Evogene Ltd

NASDAQ:EVGN

Earnings Call Transcript

[Operator]

Welcome to Evogene's Second Quarter 2025 Results Conference Call. As a reminder, this conference is being recorded August 19, 2025. 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. This presentation contains forward-looking statements relating to future events and Evogene LTD, the company may, from time to time, make other statements regarding our outlook, or expectations for future financial or operating results and other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, the PSL RA and other securities laws as amended statements that are not statements of historic may be deemed to be forward-looking statements.

Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimated and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers, commercialization, efforts, and timing, product development and launches, estimated market sizes and milestones, pipelines as well as our capabilities and technology.

Such statements are based on current expectations, estimates, projections and assumptions described opinions about future events involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance Readers are cautioned that certain important factors may affect the company's actual results and could cause such results to differ materially from any forward-looking statements that may be made in this presentation.

Therefore, actual future results, performance or achievements and trends in the future may differ materially from what is expressed or implied by such forward-looking statements due to a variety of factors, many of which are beyond our control, including without limitation, the current war between Israel, Hamas and Hezbollah and any worsening of the situation in Israel, such as further mobilizations or escalation in the northern border of Israel, those described in greater detail in Evogene's annual report on Form 20-F and in other information, Evogene files and furnishes with the Israel Securities Authorities and the U.S. Securities and Exchange Commission. including those factors under the heading Risk Factors, except as required by applicable securities laws.

We disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statements that may be made to reflect future events or developments or changes in expectations, estimates, projections and assumptions. The information contained herein does not constitute a prospectus or other offering document nor does it constitute or form part of any invitation or offer to sell or any solicitation of any invitation to offer or purchase or subscribe for any securities of Evogene or the company nor shall the information or any part of it or the fact of its distribution from the basis of or be lied on in connection with any action, contract, commitment or relating thereto or to the securities of Evogen or the company.

The trade marks included herein are the property of the owners thereof and are used for reference purposes only. such use should not be construed as an endorsement of our products or services. With us on the line will be Ofer Haviv, President and CEO of Evogene and Yaron Eldad, CFO of Evogene.

Now I will turn the call over to Ofer Haviv, Mr. Haviv, please go ahead.

[Ofer Haviv, executive]

Hello, everyone. Thank you for joining Evogene's Second Quarter 2025 Analyst Call. Today, I will provide an overview of significant developments during the second quarter and through August, resulting from the strategic transition we announced earlier this year. I will also share our outlook for the remainder of the year. Following my remarks, our CFO, Yaron Eldad will present the financial results, and we will then open the call for questions. .

I will start with the financial highlights. In reviewing our financial results for the first half of 2025, it's important to note that Lavie Bio, Evogene's subsidiary and MicroBoost AI for ad operations are presented as a single line item in the consolidated profit and loss statement. This appears under the line titled lost from uphold for [indiscernible]. This accounting treatment follows the intention to sell Turkey of LAvie Bio's activity and the MicroBoost AI for ad as of June 30, 2025.

Moving to revenue performance. Total revenues for the first half of 2025 were approximately $3.2 million compared to $2.3 million in the first half of 2024. This increase was primarily driven by a strong seed sales from our subsidiary, Castera. In addition, during the first of the year, Evogene initiated and executed a cost reduction plan. Most of this plan was completed by the end of the second quarter. While the financial impact is partially reflected in our first half results, we expect to see the full benefit of these reductions in the second half of 2025.

Turning to our operation expenses. Research and development expenses for the first half of 2025 were approximately $4.8 million compared to approximately $6.5 million in the same period last year. This decrease is primarily due to a reduction in R&D activities at Biomica and the discretion of operation at economic. Sales and marketing expenses totaled approximately $800,000 in the first half of 2025, down from approximately $1.1 million in the first half of 2024. The reduction reflects lower headcount across several of our subsidiaries. Overall, Total operating expenses net for the first half of 2025, were approximately $1.7 million compared to approximately $11.1 million in the same period last year.

This significant decrease is mainly added to the reduced level of activity in our subsidiaries. At the end of the first half of 2025, Evogene cash and short-term bank deposit stood at approximately $11 million. It is important to note that this cash balance does not include the expected proceeds from the sales of Lavie Bio's assets and the MicroBoost AI for [indiscernible] engines to ICL. This transaction was completed during the third quarter of 2025.

