This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: Ladies and gentlemen, thank you for standing by. Welcome to Evagen's second quarter 2022 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 August 31st, 2022. Before we begin, I would like to caution that certain statements made during this earnings conference call by Evagen'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 US 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 statement in this call when it discusses its expected paths 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 results. Many of the factors that impact whether forward-looking statements will come true are beyond the control of Evagen 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 Khabib, Evogen's CEO. Ofer, please go ahead.
spk04: Thank you for joining us today for our second quarter 2022 conference call. We are very happy to have you with us and review with you important recent events that took place in Evogen Group. The first patient dose in the phase one clinical trial announced by Biomica, and the announcement on the strategic collaboration and the $10 million investment of ICL in La Vie Bio. We are very pleased with these developments, which we believe provide evidence to the value that La Vie Bio and Biomica have and continue to create, and I will cover this shortly. Today, joining me on the call is Ross Patland, EBP commercial and general manager of La Vie Bio Inc., to provide some additional color on their activities and go over some of the upcoming milestones to be expected. The financial stats themselves can be found in today's press release, and Yaron Eldad, our CFO, will provide a short summary. Following that, we will all be happy to take your questions. Before I start to review the recent events, I want to emphasize that we continue to strengthen Avogen's management team. As I discussed last quarter, we made a number of changes to expand Avogen management and I'm very happy to announce the latest addition to our team. In June, we added Eyal Ronen as Executive Vice President of Business Development. Eyal brings us over 20 years of extensive business development experience with biotech companies. Eyal's focus is to create and bring us additional value by building new partnerships or forming new subsidiaries, leveraging our technology engines and expanding our activity into new areas. Evogen has significant untapped potential held within its technology engines and Eyal's focus is to realize some of that value. I congratulate Eyal and trust he will be a key asset to Evogen. We are already seeing some of his positive impact. I would like to now discuss the two important events took place in the last few months. The first event was reported on July 26 by Biomica, our subsidiary focusing on developing drugs based on human microbiome. The company announced that the first patient was those in its phase one clinical trial taking place in Rambam Healthcare Campus, a hospital in the north of Israel in Haifa. The trial is designed, preliminary, to evaluate the safety and tolerability of Biomicase Microbiome-Based Immune Oncology drug candidate, BMC-128, in combination with immune checkpoint inhibitor in patients with either non-small cell lung cancer, melanoma, or renal cell carcinoma. The drug candidate is a consortium of microbes, which we identify and selected through a detailed functional microbiome analysis using Prism tools, a high resolution microbiome analysis platform, which is powered by Evogen's MicroBoost AI tech engine. As the trial is open label, we expect preliminary results and the first data point read out in early 2023, as the first patients conclude their treatment programs. We are targeting to complete this in the second half of 2023. This development demonstrates that our tech engines can be leveraged across multiple industries. While Avogen is traditionally leveraging its tech engines to cultures, Biomica's latest achievement is a proof that there is a huge market of human that we are uniquely positioned for playing an important role. The second important event was announced on August 17. A strategic collaboration and a $10 million investment by ICL in Labibio are focusing on developing AgBiologicals. I would like to provide you some color on the collaboration and investment. Labibio and ICL engage in a multi-year strategic collaboration to develop novel biostimulants. For those of you who are less familiar with ICL, ICL Group is a leading global speciality minerals company listed on the New York Stock Exchange and in Tel Aviv with a $13 billion market cap. ICL Group creates solutions for the global food agricultural markets via its global resources of roaming potash and pot fat. It is highly focused on technological innovation to create impactful solutions for sustainability challenges in the global food and agriculture markets, especially in a time of food scarcity, high prices, and macroeconomic uncertainty. La Vie Bio and ICL's shared vision is to enhance global food quality agriculture sustainability, and increase productivity. The goal of the strategic collaboration is to combine La Vie Bio's agri-biological expertise and MicroBoost AI power technology with ICL's fertilizer experience, enabling the development of new and innovative products for agriculture. As part of this collaboration, ICL has made a $10 million investment in LaviBio. The investment was structured under a SAFE, a simple agreement for future equity. The $10 million investment that has already been received allows LaviBio to build a pipeline of products focused on developing novel biostimulant products to enrich fertilizer efficiency. ICL will join as a shareholder of LaviBio to Evogen and Corteva, a major agriculture company listed in New York with a market cap of $44 billion. And I'm very proud that these two agriculture giants have shown a strong interest in what Labib Bio has to offer. I believe Labib Bio is now well set on a phase for significant achievement and success over the coming years. From the Evogen standpoint, This investment in LaVie Bio is an additional key milestone that demonstrates the power of our business model, whereby we are leveraging the value of our tech engines through dedicated subsidiaries. It shows that our hard work in building, investing in, enhancing our subsidiaries, all of which are leveraging our underlying computational predictive biological tech engines, is the right strategy and bears fruit. The $10 million investment in Labibbio will also allow its activity to power ahead while lowering the need for Evogen financial resources. This will enable Evogen to advance other new promising activities while ensuring that Labibbio is moving ahead at full speed. I want to hand over to Russ Patland, EVP at LaVie Bio, who will go into some more details on the recent activities and progress. Russ, please go ahead.
