Evogene Ltd. (NASDAQ:EVGN) Q4 2020 Earnings Conference Call March 3, 2021 9:00 AM ET
Ofer Haviv - Chief Executive Officer
Arnon Heyman - CEO Canonic
Dorit Kreiner - Chief Financial Officer
Conference Call Participants
Kristen Kluska - Cantor Fitzgerald
Ross Haberman - RLH Investments
Kenny Green - Edison Group
Geoff Gilbert - Inukshuk Investment
Ladies and gentlemen, thank you for standing by. Welcome to Evogene’s Fourth Quarter 2020 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. [Operator Instructions] As a reminder, this conference is being recorded, March 3, 2021.
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, risks and uncertainties regarding business strategy, operations and future performance and results of Evogene. I encourage you to review Evogene’s filings with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in their earnings releases, which states that statements made in those earnings releases and in the similar way on this earnings conference call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
All forward-looking statements made herein speak only as of the date of the announcement of results. Many of the factors that impact whether forward-looking statements will come through or beyond the control of Evogene and may cause actual results to differ materially from anticipated results.
Evogene 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 over the call to Ofer Haviv, Evogene’s CEO. Ofer, please go ahead.
Thank you, and good day, everyone. We appreciate you joining us today for our full year and fourth quarter 2020 conference call. Joining me today is, Ms. Dorit Kreiner, our CFO; and Dr. Arnon Heyman, CEO of our subsidiary Canonic, which is focusing on medical cannabis.
Following my initial remarks, Arnon will then provide an update for Canonic and following Arnon, Dorit will summarize Evogene’s financial results for the full year and the fourth quarter of 2020. We will then open the call for your questions.
In view of the softening increased trading volume for our shares on NASDAQ during the last few months, it is visible to a few that we now have many new shareholders and hopefully some of you the new shareholders are participating in our call today.
Therefore, in my prepared remarks today, in addition to summarizing some highlights of our recent progress, I will briefly refer to the reason why we are confident that Evogene has and we continue to have unique competitive advantages in its existing and future market area of focus.
Currently, most life science based industries are becoming aware of the enormous potential that exists in computational biology to substantially decrease the time and cost of discovery and development of new products. And more importantly, to greatly increase the probability of success.
Evogene has, for almost two decades and with an investment of many tens of millions of dollars undertaken often in collaboration with some of the leading companies in the world, a focused – research and development efforts to establish a world-leading broadly applicable computational predictive biology platform, which we refer to as the CPB platform.
The CPB platform combines advanced computational capabilities, of which artificial intelligence is a key component with deep understanding of biology for the integration and analysis of multilayered relevant big data. The goal of this integration and analysis have been to create a platform that provide key predictive insights for the discovery and development of life science based products.
The CPB platform is designed to lead to higher probability of success, while significantly reducing both time and cost. In recent years, Evogene took these assays to the next level by creating specific engines that utilizes the CPB capabilities to address the development of life science products based on specific core biological and chemical components.
Today, three such engines has been created. First engine, MicroBoost AI. It’s the engine that supports the discovery and development of products based on microbes. The second engine is ChemPass AI to support the discovery and development of small molecule-based products. And the third engine generate through AI for product-based on genetic elements.
It’s important for me to emphasize that Evogene continuously invests significant resources in developing its CPB platform and the three engines to strength its capabilities and advance new challenges. How do we choose where to utilize our technology and capabilities?
Evogene considered among others the following main factors in deciding which fields of activity to enter, market size, need for novel products, the existence of complex challenges in product discovery and development, can solutions to challenge be addressed via computational biology, existing solution in the markets are inadequate and of course, that the product’s core components are one of the following: microbes, small molecules or genetic elements.
So, how do we capture the value of our unique offerings? Evogene has two different business models. The first, which is more common and was our main business model until 2014 is product development through collaboration. In this business model, Evogene engaged with a partner for joint product development of a defined product requested by the partner.
In this frame, Evogene typically conduct the initial R&D activity, discovery and early-stage developments, while later stage development and commercialization is conducted by the partner. Under this model, Evogene’s potential revenues include; R&D funding for activities that Evogene conducts in the collaboration; milestone payments for when the candidate advance in our process pipeline; and revenue sharing from the end product.
After 2014, Evogene engaged in several collaboration of these types with Bayer, Monsanto, DuPont and Syngenta focused on improving seed traits using the GMO approach.
Moving to the second business model, starting in 2015, Evogene made a subsidiary decision that in addition to product development with the partner, based on the partner’s request, if we begin developing its own product pipeline, each focusing on a specific industry segment benefitting from our unique technology.
