Evogene Ltd. (EVGN) CEO Ofer Haviv on Q1 2021 Results - Earnings Call Transcript
May 26, 2021 2:32 PM ETEvogene Ltd. (EVGN)
Evogene Ltd. (NASDAQ:EVGN) Q1 2021 Results Conference Call May 26, 2021 9:00 AM ET
Company Participants
Ofer Haviv - Chief Executive Officer
Arnon Heyman - CEO Canonic
Dorit Kreiner - Chief Financial Officer
Ido Dor - CEO, Lavie Bio
Conference Call Participants
Kristen Kluska - Cantor Fitzgerald
Brett Reiss - Janney Montgomery
Operator
Ladies and gentlemen, thank you for standing by. Welcome to Evogene's First Quarter 2021 Results Conference Call. All participants are present in listen-only mode. Following management's formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, May 26, 2021.
Before we begin, I would like to caution that certain statements made during this earnings conference call by Evogene's management will constitute forward-looking statements that relate to future events. I encourage you to review Evogene's filings with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in today's earnings releases, which states that statements made in the earnings releases and in the similar way on this earnings conference call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For example, Evogene is using forward-looking statements. In this call when it discusses its expected paths to value creation, its and its' subsidiaries expected trials, studies, product advancements, commercializations, launches, pipelines, milestones, potential collaborations and other plans for 2021 and 2022, the potential advantages of its technology and its anticipated entry into new fields of activity.
All forward-looking statements made herein speak only as of the date of the announcement of results. Many of the factors that impact whether forward-looking statements will come through or beyond the control of Evogene and may cause actual results to differ materially from anticipated results. Evogene is under no obligation to update publicly or alter our forward-looking statements whether as a result of new information, future events or otherwise, except as otherwise required by law we expressly disclaim any obligation to do so. More detailed information about the risk factors potentially adversely impacting our performance can be found in our reports filed with the U.S. Securities and Exchange Commission.
That said, I would now like to turn over the call to Ofer Haviv, Evogene’s CEO. Ofer, please go ahead.
Ofer Haviv
Thank you, and good day, everyone. We appreciate you joining us today for our first quarter 2021 conference call. Joining me today are, Mrs. Dorit Kreiner, our CFO; and Mr. Ido Dor, the CEO of our subsidiary Lavie Bio, which focused on ag-biologicals, the fastest growing segment in the ag-industry today.
Following my initial remarks, Ido will provide an update about Lavie Bio and following Ido the weekly summaries Evogene financial results for the first quarter 2021. We will then open the call for your question.
My remarks in today's call, we focus on our strategy for value creation to the Evogene subsidiary and its recognition by the capital markets. Before I reach this topic, I would like to recap the main topics I covered in the previous analyst call.
Then, our broadly applicable Computational Predictive Biology platform, the CPB, and the three engines rely on this platform MicroBoost AI, ChemPass AI and GeneRator AI. If they didn't many times, we believe these capabilities provide a significant competitive advantage in the discovery and development of life-science based products in multiple industries.
The CPB platform and the three engines aim to reduce time and cost of product development and most importantly to improve the provision for success to reach commercial product.
Second, our proven ability to create subsidiaries in multiple life-science based fields by utilizing the CPB platform industry engine, which is subsidiary demonstrating its ability to rapidly discover and develop very promising product pipelines. We are pleased to see our subsidiaries receiving growing recognition for this pipeline by major companies in the field of focus.
Lastly, I stated our intention to continue to initiate new activities in additional life-science based fields. In our last call, I mentioned by this new field, we are currently evaluating including using MicroBoost AI to identify microbes for the aquaculture industry and using ChemPass AI for drug optimization for human health.
Moving now to what I would like to focus on today, value creation within the evidence subsidiaries and market recognition of this value. Investing last time the best companies such as those within the Evogene Group present both financial advantages and risk for their investors.
The primary advantage is that in general if successful life-science based products can be very profitable. In addition and very importantly for investors, companies with promising life-science based products in the pipeline, like Evogene subsidiaries can have very significant market value long before the products are actually commercialized.
On the other hand, the primary risk in investing in life-science based companies is that such products typically have very high failure rate. Furthermore, those that are successful generally take a relatively long time to be commercialized.
