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Operator
Ladies and gentlemen, thank you for standing by. Welcome to Evagen's first quarter 2020 results conference call. All participants are present, listen only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 26, 2020. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evigen Management will constitute forward-looking statements that relate to future events, risks, and uncertainties regarding business strategy, operations, and future performance and results of Evigen. I encourage you to review Evigen's filings with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in their earnings releases, which states that statements made in those earnings releases and in a 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. All forward-looking statements made herein speak only as of the date of the announcement of the results. Many of the factors that impact whether forward-looking statements will come true are beyond the control of Avigen and may cause actual results to differ materially from anticipated results. Avigen is under no obligation to update publicly or alter forward-looking statements whether a result of new information, future events, or otherwise, except 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 like to turn the call over to Ofer Chaviv, Avidgen's CEO. Ofer, please go ahead.
Evagen
Thank you, and good day, everyone. We appreciate you joining us today for our first quarter 2020 conference call. Joining me today is Mr. Rick Reiner, our CFO, and Mr. Gadi Ben-Nissim, our newly appointed Executive Vice President for Corporate Development. I would like to take this opportunity to welcome Gadi to the team. Gadi brings more than 20 years of versatile international commercial and strategic experience in the pharma industry, mostly with Teva Pharmaceuticals, where he held various senior leadership positions. I'm confident it would be a very large asset to our team. Thank you Ofer. I'm happy to join this exciting company and look forward to working together. Likewise, Dabi. I will begin my comments today by addressing the impact of the coronavirus outbreak on Evogen. I will then briefly give some insight into our rebranding which we unveiled last week. and provide an update on some recent developments. Following my comments, Dorit will summarize Abogen's financial results for the first quarter of 2020. We will then open the call for your questions. As mentioned, I would like to address the impact of the COVID-19 pandemic on the company's activities. I want to assure our shareholders that the company and its employees are working in compliance with the restrictions and guidelines provided by the Israeli health authorities in order to ensure the health of our employees. I am pleased to share that Evogen's operations have not been severely impacted and that we have almost resumed full activity in line with the official guidelines. As of today, we have not found it necessary to change any of our main targets and goals for 2020 and will update if this changes. I would also like to take this opportunity to thank our employees for the great effort and commitment during this challenging time. At the beginning of the outbreak, in order to strengthen the company's ability to withstand the impact of COVID-19, the company initiated a temporary wage reduction across the board. In addition, we decided to cut back on secondary activities that are not directly connected to our near-term milestones. These adjustments in expenditure and an expected increase in revenues attributed to the Collaboration Act plans signed with Coteva have allowed us to not only maintain our expected cash burn rate of $14 to $16 million, for 2020 as initially estimated, but potentially reduce it even further to $13 to $15 million. These guidelines excluded our subsidiary, La Vie Valle. I would now like to discuss Evogen's rebranding announced last week. The new branding reflects the company's expanded vision and new business model and will facilitate clear communication with potential partners and investors. This is a significant step in our evolution, and we are happy to share a new investor presentation and additional material available in our filings and on our website. I would like to give some insight on why we believe the company needed this rebranding to better reflect its current offerings. Established as a spin-off from CompuGen in 2002, Evogen was initially focused on applying its capabilities in computational biology in agriculture and more specifically on improving seed traits via genomic modification. Evogen's previous logo was based on a leaf and a DNA helix and was a good reflection of the company's activity during this period. This focus on improving seed trade based on genomic modification shifted following changes in this market and in consumer taste that led Avogen to broaden its vision and focus on several new target markets. In the years that followed, the company's management took a series of steps that paved the path to its new value proposition. Two key decisions underlie this development. The first was expanding Evogen's technological capabilities in computational biology to include development of products based on microbes and small molecules in addition to genomics, and the second was to expand Evogen's focus beyond agriculture to human health. This decision led to the creation of the two main pillars of our new offering. Our computational biology technology, better known as the CPB platform, and our rapidly growing subsidiaries. I would like to elaborate more on these two pillars. Let's start with the first pillar, the CPB platform. After two decades of hard work, tens of millions of dollars invested, and validations in the form of collaboration with strategic partners, Evogen now holds what can be considered one of the leading computational biology platforms which aims to revolutionize product development in life science industries, the CPB platform. Using our CPB-based solutions in the discovery and development of life science-based products is expected to substantially increase the probability of successful product launch while reducing the time and cost of development. A deep understanding of biology combined with destructive computational technologies including artificial intelligence and big data have led to the birth of this powerful platform. The platform provides tailor-made solutions for the discovery and development of products based on microbes, small molecules and genetic elements for life science based industries including human health, agriculture and industrial applications. The new logo aims to reflect this expansion in our capabilities and our mission. with world-leading companies across diverse market segments focusing on different product types. In respect to the second pillar, our subsidiaries. With the establishment of our powerful technology, we decided that in certain market segments, we will utilize the TPV platform internally to build a product pipeline in such segment The subsidiaries we established over the past few years were built on these internal product pipelines. Each subsidiary was established to advance existing and future candidate products towards commercialization in a defined market segment, using of course the CPP platform through an exclusive license for its field. The subsidiary may decide to develop and commercialize its products independently or through strategic collaboration. Today, Evergen has five such subsidiaries, Biomica and Canonic in the area of human health, ActPlanet and ZabiBio in the area of agriculture, and Castera in the area of industrial applications. I am proud of our subsidiaries and what they have accomplished in such a short period of time. The level of maturity those subsidiaries have reached and the rapid advancement achieved in product development is a direct result of the use of the CPB platform. It is important for me to note that each subsidiary has several upcoming milestones which mark their development roadmap and these can be viewed in our presentation filed last week. I'm happy to share that during the first quarter Axlanus reached one of these milestones with the announcement of their collaboration with Coteva for the co-development of new mode of action herbicides based on herbicidal candidates discovered by Axlanus. We see this collaboration to hold great promise. Other achievements announced by our subsidiaries during the first quarter of 2020 included Biomica entering an agreement with BIOS Industries for scale-up and GMP production of drug candidates BMC-121 and BMC-127 for its immune oncology program, which is intended to support the preparation toward anticipated first-in-man proof-of-concept clinical trials. Lastly, CANONIC. announced an agreement with Hadassah Medical Center for preclinical studies to support the development of Canonix medical cannabis products, focusing on inflammatory indications at Professor Ruben Ord's laboratory. I am very pleased with the progress we have made so far as a company and am certain that we have a solid strategy that will prove fruitful over the next few years. We will continue to develop the CPB platform, harnessing our technology to forge new strategic partnerships, while in parallel holding each subsidiary accountable to their milestones and supporting them in any way possible. We are ready to benefit as a shareholder from our subsidiaries as their value is unlocked and becomes apparent. With that, I would now like to turn over the call to Dorit.