With such product pipeline, which is a certain level of maturity and due to the quality of our technology it reaches the stage by the fact with business activity into a dedicated subsidiary.
Each subsidiary is focusing on continued development of its pipeline and adding new products to specific market segments while using Evogene’s technology as its core for better advantage. I would like to emphasize that each subsidiary has its own Board of Directors, separate management, scientific advisory board and its own R&D team which focuses on developing its own pipelines while they all benefit from using Evogene’s technology.
According to the end-markets, the subsidiaries can decide to commercialize their products independently or in collaboration with the partner. Today, Evogene has four main subsidiaries, two focused on human health and two on agriculture.
I would now like to provide key information on our subsidiaries, their main achievements in 2020, and lead on to the future plans.
Let’s start with Biomica. Biomica’s mission is to discover and develop novel therapies for microbiome-related human disorder using computational biology. Currently, Biomica is engaged in a few different drug product programs utilizing Evogene’s MicroBoost AI and ChemPass AI engines. One program in the area of immune oncology, two programs in the area of GI-related disorders, the first focusing on IBD and the second on IBS and two additional programs in the area of anti-microbial resistant CDI and MERSA.
In 2020, the company successfully achieved two main targets in its immune oncology programs. Positive results in a pre-clinical study and initial scale up and initiation of the first GMP production of drug candidates. We consider this excellent achievement as major milestones for Biomica and in our last Analyst Call, Dr. Elran Haber, Biomica’s CEO elaborated in more details on them.
Biomica has set aggressive targets for the next two years. For 2021, the company is planning to initiate proof-of-concept, first-in-man study in immune oncology program and extend its preclinical work in the IBD program.
For 2022, Biomica expects to obtain the clinical data from its first-in-man immune oncology study and to initiate first GMP production of drug candidates for IBD as preparation for future clinical trials in this program.
Our second subsidiary in the area of human health is Canonic. Canonic’s mission is to develop and commercialize precise and stable medical cannabis products for better therapeutic effects using computational biology.
Currently, the company is engaged in the development of two product families utilizing the GeneRator AI engine. The MetaYield family focused on stable enhancement of total plant compounds for high yield and the Precise family focused on stable enhancements of specific active compounds for therapeutic traits such as pain and inflammation.
In 2020, Canonic achieved the following main targets: firstly, diversification of leading MetaYield lines to be further developed into commercial varieties towards expected commercial launch in 2022. Secondly, signing on agreements with a commercial partner for cultivation and production of its proprietary cannabis varieties as part of its strategic goal to build and end-to-end value chain from seed to product sales.
Canonic has set clear targets for the next two years. In 2021, the MetaYield product pipeline is expected to reach first commercial varieties and in the Precise product pipeline, Canonic aims to identify specific lines that exhibit distinct effects in model systems for reducing pain or inflammation.
With respect to 2022, Canonic is expecting to launch its MetaYield commercial product in Israel and reach first Precise commercial variety for reducing pain or inflammation as preparation for commercial launch in 2023. Arnon will provide more details on Canonic’s activity later in the call.
Moving on to our agriculture subsidiaries, starting with AgPlenus. AgPlenus’ mission is to design next-generation, effective, sustainable and safer crop protection products by leveraging computational biology and chemistry. AgPlenus focuses on developing two product lines utilizing the ChemPass AI engine. Novel Mode-of-Action herbicides and insecticides with new Sites-of-Action.
AgPlenus achieved important targets in 2020 in its herbicide program entering into a strategic collaboration with Corteva to develop a novel herbicide based on pre-lead candidates and the second reaching a lead phase for its lead candidate as announced in December 2020. I would like to elaborate on the second achievement.
The achievement of this milestone, following the completion of field tests that demonstrated the product candidate APH1 at a commercial dose range effectively control over a broad panel of weeds, including weeds that are known to have resistance to existing herbicides. These results were confirmed in independent field tests conducted by SynTech Research and agriculture R&D contract research organization located in California.
I strongly believe that this remarkable achievement puts AgPlenus in an excellent position to engage with world-leading Ag chemical companies for future development and commercialization of APH1. For the coming two years, I expect that AgPlenus will continue focusing mainly on its herbicide product development activity.
During 2021, the two main targets of AgPlenus will be to reach a herbicide-tolerance rate proof-of-concept for APH1, and engage in licensing agreement for an additional candidate. In 2022, the two main targets of AgPlenus will be: to reach an optimize lead phase for APH1; and sign a strategic agreement for continued development and commercialization for APH1.
