, -- some of them we already launched. And I can update that we are quite happy with the launch of this pay product, and I hope that we'll be able to see some of the effects on the revenue for next quarter. But -- so there will be a shift from focusing on R&D activity and trying to develop a variety for or to the medical aspects of the cannabis products and more focusing on what we already developed, which there is a clear current demand in the market for ITP product, and we already have a nice variety collection of products already available. So, this is what we are going to do, focusing more on the commercial aspects and the undone asset. I hope I addressed your question.

Yes, it does Ofer. And then can you give us some context as to what we could expect to see in the spring 2023 update for Biomica, -- is this primarily going to focus on safety? Or do you think you'll get some crews into early efficacy signals at this time? And then are you targeting to present at a medical conference in the spring.

So actually, the reason that Elran is not participate in this call, as an example, is because we participate in a conference in Boston in a very important panel. And then I would see a very codependent. And yes, we will particularly even conferences, and we are going to publish it and we're going to present the results. With respect to what I'm expecting in spring 2023 the clinical trial is focusing on safety. So of course, we are going to disclose information about safety. But the thing that you can already see some indication that we are in a good shape. Otherwise, we won't be able to move to the third patient. And hopefully, after we will receive positive fee second and the third, we can move automatically to recruit the additional 9 patients.

So, I think that, again, it's -- you never know until you have on the results, but safety, this is definitely what we're going to focus on. And I think that we -- at least until now we are in good shape. With respect to efficacy. So of course, if we are lying to see some indication for efficacy, if we are going to discuss this information. Please remember that the patients that we are recruiting for this experiment, they are all suffering from cancer. They all received already on treatment of Opdivo for KEYTRUDA that it didn't help them. And now they're entering into another cycle of treatment with this Opdivo, but this time with our micro.

So, if we are going to see some positive effects, it's really going to have a lot of meaning and make us very, very excited. So, we are not targeting for this because the number of patients is relatively very small, it's only well. But if we are going to see some indication like this, of course, we will share this information with the public.

Okay. And last question for me is, if you could talk a little bit more about the work that you're doing to understand the financial resource requirements moving forward for each of the subsidiaries.

So, we have each of our CEO is establishing a clear target for '23 and '24, each one of our subsidiary is building the required budget. And we are building our financial plan according to this need. And I think that based on -- in the financial plan that we already established I think that we are hoping in a good shape. And as I said, I can't disclose much, but I believe that at least some of our subsidiaries will be able to raise money in the short term or maybe in the midterm. And this is definitely will support their activity. And I can disclose more than this, but we are aware to the challenging environment and the fact that we're currently keeping all of the activity moving forward, I think it should send a message that we are confident on our ability also to fund this activity is during next year. And I hope that if our plan will materialize, we will be all with big smile also for 2024.

Great. Thanks again.

If there are any additional questions, (Operator Instructions) -- there are no further questions at this time. Before I ask Mr. Ofer Haviv to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin 2 hours after the conference. In the U.S., please call 1 (888) 326-9310. In Israel, please call (039255-91-901. Internationally, please call 9723 9255-901. Mr. Haviv, would you like to make your concluding statement?

Yes. Thank you. Thank you all for joining the call today. I look forward to updating you on our progress in our next call. Thank you once again.

Thank you. This concludes Evogene’s Third Quarter 2022 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.