Evogene is currently undergoing a strategic shift focused on maximizing the value of Campus AI, our proprietary platform for AI discovery and optimization of small molecules in both the pharmaceutical and agriculture industries. As we shared earlier this year, our strategic priorities include: strengthening campus as core assets, expanding collaboration efforts in small molecule but [ discovery ]. Integrating at [indiscernible], our subsidiary focused on crop protection product development based on small molecules into Evogene and expanding its business collaborations, enhancing cash flow, primarily from our subsidiaries and streamlining operational expenses across Evogene and its subsidiaries. We executed several impactful actions aligned with this strategy during the second quarter and through August.

With respect to strengthening our campus AI. In June, we announced the completion of version 1 of our first-in-class generative AI foundation model for small molecule design developed in collaboration with Google Cloud. This model significantly enhanced Campus AI's capability by addressing a major challenge across pharma and adtech. The identification of novel [indiscernible] meeting multiple complex criteria, trended on a proprietary data set of approximately 38 billion molecular structures and deployed on Google's advanced AI infrastructure. This model lays the groundwork for continued technological leadership and future product development.

As part of our efforts for collaboration in Pharma, last week, we announced a collaboration with Professor [indiscernible] from Tel Aviv University, a global expert in biomolecular self-assembly to develop a small molecule therapeutics, targeting disease caused by the accumulation of metabolite such as gout and PKU.

This collaboration leverages cap AI to identify novel compounds that inhibit the self-assembly of [indiscernible], a promising and largely untapped therapeutics area. To align our operations with the new strategic direction and as part of the integration of AgPlenus activity into Evogene, we implemented significant organizational change including a reduction of over 40% in headcount at Evogene. We expect this change to allow for a more effective use of Campus AI to enhance AgPlenus pipeline. The most important event that took place since our last analyst call was the transaction with ICL that significantly enhance our cash flow. In April, we announced the sale of most of Lavie Bio's activity to ICL for a total creation of 15.25 million. In addition, Evogene MicroBoost AI platform for agriculture was sold ICL for $3.5 million. As part of the transaction, Lavie Bio redeemed the safe investment, which was made by an ICL affiliate. This transaction was completed in July and generated cash for Evogene, both directly through the sale of MicroBoost AI for Ag and indirectly through a dividend as Evogene remains a meter shareholders in Lavie Bio and preserve the upside from a continuing collaboration agreement between Lavie Bio and one of its existing partner, which is excluded from the transaction. As stated, our strategic priorities include streamlining operational expenses across Evogene and its subsidiaries. I would like to share with you the steps taken in Biomica and Evogene.

In the second quarter, we began a swing process at Biomica, which included a significant workforce reduction and organizational change at the management level. During this time, Mr. [indiscernible], CEO of Biomica, stepped down from his world due to health reasons. We extend our best wishes for his full and speedy recovery. In the interim, I have assumed direct responsibility for overseeing Biomica's operations. Biomica is now focused on 2 key goals: completion of its clinical trial expected in early 2026 and securing partners to take the lead on its development programs.

As of now, Biomica holds approximately $4 million in cash enough to complete the clinical trial, we will share more updates as progress continue. With respect to Evogene to support our new strategic focus, we implemented major organizational structuring, which included workforce reduction of approximately 30%. As stated, the effect of this national streamlining will be reflected in our financial report starting the third quarter of 2025. In addition to this impactful action, we succeeded in strengthening the company's financial position by offering new shares supporting our ability to implement our strategy over time.

In June, we successfully raised $4.4 million through our at the market facility with next week capital market, at an average price of approximately $2.31 per share based on our shelf registration. We have no further capacity under this ATM facility. The offer met with strong investor interest, signaling confidence in our strategic direction. Combined with the Lavie Bio transaction, I have already described we now have a solid financial foundation and operational runway of approximately 18 months. Let me now outline our expectation for the remainder of 2025.

As stated earlier, our new strategy centers around a single computational engine, our campus AI platform for accelerating small molecule best innovation. Our primary target is to continue investing in the unique offering of our engine cutting adds. To maintain our competitive edge, we intend to continue advancing our technology including partnerships with global tech leaders such as Google and leveraging our platform performance to new heights. We intend for this platform to serve 2 key verticals pharma for the discovery and optimization of small molecule therapeutics, agriculture for the development of crop protection products.