Rick Reiner
Thank you, Ofer. I will begin by reviewing our cash balance. As Ofer described earlier, the company has taken certain measures to mitigate the impact of the COVID-19 pandemic on the company, including a temporary reduction in salary-based expenditures and a cutback in secondary activities. In addition, the company expects an increase in revenue for the remainder of 2020 Following the collaboration agreement, Aktenos signed with Corteva during the first quarter of the year. These adjustments in expenditure and an expected increase in revenues have allowed us not only to maintain our expected cash burn rate for 2020, but to potentially reduce it to $13 to $15 million. These guidelines exclude cash usage of our subsidiary, Labdi Bayot. Evogen continues to maintain a strong financial position for its activities, with approximately $40.6 million in consolidated cash, cash-related accounts, and bank deposits as of March 31, 2020. Approximately $16 million of Evogen's consolidated cash is appropriated to its subsidiaries, LaviBio. Consolidated cash usage amounted to approximately $6.3 million during the first quarter of 2020, or $4.6 million is excluded in LaviBio. The cash usage during the first quarter includes prepaid expenses and non-recurrent payments of approximately $0.8 million. The company does not have bank debt. Let's now turn to the statement of operation. As discussed in prior calls, Evergen's revenues to date have consisted primarily of research and development revenues. These revenues represent R&D cost reimbursement and milestones under our various collaboration agreements as reflected in the cost of revenues. The majority of these agreements also provide for royalties or other forms of revenue sharing from successfully developed products. R&D expenses for the first quarter of 2020 were $4.6 million, including a non-cash expense of $0.9 million for amortization of SharePay's compensation in comparison to $3.5 million, including a non-cash expense of $0.1 million for amortization of SharePay's compensation in the first quarter of 2019. R&D expenses in this quarter were attributed to product development activities of the company and its subsidiaries, including fermentation, lab work, and preclinical studies carried out by third parties, as well as expenses related to computational work. Business development expenses for the first quarter of 2020 were $1 million, including a non-cash expense of $0.7 million for amortization of share-based compensation. In comparison to $0.5 million, including a non-cash expense of $0.1 million for amortization of share-based compensation in the first quarter of 2019. General and administrative expenses for the first quarter of 2020 were $1.3 million including a non-cash expense of $0.3 million for amortization of share-based compensation in comparison to $0.9 million, including a non-cash expense of $31,000 for amortization of share-based compensation in the first quarter of 2019. Operating loss for the first quarter of 2020 was $6.9 million, including a non-cash expense of $1.9 million for amortization of share-based compensation, mainly attributed to auctions granted to La Vie Bio employees, in comparison to $4.7 million, including a non-cash expense of $0.2 million for amortization of share-based compensation in the first quarter of 2019. Net financing expenses for the first quarter of 2020 was $0.4 million in comparison to net financing income of $0.9 million in the first quarter of 2019. The increase in the net financing expenses during the quarter is due to the translation of the Israeli shekel denominated cash and marketable securities to U.S. dollars. The loss for the first quarter of 2020 was $7.2 million in comparison to loss of $3.8 million during the first quarter of 2019. This increase is attributed to an increase of $1.7 million in non-cash expenses, mainly related to amortization of share-based compensation in the VBIO and to net financing expenses in comparison to net financing income in the corresponding quarter of 2019. With that said, we would now like to open up the call for any questions you may have. Operator?
Operator
Thank you, ladies and gentlemen. At this time, we will begin the question and answer session. If you have a question, please press star 1. If you wish to cancel your request, please press star 2. If you are using speaker equipment, kind of dip the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. I repeat, if you have a question, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we hold for your questions. There are no questions at this time. Before I ask Mr. Opakadiv 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 1-888-326-9310. In Israel, please call 03-925-5904. Internationally, please call 972-3925-5904. Mr. Khabib, would you like to make your concluding statement?
Evagen
Yes, thank you. So thank you all for joining the call today. I look forward to updating you with our progress over the next few months. Thank you and good day, everyone.
Operator
Thank you. This concludes Evidence First Quarter 2020 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
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