Evogene Q2 2023 Earnings Call Transcript

There are 5 speakers on the call.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Evogene's Second Quarter 2023 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. As a reminder, this conference is being recorded on August 17, 2023.

Operator

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 today's earnings release, which states the statements made in the earnings release and in a 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. For example, Evogene is using forward looking statement in this call when it discusses the establishment of collaboration agreements with leading companies and new domains of activity, targets select our ability to identify novel target proteins for innovative products, the BMC-four twenty six and BMC-four twenty seven for IBS treatment effectiveness in reducing visceral pain and related studies and trials, future milestone payments and royalties from Corteva's sales of LaVivio's products, the resources needed to execute the company's plans effectively and in a timely fashion, return on investment for farmers who use Trivus and the enhancement of AgPlenus' ability to identify new pesticide mechanisms due to the use of Evogene's Target Selector applications.

Operator

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 true are 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,

Speaker 1

either as a result

Operator

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.

Operator

Starting the call today is the President and CEO of Evogene, Ofer Haviv joined by Evogene's CFO, Yaron El Dad CEO of Castera, Eyal Ronnen CEO of Laviv Bio, Amit Noam. That said, I would now like to turn the call over to Ofer Haviv, President and CEO of Evogene. Mr. Haviv, please go ahead.

Speaker 2

Thank you and good day everyone. Today, I will review Evogene's activities and recent achievements and provide you with an update on Evogene's potential catalyst expected in the near future. I will also discuss some of our subsidiary recent accomplishments, which leverage Evogene's AI driven tech engines as their main competitive advantage and demonstrate the power of our technology underlying their product development process. I will end my part reviewing Evogene's recent fundraising and how it improves our financial stability. I would like to state that the Q2 of 2023 has been a remarkable one.

Speaker 2

We made significant achievements on all fronts, and I hope that you will share with you at the end of our call. As we have many new listeners on today's call, I would like to briefly review Epogen's core technology. Epogen has been using its computational predictive biology platform, the CTB, to direct and accelerate the discovery and development of life science based products. The CTB is the foundation of our 3 pet engines. Microboost AI supports the discovery and development of micro based products.

Speaker 2

Generatory AI supports products based on genetic elements and Campus AI supports more molecules based products. Our AI driven tech engines aim to tackle the main challenges in life science product development, identifying winning candidates from a best number of prospects and meeting complex criteria for successful commercial products. Our AI driven tech engines efficiently find the needle in a high spec, therefore increasing the probability of product set within a competitive timeframe and at a cost efficient manner. On July, we unveiled the latest enhancements of our campus AI tech engine, Target Selector, a groundbreaking application designed to streamline target protein discovery using predictive machine learning algorithms and genomic data. With this new technology, researchers across various industries can efficiently identify novel target protein for innovative products, while significantly reducing research and development time and resources and increasing the likelihood of success.

Speaker 2

Proteins are crucial for developing therapeutic and lifetime solutions and play a pivotal role in biological processes across pharmaceuticals, agriculture and environmental applications. As mentioned, Campus AI Tech Engine is a cutting edge platform for the identification of small molecules. The addition of the target selector applications now enable a broader scope of finding the optimal target protein for those molecules. Our subsidiary, AgPlenis, which focus on developing a clinical, is the first to benefit from this new improvement, applying it to identify novel mechanism of action for pesticides. We consider this significant investment in Epogen Canvas AI Tech Engine to strongly position us to forge strategic partnerships with industry leaders, expediting product development and delivering novel solutions to facing global needs such as developing sustainable new pesticides and therapeutics.

Speaker 2

Evotecent's business model is to establish a product development ecosystem around each tech engine through 2 main business structures: independent subsidiaries focusing on specific life science market segments with the license to use Evogene Tech Engine for product development or a joint development with leading companies for defined products utilizing Evogene Tech Engine. Typically, partners lead later stage of development and product commercialization. In recent years, our focus has been on the establishment of Freya's valued subsidiaries that nowadays show impressive results, which I will soon discuss.