With respect to the pharma vertical, the collaboration engagement with Tel Aviv University is part of a broader plan to establish Evogene's partner ecosystem in pharma across academic and industry. in Israel and internationally. This is the first of several such initiatives we are currently advancing. We will establish a dedicated business development arm led by a senior executive to accelerate growth in the pharma vertical. In agriculture, we will continue to operate through AgPlenus which maintained strategic collaboration with Bayer and Corteva. We anticipate further growth in this area, including new partnerships later this year with both existing and new partners. Now let's continue with our expectation for our other subsidiaries in line with our strategic focus, Lavie Bio. Following the sale of the majority of the company's activity, Labie Bio will maintain only its existing collaboration agreement with existing partner and is expected to distribute funds to its shareholders with Evogene as the majority holder. No additional activity are expected. Biomica is expected to complete its clinical trial in early 2026, and continue efforts to secure partners to lead its current development programs.

No additional activities are expected. Our plans for Corteva, our wholly owned subsidiary offering an integrated solution for growing caster as a feedstock, defer from our other subsidiaries. Even though it's not directly tied to our strategy and core technology, we intend to continue supporting the company's activity in the future. Over the past few months, Castera has begun entering in new markets and marketing channels, and we see strong potential met operations to build a sustainable revenue stream. The company is advancing multiple business initiatives and we will update you as this develop. In summary, we are foreseeing steadily with the execution of our new strategy. The step taken this quarter reflect a clear commitment to focus operational discipline and long-term value creation.

Beginning in [indiscernible], I will have the honor of presenting Jen's update corporate strategy at selected industry conferences and professional events. I encourage you to follow our official publications for updates, and I would welcome the opportunity to connect with you at these engagements. We continue to keep you, our shareholders, partners and analysts informed as we advance toward our goals.

Thank you for continued support. Yaron Eldad, Evogene's CFO will now present our financial results for the second quarter. Thank you.

[Yaron Eldad, executive]

Thank you, Ofer. As of June 30, 2025, Evogene held consolidated cash, cash equivalents and short-term bank deposits of approximately $11.7 million. The consolidated cash usage during the second quarter of 2025 was approximately $2.4 million. Excluding the Labie Bio and Biomica, Evogene and its other subsidiaries used approximately $1 million in cash during the second quarter of 2025. Revenues for the first half of 2025 were approximately $3.2 million compared to approximately $2.2 million in the same period the previous year. reflecting an increase of approximately $0.9 million. This increase was primarily driven by higher revenues recognized by Castela attributed to sales to seed sales on the first half of 2025 partially offset by a decrease in AgPlenus revenues, mainly due to revenues from a licensing agreement was Bayer recognized in 2024. Revenues for the second quarter of 2025 were approximately $0.9 million, a slight increase compared to approximately $0.6 million in the same period last year.

Research and development expenses net of nonrefundable grants for the first half of 2025 were approximately $4.8 million, a decrease of approximately $1.7 million compared to $6.5 million in the first half of 2024. The decrease was primarily due to reduced R&D expenses in Biomica and the section of Economics operation at the beginning of 2024. In the second quarter of 2025, R&D expenses were approximately $2.3 million, down from $2.9 million in the [indiscernible] of 2024, this decrease is mainly attributable to the decreased expenses in Biomica and Costera. Sales and marketing expenses for the first half of 2025 were approximately $0.8 million, a decrease of approximately $0.3 million compared to approximately $1.1 million in the same period last year.

The decrease only due to results in Evogene, AdPlenus and Biomica's personal costs. Sales and marketing expenses for the second quarter of 2025 were approximately 0.4%, reflecting a decrease of approximately $0.2 million compared to approximately $0.6 million in the second quarter of 2024. The decrease was mainly attributable to reduced expenses in Evogene, Biomica and AgPlenus, as mentioned above. General and administrative expenses for the first half of 2025 decreased to approximately $2.3 million from approximately $2.9 million in the same period last year. The decrease is mainly attributable to lower personnel costs in Evogene, a decrease in D&O insurance costs and lower noncash compensation expenses in Castera, Biomica and AgPlenus. General and administrative expenses for the second quarter of 2025 decreased to approximately $1.1 million compared to approximately $1.4 million in the same period of the previous year. mainly due to decreased expenses in Evogene, as mentioned above.

