Evogene Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to Evagen's fourth 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. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded March 10, 2022. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evogen's management will constitute forward-looking statements that relate to future events, risks, and uncertainties regarding business strategy, operations, and future performance and results of Evogen. I encourage you to review Evogen's filings with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in today's earnings release, which states that statements made in the earnings release 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. For example, Evagen is using forward-looking statements in this call when it discusses its expected path to value creation, including potential fundraisings at the subsidiary level, its and its subsidiaries' expected trials and their expected results, studies, product advancements, commercializations, launches, pipelines, milestones, Potential collaborations and other plans for 2021 and 2022, expected burn rate, 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 the 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. Evagen 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 the call over to Ofer Haviv, Avogen CEO. Ofer, please go ahead.

Thank you and good day, everyone. We appreciate you joining us today for our fourth quarter 2021 conference call. Joining me today is Ms. Dorit Breiner, our CFO. I will begin the call with sharing the company's plans for the coming years, what we aim to achieve, and how our three tech engines are the driving force behind our activities and serve as the main competitive advantage of our subsidiaries. I will then go on to present the achievements in each of our subsidiaries and how Evogen's tech engines have supported those achievements. I will then turn the call over to Dorit, who will summarize the Evogen financial results for the fourth quarter and whole year of 2021. We will then open the call for your questions. As you know, InvoGen aims to revolutionize the development of novel products for life science-based industries by utilizing cutting-edge computational biology technologies. Why is it so important to instill this revolution? In general, life science product development is characterized by astronomic development costs requiring very long development periods and the most frustrating part is the local virtue of actually reaching a successful commercial product. The reason for this reality is the challenge in finding the winning candidates which are the core of life science products microbes, small microbes or genetic elements out of a vast number of possible prospects that need to address a complex myriad of criteria to reach successful products. It is the ultimate case of finding a needle in high-tech. We in Avogen see a unique opportunity in harnessing an advanced computational technology, including proprietary database and sophisticated algorithms, together with deep understanding of biology, that have the potential to address the multiple development challenges toward the development These increase the probability of success while reducing time and cost. So, to achieve our mission, we established our unique computational predictive biology, the CPB platform, which is the basis for three tech engines, each focused on accelerating and directing the discovery and development of products based on one of the following core components. microbes via microboost AI, small molecules via campus AI, and genetic elements via generator AI. Our tech engines provide rationally designed computational and experimental end-to-end discovery and development solutions for life science based products. What is really unique in these engines are the proprietary elements of our databases and even more so, the multidisciplinary interconnection between the databases. This makes each tech engine an invaluable tool in the hands of researchers who can now visualize and reach novel insights through the tech engine's interactive work environment. In our vision, We see each of these tech engines as the core of an ecosystem that powers the development of products in a wide range of life science industries based on either microbes, small molecules, or genetic elements. Each ecosystem will provide an interactive work environment in which the more projects we embark on, the more enriched our database and Analysis Capabilities, BCAM, contributing to better predictions and improved probability of success for each product on its own. Our Chief Product Officer, Dr. Neil Arabell, together with his team, have designed these engines to provide access to multiple users and partners to the enhanced discovery and development experience Avogen can provide. For example, this vision has already began to materialize with MicroBoost AI, which serves two of our subsidiaries as driving force in two very distinct life science areas. Agriculture, where LaviBio is developing agbiological, and Pharma, where Biomica is developing microbiome pest therapeutics. The company's business model to capture the value of our three tech engines rely on supporting product development efforts of our dedicated subsidiaries, which we expect will generate value through our equity tech or through co-development of design products through strategic partnerships, which are expected to include R&D and success-based payments from our partners. In the coming years, in order to support the future growth of the company, We expect to see Evogen's activities focus on the following three pillars. First, Evogen intends to increasingly invest in the capacity of its three tech engines. We intend to address more discovery and development challenges and to improve the existing solution with new algorithms and datasets. We will continue our journey to support our partners in their efforts to develop innovative products with the best computational biology support. Second, we expect advancement in our subsidiaries' development pipeline and the establishment of each company as a leading company in its field. Of course, we will continue to update on the progress to success. And third, Evogen intends to be more active in expanding its tech engine offerings to additional areas to support the development of new product types. I will now move on to discuss our subsidiaries and how Evogen's technological engines supported their achievements over the past year and what we can expect looking forward. I will start with Biomica, our subsidiary focused on the development of drugs based on the human microbiome. Biomica utilized