Evogene sales down 50% in first half 2017

Evogene Ltd., a leading company for the improvement of crop productivity and economics, announced today its financial results for the second quarter ended June 30, 2017.

Ofer Haviv, Evogene’s President and CEO, stated: “2017 is proving to be a significant year in the development of Evogene and we look forward with high expectations to what the year has yet to bring. We were pleased to see progress and achievements in our collaborations and internal programs, across all areas of activities. In our on-going Fusarium collaboration with Monsanto, we reached an important milestone, and our newly initiated collaboration with DuPont-Pioneer, is a testament to the important achievements reached in our internal bio-stimulant product program. This collaboration is an example of the comprehensive abilities of our computational biology platform, which is constantly evolving to now also include ‘artificial intelligence’, allowing us to enter new areas of activity. Evogene continues to lead innovation and, as we announced in the past, we are actively seeking applications for our exciting technology, both within and outside the agriculture world.

For the first time, in addition to our robust internal programs, we now have collaborations with at least one world leading company in each of our areas of activity: DuPont-Pioneer in Ag-Biologicals, Monsanto in Seed Traits and BASF in Ag-Chemicals. We believe this trend will continue and are looking to strengthen our position as a world leading ag-biotech company with additional collaborations.

Looking deeper into each area of activity, I would like to emphasize the following:

In Ag-Biologicals, our most important achievement in recent months is our strategic collaboration with DuPont-Pioneer, a leader in the corn seeds market, for the development of bio-stimulant seed coating products. This collaboration is based on the achievements of an internal product program in which positive results were achieved in corn field trials under drought conditions. Additionally, we also have an internal bio-stimulant program in wheat in which we reached positive results on 1st year field trials on select microbial strains that will be re-validated in field trials next year. Bio-stimulant products present an exciting opportunity, as product development is considered short, with time to market, according to industry estimates, as short as 5 years, depending on regulation.

We are also happy to announce the addition of a product program for the development of microbial-based bio-pesticides that address various insect and fungi control. This market is expected to reach $8B in 2020.

In Seed Traits, we had three important achievements during the past quarter:

• Gene advancement in our disease resistance Fusarium collaboration with Monsanto – we reached an important milestone with Evogene discovered genes showing resistance to Fusarium in model plants, with the top prioritized genes advancing to testing in Monsanto’s corn pipeline.
• Completion of discovery in our yield and abiotic stress collaboration with Monsanto – we successfully completed of the gene discovery phase, with the discovery of ~4,000 genes and more than 1,000 genes nominated to Monsanto’s product development pipeline, as disclosed in the past.
• Advancement to phase I in our internal insect control program – in our Coleopteran control product program we have advanced a gene to phase I, having met all of phase advancement criteria, including efficacy and lower risk of toxicity to other organisms such as bees, animals and humans.

In Ag-Chemicals, we continue to show good progress in our internal herbicide program as well as in our collaboration with BASF. Additionally, I am very excited to disclose that we recently initiated an insecticide product program. The global insecticide market is currently estimated at $14B, and is expected to reach $16B by 2020[3].

In conclusion, we are making important progress in all three of our core activity areas: Ag-Biologicals, Seed Traits and Ag-Chemicals. We look forward to the second half of 2017, and we expect progress in our internal programs, as well as our collaborations with world leading partners, and hope to forge new partnerships in the future.”

Financial results for the period ending June 30, 2017

Cash Position: As of June 30, 2017, the Company had $79.7 million in cash, short-term bank deposits and marketable securities, as compared to $83.4 million at March 31, 2017. 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 half of 2017 reached $1.9 million in comparison to $3.8 million, in the comparable period in 2016. Total revenues for the second quarter of 2017 were $1.2 million, compared to $1.8 million for the second quarter in 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.

During the first half of 2017 we saw a negative impact on our expenses due to the depreciation of the USD in comparison to the Israeli Shekel. Our expenses, mostly salaries, are denominated in Israeli Shekels while our reporting currency is USD.

Cost of revenues consist of collaboration related R&D expenses. Cost of revenues during the first half of 2017 reached $1.7 million in comparison to $3.1 million in first half of 2016. During the second quarter of 2017 the cost of revenues reached $1.0 million, in comparison to $1.6 million for the same period in 2016. The decrease related primarily to the decrease in revenues for such periods.

R&D expenses for the first half of 2017 reached $8.0 million in comparison to $7.8 million in the first half of 2016. During the second quarter of 2017, R&D expenses remained stable at $4.0 million, in comparison to the second quarter of 2016. R&D expenses were impacted by exchange rate fluctuations, as mentioned above.

Operating loss during the first half of 2017 reached $10.4 million, in comparison to a loss of $9.8 million during the first half of 2016, due to the decrease in revenues which was partially offset by a decrease in other expense categories. Operating loss for the second quarter of 2017 remained stable at $5.2 million in comparison to the comparable quarter in 2016.

The net financing income for the first half of 2017 reached $0.8 million in comparison to $1.9 million in the corresponding period. The net financing income for the second quarter of 2017 reached $0.4 million in comparison to $0.7 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 and second quarter of 2016.

Net Loss for the first half of 2017 reached $9.6 million in comparison to $7.8 million in the first half of 2016. Net loss for the second quarter of 2017 was $4.7 million compared to the net loss of $4.5 million in the comparable quarter in 2016. The increase in the net loss was primarily due to the decrease in revenues and the decrease in net financing income, which was partially offset by a net decline in other expense categories.