Earnings Call Transcript - EVGN Q2 2025

Operator, 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/or 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 PSLRA, and other securities laws as amended. Statements that are not statements of historical fact 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, planned, estimated, intend 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, describe 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 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 form the basis of or be relied on in connection with any action, contract, commitment, or relating thereto or to the securities of Evogene or the company. The trademarks 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, President and CEO

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 Ag operations, are presented as a single-line item in the consolidated profit and loss statements. This appears under the line titled, 'Loss from operations held for sale, net.' This accounting treatment follows the intention to sell the majority of Lavie Bio's activity and the MicroBoost AI for Ag 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 strong seed sales from our subsidiary, Casterra. In addition, during the first half 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. This decrease is primarily due to reductions in R&D activities at Biomica and the discontinuation of operations at Canonic. 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 $7.7 million compared to approximately $11.1 million in the same period last year. This significant decrease is mainly attributed to the reduced level of activity in our subsidiaries. As of the end of the first half of 2025, Evogene's cash and short-term bank deposits stood at approximately $11.7 million. It is important to note that this cash balance does not include the expected proceeds from the sale of Lavie Bio's assets and the MicroBoost AI for Ag tech-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 ChemPass AI, our proprietary platform for AI-driven discovery and optimization of small molecules in both the pharmaceutical and agriculture industries. As we shared earlier this year, our strategic priorities include strengthening ChemPass AI as core assets, expanding collaboration efforts in small molecule drug discovery, integrating AgPlenus, 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 ChemPass 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 ChemPass AI's capability by addressing a major challenge across pharma and Ag tech: the identification of novel molecules meeting multiple complex criteria, trained 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 Ehud Gazit from Tel Aviv University, a global expert in biomolecular self-assembly, to develop small molecule therapeutics targeting diseases caused by the accumulation of metabolites such as gout and PKU. This collaboration leverages ChemPass AI to identify novel compounds that inhibit the self-assembly of metabolites, 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 changes, including a reduction of over 40% in headcount at AgPlenus. We expect this change to allow for a more effective use of ChemPass AI to enhance AgPlenus' pipeline. The most important event that took place since our last analyst call was the transaction with ICL that significantly enhanced our cash flow. In April, we announced the sale of most of Lavie Bio's activity to ICL for a total consideration of $15.25 million. In addition, Evogene MicroBoost AI platform for agriculture was sold to ICL for $3.5 million. As part of the transaction, Lavie Bio redeemed the SAFE investment 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 dividends as Evogene remains a major shareholder in Lavie Bio and preserves the upside from a continuing collaboration agreement between Lavie Bio and one of its existing partners, which is excluded from the transaction. As I stated, our strategic priorities included 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 streamlining process at Biomica, which included a significant workforce reduction and organizational change at the management level. During this time, Mr. Elran Haber, CEO of Biomica, stepped down from his role 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 two 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 continues. With respect to Evogene, to support our new strategic focus, we implemented major organizational restructuring, which included a workforce reduction of approximately 30%. As stated, the effect of this organizational streamlining will be reflected in our financial report starting in the third quarter of 2025. 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 Lake Street 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. Regarding the 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 expectations for the remainder of 2025. As stated earlier, our new strategy centers around a single computational engine, our ChemPass AI platform for accelerating small molecule-based innovation. Our primary target is to continue investing in the unique offering of our engine cutting-edge. To maintain our competitive edge, we intend to continue advancing our technology, including partnerships with global tech leaders such as Google, aimed at elevating our platform performance to new heights. We intend for this platform to serve two key verticals: pharma for the discovery and optimization of small molecule therapeutics and 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 maintains 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 expectations for our other subsidiaries in line with our strategic focus. Lavie Bio: Following the sale of the majority of the company's activity, Lavie Bio will maintain only its existing collaboration agreement with its existing partner and is expected to distribute funds to its shareholders, with Evogene as the majority holder. No additional activities 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 Casterra, our wholly-owned subsidiary offering an integrated solution for growing castor as a feedstock, differ 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, Casterra has begun entering new markets and marketing channels, and we see strong potential in its operations to build a sustainable revenue stream. The company is advancing multiple business initiatives, and we will update you as these develop. In summary, we are progressing steadily with the execution of our new strategy. The steps taken this quarter reflect a clear commitment to operational discipline and long-term value creation. Beginning in September, I will have the honor of presenting Evogene's updated 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 will continue to keep you, our shareholders, partners, and analysts informed as we advance toward our goals. Thank you for your continued support. Yaron Eldad, Evogene's CFO, will now present our financial results for the second quarter. Thank you.

Yaron Eldad, CFO

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 Lavie 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 $2.3 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 Casterra attributed to seed sales in the first half of 2025, partially offset by a decrease in AgPlenus revenues, mainly due to revenues from a licensing agreement with 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 decision of Canonic's 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 same period of 2024. This decrease is mainly attributable to the decreased expenses in Biomica and Casterra. 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 was mainly due to reductions in Evogene, AgPlenus and Biomica's personnel costs. Sales and marketing expenses for the second quarter of 2025 were approximately $0.4 million, 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 non-cash compensation expenses in Casterra, 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 the accounting treatment related to a sublease agreement. The decision to cease Canonic's 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 the accounting treatment of prefunded 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 prefunded 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 the accounting treatment of prefunded 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 Lavie 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 statements 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 revenues. The net loss for the second quarter of 2025 was approximately $4.7 million compared to approximately $6 million in the same period last year. The $1.3 million decrease in net loss was primarily due to decreased operating expenses, decreased loss from operations held for sale, and increased revenues, partially offset by increased financing expenses as mentioned above.