With respect to their advantage, as stated, each of our subsidiaries has a very promising product pipeline and the activities are aiming to advance the product candidates towards commercialization. In 2021 and 2022, all our subsidiaries have a significant milestone for pipeline advancements and some of them are even expected to reach first product launch.
We believe that announcing the achievement of such milestones as they are reached will enable the capital markets to properly appreciate the value created by the subsidiaries and will also be reflected in Evogene's value recognition.
Turning to the risk, we believe that the technology utilized by our subsidiaries, which relied on Evogene unique technology, provides a substantial advantage with respect to dealing with the challenges of high failure rates, and time to market.
We believe that, the power of the technology is demonstrated and can be recognized to the rapid progress of our subsidiary, discovery and development pipeline. Moreover, any strategic collaboration such as between AgPlenus and Corteva, or equity investments in a subsidiary by subsidiary partner, such as Corteva's investment in Lavie Bio, is a vote of confidence in the unique advantages of our technology.
As previously disclosed, some of our subsidiaries are targeting to achieve additional strategic collaborations during 2021 and 2022. We expect that such collaborations will enable the capital markets to further recognize the unique technological value of our subsidiaries, thus reflecting on Evogene's value, as well.
I'm pleased to report that both Evogene and our subsidiaries have been progressing in accordance with the plan, and I would like to highlight the following events that took place since the beginning of the year.
Biomica, Evogene's subsidiary focusing on developing innovative microbiome-based therapeutics, announced additional positive pre-clinical results in its immuno-oncology program demonstrating efficacy of its live biotherapeutic product consortium BMC128, this time in melanoma.
As demonstrated in our previous slide, the treatment with BMC128 in combination with immune-checkpoint inhibitors, immune therapy, significantly enhanced anti-tumor activity. We are very excited with the results of this study, demonstrating that the effectiveness of BMC128 in treating additional set of solid cancer tumors. We look forward to providing incremental updates as we work towards the first human proof-of-concept clinical trial later this year.
Canonic Ltd, our subsidiary focused on the development of medical cannabis products announced that it entered into an agreement for the production and distribution in Israel of medical cannabis products with Tikun Olam-Cannbit Pharmaceuticals Ltd. These agreements are expected to support the successful launch of Canonic's first product in 2022.
Evogene Ag-Seed division focusing on discovery and development of seed traits announced a collaboration agreement with a U.S. company, Plastomics, targeting novel insect control trait for soybean. As part of the collaboration, Plastomics utilizing its disruptive new technology will introduce Evogene insect control gene, demonstrating new modes of action into soybean.
There was a dire need for new mode of action insect control traits and we are looking-forward to addressing it through our joint efforts.
Lavie Bio, our subsidiary, focusing on ag-biological through the introduction of microbiome-based products announced the joining of Mr. Russ Putland, as VP Commercial. Russ brings significant commercial experience to the Lavie Bio team and together with management will prepare the Company for its next phase focusing on commercializing its products, starting from 2022.
With this, I hand over to Ido, Lavie Bio's CEO. Thank you, Ido?
Ido Dor
Thank you, Ofer. I would like to begin by introducing myself. My name is Ido Dor and I serve as Lavie Bio's CEO, and I joined Evogene at the end of 2011 and held value of business and manager and related those, since 2015 I lead their biological division within Evogene, which we started off as Lavie Bio on February 2019.
My background is in engineering and I held MBA and started my career in management consulting forward roughly six years followed by additional six years in leading sales and channel organization for SAP in Israel.
I will start with a short introduction of Lavie Bio, which is addressing the need for a more sustainable food system with stronger focus on the quality of food and nutrients of the produce. In the last few years, we have seen a trend where consumers are more aware and demand better practices to drive sustainability and food quality in a way the folks influences the farm.
However, the fact that in agriculture farmer used more than $200 billion every year in fertilizer and chemicals, a core protection in order to secure production is quite significant conflict and this conflict needs to be balanced and shifted, and ag-biologicals are one of the key solutions in driving this revolution of improving the way we produce our food.
Lavie Bio is focusing on improving food quality, sustainability and ag productivity by harnessing the power of microbiome technologies to develop innovative ag-biologicals products. Ag-biologicals are externally applied products from biological sources such as microbial which are microorganisms, and naturally derived biochemicals designed to improve crop productivity. The microbiome is a sub-segment and resells to the microbial population living closer or within the plant or other organisms. These microorganisms have unique functional composition that Lavie Bio is harnessing in order to develop novelized biological products.