Moving to our Ag biological subsidiary Lavie Bio. Lavie Bio aims to improve food quality, sustainability, and agriculture productivity through the introduction of microbiome-based Ag biological products. Lavie Bio is developing the following live microbial products utilizing Evogene’s MicroBoost AI engine. Bio-stimulant for improving crop yield and Bio-pesticides that protect the plants from pests such as disease, fungi, and insects.
Two important achievements were reported in 2020. In October 2020, Lavie Bio shared results demonstrating the power of bio-pesticide candidate LAV312 to protect grapes from Botritis based on results obtained in a trial that took place in an Italian winery. We expect this product will reach the market in 2024. In December, Lavie Bio announced that its bio-stimulant candidate LAV211 was successfully combined with harvesting spring wheat in North Dakota.
Based on results gained during the last three years, product launch is expected in 2022. Currently Lavie Bio has a robust product pipeline spanning from corn, and wheat bio-stimulant to bio-fungicide for grapes.
For 2021, Lavie Bio has set the following main targets; to conduct pre-commercial trials for bio-stimulant LAV211 in spring wheat and to complete bio-fungicide LAV311 and LAV312 development toward regulation.
In 2022, Lavie Bio is expected to initiate product sales of bio-stimulant LAV211 for spring wheat and file for regulatory approval for its leading bio-fungicide product candidate LAV311 and LAV312. You can find all the future expected milestones for our subsidiaries in our updated presentation that we upload in parallel to our annual financial reports.
I conclude the review of our subsidiaries and I hope you are as excited as I am about their expected future achievements. But these are not all the highlights I wish to update you with today. I am very pleased to share with you that we are now evaluating the entering into various new fields of activity including, using MicroBoost AI for developing products based on microbes to address various market needs in the aqua-culture industry, using ChemPass AI for drug optimization in human health, using GeneRator AI with focus on genome editing to developing high quality plant-based food.
Before turning the mike over to Arnon for an overview of our cannabis-focused subsidiary, I can summarize today’s prepared remarks by stating that our excitement at Evogene today is based on two substantial value creating centers that have resulted from our long-term commitment to computational predictive biology for the development life science based products, the first being our growing group of highly focused subsidiaries in multiple key markets, each with very attractive products under development and a unique capability to rapidly develop them.
And the second, being a powerful technology hub at the current company level in the form of our CPB and specific engines for the establishment of product pipelines in new field of activity.
With this, I hand over to Arnon, Canonic’s CEO. Thank you. Arnon?
Thank you, Ofer. I would like to begin by introducing myself. My name is Arnon Heyman and I serve as Canonic’s CEO. I have been with Evogene for the last six years, previously serving as the Vice President and General Manager of the Ag seeds division. My background is in biotechnology and I hold a PhD from the Hebrew University in Jerusalem.
Canonic’s mission statement is to develop and commercialized precise and stable medical cannabis products for better therapeutic effects using computational biology. We are here because genetics can make cannabis much more effective. Our genomic approach is powered by our exclusive access to Evogene’s CPB platform and its GeneRator AI engine.
We believe that these assets and the capabilities that we bring uniquely position us to bring substantial added value to this market and address the market’s three main challenges, stability, increased yield, and specificity as I will describe momentarily.
As you are probably aware, the cannabis market is growing at a fast pace worldwide and according to industry publication is expected to reach more than $40 billion in the next four years. Canonic is focusing on the Israeli market to begin with expecting to be followed by the European markets and North America.
I would like to highlight some facts about the Israeli market and while we believe it to be an exciting business opportunity to start with. By the end of 2020, we had more than 80,000 license patients in Israel which corresponds to approximately $260 million per year.
There is a steady increase of 30% to 50% per year in patients. Analysts forecast the Israeli market to reach 250,000 license patients in four years which corresponds to an approximately $830 million per year.
In addition, we see the increasing demand for premium products with patients willing to pay higher prices. Based on this growth forecast, Canonic is targeting this attractive premium product market in Israel expecting our first product launch to the Israeli market in 2022. Once again, I would like to emphasize that the Israeli market is only our starting point to be followed by the European and later, the North American markets.
The first key challenge we see in the cannabis global market is variety stability. Current cannabis lines demonstrates high variability in active compound concentration and other desire traits. Patients continuously seek more reliable consistent products. This variability starts with the cannabis line demonstrating unstable genetics and at least to frustration with inconsistent and unreliable products.
The second challenge is the current active compound yields. The yield in cannabis refers to the active compound or metabolites found the plant. Currently, low yield leads to higher production cost and subsequently higher cost for the patients. But maybe the most challenging gap in the industry today is the specificity.
Cannabis is known to contain hundreds of active compounds and a critical need is to connect specific active compounds to the relevant medical indication and to develop cannabis varieties and products that include these specific active compounds in a stable and consistent manner.