spk03: Thank you, Ofer. I'm very happy to have been asked to participate in the Evagen Analyst Call today. It's the first time I've participated in such a call, and given that, I'd like to introduce myself. As Ofer mentioned, my name is Russ Putland, and I am LaVie Bio's Executive Vice President of Commercial and General Manager of LaVie Bio's U.S. subsidiary. I joined LiviBio in May of 2021 and have previous experience in commercial leadership and strategy with FMC, DuPont and Cargill spanning over 30 years. I'm excited to be able to share LiviBio's progress and direction with you today. I'll start at a high level and then we can work down into some of the detail. The world's population continues to grow and consumer sophistication is increasing. We are faced with the challenge of producing food not only sustainably, but also profitably for farmers. We at Levy Bio have accepted this challenge and are well positioned to lead agriculture in this biological segment. Levy Bio uses microbiome selected naturally occurring microbes that create positive effects in plants. Levy uses these microbes to establish living factories in chosen crops, surpassing the efficacy, consistency, and the stability of not only other existing biological competing products, but measuring up to current synthetic commercial products. We are fortunate to be blessed with the strong proven partners in Corteva Agriscience, a global leader in crop protection and seeds, and now ICL and our new collaboration agreement focusing on novel biostimulant products that will enrich and improve fertilizer efficiency. When you have access to leverage Corteva and ICL's successful organizations and couple them with Evagen, our parent company's core competency of computational biology, this is where unique and breakthrough products are born. In early 2022, we sold out of our planned production of Thrivis Inoculant, the brand name of our new product, for use in wheat crops in the US, and it was part of our first soft launch. It was a relatively small amount, and our intended purpose was to demonstrate our launch capability in the areas that include production, marketing, and sales, all in preparation for a significant accelerated growth in 2023. I want to add that we recently made a decision to change our bioinoculants name from Result to Thrivus, as we believe the new name Thrivus strongly represents our brand and its expected performance. Thrivus, our inoculant for use in spring wheat, was launched in the market at exactly the right time. When you consider increasing global supply shortages resulting from unfavorable environmental conditions in these key growing geographies. Also, we need to highlight the Russia-Ukraine war. as these are two of the largest wheat exporters. This further supports the immediate need for increasing wheat yields globally. We have chosen to distribute our products through two distinct routes to market, direct, and as is the case in 2022 with United Agronomy, and indirect in the future. It is important that farmers have the necessary access to purchase Thrivis and realize the benefit of increased root development, biomass, and ultimately three to four bushels of yield per acre. representing an average of 4% to 6% in increased wheat yield. As our strategy marches toward 2023, we are finalizing the expanded production for next year's growing season. Our increased production will fuel expansion in North Dakota, Montana, and Minnesota, the spring wheat belt of the United States. We are on track with our plans to launch in Western Canada for the 2024 growing season, and in parallel, we are continuing with our plans to expand through this into new geographies namely Europe and Israel, from 2025 onward with partners from around the globe. Additionally, we will be working to advance and broaden the crop use label with additional crops such as durum, oats, barley, soybeans, and canola, and we'll update with you when we have news to report there. Moving to our biopesticides pipeline, our biofungicide fruit rot program is progressing as we'd expect, and we continue to see exciting results in our field trials conducted in vineyards. Prior to the end of 2022, we expect to submit a regulatory dossier with the federal U.S. EPA for our leading candidate, Lab 311. The standard timeline registration tends to take about 18 months, and we will continue to update as we progress. Our intent is to soft launch in 2024 growing season pending regulatory approval. It is important for me to emphasize that this significant progress I described could not be achieved without the fruitful activity between the R&D group at Levy Bio and Avagen, and more specifically, the MicroBoost tech engine that boosts our pipeline. I want to thank OFER and all the Avagen staff for their ongoing support of our activities at Levy Bio. Thank you for spending this time with Levy Bio. We look forward to speaking with you again as we hit our goals and achieve our milestones. With that, I'll turn things back to OFER. Back to you, OFER.
