Evogene Ltd . (NASDAQ: NASDAQ:EVGN) has reported a significant increase in its annual revenue, rising from $1.7 million in 2022 to approximately $5.6 million in 2023. The company, in its fourth quarter and full year 2023 results conference call on March 7, 2024, attributed the growth to its successful partnerships and subsidiary achievements, including a notable collaboration with Bayer (OTC:BAYRY)'s Crop Science division.
Despite the positive revenue trend, the company faced an operating loss and a net loss for the year, although these figures showed improvement from the previous year. Evogene's cash balance stood strong at $31.1 million as of December 31, 2023, with expectations of additional cash inflows in 2024.
Key Takeaways
- Evogene's revenue surged to approximately $5.6 million in 2023, up from $1.7 million in 2022.
- The company expects continued revenue growth and a lower consolidated burn rate in 2024.
- Subsidiary AgPlenus signed a significant agreement with Bayer and achieved a milestone with Corteva (NYSE:CTVA).
- Biomica, another subsidiary, completed a $20 million financing round and is advancing clinical trials.
- Lavie Bio secured licensing agreements and regulatory approval for its bio-inoculant product, Yalos.
- Canonic, the medical cannabis subsidiary, is exploring a transfer of operations due to market challenges.
- The company reported a net loss of approximately $26 million for 2023, an improvement from 2022.
Company Outlook
- Evogene anticipates revenue growth and cash injections from collaborations and product sales in 2024.
- The company plans to reduce its total consolidated burn rate in 2024 compared to 2023.
- Continued development and potential commercialization of subsidiary products are expected.
Bearish Highlights
- Operating loss for Q4 2023 increased to approximately $7.6 million.
- Net loss for Q4 2023 was approximately $7.3 million, up from $3.8 million in the same period in the previous year.
- Canonic is undergoing a strategic review due to challenging conditions in the medical cannabis sector.
Bullish Highlights
- Subsidiary achievements, including licensing agreements and clinical trial advancements, contribute to optimism.
- Lavie Bio's Yalos has a secure supply chain and is set for a commercial launch in 2024.
- AgPlenus expects milestone payments and royalties from collaborations with industry giants Bayer and Corteva.
Misses
- Despite overall growth, the company still reported an operating loss and a net loss for 2023.
- The medical cannabis subsidiary, Canonic, is facing market headwinds, prompting a review of its operations.
Q&A Highlights
- Evogene aims to achieve near-term milestones this year, with a focus on supporting demand and building inventory for 2025.
- The company is expanding its network of seed producers and plans to open a subsidiary in Kenya.
- CEO Ofer Haviv expressed commitment to the company's growth and gratitude for support.
In conclusion, Evogene has demonstrated a strong performance in terms of revenue growth and strategic partnerships. The company's focus on its AI tech engines and subsidiary advancements, alongside prudent financial management, has positioned it for potential continued success in 2024. Despite the challenges faced by its medical cannabis subsidiary, Evogene's diverse portfolio and collaborations with industry leaders present a positive outlook for the future.
InvestingPro Insights
Evogene Ltd. (NASDAQ: EVGN) has shown remarkable revenue growth in the last twelve months as of Q1 2023, with a striking 331.52% increase, signaling a strong upward trend in its financial performance. This aligns with the company's reported annual revenue surge to approximately $5.6 million in 2023. Investors looking at the company's fundamentals will note that Evogene's market capitalization stands at $45.28 million, reflecting its valuation in the market.
An InvestingPro Tip highlights that Evogene holds more cash than debt on its balance sheet, which is a positive sign for financial stability and potential for future investments. Additionally, analysts anticipate sales growth in the current year, suggesting that the revenue uptrend may continue.
While the company's P/E ratio is currently negative at -2.01, indicating that it is not profitable at the moment, an InvestingPro Tip also points out that Evogene is not expected to be profitable this year, which is consistent with the net losses reported. However, its liquid assets exceed short-term obligations, providing some cushion against financial pressures.