Lavie Bio's approach is focused on biology-driven design or BDD for the discovery optimization and development of effective stable and cost-effective microbial based ag-biologicals. Lavie Bio's BDD platform facilitate and accelerate the development of microbiome-based products through the decoding of complex microbiome/host interaction and the utilization of key genetic elements, which are functions governed this interaction for product development.
Then Evogene's technologies for the establishment of the BDD platform are the MicroBoost AI engine, a component of Evogene CPB platform and the Taxonia platform which enhances genomics informatics to develop a transformative application to agriculture acquired as part of the Corteva investment in Lavie Bio.
Lavie Bio is focused on developing two main types of products, bio-pesticide which are ag-biologicals for crop protection, addressing biotic stressors such as insect diseases and weeds. And also biostimulants, which are biological ag-biological for crop enhancements directly impacting crop yield or biotic stressors the tolerance of distance.
In 2020, we saw significant advancements in Lavie Bio product pipeline. In December 2020, Lavie Bio announced that its stimulant candidate 211, LAV211 was successfully advancing into the pre-commercial phase, following the field trials in target locations, meeting development criteria and outperforming trial controls, which include competitive benchmarks. Product launch is expected in 2022.
In October 2020, we also shared results demonstrating the power of bio-pesticide candidate LAV312 to protect grapes from Botrytis based on the results obtained from multi-location trials in target geographies. We expect this product to reach the market in 2024. For further updates on the pipeline status and advancements, I would also like to guide you to our publication from December 2020, which has a broader view of all of our products.
Since the beginning of 2021, Lavie Bio has continued to progress well with this product pipeline and it might control 2021 out, first to conduct pre-commercial trial for its bio-stimulant products for spring wheat and to finalize all the stages planned in order to commercialize in 2022. And second to continue product advancements on its bio-fungicide product for fruit rot, LAV311 and LAV312 towards regulation, which is planned to be filed in the first half to 2022.
With respect to the first milestone, the LAV211, we are in the last season before launch, working with our early farmer adaptive network, conducted commercial trials and the commercial practices in North America and specifically North Dakota. In parallel, we are working to extend the product to new course and territories and establishing the commercial tempo 2022 initial phase.
To this end, I'm very pleased with the joining of Mr. Russ Putland to our team as VP Commercial. Russ brings significant commercial experience to the Lavie Bio management team including more than 30 years of leadership within large multinational ag companies. Russ will lead Lavie Bio's commercial strategy and execution focusing on establishment, the relationship and partnership with strategic and channel partners, driving revenue for ag-biologicals, ag-stimulants and bio-pesticide product line.
With respect to the second life on our first bio-fungicide target, this year includes multiple trials in Europe, U.S. and South Africa that will help us to further improve the formulation the cost of production. We target to advance formulation and production technology by the end of the year, and we will be able to find the leading candidate regulation in the first half of 2022.
In addition, we see significant progress, which we are excited about in each of our other pipeline activities. The [mini] program corn [indiscernible] seedling diseases and bio-stimulants for crop other than wheat. I am pleased to update that our collaboration with Corteva is developing with our focus product process.
In addition, I would like to update that we are actively engaged in seeking partnerships for accelerating and expanding our product pipeline and creating new business opportunities benefiting from our robust technological capabilities. These efforts will focus on one or more of the following.
The first one is early commercialization of certain of our pipeline candidate through a partnership. And the second one is optimization of partner's candidate product using our ability platform. I will keep reflecting on the progress as we move forward with this commercial effort.
To summarize, the opportunity we found in ag-biological market for our product is unique and has significant potential. The team and I believe we are on track to meet the Company goals and are excited to be close to our first product launch.
With that I would like to turn the call over to the Dorit. Dorit?
Dorit Kreiner
Thank you, Ido. I will begin by reviewing our cash balance. Evogene maintain its strong financial position for its activities with approximately $70.1 million in consolidated cash, cash related accounts, bank deposits and marketable securities as of March 31, 2021. Approximately $11.8 million of Evogene's consolidated cash is appropriated to its subsidiary Lavie Bio.