Speaker 3

I would like to

Speaker 2

emphasize that this year, Evogene increased its efforts to establish collaborations with leading companies in new areas of activities not covered by our subsidiaries for further development leveraging our tech engines. Those just recently initiated, the response we received to our unique offering is positive, and we hope some of those discussions will materialize into collaboration agreements in the near future. With respect to our subsidiaries, they have accomplished multiple achievements and have several upcoming milestones of significant potential value creation. I would like to start by reviewing Biomica, a subsidiary of Evogene that is developing microbio depth therapeutics for human health. Biomica leverages Evogene's Micro Boost AI tech engine to identify and characterize micro with therapeutic potential.

Speaker 2

In April 2023, Biomica completed a $20,000,000 financing round led by a $10,000,000 investment from Shunshai Healthcare Capital. The transaction was done at a postman valuation of $50,000,000 This external and independent endorsement of BIOMICA validates our belief in BIOMICA's long term potential. BIOMICA's leading product candidate, BLC128, is for the treatment of immuno in collagen patients now in Phase 1 clinical trial. The trial conducted an interest at the London Healthcare Campus aimed to evaluate BMC 128 safety and tolerability alongside BNS Opdivo, immunotherapy for respiratory patients with NSCLC, melanoma ORCT. The trial is planned to include 10 to 12 patients, and until now, 6 have enrolled.

Speaker 2

In August, Bellomica opened a second site in Israel at the Davidoff Cancer Center to open the trial to additional potential patients. In addition, this quarter, Bionica reported positive interim results for its IBS programmed preclinical studies. The studies were performed in a collaboration with the lab of Professor Kera Gross Margolis, SMYU, and demonstrated the efficiency of Bionica's live bacterial consortium BNT-four twenty six and BNT-four twenty seven in reducing visceral pain, a major IBS symptom. Given the limited options for IBS treatment and the significant unmet need, these findings present promising new treatment possibilities. BioEmica intends to further assess BMC426 and BNC 4/27 efficiency in additional preclinical studies in the near future in preparation for its clinical trial for IBS.

Speaker 2

The second subsidiary, which is also using Evogene Micro Boost AI Tech Engine, is Labibio, developing next generation biological products. In addition to Evogene's majority ownership, we are happy to emphasize that Slapibio has 2 additional major shareholders: Corteva, a public multinational Aztec Giant and ICL, a public global mineral and an Aztec company, which last year made a $10,000,000 investment into Labii Bio under a safe agreement. In addition to equity investment, Cortera and ICL are also collaborating with Labii Bio on the development of novel ad biologicals. In July, Labii Bio announced that it entered into another licensing agreement with Corteva. The agreement grants Corteva exclusive rights to further develop and commercialize 2 of La Pribil Bio's lead bio fungicide product candidates, LAB-three eleven and LAB-three twelve targeting throughput.

Speaker 2

The agreement follows 3 years of independent field validation trial conducted by both companies. Latvibayo is set to receive an initial payment of approximately $5,000,000 in 2 formats and will also be eligible for additional future milestone payments and royalty from Forteva to sell of those future products. Stay tuned to hear directly from Zbio's CEO, Amit Nuan, as he shares in-depth insights into this remarkable achievement and other ongoing activities. Now I would like to review X Lens, our subsidiary leveraging the campus AI tech engines. AgPlanet aims to discover next generation innovative crop protection products, including herbicides, insecticides and fungicides and commercialize them through collaboration with world leading partners.

Speaker 2

Major clinical companies such as BSS, Bayer, Corteva and Syngenta dominate today's protection industry. Still, they look to smaller asset companies like AgPlenus to discover new target proteins and small molecules that inhibit such target proteins, serving as the active ingredient in commercial crop protection products. AgPlenus is exactly the company that addresses this need and it explores partnership with these major industry players. The need for new crop protection products is enormous due to the growing resistance of pest and weed to existing commercial solutions. Herbicides resistance weed today approaching and there has not been a new commercial herbicide with a novel model action for over 30 years.

