Evogene Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Evagen's second quarter 2020 results conference call. All participants are present in listen-only mode. Following management's formal presentation instructs to pick events for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded August 5th, 2020. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evigenz Management will constitute forward-looking statements that relate to future events, risks, and uncertainties regarding business strategy, operations, and future performance and results of Evigenz. I encourage you to review Evigenz's silence with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in the 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 Security Certification Reform Act of 1995. 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 true are beyond the control of Evogen and may cause actual results to differ materially from anticipated results. Evogen is under no obligation to update, publicate, 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 obligations 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 the call over to Ofer Haviv, Evidence CEO. Ofer, please go ahead.

Thank you and good day, everyone. We appreciate you joining us today for our second quarter 2020 conference call. Joining me today is Ms. Dorit Weiner, our CFO. I will begin my comments today by addressing the impact of the coronavirus pandemic on Evogen. I will then provide a brief review of Evogen and its subsidiaries' primary expected value enhancing activities in the near future. Following my comments, the week will summarize Evogen's financial results for the second quarter of 2020. We will then open the call for your questions. With respect to the impact of the COVID-19 pandemic on Evogen's operations, I am pleased to say that, to date, the impact has been minimal. As of today, the company has resumed full activity. While we are fully operational, I wanted 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 and other applicable governmental authorities and will continue to do so. Although Avogen Group's internal operations have not been severely impacted by the ongoing pandemic, our ability to meet freely with partners and investors has been hindered over the past few months. We have attempted to overcome this limitation by conducting meetings over virtual platforms. I would now like to begin by giving the quarterly update. In May, Emberton announced its new branding, which marks the conclusion to the strategic change the company has been focused on over the past years. The goal of this change was to apply our world-leading computational biology capabilities to important new market areas both within and outside agriculture. Our unique computational biology capabilities aim to revolutionize life science product development in human health and agriculture to substantially increase the probability of success while reducing the time and cost of life science product development. These unique capabilities were developed for over a decade and with an extended share of tens of millions of dollars and validated through collaborations with industrial leaders. As a result, our computational predictive biology, the TikiB platform, today incorporates an increasing number of deep scientific understandings together with multiple big data bases and advanced artificial intelligence technologies. Until 2014, Evogen's initial market focus was on decoding important aspects of biology in order to improve seed traits based on genetic modification. These capabilities were the basis for a significant expansion of our technology platform over the past few years, which now provide us with substantial competitive advantages for the discovery and development of life science-based products In this regard, it is important to note that a substantial percentage of life science products are based on microbes, small molecules and genetic elements as their core components. Therefore, we established three distinct solutions addressing the discovery and development of life science products based on these core components. Macrohost AI for products based on microbes, ChemFast AI for products based on small molecules, and Generator AI for products based on genetic elements. One clear demonstration of the value of our technology is the promising early stage pipeline of novel product candidates that are taking place within our subsidiaries, all of which were established only a few years ago. We are committed to continuously enhancing and improving his solutions. To that end, we are very pleased to welcome Dr. Gaia Loren, who joined Evogen as Executive Vice President for Product Development. We are very pleased that Gaia, with over 20 years of multidisciplinary managerial expertise in innovation-driven ventures, as well as research and development experience in the biotech and high-tech industries has chosen to join us. As EVC product development, Dr. Loren's mission will be to position Avogen as a leading decoding biology partner of choice in selected strategic market segments. The business model we implement to capture the value of our diverse and broadly applicable technology is based on two avenues for product development. The first is product development through partnership with leading companies for defined products using Evogen's product solutions. Later stage development and commercialization of the product will likely be done by the partners. This avenue was our main business model until 2014. During this year, Evogen was engaged with leading ag companies including Bayer, DuPont, Monsanto and Syngenta for the development of new GMO seed trades. Looking forward, we aim to engage in partnerships in additional market segments. The second avenue for capturing the value of Evogen's technology is product development through subsidiaries. Evogen established to focus on a defined commercial field with an exclusive license to use the CPP platform in the field of activity. I would like to emphasize that these subsidiaries may commercialize their future products either independently or with partners according to the characteristics of the product and end market. Some of the strategic partnerships Evogen and its subsidiaries currently have are with world leading companies such as BSF, Bayer, Corteva and ICL. Today, Avogen has several subsidiaries including iPlanus in ag-chemicals, Biomica