Evogene reports first quarter 2017 financial results

Evogene Ltd., a leading company for the improvement of crop productivity and economics for food, feed and fuel, announced today its financial results for the first quarter ended March 31, 2017.

Ofer Haviv, Evogene's President and CEO, stated: “Important progress continues in all three of our core business areas, Ag-Biologicals, Seed Traits and Ag-Chemicals. This progress includes an overall key corporate initiative to expand our capabilities and activities past the discovery phase and into early, and even advanced, product development phases. We expect our efforts will result in both new opportunities for various types of collaborations and the ability to obtain an increased share of future revenues from products based on our unique capabilities.

In our internal bio-stimulant product program within our Ag-Biologicals area, we have obtained positive field trial results showing increased efficacy and stability in corn under drought conditions and now advancing 20 promising microbial strains in second year corn validation field trials. Additionally, moving downstream past discovery, we have added key product development activities, including microbe seed coating formulation and microbe culture fermentation.

In the area of bio-pesticides, we recently announced that our partner, Marrone Bio Innovations (MBI), is advancing certain novel bacteria related to Evogene-identified proteins into MBI's bio-insecticide product development pipeline.

In Seed Traits, progress continues under our yield and environmental stress collaboration with Monsanto, with Evogene gene candidates that have demonstrated positive results for yield enhancement in corn and soybean being further optimized and evaluated in Monsanto’s pipeline.

Also within Seed Traits, our insect control program is focused on bringing next-generation seed-trait solutions to market through the discovery of novel toxins. Following the demonstration last year of insecticidal activity for a set of predicted toxins on a representative insect from the Lepidopteran family, a sub-set of these toxins demonstrated insecticidal effect when recently tested on additional insects of the same family. This is a strong indication for the potential of broad applicability for these toxins on this entire insect family. The next step is for selected toxins to be introduced into target plants for crop testing. Furthermore, with respect to the Coleopteran family of insects - an insect family that poses a widespread worldwide threat to corn - other Evogene discovered toxins have recently demonstrated initial insecticidal activity.

In Ag-Chemicals, we are focused on the biology-driven predictive discovery of candidate chemical molecules for the development of next-generation herbicides with novel mode of action. Such discovery capability provides the foundation for both our collaboration with BASF and our internal novel herbicide pipeline. In Evogene's internal herbicide program, a subset of 10 previously validated Evogene chemical compounds have now demonstrated initial positive results in greenhouse evaluation. These compounds were computationally predicted to impact six Evogene discovered targets for their herbicidal activity. In parallel, we continue our work aimed at establishing biological proof of the novel mode-of-action for those 10 chemical compounds. We have also integrated certain early product development activities, including the establishment of a computational infrastructure addressing key parameters for molecule optimization such as efficacy, toxicity, and safety.

With respect to our unique predictive discovery infrastructure, we are now incorporating 'genome editing' technology, a novel revolutionizing technology which will initially be utilized in our internal yield and environmental stress resistance programs for soybean and wheat. We are also actively examining other potential market areas, beyond the core areas of our work in the agricultural sector, where our broadly applicable discovery infrastructure and know-how can create additional value for our stakeholders.

In summary, we believe that only through the leveraging of our unique predictive discovery infrastructure have we been able to address, with such potentially novel solutions, the diverse key unmet needs in our three core ag-bio market areas. We enthusiastically look forward to our continuing growth and development as our current programs move further towards product development and we continue to identify additional areas to apply our unique capabilities,” added Mr. Haviv.

Financial results for the period ended March 31, 2017

Cash Position: At March 31, 2017, the Company had $83.4 million in cash, short-term bank deposits and marketable securities, as compared to $88.2 million at December 31, 2016. Evogene continues to expect that its net cash usage for full-year 2017 will be in the range of $16 to $18 million.

Revenues primarily consist of research and development payments, reflecting R&D cost reimbursement under certain of our collaboration agreements. The majority of these agreements also provide for development milestone payments and royalties or other forms of revenue sharing from successfully developed products.

Revenues for the first quarter of 2017 were $0.7 million, compared to $2.0 million for the first quarter of 2016. The decline in revenues reflects the net decrease in research and development cost reimbursement, in accordance with the work plans under Evogene's various collaboration agreements. This decline is mainly due to the advancement of our collaboration agreement with Monsanto, from gene discovery to pre-development efforts, resulting in reduction of activity scope. As we look forward, we expect this revenue trend to continue.

Cost of revenues consist of collaboration related R&D expenses. Cost of revenues for the first quarter of 2017 were $0.6 million, compared to $1.5 million for the first quarter of 2016. The decrease primarily related to the change in the scope and type of activities preformed under Evogene’s collaboration with Monsanto, as noted above.

R&D expenses for the first quarter of 2017 were $4.0 million, compared to $3.7 million for the first quarter of 2016. This increase was primarily due to increased funding of our internal pipeline in bio-stimulants and herbicide discovery.

In order to address the shift in activity scope of our collaboration with Monsanto, and the change in composition of our activities, we have increased our staffing needs in certain areas and functions, and decreased in others. As a result, by end of the quarter, there has been an approximately 8 percent net reduction in total headcount for the company since year end 2016.

Operating loss for the first quarter of 2017 was $5.3 million, compared to $4.6 million in the comparable quarter in 2016. The increase in our operating loss was primarily due to the decrease in revenues, which was partially offset by a net decline in other expense categories.

The net financing income for the first quarter of 2017 reached $0.4 million in comparison to $1.2 million in the comparable quarter in 2016. This decrease is due to relatively high capital gains derived from the company's marketable securities in the first quarter of 2016.

Net Loss for the first quarter of 2017 was $4.8 million, compared to a net loss of $3.4 million for the same period in 2016. The increase in the net loss was primarily due to the decrease in revenues and a decrease in net financing income, which was partially offset by a net decline in other expense categories.