spk04: Thank you, Ross. In summary, Evogen today is at a key inflection point whereby we are meeting critical milestones and the inherent value of our subsidiaries is becoming increasingly obvious. Evogen goals in the near term is to continue to bring high value adding partners and investors at the subsidiary level who understand and can value the potential from the products that our subsidiaries are developing. This, we believe, will demonstrate in a very public way the significant untapped value contained within our activities. We continue our discussion with potential strategic and financial investors toward potential fundraising and partnering at the subsidiary level, and to the extent possible under security laws, we intend to provide updates. Our target is that each subsidiary will have its own financial resources to support its activities until its success, while at Evogen, in addition to being a major showholder, continue to play a major role in maintaining and building the competitive advantage through our tech engines. In parallel, and maybe even more importantly, we are targeting and exploring the potential to establish new activities that can benefit from our technology. This is Eyal Ronen, our new EVP of business development main mission. And I aim to elaborate on it more during our next quarterly analyst call. Over to Yaron and the financial review. Yaron?
spk02: Thank you, Ofer. I will now provide the financial summary. Evergen continues to maintain a solid financial position for its activities with approximately $35.3 million in consolidated cash, cash-related accounts, bank deposits, and marketable securities as of June 30, 2022. Approximately $3.6 million of Evogen's consolidated cash is appropriated to its subsidiary, La Vie Bayeux. We do not have any bank debt. These amounts do not include the $10 million investment of ICL in La Vie Bayeux. which was completed during the third quarter. During the second quarter of 2022, the consolidated cash usage was approximately $9.3 million or approximately $6.4 million, excluding La Vie Bayonne. Out of the $9.3 million, $1.7 million is a non-cash charge related to foreign exchange expenses due to U.S. dollar and Shekel exchange rate differences and a decrease in the market value of marketable securities on our balance sheet. As we have previously discussed, our full year net burn rate, excluding exchange rate impacts in 2022, is expected to be in the range of $26 to $28 million, including La Vie Bayeux, and $18 to $20 million, excluding La Vie Bayeux, which manages its own cash position. I would like now to highlight some specific items on the P&L. Revenues for the second quarter were $312,000 in comparison to $135,000 in the same period the previous year. Revenues were primarily due to the initial sales of LaviBio's previous product and sales of Canonic products in the Israeli market. R&D expenses for the quarter, which are reported net of non-refundable grants received, were $5.4 million in comparison to $5 million in the same period the previous year. The increase in R&D expenses were primarily due to the increase in La Vie Bio's R&D activities and Biomica's recent start to its phase one trial. Business development expenses were approximately $1 million for the second quarter of 2022 in comparison to $700,000 in the same period the previous year. The increase in the business development expenses was primarily due to recruitment of business development personnel. General and administrative expenses remained stable and for the second quarter of 2022 were $1.7 million in comparison to $1.8 million in the same period in the previous year. Operating loss for the second quarter of 2022 was $8 million in comparison to $7.4 million in the same period in the previous year. Financing expenses for the second quarter of 2022 were $1.7 million in comparison to financing income of $600,000 in the same period in the previous year. The increase in financing expenses was mainly due to the US dollar and shekel exchange rate differences between periods and a decrease in marketable securities value as I mentioned earlier. The net loss for the second quarter of 2022 was $9.8 million in comparison to a net loss of 6.9 million in the same period in the previous year. As Ofer mentioned earlier, ICL invested the $10 million in LaviBio via a SAFe mechanism. For those of you who are less familiar with a SAFe investment, I would like to elaborate. SAFe stands for a simple agreement for future equity, and today has become a common investment agreement tool due to its simplicity. It is an agreement between a company and an investor, whereby the investor transfers the funds into the company immediately, which will convert automatically to equity at the next fundraising at a discount from the share price to be determined in this future round. The ICL investment into LaviBio was concluded in mid-August. and it enables LaviBio to continue further development, growth, and increased value prior to completing its next financial round. As Ofer mentioned, we continue to pursue strategies to strengthen Evogen's group cash position, ensuring our subsidiaries are well capitalized and also have value-adding investors and partners to advance their goals. Finally, in the near term, while the capital markets remain volatile, we are looking to lower expenses by reducing activities with distant milestones. With that, both Ofer and I would now like to open the call for any questions you may have. Operator?
spk05: 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, kindly lift the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Kristen Kluska of Cantor Fitzgerald. Please go ahead.