Speaker 2

AgClens looks to change that. There is a growing interest in AgClens' product pipeline, especially in our latest target protein, APTH1, and the small molecules that bind to this protein as candidates for a novel herbicide with a broad weak controlled spectrum. We hope to update in the future on strategic collaboration based on APTH1. As I mentioned earlier, the new application, Target Selector, that is now part of our campus AI tech engine, which serve as the infrastructure of AgPlanet's technology platform, will allow the company to accelerate and improve the identification of novel mechanism of actions

Speaker 4

for

Speaker 2

pesticides. I expect that this significant advancement will better position AgPlanet to forge strategic partnerships with industry leaders. Lastly, I would like to congratulate Doctor. Edlain Percy on joining the AgPlenus Board of Directors. Doctor.

Speaker 2

Percy is highly accomplished agricultural scientist with over 20 years of experience in the industry. Doctor. Percy also served as a member of Evogene's Board of Directors since 2019. We wish all of us good luck. Before I move on, I would like to encourage you to review AgPlenus' new presentation available on AgPlenus and Evogene's website.

Speaker 2

I will now review the activities of Castera and Canonic, our subsidiaries that utilize Evogene's generator AI tech engine as their main technological advantage. Starting with Castera, which reached a major milestone in the last quarter. Castera focused on developing an integrated solution to enable large scale commercial cultivation of castor bean through its unique elite seed varieties. The goal of Castera is to address the global demand for a stable castor oil supply, mainly for the biodiesel industry. The past few months were pivotal to Castera.

Speaker 2

Our vision of becoming a major player in the biodiesel industry progresses with seed orders from a world leading energy and gas company totaling $11,200,000 for customer cultivation in Africa to support the growing demand for biodiesel. This is just the beginning. For more details on Castera's activity and its impressive achievements, we will later hear from Casera's CEO, Eyal Honelli. Moving on to Canonic, which focus on developing best in class medical cannabis products using Evogene's generator AI tech engine. As we disclosed in our previous analyst call, Canonic's main targets for the near term are to grow its cannabis sales in Israel, benefiting from its unique strength, while significantly reducing Canonic expenses.

Speaker 4

Canonic's

Speaker 2

go to market strategy includes out licensing to third party the commercial growth of the Canonic strain towards the final product. It is crucial to select subcontractors that have the right skills and the expertise to maximize the genetic value of Canonic strain, meeting the premium market criteria. To this end, during the past month, the company has been evaluating and negotiating with various subcontractors, including growers outside Israel and indoor growth facilities. We hope to update on this matter in the coming months. I would now like to address the successful completion of Evogene's latest capital raise.

Speaker 2

On July 17, we raised $8,500,000 through a registered direct offering for institutional investors, including Silver Hawk Capital Management, Altium Capital Management, LP and CBI Investments. While within the whole Evogene Group, we do have a substantial amount of funds, a significant portion is assigned to the subsidiaries. The additional funds raised for Evogene itself will now allow more financial flexibility, strengthen our position and will ensure continued growth as planned. For more details on Evogene's financials, we will later hear from Evogene's CFO, Yaron Lagares. To wrap up, the Q2 of 2023 has been an exceptional period of achievement in the Evogene Group.

Speaker 2

And in my view, it is pivotal point in the transformation Evogene is going through. We started with the creation of our 3 AI set engines. Announcing purchase order in the accumulated amount of $11,200,000 for Casera's Castor seat. Licensing agreement between La Vibayo and Forteva, which includes an upfront payment of $5,000,000 milestone in royalties, closing a financial round for Biomica on the amount of $20,000,000 and last but not least, receiving the trust of high quality investors demonstrated by purchasing 8,500,000 ordinary Evogene shares in our recent financing round, all happening in a relatively short time signals a clear message that Evogene is on the right path of success. I will now hand over to Amit Nuan, Lapid Bayaud's CEO, who will be followed by Eyal Ronen, Castello's CEO and finally, Yaron Eldad, Evogene's CFO, who will elaborate on the latest Evogene fundraising and our financial results for the Q2.