Other income of approximately $191,000 was recorded in the first quarter of 2025 as part of accounting treatment related to a sublease agreement, the decision to seize economic operation in the first half of 2024 resulted in other expenses of approximately $0.5 million primarily due to the impairment of fixed assets recorded in the first quarter of 2024. The operating loss for the first half of 2025 was approximately $6.1 million, a significant decrease from approximately $9.4 million in the same period of the previous year, mainly due to decreased operating expenses as mentioned above.

The operating loss for the second quarter of 2025 was approximately $3.1 million, a decrease from $4.6 million in the same period of the previous year, mainly due to decreased operating expenses as mentioned above. Financing income net for the first half of 2025, was $732,000 compared to financing income net of $373,000 in the same period of the previous year. The increase is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August 2024 fundraising.

As a result, during the first half of 2025, the company recorded net financial income related to pre-funded warrants and warrants of approximately $663,000 Financing expenses net for the second quarter of 2025 were $393,000 compared to financing income net of $97,000 in the same period of the previous year.

The decrease is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August 2024 fundraising. Loss from operations held for sale, net for the first half of 2025 was approximately $2.2 million compared to approximately $0.8 million in the same period of 2024. For the second quarter of 2025, the loss from operations held for sale net was approximately $1.2 million compared to approximately $1.4 million in the second quarter of the previous year. These amounts mainly reflect the financial results of Labie Bio and expenses related to the development and maintenance of MicroBoost AI for Ag, which are presented as a single line item in the consolidated statement of profit and loss. This accounting treatment follows the intention to sell the majority of Lavie Bio's activities and the MicroBoost AI for Ag as of June 30, 2025.

All prior period amounts were reclassified to conform to this presentation. The net loss for the first half of 2025 was approximately $7.7 million compared to approximately $9.8 million in the same period last year. The $2.1 million decrease in net loss was primarily due to decreased operating expenses and increased financing income net, partially offset by the increased loss from operations held for sales, net and reduced drift the net loss of 2025 was approximately $4.7 million compared to approximately $6 million in the same period last year. The $1.3 million increase is in net loss was primarily due to decreased operating expenses, decreased loss operations held for sale and increased revenues, partially offset by increased financing expenses as mentioned above.

[Operator]

[Operator Instructions] The first question, how much castor seed inventory do you have today, both finished and expected to be finished after the harvest? And if your current customer does not place a follow-on order, what are your plans to commercialize this inventory?

[Ofer Haviv, executive]

This is Ofer. [indiscernible] great to hear from you. So I won't disclose the specific amount of inventory [indiscernible] but we have a few hundred of bonds in castor seed, which they are ready. And we have intention to sell those seats to our partners. But in any event, as I mentioned in previous call. Casterra is also focusing on using our seats in order to grow and then through subcontractors to grow grain and to send the grain to our partners because in some cases, we feel that we have a better understanding how to utilize and to grow Cantor in certain territories compared to what our partners are doing. .

So I don't -- at this in this point of time, I don't have a question mark on how we are going to benefit from our case inventory. It could be through a direct sale or we are going to use it to grow castor by ourselves than to sell the grain. And in this earlier, we already conduct field trials both in Brazil and in Kenya, evaluating our growth protocols in the way that we believe we should linguist growth Casterra. And it looks that in Brazil, we already have some initial results and they look very, very promising. And we are now waiting to see the results in [indiscernible], but I think that we are also in the right direction there as well. So I hope that addressed your question.

[Operator]

What steps need to occur before an announced a castor oil business?

[Ofer Haviv, executive]

If I understand the question correctly, so it's meaning that we are going to enter into the oil base itself. So at least in this stage, we are putting ourselves -- we are entering into the area of crane cultivation and selling [indiscernible]. And there is enough today both in Africa, but also in real being oil factories that are eager to receive more and more cancer brand because the demand for cluster oil is still high and increasing actually. So the bottleneck day is really in the capital cultivation. And we believe that our varieties their uniqueness and the way that we want to use them as part of our growth protocol, are going to address the demand in a very, very competitive expenses, cost to grow the customer itself. So I think that this is what, as a shareholder, you should wait to hear from us on the results coming from our commercial field [indiscernible] in growing [indiscernible] variety. .

[Operator]

Next question. The stock is still low. When will it start going up?

[Ofer Haviv, executive]

This is an interesting question. We never control the stock [indiscernible], et cetera. We are now at the end of end of [indiscernible] the loan process of analyzing our pet, which we presented today, I hope, in a very clear way. We are now in the process of finalizing new company presentation. And we're also going to have a new website that will reflect the new strategy, and we're planning to launch [indiscernible] presentation during September and then other communication tools through the end of the year. .