Evogen's MicroBoost AI tech engines to support its activities. Over the past year, we have seen Biomica reach positive preclinical results in its immunotherapy program, which may indicate a back-in-class drug candidate. In a series of preclinical studies, BMC-128, given in a combination with immune checkpoint inhibitors, immunotherapy, significantly improved anti-tumor activity. BMC-128 is a combination of four microbes that were identified and rationally designed according to their functionality using Prism powered by MicroBoost AI. Biomica recently received clearance from the Israeli Ministry of Health to proceed to a first in human phase one study, which is set to be held at the Ramban Healthcare Campus, the largest healthcare center in the northern part of Israel, serving a population of approximately two million people. Biomeca is currently advancing towards the initiation of the study. This phase one study will evaluate the safety and vulnerability of BMC128 in combination with BMS Optibo in patients with non-small cell length cancer, melanoma, or renal cancer. BMC128 will be offered to oncology patients who have been found to be non-responsive to current treatments. So if BMC128 shows any clinical Signals that would be a wonderful additional outcome. In parallel, Biomica's IBD program is also proceeding nicely. During 2021, we received positive preclinical results that gave the company the confidence to proceed in 2022 to the scale-up development process of BMC-333 which was also rationally designed according to micro functionality by Prism powered by MicroBoost AI. Moving on to the second company in the field of human health, Canonic. Our subsidiary focused on the development of medical cannabis products. Canonic utilized Evogen's generator AI tech engine to achieve this mission. I am particularly happy with the rapid advancement in this company. Focusing on the genetics of cannabis is one of the best things we could have done. The cannabis plant was such an overlooked plant that even relatively simple genetic steps make a huge impact on the plant. Of course, you have to know what you are doing, even to make relatively simple changes. and that is the purpose of the generator AI technological engine. In October 2021, Canonic moved ahead with full commercialization in Israel of its two first products from the MetaYield family. Over these past few months, we have seen our brand awareness increase and we hope that the quality of Canonic's products and marketing efforts will support market penetration over the coming year. As of today, the sale we expect to see in 2022 in Israel will still be modest and represent the beginning of market penetration, while we see Europe as the company's main target market. During 2022, Tehonic expects to work on the go-to market for the European expansion. In parallel, it intends to bring to market in Israel additional products from these families. To this end, Canonic employed generator AI to design several genetic markers, including for increased THC levels. And the company has recently shown statistically significant increase of more than 20% in THC concentration in its target cannabis population. Canonic is also developing products from its precise family, aiming to bring to market products that target specific medical indications. Over the past two years, Canonic conducted preclinical trials which have identified cannabis varieties with pain relief and anti-inflammatory properties and it intends to gather clinical information over the course of 2022 to support the commercial launch of such products in 2023. The use of Evergel's tech engine is particularly valuable in this program through the ability to map and characterize the functionality of active ingredients within the plant and to connect it to a clinical data. I will now move to Agplanus, our first subsidiary in the ag industry segment. Agplanus' mission is the target-based design of novel and sustainable crop protection products based on small molecules. ActLan will utilize Evogen's Campus AI tech engine to achieve this mission. Following the appointment of ActLan's new CEO, Dr. Brian Ember, the company will continue to advance its new mode of action herbicide development program through its internal pipelines and as part of its collaboration with Vorteva and expand its activity in other crop protection segments. ActLanus will also focus its effort on streamlining the predictive biology and chemistry tools according to user requirements and branding them as a full solution platform. In 2021, the company gathered Additional information regarding its leading new mode of action, APTH1, the target protein for the development of novel herbicides, and rich proof of concept for a seed trait presenting crop resistance to APTH1, a chemical compound that could serve as a basis for a novel herbicide. In parallel, the collaboration with Coteva In 2022, Agplanus intends to further expand the data surrounding APTH1, which should position it well for engaging in discussions with potential partners. Moving to La Vie Barrio, our second subsidiary in the ag industry, aiming to improve agriculture productivity and sustainability, through microbio-based agri-logical products. LaviBio utilized Evogen's MicroBoost AI tech engine to achieve this mission. During late 2021, LaviBio launched its inoculant results toward the 2022 spring season. The product's initial market penetration is planned for the upcoming 2022 Thank you very much. The company expects to increase its production capacity through tall manufacturers toward a significant increase in market penetration in the 2023 spring season. In parallel, Labibio's biopharmacide food trust program is continuing to expand, and during 2022, the company expects to submit a regulatory dossier with the federal U.S. and California EPA for its leading candidate Lab 311. Both results in Lab 311 were discovered and developed through the use of microbus AI, taking into account both microbe functionality and plant genetics. So, as you can understand, we are very pleased with the advancement we see across the board Thank you very much. Our consolidated cash, cash-related accounts, bank deposits, and marketable securities is approximately $54 million, which we believe sends a clear message of our financial stability. Still, in order to accelerate our subsidiary growth and to strengthen their position as independent companies, we are in different levels of discussions with potential strategic and financial investors If and when we can update further, we will do so. With that, I would now like to turn the call over to Dorit. Dorit, please go ahead.