During the first quarter of 2021, our consolidated net cash usage excluding 27.1 million net raised to at the market offerings initiated January 2021 and concluded during February 2021, was approximately 5.2 million or 4 million, if excluding Lavie Bio.
The low range case usage during the first quarter is mainly attributed to amount receipts for reimbursement of expenses for our collaborator. In March 2021, we announced a new ATM, and we had not sold any shares under this offering as of the end of the quarter. The Company does not have bank debt.
Let's now turn to the statement of operations. R&D expenses, which are reported net of grants received were approximately 4.3 million for the first quarter of 2021, including a non-cash expenses of 0.3 million for amortization of share based compensation in comparison to 4.6 million, including a non-cash expenses of 0.9 million for amortization share-based compensation in the first quarter of 2020.
In the first quarter of 2021, the actual R&D expenses slightly decreased, mainly due to the decrease in share based compensation. Business development expenses were approximately 0.6 million for the first quarter of 2021 including non-cash expenses of $0.1 million for amortization of share-based compensation in comparison to $1 million including a non-cash expenses of $0.7 million for amortization of share-based compensation in the first quarter of 2020.
General and administrative expenses for the first quarter of 2021 were $1.5 million including a non-cash expense of $0.1 million for amortization of share based compensation in comparison to $1.3 million including a non-cash expense of $0.3 million for amortization of share based compensation in the first quarter of 2020. The increase is mainly attributed to the increase of the costs of directors' and officers' insurance, partially offset by a decrease in non-cash expenses of amortization of share-based compensation.
Operating loss for the first quarter of 2021 was $6.3 million, in comparison to $6.9 million for the first quarter of 2020. The decrease in operating loss during the first quarter is attributed to the increase in revenues from collaboration agreements compared to the first quarter of 2020 and due to the decrease in aforementioned amortization of share-based compensation expenses.
The loss for the first quarter of 2021 was $7.1 million in comparison to a loss of $7.2 million during the first quarter of 2020. The slight decrease in the loss for the first quarter is attributed to the reduction in operating loss, offset by an increase in financing expenses mainly attributed to exchange rate differences and revaluation of pre-funded warrants.
With that said, we would now like to open up the call for any question you may have. Operator?
Question-and-Answer Session
Operator
Thank you. Ladies and gentlemen, at this time we begin the question-and-answer session. [Operator Instructions] First question is from Kristen Kluska of Cantor Fitzgerald. Please go ahead.
Kristen Kluska
Thank you. Thanks everybody for taking the questions. Have some for Lavie Bio. So with the recent announced hire of Mr. Putland as VP Commercial, how are you thinking long-term across your pipeline, which markets and geographies and products might be most appropriate for you to bring forward versus out of a partner? And then what are some of the key priorities he shared for the Company upon joining?
Ido Dor
This is Ido. Well a rough person is joining to take a broad leadership of all the commercial activities. As we disclosed, the first target launch is targeted for North America, focusing on spring wheat and it's happening already in 2022. In parallel, we're working quite extensively on the second launch, which is planned there for the new generation product of bio-fungicide during 2024. Russ brings a lot of experience and knowhow from retail level from producer level and from our company levels, along more than 20 years of experience, mainly North America and then Canada and the U.S., but also in other parts of the world. Naturally, our products are targeting beyond North America and last we release also this part of the activity.
Kristen Kluska
Thanks. And then for LAV312, on the back some of the data you recently reported here. Could you talk about what the latest has been on the formulation technology and the fermentation protocol? And in light of what you've already seen here, wondering if you've is that internally established a goal of what you might hope to see with some of these changes?
Ido Dor
Yes, okay. So yes, we are working heavily on stabilizing the formulation extending the shelf life, reducing the cost of goods and also certain optimization approaches that targeting to increase the potential of the product for maybe additional crops and additional diseases.
All of that is being validated in this season across multiple trials, multiple patients in Europe and U.S. and also plans for later this year, also in the Southern Hemisphere and the experiments we conducted in South Africa
All of that should bring up to the situation where we finalize the formulation by the end of this year. So, we have few leading formulation both for LAV312 and both for LAV311. And once we finalized the leading formulations then we will choose the best of them, and these are the formulations that will be leading dossier that we are going to file in the first half of next year formulations.
