Rehovot, Israel
November 18, 2015
Evogene Ltd. (NYSE, TASE: EVGN), a leading company for the improvement of crop productivity and economics for food, feed and fuel, announced today its financial results for the quarter and nine months ended September 30, 2015.
Ofer Haviv, Evogene's President and CEO, stated: "For more than a decade we have focused on creating a unique discovery and validation infrastructure based on a deep understanding of plant science and our ability to create, integrate and analyze ag-related “big data”. Our purpose in doing so was to create a broadly applicable capability for the development of improved input products for agriculture, such as: seeds, ag chemicals and ag biologicals, offering substantial measurable benefits to farmers. I believe that our ongoing success in this long-term effort is clearly demonstrated by both the impressive number of leading agriculture companies that entered into collaborations with us in our initial area of focus - yield and abiotic stress - and by the advancements we are now achieving as we enter additional major ag-market segments, such as ag-chemicals and insect control".
Mr. Haviv continued: "It is well recognized that the worldwide need for food, feed & fuel will be continuing, and most likely, will increase in the future. Therefore, it is expected that the demand for the input products required for their production will also be substantial. In addition, past industry experience has shown that with respect to input products for agriculture, a product providing measurable new benefits can dominate a major market."
"In order to fully utilize our unique infrastructure and capabilities as we leverage its application into a growing number of areas, we are now making certain organizational changes. The key to this re-organization is to group all of our operations into two operating hubs: Crop Enhancement – which aims to improve yield and tolerance to a-biotic stress, such as drought, and Crop Protection – covering crop resistance to various biotic organisms, such as insects, fungi and weeds. Each of these two operating hubs has the benefit of our existing expertise and assets gained through our long experience in the field, including an experienced multidisciplinary professional team, designated databases, proprietary data generation and validation capabilities, and an inventory of specific algorithms and data analysis tools."
Mr. Haviv concluded, "Considering the global ag-opportunities that we see for the Company, our existing and expanding leading capabilities and the major market needs they address, along with the benefit of a strong balance sheet, we believe Evogene is well positioned to play an important role in providing new improved products in each of the market segments that we are addressing and we enthusiastically look forward to doing so, both directly and under milestone and royalty bearing agreements."
Program highlights for the quarter:
- Crop Enhancement (former yield and abiotic stress division and ag biologicals)
- Activities in accordance to the work plan across all 18 seed trait product programs for yield and abiotic stress tolerance primarily with leading seed companies worldwide.
- Through the joint research with Monsanto the Company has been able to identify a series of key enabling traits, which the Company believes will improve overall performance in the collaboration crops, leading to increased yield.
- Initiated discovery activities in the area of ag biologicals for yield improvement with current focus on bio-stimulants.
- Crop Protection (former biotic stress division and ag chemicals division)
- In the Company’s insect resistance trait program, novel toxins discovered by Evogene earlier this year are now undergoing validation against Coleoptera and Lepidoptera insects.
- In the Company’s collaboration with Monsanto, the Company recently delivered the first batch of novel genes predicted to improve resistance to stalk rot (Fusarium) in corn.
- A first set of Evogene discovered novel targets for herbicides has advanced to the next stage of identifying chemical molecules designed to inhibit the activity of such targets.
- Evofuel Ltd (a wholly owned development stage company)
- Field trials in 2015 demonstrated the ability to produce castor as a row crop, and jointly with CNH industrial, the ability to mechanically harvest the crop.
- Decision by SLC and Evofuel to further evaluate castor on an experimental scale, therefore not moving to commercial production in 2016.
- Ongoing activities with existing partners, including SLC and Insolo, and other partners in Brazil and other countries in Latin America to prepare for initial commercialization.
Financial results for the period ended September 30, 2015:
Cash Position: As of September 30, 2015, Evogene had $106.4 million in cash, short-term bank deposits and marketable securities, representing a net cash usage of $9.9 million for the nine months ended September 30, 2015.
Research Revenues include mainly periodic payments for research and development activities, provided under certain of the Company's collaboration agreements primarily with seed companies. Revenues from research and development payments for the nine months ended September 30, 2015 were $8.5 million, compared to $10.6 million for the same period in 2014. The decrease was primarily related to the previously announced amendment to the collaboration work plan with Bayer. Revenues from research and development payments for the third quarter of 2015 were $3.3 million, compared to $3.1 million for the same period in 2014.
Evogene anticipates that for the longer term, its primary sources of revenues will be future royalties and other revenue sharing amounts, as well as castor seed sales by its wholly owned subsidiary Evofuel. Research revenues which reflect R&D related cost reimbursement under certain of Evogene's collaboration agreements, were in the past a meaningful contributor to cash flow. Currently, in view of the Company's financial strength, Evogene considers, on a case by case basis, self-financing certain activities under its collaborations. Although possibly resulting in less short term research revenues than would otherwise be the case, the Company’s goal in negotiating the terms for collaborations is to maximize long-term revenues, consistent with maintaining its financial strength.
Cost of Revenues includes research and development expenses related to the support of the Company’s on-going activities under collaboration agreements primarily with seed companies, which provide for future milestone and/or royalty revenues. Cost of Revenues for the nine months ended September 30, 2015 was $6.2 million, compared to $7.3 million, for the same period in 2014. The decrease was primarily related to the previously announced amendment to the collaboration work plan with Bayer. Cost of revenues for the third quarter of 2015 was $2.5 million, compared to $2.3 million, for the same period in 2014.
Research and Development Expenses for the nine months ended September 30, 2015 were $10.3 million, compared to $9.8 million for the same period in 2014. This increase derives from an increase in non-cash share-based compensation expenses. Research and Development Expenses for the third quarter of 2015 were $3.1 million, compared to $3.7 million for the same period in 2014. This decrease mainly relates to (1) the increase in the exchange rate of the US dollar against the Israeli Shekel, creating a decrease in the company expenses in terms of USD (2) a decrease in overhead expenses related to those R&D expenses. As stated above, research and development expenses do not include such expenses incurred in support of on-going collaborations, which are accounted for as cost of revenues.
Operating Loss for the nine months ended September 30, 2015 was $12.6 million (including a non-cash expense of approximately $3.3 million for amortization of share-based compensation), compared to an operating loss of $10.7 million (including a non-cash expense of approximately $2.5 million for amortization of share-based compensation) for the same period in 2014. This increase is mainly attributable to the increase in non-cash share-based compensation expenses and the decrease in revenues from research and development payments as described above. Operating Loss for the third quarter of 2015 was $3.8 million (including a non-cash expense of approximately $1.1 million for amortization of share-based compensation), compared to an operating loss of $4.3 million (including a non-cash expense of approximately $0.8 million for amortization of share-based compensation) for the same period in 2014. This decrease is mainly related to the decrease in R&D expenses as noted above.
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