We believe that the use of our artificial intelligence together with deep understanding of genomics and analysis of big data can decode cannabis genomics to address these three challenges. This is what makes Canonic unique.
Canonic is engaged in the development of two product families; the MetaYield family focused on stable enhancement of total plant compounds for high yield and consumer-related traits and the Precise, focused on stable enhancement of specific active compounds for therapeutic traits such as pain and inflammation.
As mentioned by Ofer, it is Canonic’s strategy goal to build an end-to-end value chain from feed to product sales. As we described in previous announcements we are building our strengths from both ends of the value chain starting with the genetic development of unique strains in our breeding and propagation facility, then outsourcing the intermediate stages of cultivation, packaging and distribution and ending with product marketing by Canonic.
Canonic is the youngest subsidiary in Evogene group established in 2019 and has already achieved significant milestones, most of which were previously reported and I am proud to share some of them today with you again.
I’ll start with two important technological infrastructure achievements. The first is the completion of one of the biggest dedicated R&D facilities for cannabis in the Israel. We also imported more than 100 different cannabis lines and initiated cultivation after receiving all required regulatory approvals.
The second is the establishment of our proprietary genetic and phenotypic database to support our breathing problem and the initial identification of relevant genomic markers for our diverse product programs.
With respect to the MetaYield product family and our strategic goal to launch first product in 2022, we are currently testing our most advanced MetaYield lines at local growers’ sites as a pre-commercial preparation. This involves the cultivation of the most advanced lines, yield evaluation, additional testing, including consumer ranking for selected varieties and marketing activities to prepare for product launch.
We recently signed a cultivation service agreement with Telcann, an Israeli cannabis cultivator. The agreement Telcann supports our go to market strategy to use subcontractors for cultivation, production and distribution of Canonic’s medical cannabis products. This is a major milestone for building the value chain supporting our intention to launch first products in 2022.
With respect to the Precise product family, we have entered collaborations with research centers to use preclinical, high throughput systems to screen dozens of genetic lines for two main indications, pain and inflammation. The generated data is integrated into our proprietary database and is directing our product development efforts for optimized therapeutic products.
Last but not least, we have announced last week the signing of the collaboration agreement with Cannbit, a subsidiary of Tikun Olam-Cannbit, a leading cannabis company in Israel for the development of novel precise medical cannabis products.
The companies expects that the combination of Cannbit’s vast clinical data on the impact of medical cannabis strains collected over many years, together with Canonic’s recognized leading computational biology platform and cannabis breeding capabilities, we lead the companies to successful joint development of precise products.
The development of new products will be performed at Canonic’s R&D facility and will be based on cannabis strains that both companies will contribute to the collaboration.
To summarize, the opportunity we found in the cannabis market for the computational genomic technology we have in-house and our advanced breeding capabilities is unique. The team and I believe we are on track to meet the company goals and are excited to be so close to our first product launch. After Dorit’s review of the financial results, I will be happy to answer any questions you may have.
And with that, I would like to turn the call over to Dorit. Dorit?
Thank you, Arnon. I will begin by reviewing our cash balance. As of December 31, 2020, our consolidated cash, cash-related accounts and bank deposits includes approximately $48.2 million, approximately $13 million of Evogene consolidated cash is appropriated to its subsidiary, Lavie Bio.
The $48.2 million does not include $28 million received after year end from the company's "At the Market Offering" initiated January 2021 and concluded during February 2021. The weighted average selling price under the ATM offering was $7.36 per share. With that, we exhausted the remaining amount under the shelf prospectus we filed in July 2020.
During the fourth quarter of 2020, our consolidated net cash usage was approximately $6.1 million, or $5.1 million, if excluding Lavie Bio. During the full year of 2020, our consolidated net cash usage was approximately $19.3 million, or $14.7 million, if excluding Lavie Bio, which is in the range we estimated for the full year of 2020.
This year 2021, we expect to see an increase in the cash usage as our subsidiaries enter advanced stages of product development and commercialization: Biomica is expecting to conduct its first-in-man clinical trial, AgPlenus is expecting to conduct a broad field trial in its herbicide program towards Advanced Lead, and both Canonic and Lavie Bio are preparing for their respective first product launches during 2022.
For the full year of 2021, we estimate that our net cash usage will be within the range of $26 million to $28 million. Excluding cash usage by Lavie Bio, our subsidiary, we estimate that our net cash usage will be within the range of $20 million to $22 million. The company does not have bank debt.