I'm planning to start to meet with investors and teach the new company strategy. And most important, most important when do we start to announce a new collaboration agreement, both in pharma and also in Ag that will strength and the value proposition or business model and our technology, I believe the share will start to react this announcement. So I am quite positive about the new revenue. The company is focusing on. Our -- the Board is extending behind management. And I believe that together, I'm taking to start to see and I hope and believe that the capital market will start to react that the company strategy and the achievement ahead of us.

[Operator]

Next question, how repentative are operating expenses in Q2 2025 or going forward operations? Are all cost reductions fully reflected in the numbers?

[Ofer Haviv, executive]

So the answer is yes. And actually, we expected to see in the third and the fourth quarter, we are expecting to see a continued decline in the company expanded I believe in all different expense item, R&D business development, marketing and sales and also in the G&A. Actually, we give an expected continued reduction in our expenses.

[Operator]

The next question, what was revenue in Q2 '25 how should we think about peak sales given recent results? And how long should it take reach peak sales?

[Ofer Haviv, executive]

So I think that we are now in [indiscernible] when we talk about sales, so [indiscernible] this specific Board is relevant for Casterra because Casterra is coming our only activity that produce sales on a regular basis because there is the other 2 early activity and pharma, which I rely on our campus technology, it will be more the collaboration [indiscernible] of agreement, which will include R&D fees, a milestone and royalty. But when talking about sales, so probably it's referred to Casterra activity, which is selling and in the future, and we are expecting also to sell grain. So I think that what we are now doing in Casterra is talking with a few mega partners, not one, more than one which show interest to expand their activity in castor oil. They're all [indiscernible] for way to store, which -- what we believe is the main challenge in the customer industry the cost to grow is the grain that then we are using them as the sort of the oil.

I think here, this is the main limitation. And we believe that our [indiscernible] and the gross protocol develop which is the -- is to maximize yield versus expenses, not just to maximize yield, but maximum deals versus the expenses. And this is the right approach. We are now in a quite advanced stage in validated concept, both in Brazil and in Africa. And I think that for the initial indication that we received at least in this stage in Brazil.

There is a lot of [indiscernible] trial and create a lot of interest, and I hope that we will be able to disclose more information during the next quarters.

[Operator]

The next question, for Campus AI platform, what catalyst milestones should we expect in the next 12 to 18 months to evaluate progress?

[Ofer Haviv, executive]

So Campus AI, this is the tech engine that both of our vision are using it, the Pharma division and the Ag division. So talking about 2 type of catalysts. One, which is can come from the pharma or from the Ag. And this is an announcement press release or a new collaboration with the partners that are interesting getting the benefit from the Campus AI, that they would have to have a drug candidate targeting their point of interest, and they will actually to benefit from campus AI or strategic [indiscernible] between AgPlenus, our subsidiary focusing on full Protection. The company [indiscernible] Syngenta, FMC and others. Bear in mind that on we already have 2 strategic [indiscernible] that AgPlenus [indiscernible] already in [indiscernible]. So this is the type and that's 1 of press releases that we might release during next year, announcing more and more collaboration, which demonstrate the value of our technology Campus AI.

In addition, we are -- we continue to invest to develop campus AI, the engine itself, and we are doing it in some cases together with partners such as Google, as we announced in this year, May or June this year. So we are now talking with a big tech company and we have a different opportunity to continue the development of our tech engine together with them.

And this is another type of [indiscernible] when we disclose new capabilities, breakthrough capabilities that we need to develop as part from our Campus AI generative engine, and we are very, very proud to announce our foundation model that was development of Google during the first half of this year. and we already see the positive effect that we have [indiscernible] that this development can give us in the ongoing discussion we are conducting with potential partners, both in the pharma and in the Ag as well.

[Operator]

There are no further questions at this time. Mr. Haviv, would you like to make your concluding statement?

[Ofer Haviv, executive]

Yes. Thank you. I would like to thank you for taking the time to participate in this conversation, and I hope to see you all at our next meeting. Once again, thank you all.

[Operator]

Thank you. This concludes Evogene's Second Quarter 2025 Quarter Results Conference Call. Thank you for your participation. You may go ahead and disconnect.