spk07: Hi, good morning and good afternoon, everybody. Thanks for taking my questions. The first one I had in regard to LabVIEW Bio, could you discuss some of the specific components and the particular data that led to the collaboration with ICL? And I guess, how are you thinking about the potential for other deals moving forward And of the key players in the field, do you believe that there's a lot of overlap and synergies in the activities across both biostimulants and biopesticides?
spk04: Okay, so this is Ofer, and I will take this question. And thank you for participating in our analyst call. In the long-term strategy of Labibio, we are intending to be the world leading in the world of mainly biopesticides. But of course, we can use our technology also in the area of biostimulant. And one of the things that we really see as a significant value is working together with a fertilizer company that have a broad experience in using fertilizer. And we believe that in the future there will be more and more products that will combine fertilizer and biostimulant. And we saw that ICL could be a great partner to work with Labibio. ICL are located, the headquarters is here in Israel. They have research centers worldwide, and I think that this could create a very, very nice energy. The field that we are going to focus on is biostimulant, and it's not related to biopesticides, and it's quite a different type of microbes, and it's a very different type of regulatory processes. I don't see too much of overlap between biostimulant and biopesticides. So we will continue all of our activity in the area of biopesticides based on the results and the business plan of Labibio. It's not far from the relationship with ICL. ICL, it will be the program that we are going to run with them. It will be in addition. to what we already have in our pipeline.
spk07: Okay, thanks so much for that. And then I had another question in regard to Biomica. So we're under a month away from the advisory committee meeting for a different microbiome-based product. So, you know, while it's another indication and a different mechanism, Could you talk about the importance of these meetings and really understanding what the FDA is looking for and also what a first potential approval in the microbiome class can mean for your company?
spk04: The connection wasn't very well. Can you repeat the answer, please?
spk07: Yeah, so I was asking in regard to an advisory committee meeting that's scheduled for another microbiome-based product, how important this could be for the field with the first potential microbiome-based approval, but then also helping a company like Biomica start to understand what the FDA is looking for, again, because it is a newer drug class and we haven't seen any approvals yet.
spk04: I'm less familiar with this specific meeting you're talking about. What I can do, I'm sorry that Erwan is not participating in this call. He's abroad, but I will ask him to contact with you and address this question, if it's okay.
spk07: Yeah, absolutely, thanks. And then just last for me, how are you thinking about balancing the cash on hand in light of the subsidiaries moving forward, but then also looking to expand your technology applications into other fields as well? Thanks again.
spk04: Okay, so I think that as in my script, the main message is that we are expecting that our subsidiary will have their own resources I think that we are in a good shape now with LaVie Bio, and we might extend the investment in the company in the future. We are talking with additional investors. And I think that we are also talking with another subsidiary with another set of investors that they might will invest in this company as well. So what I'm trying to say is that our target is that each subsidiary will have its own financial resources and the need for a Evogen budget will be as we see cash from Evogen will through the years will be lower. And this will allow us to use the money that we already have uh to invest in additional new opportunity uh and this is one of the purpose of uh that we recruit a a a our evp business development because there are so so many other different areas that can benefit from our technology and i think that at least in some cases uh what we might look also is to uh a collaboration agreement in the area that our subsidies are not participate in the type of collaborations can inject also cash to the company uh structures you know maybe upfront payments milestone and loyalty uh the same type of structure that we did in in the past so this will be another way to fund future activity in Evogen. So bottom line, when I'm looking on how we're going to structure our financial funding in the future, so the subsidiaries, we are planning to fund their activity through additional investments conducted by And also through collaboration agreement that some of them are now discussing and with respect to evergen we have our financial resources And and we are also looking for additional opportunity To use our technology and to generate revenue and we are also always looking on the capital market to see what What is the position and looking for additional opportunity to raise money. But at least in the short term, the main focus is going to be to bring more cash in the subsidiary level through fundraising and collaboration.
spk07: Great, thanks.
spk05: The next question is from Brian Wright of Roth. Please go ahead.
spk06: Thanks. Good morning. Congrats on the quarter. And I apologize if I miss this. They're literally doing construction outside my window. So did you all provide any kind of valuation parameters for the $10 million investment in LAVI?
spk04: So, unfortunately, we are limited from disclosing the specific details of the SAFE contract as for various business and various competitive reasons, and the partner involved needs to maintain those details confidential. However, what I can say is that we are very, very pleased with this deal, including the terms, and believe it is good for all parties involved, Labibio, ICL, and especially Evogen and its shareholders. I think that in any event, when this investment will be converted into share, it will be very positive for Evogen shareholders, definitely based on the current market valuation of Evogen, the company itself. So, we can't disclose, but I think that this is something that I'm quite proud about.