Before we turn to the statement of operations, I would like to explain a new line item on our balance sheet this quarter relating to pre-funded warrants that were issued in conjunction with a $12.0 million of investment in November 2020. In accordance with the IFRS accounting practices, the warrants were recorded as liability as of December 31, 2020. The warrants were exercised for shares at the beginning of January 2021, and therefore will not appear on our balance sheet next quarter.
Let’s now turn to the statement of operations. R&D expenses, which are reported net of grants received, were approximately $4.8 million for the fourth quarter of 2020, in comparison to $5.2 million in the fourth quarter of 2019. This decrease in R&D expenses during the fourth quarter was mainly due to grants received from the Israeli Innovation Authority.
For the full year of 2020, R&D expenses were approximately $17.3 million, compared to $15.8 million in 2019. The increase in R&D expenses for 2020 were mainly attributed to payments made to third parties in connection with the pre-clinical studies conducted for Biomica, field trials conducted in target locations for Lavie Bio, and an increase in non-cash expenses of $1.4 million for amortization of share-based compensation.
General and administrative expenses for the fourth quarter of 2020 were $1.7 million, in comparison to $1.1 million in the fourth quarter of 2019. For the full year of 2020, G&A expenses were approximately $5.3 million, compared with $3.8 million in 2019.
The increase during the fourth quarter was partly attributed to the impacts of an interest toward increase of the cost of directors' and officers' insurance. For the full year of 2020, the increase was also attributed to the impact of the cost of directors' and officers' insurance and in an addition to an increase in non-cash expenses of amortization of share-based compensation.
Operating loss for the fourth quarter of 2020 was $7.2 million, in comparison to $6.9 million for the fourth quarter of 2019. For the full year of 2020, the operating loss was $24.8 million, compared with $21.2 million in 2019. The increase in loss during the fourth quarter and for the full year of 2020 is attributed to the increase in the aforementioned operating expenses.
The loss for the fourth quarter of 2020 was $8.8 million, in comparison to loss of $6.7 million during the fourth quarter of 2019. For the full year of 2020, the loss was $26.2 million, compared with $19.1 million in 2019.
The increase in the loss during the fourth quarter and for the full year of 2020 is attributed to an increase in operating expenses and an increase in financing expenses, mainly attributed to $1.9 million non-cash expenses related to the revaluation of pre-funded warrants mentioned earlier.
With that said, we would now like to open up the call for any question you may have. Operator?
[Operator Instructions] The first question is from Kristen Kluska of Cantor Fitzgerald. Please go ahead.
Hi, everyone. Thanks for taking the questions and for providing the in-depth overview this morning. So, Ofer, I wanted to first ask you about some of the new announcements you have today related to where you might look to use the CPB platform in other fields such as agriculture, human health and plant-based food.
Could you maybe walk us through how you view those markets right now and some of the key limitations from other approaches in this field? And then on that note, what are the learnings that you’ve found from both the internal work and for your subsidiaries that you think could help address some of these markets?
Hi, Kristen, and nice talking with you. So, first, as I emphasized in my script today, we are in the initial stages of validate this new field of activity where we believe we can yield our technology. And it’s for us to decide moving into a specific area of activity is, after we are addressing set of criteria and once the criteria as an example is market size, then there is a question here, there is a need for novel products.
And the other question is, is there is challenge to develop this product and what type of challenges need to be addressed in order to develop this product. And if we came to the conclusion that the answer to all the questions is yes, there is a big market. There is every need for new products. And there is a significant challenge developing this product.
The challenges are in the discovery phase and development phase and the core components of this product is based on microbes, small molecules or genetic elements only then we are looking into this field of activity with more details.
The area that I mentioned today, I think that they are all addressing this type of question positively and we are now learning more into the details on what does it mean for Evogene to engage and be more committed to develop activity in this area. So, as an example, and in terms of connected to your second part of your question, and the area of improving small molecules towards drug.
So, we already have two projects in this area that is managed by Biomica, the MERSA and the CDS. And we also even have a small project that we didn’t disclose because of the size of this with an external company which where we use our technology in order to improve the efficacy of the molecules.
And we feel that the technologies we develop in this field originally – originally for AgPlenus for developing herbicides and pesticides. So that, as we develop there in many directions can address some of the challenges exists in this field and we are now starting to looking more and we have even recruited some people to learn more about Evogene’s technology and how we would like to navigate it to play a significant role in the future in this area.
Another example is, that I mentioned, is improving quality trait using genome editing. So, in genome editing, there is few questions we need to address. The first one is, what gene you want to edit? And this is definitely existing technologies in Evogene. The next question is, what is the specific edit you want to do?