Operator, Operator

The first question is about the current amount of castor seed inventory you have, including both finished products and those expected to be finished after the harvest. Additionally, if your existing customer does not make a follow-up order, what are your strategies for commercializing this inventory?

Ofer Haviv, President and CEO

This is Ofer. Ben, great to hear from you. So I won't disclose the specific amount of inventory we have, but we have a few hundred tons in castor seed, which are ready. And we intend to sell those seeds to our partners. But in any event, as I mentioned in a previous call, Casterra is also focusing on using our seeds to grow grain and then through subcontractors to grow grain and to sell the grain to our partners. Because in some cases, we feel that we have a better understanding of how to utilize and to grow castor in certain territory compared to what our partners are doing. So I don't—at least at this point in time, I don't have any question marks on how we are going to benefit from our castor seed inventory. It could be through direct sales, or we are going to use it to grow castor by ourselves and then to sell the grains—and in this area, we already conducted field trials both in Brazil and in Kenya, evaluating our growth protocols in the way that we believe we should—the industry should grow castor. And it looks like in Brazil, we already have some initial results that look very, very promising. And we are now waiting to see the results in Kenya, but I think that we are also in the right direction there as well. So I hope that I addressed your question.

Operator, Operator

The next question, what steps need to occur before you can announce a castor oil business?

Ofer Haviv, President and CEO

If I understand the question correctly, it means that if we are going to enter into the oil business itself? So at least at this stage, we are putting ourselves—we are entering into the area of grain cultivation and then selling grain to partners. And there is enough today both in Africa and Brazil, and there are crushing oil factories that are eager to receive more castor grain because the demand for castor oil is still high and actually increasing. So the bottleneck today is really in the castor cultivation. And we believe that our variety, with 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 expense and cost to grow the castor 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 trial in growing castor for grain using our seed variety.

Operator, Operator

The next question, the stock is still low. When will it start going up?

Ofer Haviv, President and CEO

This is an interesting question. We can never control the stock market. But what I can say is that we are now at the end of a very—at the end of a long process of analyzing our strategy, which we presented today, I hope, in a very clear way. We are now in the process of finalizing a new company presentation, and we're also going to have a new website that will reflect the new strategy. We are planning to launch at least a presentation during September and then other communication tools through the end of the year. I'm planning to start to meet with investors and pitch the new company strategy. And most important—most important, when do we start to announce new collaboration agreements, both in pharma and also in Ag that will strengthen the value proposition of our business model and our technology. I believe the share will start to react to these announcements. So I am quite positive about the new revenue the company is focusing on. The Board is standing behind management. And I believe that together, I'm expecting to start to see—and I hope and believe that the capital market will start to react positively to the company's new strategy and the achievements ahead of us.

Operator, Operator

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

Ofer Haviv, President and CEO

So the answer is yes. And actually, what we expect to see in the third and fourth quarters is a continued decline in the company's expenses. I believe, in all different expense items, R&D, business development, marketing and sales, and also in G&A. So actually, we're even expecting to see a continued reduction in our expenses.

Operator, 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 to reach peak sales?

Ofer Haviv, President and CEO

So I think that we are now—and when you're talking about sales, this specific board is relevant for Casterra because Casterra is currently our only activity that produces sales on a regular basis. The other two areas of activity, Ag and pharma, which rely on our ChemPass technology will be more of the collaboration type of agreement, which will include R&D fees, milestone payments, and royalties. But when talking about sales, it's probably referred to Casterra activity, which is selling seeds, and in the future, 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, more than one, that have shown interest in expanding their activity in castor oil. They are all looking for a way to solve what we believe is the main challenge in the castor industry: the cost to grow the grain that serves as the source for the oil. I think here, this is the main limitation. And we believe that our variety and the growth protocol that we develop, which targets maximizing yield versus expenses, is the right approach. We are now in a quite advanced stage in validating this concept, both in Brazil and Africa. From the initial indications we received, at least at this stage in Brazil, there is a lot of—as the field trials created a lot of interest, and I hope that we'll be able to disclose more information during the next quarters.

Operator, Operator

The next question for the ChemPass AI platform. What catalyst milestones should we expect in the next 12 to 18 months to evaluate progress?

Ofer Haviv, President and CEO

So ChemPass AI is the tech engine that both our divisions are using: the Pharma division and the Ag division. So I can think about two types of catalysts: one, which can come from the pharma or from Ag. And this is announcement press releases about new collaborations with partners that are interested in benefiting from the ChemPass AI, meaning that they would like to have a direct candidate targeting their approach of interest, and they would like to benefit from ChemPass AI or a strategic collaboration between AgPlenus, our subsidiary focusing on crop protection, with companies such as Bayer, Corteva, BASF, Syngenta, FMC, and others. Bear in mind that we already have two strategic collaborations: one is Bayer, and one is Corteva. So this is the type 1 of press releases that you might see in the next year, announcing more and more collaborations, which demonstrate the value of our technology, ChemPass AI. In addition, we continue to invest to develop ChemPass AI, the engine itself. We are doing this in some cases together with partners such as Google, as we announced in May or June this year. We are now talking with big tech companies and exploring different opportunities to continue the development of our tech engine together with them. This is another type of announcement that can come when we disclose new capabilities—breakthrough capabilities that we succeed in developing as part of our ChemPass AI generative engine. We are very, very proud to announce our foundation model that was developed together with Google during the first half of this year. We are already seeing the positive effects that this development has had on the ongoing discussions we are conducting with potential partners, both in the pharma and the Ag sectors as well.

Operator, Operator

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

Ofer Haviv, President and CEO

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, Operator

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