Thank you, Ofer. I will begin by reviewing our cash balance. Evogen continues to maintain a strong financial position for its activities with approximately 54 million dollars in consolidated cash, cash-related accounts, bank deposits, and marketable securities as of December 31, 2021. Approximately $7.8 million of Evogen's consolidated cash is appropriated to its subsidiary, LaVie Bio. During 2021, the consolidated cash usage was approximately $25.8 million, lower than the estimated cash usage range of 26 to 28 million provided by the company at the beginning of 2021. The consolidated test usage excluding LaviBio was approximately 20.6 million in 2021. These sums in 2021 are before giving effect to approximately 29.6 million net raised through our ex-demanded equity offering program and 1.8 million proceeds from non-refundable funds and exercise of options. During the fourth quarter, Evogen did not raise additional funds through its ATM program. During the fourth quarter of 2021, the consolidated cash usage was approximately 8.4 million or approximately 7.0 million, excluding LaviBio. This is in comparison to the fourth quarter of 2020 during which the consolidated test usage was 6.1 million or 5.1 million if excluding LaVie Bio. The burn rate during 2021 and in the fourth quarter was higher than the same period in 2020 for the following reasons. First, during the second and third quarter of 2020, the burn rate was relatively low Due to certain measures, the company initiated to mitigate the impact of the COVID-19 pandemic. Second, during the second half of 2021, Evogen subsidiary significantly expanded product development activities, including Biometer's ongoing preparation, including GMP microproduction for the initiation of its first in-human proof-of-concept study, in the Immuno-Oncology Program at the Rambam Healthcare Campus, Lavi Bios Activities supporting the commercial launch in 2022 of its inoculant product branded as Result, Canonix product commercialization in Israel during the fourth quarter of 2021, and expenses relating to accelerating and expanding Evogen's technological engines. As Ofer mentioned, we estimate that our net cash usage for the full year of 2022 will be within the range of $26 to $28 million. These guidelines include cash usage of our subsidiary LaviBio, which is expected to be approximately $8 million. The company does not have bank cash. Let's now turn to the Statement of Operations. Revenues for the fourth quarter of 2021 were $311,000 in comparison to $351,000 in the same period for the previous year. Revenues for the full year of 2021 were $0.9 million in comparison to $1.0 million in 2020. R&D expenses for the fourth quarter of 2021 which are reported net of non-refundable 200 teams were 6.0 million in comparison to 4.8 million in the fourth quarter of 2020. R&D expenses for the full year of 2021 were 21.1 million in comparison to 17.3 million in 2020. The increase in R&D expenses was mainly attributed to expansion in product development activities of the company and its subsidiaries as mentioned earlier. Business development expenses were approximately $720,000 for the fourth quarter of 2021 in comparison to $670,000 in the fourth quarter of 2020. Business development expenses remained stable in 2021 in comparison to 2020 and were approximately $2.7 million. General and administrative expenses for the fourth quarter of 2021 were $2.0 million in comparison to $1.7 million in the fourth quarter of 2020. General and administrative expenses for the full year of 2021 were The increase is attributed mainly to the increase of the cost of directors' and officers' insurance and an increase in salary-based expenses, as I will now describe, and an increase in other professional services. Overall operating expenses increased among other reasons, Due to an increase in salary-based expenses in 2020, due to measures taken by the company to mitigate the impact of the COVID-19 pandemic, and an increase in salaries in 2021 due to an increase in market demand for highly skilled workers. The loss for the fourth quarter of 2021 was 8.1 million in comparison to a loss of 8.8 million during the fourth quarter of 2020. The loss for 2021 was 30.4 million in comparison to a loss of 26.2 million during 2020. The increase in loss is attributed mainly to the increase in operating expenses which was partially offset by net financing income for 2021 in comparison to net financing expenses for 2020. With that said, we would now like to open up the call for any questions you may have. Operator?