Speaker 2

Amit?

Speaker 3

Hello, everyone. I'm delighted to be joining Evogene's earnings call for the first time. It has been an incredible journey over the past 4 months since I joined Levi as the company's CEO. I've had the pleasure of meeting a remarkable group of people and talent, and I'm confident that together we will drive Lavie Bio to new heights in our business endeavor. I want to express my gratitude to Evogene's CEO, Ofer, his management team and the entire Laviv Bio Board of Directors for their warm welcome and unwavering professionalism.

Speaker 3

Thank you all for your support. I would like to update you on 3 of Laviv Bio's main achievements in the last quarter and provide some insights into our future plans. 1, the commercial progress of our first product, Private second, the licensing agreement with Corteva for 2 of our leading biofungicide candidates and the third, the advancements in our product pipeline. Back in May, the company updated that it had received regulatory approval from the Canadian Food Inspection Agency for its Bioinoxetine treatment, Trivus. This approval triples the product sales territory, expanding its global reach.

Speaker 3

Travis, which increases hardwood's spring wheat production by enhancing soil nutrient availability and efficiency, while mitigating environmental stressors, has always demonstrated its efficacy in the U. S. With an average of 3 to 4 bushels per acre yield increase, providing a 4x return on investment for farmers. Navibio plans to expand Trivia's application to other crops in the near future. The product developed using the Vibio's BBB platform powered by Evogene's micro boost AI tech engine exemplifies the company's commitment to sustainable agriculture and enhancing productivity for farmers worldwide.

Speaker 3

Recently, we announced that Cazoo Bio successfully entered into strategic licensing agreement with Corteva. This significant agreement grants Corteva exclusive rights subject to reaching certain commercial milestones to further develop and commercialize LAB-three eleven and LAB-three twelve, our promising lead biophthalmicide candidates, which target food trucks. These candidates were originally discovered and developed by Labii Bio, showcasing our commitment to innovative solutions in the ag biological industry. As Arthur mentioned, in the frame of this collaboration, Labii Bio is set to receive an initial payment of approximately US5 $1,000,000 In addition, we are eligible for additional milestone payments in the future based on achieving certain patent rights and regulatory approval. Most importantly, this mutually beneficial agreement also allows us to receive royalties from Corteva's sales of these future products.

Speaker 3

We are thrilled about this strategic partnership and confident that Corteva's proven capabilities in the ag biological space will help propel our lead biofungicides, LAB-three eleven and LAB-three twelve, towards commercial success. This agreement aligns perfectly with LAB-three twelve's vision to provide farmers with environmentally friendly and sustainable tools that effectively combat food floss, a highly destructive disease causing substantial annual losses in the agriculture sector. In the Q2, we continued to advance 6 additional programs in our pipeline showing satisfactory progress. We also refined the company's strategy of being a leading ag biological product development company with the goal of consistency and repeatedly bringing high quality, commercially viable ag biological products to the market that are competitive in performance to the synthetic chemical solutions, but superior in their sustainability benefits. These product programs will support our 2 go to market strategies: direct sales by La Vie Bio, like we're doing with Trevis and licensing agreement in collaboration, like the one we just signed with Coderba.

Speaker 3

I'm excited about the future of LaVie Bio and our commitment to supporting farmers worldwide with cutting edge solutions. Thank you for your continued support, and I look forward to updating you on our progress in the future. Thank you all. And now Iara Ronen, Castello's CEO and Evogene's EVP Business Development will provide his update. Hello, everyone.

Speaker 3

Thank you, Amit. I would like to begin the call today and provide a brief overview of Costera's recent activities and our plans for the future. Our mission is clear: to transform the customer's oil industry by providing an integrated holistic solution for gas derived cultivation, ensuring a consistent supply of high quality grains for the industry's value chain. Through our profound knowledge of genetics and innovative agro and technical solutions, we are committed to creating a continuous single season industrial solution for the best customer product performance. Let's review last quarter's activities.