in human microbiome, Canonix in medical cannabis and LaviBio in ag-biologicals. I would now like to briefly review some of the primary value enhancing activities being pursued by our subsidiaries Agplanus, Biomica, Canonic and Labibio, and by Evogen via its AgSeed division. I will begin with Agplanus, our ag-chemical subsidiary. I'm happy to mention that Agplanus already met its first significant milestone for 2020, entering into a strategic collaboration with Corteva based on candidates from the herbicide program and I would like to encourage you to read the press release we issued on the collaboration which we believe holds great promise. In our call today, I would like to focus on the second milestone we aim to achieve in 2020 that relates to Agplanus internal herbicide program. In the second half of 2020, ACT Planus aims to reach an important phase advancement, a new mode of action lead in its herbicide problem with respect to a certain compound. A lead herbicide is a chemical compound or a family of chemical compounds that have shown efficacy in killing weeds in commercial applications rates in a series of different trials including laboratory assays, Greenhouse Trial and finally also in field trials. A new mode of action was already confirmed in many biological assays and indicates that the herbicidal compound of interest might not be subjected to existing issues of resistance compared to commercially available products. Additionally important information is that the mode of action we are focusing on targets a protein that does not exist in humans and gives meaning a potential for high safety profile. We are currently beginning this field trial and look forward to updating you with the results of this trial. I would like to convey why this is such an important milestone. A safe new mode of action herbicide is one of the most desired products in the ag-chemical industry. This is because of growing weed resistance to existing commercial products. Reaching the development phase of a lead is a significant and important stage in reaching such a product. Moving on to Biomica. On our call today, I would like to take the time to focus on Biomica's Immune Oncology program. In this program, Biomica is developing novel microbiome-based drug products to enhance the efficacy of immune checkpoints inhibitors immunotherapy, which is one of the most effective treatments today for various types of cancer. Unfortunately, this type of therapy seems to be effective only in a fraction of patients. It has been observed In medical studies, the fecal microbiota transplant have the potential to improve the response rate to immunotherapy. In these cases, the transplant of fecal matters is done from a donor that was responsive to the therapy to a patient who was not. It demonstrated the realization that our gut microbiome make up plays an important role in the activity of our immune system. While we don't know what the active elements are in FMT, Biomica is working to overcome this by identifying the most effective microbe combinations to turn on the immune system. In 2019, Biomica shared some exciting preliminary results in animal studies. in which improved anti-tumor activity was demonstrated following treatment with Biomica's leading microbial consortia BMC-121 and BMC-127 in combination with immune checkpoint inhibitors. Currently Biomica is advancing with extended preclinical studies and we soon expect to be able to share results from these studies. Positive results in these studies are expected to be an important milestone for Biomeka in 2020 and are planned to be followed by two additional important milestones in this program. The first, the initiation of the scale-up and GMP batch production of drug candidates GMC-121 and GMC-127. The anticipated first in-man proof of concept clinical trials in 2021. I will now move on to Canonics, our medical cannabis subsidiary. We believe that our offering is unique in this market. We are not focusing on cultivation or extraction, which we view more as commodity or service that can be acquired, but rather on where the true differentiator lies, as we believe the quality of the products which is an outcome of the plant genetics. Building on Evogen's demonstrated capabilities in the area of plant genomics, Canonic is developing two main types of products. The first is meta-yield with an improved yield profile of active ingredients which we expect to launch in 2022. The second is precise with an active ingredient profile targeting specific medical conditions During the first half of 2020, Canonic engaged in framework agreements with several cultivation and extraction partners in Israel and in Europe, creating the infrastructure for the company's go-to-market strategy. Canonic's first milestone will be the signing of a definitive agreement with such partners, which we currently expect to be by the end of this year, paving the path for the commercialization of its first products. Canonix's second milestone will seem from the R&D side, where it intends to demonstrate yield improvement in its meta-yield product line. This yield improvement is expected to be a significant step toward commercialization. Those milestones are the two pillars that are expected to enable the company to meet its most important targets, its 2022 commercialization of its unique product meta-yield. In parallel, a third milestone relates to our R&D activities taking place for this precise product line with the pre-clinical studies underway with the DASA Medical Center. This study aims to identify the impact of wide varieties of active cannabis ingredients on inflammation. We expect to see results from these studies by the end of the year. Moving on to La Vie Bio. Our ag-biological subsidiary focuses on microbes that are applied to plants to improve their response to their surroundings. La Vie Bio has a number of product types under development. Biosimulant to improve plant yield and biopesticides to improve the plant resistance to pests such as disease and insects. La Vie Bio's leading program is its biosimulant for spring wheat, LAV-211, which we aim to launch in 2022. This is a live microbial product that will be applied as seed treatment for wheat seeds. Once the product meets the moisture in the ground, the microbes start multiplying, creating a beneficial environment for the wheat, leading to improved yield. In November 