Operator
[Operator Instructions] There are no further questions at this time. Therefore, I ask Mr. Ofer Haviv to go ahead with his closing statement.
Ofer Havi
Hi, operator. We actually have some write-in questions we'd like to go through, if that's okay.
Operator
Okay. Continue with the write-in questions.
Unidentified Company Representative
Okay. So, this is Kenny Green from Edison Group. I'm part of the IR team at Evogene. So, we've had some write-in questions. I'd like to thank everybody who sent us questions for their continued interest. Our first question is about Biomica. When are we expecting to commence Biomica's first in human trials? How long would that trial be? And when do we expect those indication to results?
Ofer Haviv
Hi. This is Ofer, and I will address this question. So, Biomica is really advancing nicely with its ongoing activity with respect to the immune oncology program. The expectation is that in the second half of this year, we will initiate the first first-in-man clinical trial in this program, and we already in quite advanced stage in discussion with a few medical institution here in Israel. And the expectation is that, this study will reach to conclusion during next year and we'll allow us to initiate the next phase.
Unidentified Company Representative
Okay. Thank you. Second question about genomic. Do we intend for Canonic to receive exclusivity for their products and when can we expect Canonic's first sales?
Ofer Haviv
So, Canonic is there again, advancing very, very nicely. Actually, we just now announced the agreement with respect to producing the product and distributing it. And this is message of our confidence on reaching to our target. The original plan is to launch the product during 2022, hopefully the first part of this year, and we are feeling comfortable with this expectation. Just to remind you the first product is going to be from the MetaYield family. And the idea is to distribute this product in a different marketing channels including pharmacy. We even started with some pharmacy, as preparation for this event.
There is no expectations that there will be an exclusivity for specific pharmacy on marketing the product unless there will be fully committed to market the all quantity with the private we are looking for. But in this stage, we are not expecting for exclusivity at the first step. And as we mentioned in the past, this really market, this is just the first step. We start to look outside of Israel, as a next step forward Canonic product.
Unidentified Company Representative
Okay, thanks. Third question, Ido, it's a Lavie Bio questions. When can we expect first sales from Lavie Bio?
Ido Dor
Okay. So, the target is during the season of 2022. First product we target to sell is LAV211 and regarding specific timing along the year. So, we didn't disclosed what we are planning with respect to when we are planning to recognize the revenue. We are exploring few business models in parallel and the season is between April to November. So, somewhere on this, timeframe, I assume we will be able to disclose more, based on the model for revenue recognition that will need to apply.
Unidentified Company Representative
Okay, final write-in question back to Ofer. If you are going to publicly list one of your subsidiaries overseas, will you only look at the U.S. exchanges or other countries?
Ofer Haviv
So, when the time will come with respect to taking one of our subsidiaries public, and I'd say, it won't take too long. Probably, we will focus mainly on the American -- on the stock exchange in the state, NASDAQ probably, which this is probably the right place for a high tech and tech company like the one that we established here with the Evogene Group.
But we can also think about maybe other markets that could be relevant for the specific type of company. Now Canada used to be or maybe still one of the leading capital markets for cannabis industry. So, this is probably something that we will evaluate it as well. But the main, the major markets that we consider as places that we would like to register our companies is the New York markets and mainly NASDAQ.
Unidentified Company Representative
Okay, and that end the writing questions, and I'll hand back to the operator.
Operator
[Operator instructions] There are no further questions at this time. Before I asked Mr. Ofer Haviv, the next question is from Brett Reiss of Janney Montgomery. Please go ahead.
Brett Reiss
Thank you. The Lavie Bio commercial product that's going to be launched in 2022, are you going to have a North American distributor for that? And if so, who is it?
Ofer Haviv
We are exploring and in discussion with few optional North American distributors and we hope that we will be able to share more in the next few months.
Operator
There are no further questions at this time. Before I asked 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 two hours after the conference. In the U.S. please call 188-326-9310. In Israel, please call 03-9255-901. Internationally, please call 9723-9255-901.
Mr. Haviv, would you like to make your concluding statement?
Ofer Haviv
Yes, thank you. Thank you all for joining the call today. I look forward to updating you on our progress over the next few months. Thank you and good day everyone.
Operator
Thank you. This concludes Evogene's first quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.
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