Speaker 3

In the Q2 of 20.23, Cressela achieved significant milestones with purchase orders totaling to $11,300,000 for the supply of our high yield, high oil proprietary custard seeds for the cultivation of custard plants to produce oil for sustainable biofuels. I would like to elaborate on this achievement. In June, we announced the signing of a framework agreement with a prominent oil and gas company securing initial purchase orders worth $9,400,000 for the supply of our customers' seeds to be cultivated in specific African territories. Additionally, in July, we unveiled 1 more purchase order valued at $2,200,000 for additional territories in Africa.

Speaker 4

Now I'd like to give a short review

Speaker 3

of the biodiesel market and its way to Castero. The biodiesel market at the President's research site was valued at $92,000,000,000 in 2021, which is 9% of the global digital market and is expected to reach €190,000,000,000 by 2,030. Buy diesel currently consists of 93% to 95% fossil oil and 5% to 7% non fossil oil from plants or other sources. The demand for non fossil oil in biodiesel could rise due to the biodiesel segment growth or

Speaker 2

an increase in non fossil components.

Speaker 3

Castor is a standout non fossil oil candidate with carbon natural properties thriving in marginal lands without competing with edible crops. Spearheading this development is Castera, using advanced competition of biology technologies to develop high yield castor varieties. I would like to note that we are free to receive these significant purchase orders, which confirm our value proposition for the sustainable biodiesel industry. As we eagerly hope to secure more orders in the future, these accomplishments reinforce our ongoing commitment to delivering exceptional eco friendly solutions to meet the ever growing global demand for renewable energy. Casera tends to increase its global spend and invest more companies in the oil and gas space.

Speaker 3

Additionally, in its R and D, it targets to expand its activity to sustainable aviation fuel, SAS, market and develop virtually 3 rich themed varieties for animal feed. After more than a decade of hard work and investment of 1,000,000 of dollars in developing our unique varieties and underlying technology, we are proud that Castel is now a trusted and reliable supplier in this growing market. Thank you for your attention, and I look forward to addressing any questions you may have. And now I want to pass the mic to my colleague, Yaron Aljad, Evogene's CFO. Yaron?

Speaker 3

Thank you, Eyal. As previously mentioned by Ofer, in July, we successfully concluded a fundraising round securing total gross proceeds of $8,500,000 I must emphasize that the securities issued in this round were common stock only, which did not include any warrant coverage. As of June 30, 2023, EverGen has consolidated cash, cash equivalents and short term bank deposits of approximately $33,900,000 Of good sum, Bionica accounted for $16,800,000 and Yavri Bio holds $7,100,000 Pembagen, together with Costera Economic and AgPlanet, possessed an aggregate of $10,000,000 in cash. The injection of funds from this last round in July strengthens Evident's financial position and provides us with the resources needed to execute our future plans effectively and in a timely fashion. An example of such financial need is significant increase in the required working capital of our own subsidiary, Castera, in order to produce the customer fees needed to fulfill purchase orders received in the last month, totaling $11,300,000 It is important to note that the $10,000,000 reflected in the cash balance of Evogene, together with Castello, Canonic and AgPlanist, do not include funds raised by Evogene in July and any amount due to the purchase order received by Castera in the last few months, which are expected to be supplied during the second half of the year and at the beginning of next year.

Speaker 3

Further note that the $7,100,000 reflected in the cash balance of the rebayo does not include the $5,000,000 expected to be received as the upfront payment from the licensing agreement with Corteva was announced in July. During the Q2, the consolidated cash usage was approximately $5,600,000 or approximately $2,800,000 excluding La Zibaia and Bionica. I will now review the P and L main items. Revenues for the Q2 of 2023 were approximately $654,000 compared to approximately $312,000 in the same period the previous year. The revenue increase was primarily due to revenues recognized by the collaboration agreement of Evident subsidiary AgPlanet with Corteva and from sales of La Vie Bio Treatment products.