2019, we announced results from Field trials that indicated significant yield improvement compared with industry benchmark. This field trial indicated a win rate in over 75% of the location with up to 25% yield improvement in top performing location and in average improvement of approximately 6%. This year, LaVie Bio has two milestones in this program. The first, regarding pipeline advancement, and in this respect LAB211, is currently being tested in North America with advanced product formulations. We expect to be able to share results from these field trials during the second half of 2020. The second milestone is to file for registration for a weak biosimulant product, LAB211, which we are also aiming to the second half of 2020. In its biopesticide pipeline, one of LaVie Bio's leading products are biofungicides for Botrytis and Downy Mildew. The main focus at the moment are vineyards with the potential to expand to other crops. Regulation pressure regarding the use of chemical pesticides is becoming more and more strict, especially in Europe and an effective biofungicide product could be promising. Our milestone in this program is to announce phase advancement and we are currently testing vineyards in Europe and in the United States and expect to be able to share the results of these trials in the coming months. Lastly, moving on to our internal seed trace activity. In the past, Our focus was on developing new seed traits such as yield and drought resistance and developing replacements for existing seed traits such as insect control that suffered from growing insect resistance. All this via a GMO approach. Due to consumer preference regarding GMO products, introducing new products to the market became more challenging While there is still a growing market for the insect physician seed trait. Despite the negative trend in public acceptance of GMO, the need for healthy, plentiful food and feed has not changed and if anything is only growing. We believe this area in improving seed trait via genomics is facing evolution due to the new capability genome editing. Genome editing is a tool that enables genetic changes in a method that may not be considered as GMO and we believe that this revolutionary technology may be a breakthrough for this market in terms of consumer acceptance. This is the spirit of our recent announcement regarding Evogen's participation and leadership in the CRISPR-IL Consortium to provide an end-to-end artificial intelligence system for genome editing. The goal of the consortium is to develop a system providing users improved genome editing workflow from user interface to an accurate measurement tool. The system aims to be used in multiple species for pharma, agriculture, and aquaculture. This consortium is supported by the Israeli Innovation Authority and includes 25 industry and academic leaders in the artificial intelligence and genome editing space. Evogen's chief scientific officer, Dr. Eyal Emanuel, serves as the chairman of this important consortium. In summary, we are extremely pleased by the accelerating rate of the Evogen Group's product-oriented achievements, both with respect to the multiple individual product potential and with respect to this clear demonstration of the broad applicability and powerful competitive advantage of our technology. We are confident that if this achievement continues and initial products advance forward to commercialization, the investment community will value our company appropriately. and of course, we greatly appreciate the continuing support of our very loyal shareholders base. With that, I would now like to turn over the call to Dorit.

Thank you, Ofer. I will begin by reviewing our cash balance, which includes approximately $38.1 million in consolidated cash, cash-related accounts and bank deposits as of June 30, 2020. Approximately $15.2 million of Evogen's consolidated cash is appropriate to its subsidiary, LaviBio. During the first half of 2020, the consolidated cash usage was approximately $8.8 million or $6.3 million if excluding LaviBio. During the second quarter, the consolidated cash usage was approximately $2.5 million or $1.7 million if excluding LaviBio. The low burn rate during the second quarter of 2020 is attributed to the following. Certain measures the company took to mitigate the impact of the COVID-19 pandemic on the company, including a temporary reduction in salary-based expenditure and a cutback in secondary activities. Funds received attributed to the collaboration agreement at Plenus signed with Corteva during the first quarter of the year. Grants received attributed to the Ongoing Phenomics Consortium. For the full year of 2020, we continue to estimate that our cash usage, excluding cash usage of our subsidiary LaviBio, will be within the range of 13 to 15 million dollars. The company does not have bank debts. Let's now turn to the statement of operation. R&D expenses for the second quarter of 2020 were 3.9 million including a non-cash expenses of 0.5 million for amortization of share-based compensation in comparison to 3.5 million including a non-cash expenses of 0.1 million for amortization of share-based compensation in the second quarter of 2019. While the actual R&D expenses remain stable from quarter to quarter, R&D expenses attributed to LaVie Bio increased due to an increase in downstream development activities which were offset by reduction in other secondary activities as mentioned. General and administrative expenses for the second quarter of 2020 were $1.1 million in comparison to $0.8 million in the second quarter of 2019. Although the company decreased its cash burn rate during the quarter, we experienced an increase in general and administrative expenses, mostly attributed to an increase in the cost of their company's D&O insurance. Operating loss for the second quarter of 2020 was $5.2 million, including a non-cash expense of $0.9 million for amortization of SharePay's compensation mainly attributed to options granted to Lavi Bio employees in comparison to 4.7 million including a non-cash expenses of 0.2 million for motivation of share-based compensation in the second quarter of 2019. The loss for the second quarter of 2020 was 4.8 million in comparison to loss of 4.1 million during the second quarter of 2019. With that said, we would now like to open up the call for any questions you may have. Operator?