And we have this technology already and one of the important question is, do you have the technology to actually to execute this edit you are interested at? And this is part from our work today in the Israeli consortium to CRISPR-IL, which is trying to address some limitation exists in this area.
And yes, I mean, Evogene was heavily engaged in developing crop trade in the area, but in the old days we were focusing mainly on GMO approach.
So now, we want to leverage all the technologies exists in Evogene, all the databases, all the knowhow expertise, but toward genome editing and we want to focus on quality traits and not just trades that are relevant for the farmers, more trades that are relevant for the consumers. And we are now seriously evaluating this opportunity.
And the third is the aqua-culture. Here, we believe that there is a growing market that I presently also have a very strong feeling about it, because I really hate to see that we continue to take all the fishes in the oceans and eat them and I will prefer to see that we are growing them in a more – and on hold or in different cultured way.
But going into this direction where I believe the world is more and more going into this – in this channel, it creates a new problem and new diseases coming that’s you need to address. And that maybe also to improve the growth rate of the fish in order to reach to right size, et cetera. And we believe that you can address some of these challenges with my problem.
And when you look at the MicroBoost technology that we are using it for Lavie Bio, we are using for Biomica two completely different kingdoms. I think that this is really natural development to move also and to use this technology for the aqua-culture industry. Of course, there is questions asked, is there relevant data is exist and there is the question of, the maturity of the industry to use this type of product.
There is many other commercial questions and technical questions that still need to be addressed. But I felt that the time I will show with our shareholders that Evogene start to explore additional opportunity to the existing subsidiary and activity we are already managed which we are very excited about and I believe that we will hear more about this – those areas in the future.
I just want to make sure that it’s just the beginning, we are in the beginning of the valuation of this new area. It’s heartening to believe that we will push all of them at the same time. We need to make sure what we are choosing and where we are going to focus on and where we will have more and clear decision, of course, I will share it in future analyst calls.
Great. Thanks. Look forward to those updates down the line. And then, Arnon, thanks for your comments as well.
I wanted to ask you, once the product is potentially commercialized in 2022, could you please walk through the work that either you and/or a partner will have to do to make sure the very market is aware of the key advantages here to MetaYield versus what’s currently available in the market, both from a pharmacy and web platform, as well as a consumer or a patient standpoint?
And then on that note, how are you thinking about the initial uptake trends in light of the stability and yield issues we’ve seen from marketed products and I know in your prepared remarks, you did discuss a lot of the current frustrations.
Okay. Thank you, Kristen. So, in terms of our market entry next year, 2022 here in Israel, so, we need to do a lot of work through a web platform actually. As I mentioned, in my talk, there is roughly 80,000 patients, licensed patients now in Israel and we expect this community to grow next year.
So we are talking about a very specific community of patients, of consumers that we will need to address, we will need to approach them in order to demonstrate what kind of product attributes, what kind of traits we are presenting with our varieties.
We are targeting our first product to be at the premium product category, at least here in Israel, where we are talking about high PHC, which is the – currently the most popular product. And of course, there is a lot of marketing work, branding and so on to be done in order to enter this market.
In terms of challenges, yes, I talked about stability and specificity and of course, yields. I can say that, at least till now those challenges are met. Roughly, well, I will say not in an optimal way, in terms of the product stability, most companies devote their efforts for the cultivation verticals in order to get stability, but not as much as needed on the genetic side.
We see clinical trials conducted all around the world, but still the major question of specificity and to connect between active compounds in the plant and the therapeutic effect is still a big question. This is one of the reason why we have signed a collaboration with Tikun Olam here in Israel, obviously, last week I believe, so.
And we truly believe that both companies together can address this challenge which is one of the biggest challenges today in the industry. I hope I answered your questions Kristen.
Yes. Thank you so much. Appreciated.
Thank you, Kristen.
[Operator Instructions] The next question is from Ross Haberman of RLH Investments. Please go ahead.
Good morning, Ofer. Thank you for the call today. Could you just talk about the cash burn? You burnt, I think you said about $7 million in this quarter. What’s your expectation for the next couple quarters? Thank you.
I think that we – in – there is – Ross, we were talking about the burn rate is expected for next year, for the total year for the company, excluding Lavie is around $20 million - $20 million to $22 million and with Lavie Bio it’s around $26 million to $28 million.
The reason for the growth of the burning rate is, next year, Lavie and Biomica has planned to conduct a first-in-man clinical trial and just this trial, it’s estimated around $5 million, not all of this will paid this year. But a significant portion will be paid this year.
Lavie Bio is going to conduct a very broad field experiment for its advanced product in North Dakota in USA and in other territories in the U.S. and the provision for first product launch in 2022. Canonic is expanding its activities significantly and we are really excited with the results we start to see lately from the MetaYield family product and we are very positive with our expectation for fist product launch in 2022.