Speaker 3

R and D expenses for the Q2 of 2023, which are reported net of R900 in fee, were approximately $5,400,000 and remained stable as compared to approximately $5,400,000 in the same period in the previous year. Sales and marketing expenses were approximately $928,000 for the Q2 of 2023 and slightly decreased as compared to approximately $96,000 in the same period in the previous year. The main contributor to this decrease in expense was a reduction in personnel expenses at Comanica. General and administrative expenses were approximately $1,800,000 in the Q2 of 2023 compared to approximately $1,700,000 in the same period in the previous year. The increase is mainly due to expenses related to share based compensation.

Speaker 3

Operating loss for the Q2 of 2023 was approximately $7,900,000 compared to an operating loss of approximately $8,000,000 in the same period in the previous year. Financing income for the Q2 of 2023 was $100,000 in comparison to financing expenses of $1,700,000 in the same period in the previous year. This difference was mainly due to the U. S. Dollar and shekel exchange rate differences between periods, a decrease in marketable securities value in the Q2 of 2022 and an increase in interest income during the Q2 of 2023.

Speaker 3

Net loss for the Q2 of 2023 was approximately $7,800,000 compared to a net loss of approximately $9,800,000 in the same period in the previous year, mainly due to the financing expenses differences as mentioned above. With that, Oferon, I would like to open the call for any questions. Operator?

Operator

Operator? Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. The first question is from Ben Klee of Lake Street Capital Markets.

Speaker 1

I have a few of us to start with a couple on TASTERRA. For this initial $11,000,000 order that is underway, can you clarify how much of that order is going to be filled by seed inventory that you already had on hand versus contract production that is out now to satisfy that order?

Speaker 2

Ben, this is Oscar. I will ask Eyal to address his question.

Speaker 3

Ben, basically, the amount that we received in the order are substantial amount. So we are producing and continue producing the extra capacity, which is required to submit for that this order. It's not something that we had in inventory. The inventory was mainly used to supply the common demand that exists in the markets. The additional orders were requiring us to add more in our production.

Speaker 3

This is exactly what we are doing now, and we'll continue in the coming months to accomplish all the quantity required for that deal.

Speaker 1

Okay. Okay, great. And so this is, I think, clearly in that sense of what I certainly was expecting would be possible here in year 1, and so which is fantastic to see. I'm wondering if you can help us understand kind of your outlook for next year. And specifically, do you know what kind of the limiting factor will be for Castero revenue next year?

Speaker 1

Is it going to be capacity for your biofuel partner? Is it going to be access to farmers to actually plant the seed? Is it going to be available inventory? I mean, what do you think the limiting factor is going to be for Castera into the second year?

Speaker 2

Yes. Can you continue? Yes. Based

Speaker 3

on the estimation that we received from the clients and based on the preparations required in terms of rent, I do not see at the moment any limitation that will be restricting us from producing the substantial amounts that are required. The main challenge, I believe, in having those capacities shifted to the client is a logistic one. So we are improving and preparing all kinds of adjustments over there to attend the supply itself. From production perspective, we don't see any limitations land. It's quite available whether you produce this amount or another amount.

Speaker 3

The additions that are required are not something which is beyond our reach. I see it mainly as a challenge in the logistics that we need to shift substantial amount from one place to another. Production wise, we are certain down. And whether they will be increasing dramatically, we are able to supply the quantities.

Speaker 2

I would prefer to believe it more conservative. And I will say that that's on what we know could be the orders for next year. So we believe that we are in a good position to support it. Still, it will need to strengthen our infrastructure, as an example. So we need to have additional de hauling machine, additional servicer, and we need to prepare more length.

Speaker 2

But I think that this is the thing that we can handle. Of course, if it will be a dramatic increase in the demand, which is something that we currently have not expected, something that's 10 times more, I think then it's probably because it will be more difficult to address the prospect list. So what we know now, yes, we're expecting to see increasing demand, and we believe that we would be able to address this increase. And we are working very, very hard, and in some cases even day and night in order to be able to address this challenge.

