Evogene reports third quarter 2018 financial results

Date:11-15-2018

Evogene Ltd. (NASDAQ, TASE: EVGN), a leading biotechnology company developing novel products for life science markets, announced today its financial results for the third quarter ending September 30, 2018.

As outlined in the 2018 CEO letter to the shareholders, Evogene is in the process of implementing its new business strategy and supporting corporate structure, which is based on stand-alone companies, each focused on a distinct field, with access to Evogene's unique CPB (Computational Predictive Biology) platform for their field. This standalone structure is expected to accelerate commercialization efforts, making product development more efficient and reduce time to market. Today, Evogene’s subsidiaries and dedicated divisions are focused in the following distinct fields: (i) Agriculture – Ag Chemicals, Ag-Biologicals and Seed Traits; (ii) Human Health – microbiome based human therapeutics; (iii) Industrial Applications – castor oil.

Each of these subsidiaries, with its own management and R&D team, has three main objectives:

(i) advance its product pipeline;
(ii) establish its go-to-market strategy based on collaborations and/or direct sales;
(iii) enhance the creation of its internal value and secure its own financial resources.

Evogene is rapidly advancing in the execution of its new strategy, the implementation of its new corporate structure and the achievement of the subsidiaries’ and divisions’ defined objectives; as is illustrated in the following highlights from the last quarter:

Agriculture:

• The incorporation of Evogene's broad Ag-Chemicals division's activities to a stand-alone company is expected to be completed by year end.
• A significant milestone was achieved in the Ag-Chemicals division’s next generation herbicide pipeline. Biological proof was demonstrated in lab assays of the binding of predicted molecule families to two novel target proteins, representing a new Mode-of-Action. These next generation herbicide candidates have the potential to overcome growing weed resistance with a high standard of safety as they address target proteins not present in humans.

Human Health:

Biomica recently announced the addition of internationally renowned experts in the fields of Gastroenterology and the Human Microbiome to its Scientific Advisory Board. This addition to Biomica’s scientific expertise will support the company’s upcoming steps towards its clinical development and is an important step in the creation of the required infrastructure for Biomica’s success as a stand-alone company.

Industrial Applications:

• Evofuel is currently in a rebranding and renaming process to better reflect its new strategy. Evofuel has realigned its strategy in light of changes in the biofuel industry and initiated a change in its targeted market from the biofuel industry to the castor oil market for industrial uses and a change in business model – from generating revenues from seed sales, to mainly focus on partnering with castor oil producers on a revenue-sharing basis from oil and other final product sales.
• Evofuel recently announced together with Fantini, an agricultural equipment manufacturer, a breakthrough in mechanical harvesting for castor bean. Mechanical harvesting is a major bottleneck in the conversion of castor bean to a fully modernized commercial crop and the combination of Fantini’s harvester with Evofuel proprietary seeds has demonstrated significant improvement in yield loss in field trials.

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Ofer Haviv, Evogene's President and CEO, stated: “I am very happy with the progress achieved to date in the implementation of our overall strategy and we are expecting to complete the new corporate structure in the first half of 2019. As you recall the CPB platform is at the core of our activities and their main competitive advantage. During the third quarter of 2018 we completed the development of the PRISM platform, exclusively dedicated to our activities in Human Health. With these abilities in place, they are expected to greatly accelerate Biomica’s product pipeline.

“We look forward to sharing with you the progress in our diverse activities and expect the remainder of 2018 to be a further demonstration of the CPB platform's capabilities.” - Concluded Mr. Haviv.

Financial results for the period ending September 30, 2018:

Cash position: As of September 30, 2018, the Company had approximately $58.2 million in cash, short-term bank deposits and marketable securities, representing a net cash usage of approximately $13.5 million for the first nine months of 2018 and approximately $4.0 for the third quarter of 2018. The Company does not have bank debts.

Evogene expects its cash burn rate for 2018 to increase to the range of $16-$17 million, from $14 - $16 million, assuming the company continues to operate according to the current course of business and assuming no significant change in the Dollar/ILS exchange rate. This increase is mainly due to a significant reduction of approximately $1 million in the company's forecast for its financing income for the year. Additional details are provided below in the review of the net financing expenses.

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

Gross profit for the first nine months of 2018 was approximately $0.3 million in comparison to approximately $0.4 million during the first nine months of 2017. Gross profit for the third quarter of 2018 was approximately $0.1 million in comparison to approximately $0.2 million reported for the third quarter of 2017.

R&D expenses for the first nine months of 2018 were approximately $10.8 million in comparison to approximately $12.3 million in the first nine months of 2017. R&D expenses for the third quarter of 2018 were approximately $3.9 million in comparison to approximately $4.3 million in the third quarter of 2017. R&D expenses decreased following operating efficiencies achieved as a result of the new corporate structure initiated at the beginning of 2018.

Operating loss for the first nine months of 2018 was approximately $14.7 million in comparison to approximately $15.9 million in the first nine months of 2017. Operating loss for the third quarter of 2018 was approximately $5.1 million in comparison to approximately $5.5 million in the third quarter in 2017. The decrease in operating loss was mainly due to the decrease in R&D expenses as described above and a decrease in G&A expenses, which was partially offset by an increase in the business development expenses.

The net financing expenses for the first nine months of 2018 were approximately $0.2 million in comparison to net financing income of approximately $1.3 million in the corresponding period in 2017. The net financing income for the third quarter of 2018 was approximately $0.3 million in comparison to net financing income of approximately $0.5 million in the comparable quarter in 2017. This decrease in the first nine months of 2018 is mainly due to re-evaluation of marketable securities following the increase in the US treasury bonds interest rate.

Loss for the first nine months of 2018 was approximately $15.0 million compared to a loss of approximately $14.6 million in the first nine months of 2017. Loss in the third quarter of 2018 decreased to approximately $4.8 million compared to approximately $5.0 million in the third quarter in 2017.