And we are now in the preparation, including the marketing activity, including building this patient club that are going t be our ambassadors in the Canonic and the cannabis community here in Israel. And also AgPlenus is now moving toward a lead optimization which is fleet candidates and there is other candidates that we hope to reach to a lead phase during this year.
So, lots of activity. Lots of excitement. Lot of progress to our – consumer money than previous year, but it’s also news that I believe that we’ll see the fruits coming from all this activity starting from 2022 and on.
So, I’d say, you are saying a total of $48 million, is that correct in total?
As of this December, yes.
But for next year, the burn rate for next year is projected to be $20 million to $28 million for the whole year.
Okay. $20 million to $28 million, got it. Okay. Thank you very much guys. Best of luck.
The next question is from Kenny Green of Edison Group. Please go ahead.
Hi everyone. So, on the Investor Relations, I think some Investor Relations of Evogene and we have received a number of questions by email from investors. So, I will go through them now. First question is, what is the purpose for your new shelf filing?
The shelf registration statement and the ATM filed recently is effective for three years and the filing goes to have something in place in the event the company wants to raise capital in the future. Also as I am sure you are aware, this is routine practice for many companies. With respect to the cash needs of the Evogene Group, we see no short to need for additional funds to meet our current plan in the budget.
However, as publicly disclosed, we are very pleased with the rapid progress as I described it in the previous question answer being made by our subsidiaries. And therefore, we continue to consider various alternatives for possible acceleration of the progress. Of course, if we were to choose to do so, it would be done only in manner consistent with the best interest of the Evogene shareholders.
Okay. Thank you for that. Do you have plans to establish new subsidiaries in the coming year? And if so, what would the process be?
So, in a way it’s somehow I think when I answered the question of Kristen, I think that I was giving quite a broad overview to the question. But in high level there is certain criteria that we need to make sure that we address positively before we will decide to enter into the facility. And based on the past experiences we prefer to have a small group inside of Evogene that start to use our technology or modify our technology to address specific challenges and field of interest.
And only when we start to see the initial pipeline of products that is what developed dedicated to the field of interest, only then, we are moving to the stage of establishing a subsidiary focusing on these specific segments.
So, it’s something like this is expected to happen this year, it hard to guess, maybe at the end – close to the end of the year. But probably makes more sense at the beginning of next year and probably it should be one – if it will have two – there will be one of the three fields of activity and I described earlier that we already start to investigate and learn as I mentioned earlier.
Okay. Next question will be for Dorit. Dorit, what is the current share count post the ATM?
Okay. So the currently outstanding shares after the ATM is 40,386,448.
Okay. Thank you. And the total is 14 million?
40 million shares.
40.3. The next question…
40.3, yes, you are right.
The next question is for Arnon, with regard to Canonic. So, with the Tikun Olam agreement, what are your targets? When do you expect to see the product in the market? A follow-up question to that would be, are you looking to do other similar joint ventures with other non-Israeli companies?
Okay. So, thank you for the question. I want to say that, we see the essence of this collaboration in combining our computational capabilities, computational genomics and of course, reading capabilities with a desired clinical deep data and market knowhow of Tikun Olam.
As we have explained in previous talks and also in our website, our Precise product family is focused on closing the gap of specificity challenge in the market, meaning, we are trying to connect therapeutic effects with genetic elements in the plant.
So, combining forces with a company that has so many – so much clinical trials conducted here in the Israel, treated thousands of patients for more than ten years since the reform here in Israel is initiated would truly help us in moving forward with this specific product program. This is part of the Precise program and we are truly excited to start this collaboration.
In terms of timelines, this is something that we have not disclosed so far. And when we will make this public, of course, I can relate to specific timelines and product launch and so on.
Talking about our future collaborations outside of Israel, so, I can say that we see the cannabis market in North America, very, I would say, enthusiastic towards a collaboration and new technologies, especially now with the new administration in the U.S. and the big hopes for legalization of cannabis on the Federal level.
We have been in contact with several companies in North America. And I am sure that our way outside of Israel would be in collaboration with those global companies. As I mentioned before, Israel is our first base for commercialization. But then, Europe and North America would follow and there we would also look for local collaborations of course.
Okay. Thank you, Arnon. And two more questions for Ofer. First one is, please provide more details and an update on Evogene’s participation within the CRISPR’s consortium?