Speaker 1

Great, great. Thank you. One last one on Castera and then I have a quick one on lobby. So for Castera, Eyal, I heard your comment about ambitions in the world of sustainable aviation fuel. I'm curious if your unnamed partner in this space is would be your expected partner in this for this end market or if you're looking to strike additional collaborations with other energy players in the world with sustainable aviation fuel?

Speaker 2

So maybe I will take this question. It's very interesting because I think maybe 10 years ago, Akertera had an ongoing relationship directly with NASA from the U. S. And with the aviation companies where we evaluate the probability of converting biofuel into converting castor oil into jet fuel. And we succeeded to demonstrate that it's really working.

Speaker 2

The product didn't move forward because, again, there was a decline in the oil price being in 2014 and on. So and it's a little bit reduced the motivation of the BPS company to move into this direction. So we already have we already in the past had a collaboration with 1 of the big airplane manufacturing and NASA, and we demonstrated it will really work. Now we are talking with new companies, new partners. We can't, of course, disclose the names, but I think that hopefully next year, we will advance and maybe even before, but we will advance a little bit faster and maybe with something that we can disclose.

Speaker 2

But we already have a nice experience in this field in a way we are now continuing what we did in the past and what we stopped and now I think we are really in good position to see nice results pretty soon.

Speaker 1

Okay, great. Thanks, Ofer. One more on the V and then I'll get back in queue. I'm wondering if you can comment about the saliva's performance so far this year, kind of what your expectations were for this product when you entered the year versus how it's shaping out? And then kind of what you're doing to really accelerate private revenues in 2024?

Speaker 2

Thank you for this question. And I will ask Amit to address Amit, the CEO of Labibayo, to address this question.

Speaker 3

Yes. So try the sales in 2023, again, we're just in the beginning of entering the market, but we saw this year 2 main things. 1 is we continued the growth compared to last year, but we've encountered some production challenges that limited the amount of the product that we were able to produce this year. We fixed it for next year. Next year, we're supposed to be able to produce a lot more than we did this year to be able to grow the sales.

Speaker 3

Second thing we're doing is that we got regulatory approval for Canada. So next year, we will sell also in Canada, which tripled the land area that is addressable for us to sell. Canada is twice the size of the U. S. In our relevant crops.

Speaker 3

And the second thing that we're doing is that we're advancing to additional crops. We're currently running field trials in different crops like burrowing and barley and oats and others. And hopefully, next year, we'll be able to, in addition to adding another country, add additional crops, and that will enable us to continue to see it.

Speaker 1

Great, great. Very helpful. Thank you and congratulations on all the progress year to date. Thanks for taking my

Speaker 2

questions and I'll get back in queue. Thank you.

Operator

The next question is from Red Reiff from Jenny Montgomery Scott. Please go ahead.

Speaker 4

Good morning, gentlemen. Thanks for the opportunity to ask a question or two. First question, I just want to understand the flow of the cash management on the casters seed part of the business. If you get continued large orders, you have to lay out capital to the entities producing the seeds. And then once the seeds are delivered to the customer, we get paid and reimbursed.

Speaker 4

What is the timing on all of that?

Speaker 2

Okay. Eyal, can you take this question?

Speaker 3

Yes. Basically, there are many pathways to conduct those businesses or those deals. We normally take the responsibility to produce the seeds and bring them to the port. And from that port, there it is in Latin America or in Africa. The client is responsible for dispatching and taking the goods on his behalf.

Speaker 3

In terms of the recognition of the revenue and the income, some of it is obviously paid in advance in order to support the production, especially if we talk about substantial production. And later on, once the goods are arriving the course of the client, we are receiving the trial and completion of the payment. So that's in terms of the support of the capital to provide the cultivation of the after capital.

Speaker 2

Maybe I will add a little bit more. We have 3 different sites where we are producing the feed, which this is the product that Castelo is selling to its partner. One is the smallest one is in Israel, then we have one in Africa and the other one is in South America. When we collect the purchase order from our partners, then we are instruct our subcontractors how much we would like them to grow and to give to us feed to support the purchase orders. In some cases, yes, we have already some feed in the inventory, but especially when there is such a significant increase in demand like that we have been exposed this year.