spk06: Right, and it sounds like there might be some minimum valuation parameters in that. Yes, yes, yes. Awesome, great, great. Thank you. Just in a detailed question on the quarter, could you give us a little more granularity between kind of the lavi and canonic on the quarter? Any kind of color on that for modeling would be very helpful.
spk04: What I can say is that we are expecting to see some increase in revenue from canonic activity in the second half of this year. We are planning to launch a new variety at the Israeli market that's addressing the demand for high THC. We hope to launch those products during September, October. So currently, without getting into the details, currently we don't see the jump that we were working in economic revenue from the existing product. but the expectation is that in the second half of the year, we will start to see a change in this mean. So more or less, I can't disclose too much, but you can look at previous reports and you can try to calculate the numbers.
spk06: Okay, thank you.
spk05: The next question is from Brett Rice of Janney Montgomery Scott. Please go ahead.
spk01: Hi. Thanks for the opportunity to ask a question or two. This might be for Mr. Potland. Since you with the spring reed are getting greater yields, do you use the same amount of water so in effect water usage you know, is going down per unit?
spk03: Yeah, so in terms of... Yes, I've got it. In terms of water use, there is a slight gain. You know, we're in the process of mapping out, you know, that environmental footprint and kind of the carbon realm as we speak. I don't know that we're far enough along to comment specifically on, you know, the amount of water efficiency or nutrient efficiency that we've gained. You know, clearly we do gain within nutrient uptake and efficiency. We've seen that clear. It is notable. And once we've got, you know, that mapped out a little more clearly, I think we'll share that with the public. But we're not in a position today to do that.
spk01: Right, right. If you have favorable news on that, it's a real important topic. That would excite people. I don't have to tell you that.
spk03: I'm actually working on that as we speak. I'm looking at sustainability measurements around land use efficiency, energy use, and GHG emissions. We should have something in a relatively short period of time. And we will surely share that, not only for our benefit, but just to kind of backdrop all the good things that are happening with the bioinoculant.
spk01: Great, great. Now, the phase one trial, where the results will come out in early 2023, if you see favorable results prior to that, is it in your control to release that to the market or it's your joint venture partner who controls the news flow on that trial?
spk04: We receive the results from the hospital that is executing the clinical trial when they receive it themselves. Yes, along the the clinical trial, we are receiving the information, and we might decide if we have enough data during the terms of the clinical trial, we will share this information with the public. So we don't necessarily need to wait until the end of the clinical trial.
spk01: All right. That sounds good. Last one for me. Just can you talk about the $312,000 in revenues? So some of it is from LaviBio. Embedded in that, are there seasonality things that you can educate us on? And then Canonic is less of a seasonal type of product, sale cadence, if you could just Give us some color on that.
spk04: I think you described it correctly with respect to selling Labibio product. It's a seasonally type of product. And I think that as Raz described it, this year it was mainly, you know, to make sure that we have all the parts in place. And we were very proud. that the minute that we finish the production, we sold almost everything. Maybe we could produce more, but this wasn't our main intention. To generate a significant revenue, it was mainly to make sure that we are doing everything correctly, and it looks that we succeed in this target. Next year, the production is going to be in a few order of magnitude higher, and I hope that we'll see the same results this year. With respect to a canonic product, so here the revenue is generated through all the years because you grow the crop in greenhouses, so it's less affected by the weather. Yes, it can have effect on the quality of the product. Usually it's better to grow it during spring and summertime, but still you can grow this crop, the cannabis, during the winter. So it can generate revenue through the year. And as I described just now, we are expecting to launch a new set of products during some of them in September, some of them of October. And I will be more than happy to share with you on the performance of those a new variety at the next analyst call. We are quite positive about the performance of the new variety.
spk01: Great. Thanks for taking my questions.
spk05: If there are any additional questions, please press star 1. If you wish to cancel your request, please press star 2. Please stand by while we poll for more questions. There are no further questions at this time. Before I ask Mr. Ofer Chaviv 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 03-9255-901. Internationally, please call 972-39255-901. Mr. Haviv, would you like to make your concluding statement?
spk04: Yes. Thank you all for joining the call today. I look forward to updating you with our progress in our next call. In the meantime, I will be presenting at the HC Weinhardt Conference in September and attending the LD Micro Conference in October. And I look forward to seeing some of you there. Thank you and good day.
spk05: Thank you. This concludes Evagen second quarter 2022 results conference call. Thank you for your participation. You may go ahead and disconnect.
Disclaimer