Okay, so, the CRISPR consortium is group of companies from – all from life science and together with local academic institutions that is found by a Israeli innovation center authority. And the idea of this consortium is to try to solve certain problems in using CRISPR-Cas9 that the industry is facing, which is mainly that the edit you can conduct using CRISPR-9 is not precise and something happening more than one place in the genome.
And the consortium is focused on trying to design, derive what is called guided RNA that will increase the probability or will ensure that Cas9 will make the edit precise and only in the place you want it to be. We, at Evogene, as part of this consortium is using its AI capabilities in order to design the guided RNA and the technology that we are going to develop in this mean will stay under Evogene responsibility.
So, we will have the right to use all the technologies and the knowhow that we will develop and other members on the consortium is developing through this process to use inside of Evogene. And we are planning that it will far from this GeneRator AI technology platform.
And all our projects – programs that are focusing on genome editing can benefit from it. And this is why I believe that one of the earliest should start to explore more details is improving a quality trait using genome editing.
Okay. Thank you. And the last question is, what is – Ofer, what is your vision for Evogene in five years time?
Well, okay. So, first and most important is the technology. I think that Evogene should continue to stay the technology hub that is focusing on computational biology, it trends our CPB platform and it definitely trends our three engines, MicroBoost AI, GeneRator AI, and ChemPass AI for the three core components that we are focusing on.
And because there is all the time challenges we need to address and there is all the time new data and new algorithm that you can integrate into our systems in order to make it more efficient and much more robust.
And with respect to how to capture the value of this technology, so we already have this four - our four main subsidiaries, Canonic, AgPlenus, Lavie Bio and Biomica. And I can envision those four companies are advancing toward completely independent companies.
I believe that each one of them should stand by itself that could be public companies with wide population that represent the ethics and the products they will develop and maybe they will be acquired, I mean, I really believe that each one of them has a huge, huge potential for – by themselves.
In addition, as I start to disclose in this analyst call, Evogene will start to develop the new set of subsidiaries. The new set of activities, not just to serve the subsidiary, it could be also just activities that we can leverage through strategic collaborations. Evogene can do strategic collaborations not necessarily through subsidiaries.
But definitely there will be new areas that we are going to utilize our technology to generate and create more value to our loyal shareholders. And in five years from now, I really hope to see Evogene as the – like a lighthouse of technology in the area of computational biology.
The four subsidiaries that we have, they are already a successful company, each one of them is a world-leading company in the sector and we also have some new subsidiaries in different phases moving to their success as well. So, I have lot of expectation from Evogene for the next five years.
Okay. Thank you, Ofer and I’ll hand it back to the operator.
Thank you. The next question is from Geoff Gilbert of Inukshuk Investments. Please go ahead.
Thank you for taking my call and I appreciate the comprehensive review, especially the insights into the new potential markets like you were talking about, Ofer. One question for Arnon, specifically since he is on the call today. While it’s a couple of years off, how do you see with your go to market strategy, the actual sales development?
Are you thinking direct-to-consumer, partnering like you have done? Maybe you can comment on industry enquiries and might you have different strategies for each of your product lines? I.e. if there is a medical cannabis partner with somebody more in the medical field versus a recreational MetaYield? Thanks for taking my question.
Hi. Thank you for the question. So, our current go to market strategy relies on two sides of the value chain actually. On one side, we are heavily structured to develop new genetics to reproduce those genetics in work with cultivators on cultivating them.
On the other side, we are building the Canonic brand all the way reaching to patients and learning about the market needs and trying to implement it into our genetics. So, here in the Israel, the structure that we are building is developing our genetics producing the reproductive material and working with subcontractors in order to get those products all the way to the pharmacy.
Cultivators, producers, distributors, and so on and we expect to see our first product in the pharmacy here in Israel under the Canonic brand. Going out of Israel, we understand that we will need to work or we would prefer to work with local brands. We would like to cultivate our developed genetics abroad, either in Europe or in North America and work with local brands in order to get those products all the way to the market.
But at the end of the day, the Canonic product would be a final product approaching the consumer. If it’s a patient here in Israel or in other territories, and the other consumers that would prefer our products. Did that answer your question?
It did. So, we can expect to see multiple strategies in getting the Canonic brand to consumers?
Right, depends on territories, it would depend to develop the strategies, sure.
Excellent. Exciting times. Thanks again.
[Operator Instructions] There are no further questions at this time. Before I ask Mr. Ofer Haviv 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 97239255901.
Mr. Haviv, would you like to make your concluding statement?
Yes, thank you. Thank you all for joining the call today. I look forward to updating you with our progress over the next few months. Thank you and good day everyone.
Thank you. This concludes Evogene's fourth quarter and full year 2020 results conference call. Thank you for your participation. You may go ahead and disconnect.