Speaker 2

So of course, we can't support such a quantity based on lifting inventory. So we ask our subcontractors in all of these locations to start to grow the seeds that we are going to distribute to our partners. And of course, they are using our genomics. They are using our protocol. And we are talking with our subcontractors during the growing season.

Speaker 2

And after 4 months, we have the seeds. And then our subcontractors doing the harvesting, the deholding, coating the seeds, packaging them and then they're ready to be shipped to our partners. And when the seeds are underway, so then of course, we there is a certain portion of the money that we receive, but then we transfer the goods at the harbor and the rest we receive it when the fees arrive to our customers. So there is a gap between the amount of money that we pay to our subcontractors to produce the feed and then we get our rewards with all the margin from our partners after we supply the seeds. So this is how it depends.

Speaker 2

And the purchase order that we receive, they are it's not something that our partners can cancel. So in a way, it's like there is a guarantee that we're going to receive the money based on the supply of the stake in a certain period of time. So this is why we feel comfortable to invest in growing the fleet and sometimes we will support our subcontractors as to strengthen infrastructure in order to support the high quality fleet to our partners. And then we in a way, we have lucky guarantee that we'll receive the money from our partners when they will receive the seats.

Speaker 4

That was helpful. But in the future, I mean, we're all looking and hopeful that sea orders are really going to explode. Do you have enough existing working capital since there's a lag between the time you get the order and you get paid to support this robust sales growth that we're all hopeful is going to come?

Speaker 2

So for this year, one of the reasons that we raised money, it was also to support this growing demand in working capital. According to our estimation, after we will go through this round with the $11,000,000 free supply and with the current financial position of Evogene, I don't think that we will need additional capital. And maybe if we'll do so based on a purchase order that we might even if needed, we can take a loan from the bank's credit or in order to support the feed production. I think that this year, we felt that maybe the right thing is to raise money in order to do so. In the future, I intend to believe that all that we will have enough from our internal resources or that if we need to receive some credit from the bank, I believe that this is another option in order to fund the working capital needed.

Speaker 4

Great. Thank you for that answer. A different question. The collaborations you're working on with companies in areas not covered by your subsidiaries, Do you have could you share with us, do you have a kind of template of what the structure of these potential deals and collaborations will look like?

Speaker 2

Yes. I can give you 2 examples. One ongoing discussion that we have, which is advancing nicely is actually in the early of Utex. And here, we are talking about producing protein in plant, protein that today we all consume through eating meat. So we would like us to use to be there with specific investors and companies that are interested in this field of protein production plant to replace mammalian protein that we are consuming.

Speaker 2

So this is one field. And here, you can imagine that we can use our generative AI technology and also maybe in certain way also campus AI in order to identify the gene, the genomic mechanism that you would like to improve in order to produce those proteins. Another example is related to Micro Boost. As you know, animals such as the chickens and maybe others. They also suffer from different type of problems that you can treat them using microbes.

Speaker 2

And we might enter to some relationship in the field that we are using our microbiome AI tech engine in order to identify microbes that can improve animal health. So this is another example. But there are many other opportunity. This is just for just few that we currently are under discussion, but there is much more that we are now looking forward.

Speaker 4

Great. Thank you very much for the opportunity to ask questions and carry on, sir.

Speaker 2

Thank you very much. I appreciate it.

Operator

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 2 hours after the conference. In the U. S, please call 1-eight eighty eight-three twenty six-nine thousand three hundred and ten.

Operator

In Israel, please call 3,9,255,901. Internationally, please call 9,723-9255-901. Mr. Habib, would you like to make your concluding statement?

Speaker 2

Yes, thank you. So thank you all for joining the call today. It was really tremendous quarter. We all look forward to updating you on our progress in our next call. Thank you.

Operator

Thank you. This concludes Evogene's Q2 2023 results conference call. Thank you for your participation.

Speaker 3

You

Operator

may go ahead and disconnect.

Earnings Conference Call
Evogene Q2 2023
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