For investors interested in deeper analysis and more InvestingPro Tips, Evogene has 5 additional tips listed on InvestingPro, available at: https://www.investing.com/pro/EVGN. To access these insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Full transcript - Evogene Ltd (EVGN) Q4 2023:
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Evogene's Fourth Quarter and Full Year 2023 Results Conference Call. All participants are present in a listen-only mode. Following managements formal presentation, instructions will be given for the question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded, March 7, 2024. 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. This investor call contains forward-looking statements relating to future events. These statements may be identified by words such as may, could, expects, hopes, intends, anticipates, plans, believes, schedules, estimates or words of similar meaning. For example, Evogene is using forward-looking statements in this investor call when it discusses the further partnerships with industry leaders, increased sales of subsidiary products like Casterra’s elite castor varieties and Lavie Bio's bio-inoculant Yalos, expansion beyond its current sectors, continued revenue growth for the Evogene Group in 2024, potential transfer of Canonic's operations to a third party, increased production of Casterra, commercialization of AgPlenus and Lavie Bio's and the timing and results of the clinical trials and preclinical trials of Biomica's products. Such statements are based on current expectations, estimates, projections and assumptions describe opinions about future events involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance. Therefore, actual future results, performance or achievements of Evogene and its subsidiaries may differ materially from what is expressed or implied by such forward-looking statements due to a variety of factors, many of which are beyond the control of Evogene and its subsidiaries, including without limitation, the current war between Israel and Hamas and any worsening of the situation in Israel. Such as further mobilizations or escalation in the northern border of Israel and those risk factors contained in Evogene's reports filed with an applicable securities authority. In addition, Evogene and its subsidiaries rely and expect to continue to rely on third parties to conduct certain activities such as their field trials and preclinical studies. And if these third parties do not successfully carry out their contractual duties, comply with regulatory requirements or meet expected deadlines, Evogene and its subsidiaries may experience significant delays in the conduct of their activities. Evogene and its subsidiaries disclaim any obligation or commitment to update these forward-looking statements to reflect future events or developments or changes in expectations, estimates, projections and assumptions. 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. Today's call will feature Ofer Haviv, President and CEO of Evogene alongside Yaron Eldad, CFO of Evogene and Yoash Zohar, CEO of Casterra. Additionally, a representative each subsidiary will be present at the Q&A session. That said, I would now like to turn over the call to Ofer Haviv, President and CEO of Evogene. Mr. Haviv, please go ahead.
Ofer Haviv: Hi, and good day, everyone. In today's conference call, I would like to start with a review of the Evogene Group's achievement June 2023 until today and provide you with an update on our activities as well as potential catalysts during the next 12 months. Following my review, Casterra new CEO, Yoash Zohar, will introduce himself, provide an update on Casterra's activity and outline the Company's Board for the coming years. Evogene's CFO, Yaron Eldad will then provide a financial summary and update. After that, we will open the Q&A session. What year it's been for the Evogene Group since our last earnings call summarizing 2022. Despite the challenges we are facing collectively here in Israel, this year marked a significant shift in how the industry views our technology and products, translating into growing collaborations with board-leading companies. The number and caliber of partnerships, Evogene and our subsidiaries have formed speaks of volumes. Lavie Bio, partnering with Corteva, ICL, and Syngenta. AgPlenus partnering with Bayer and Corteva. Casterra partnered with global oil and gas company. Biomica securing investment from Shanghai Healthcare capital and Evogene collaborating with Verb Biotics and Colors, all highlight our growing presence and impact in the life science industry. This expanding collaboration momentum validate the value of Evogene AI tech engines, MicroBoost AI, ChemPass AI and GeneRator AI, relying on our CPB platform, which we have been developing for over a decade. Looking ahead, we anticipate further collaboration with industry leaders directly or through our subsidiaries, an increase in the volume of sales of products by our subsidiaries such as Casterra's elite castor varieties and Lavie's bio-inoculant Yalos and expanding Evogene's reach behind its current sectors of activity. These efforts not only validate our contribution, but also strengthen our financial position through non-dilutive funding and revenue streams from upfront payments, R&D fees, milestones and direct product sales. As reflected in the revenue the Company reports today totaling approximately $5.6 million compared to approximately $1.7 million in 2022. We expect to see continued growth in the Evogene Group revenue in 2024. As we have new listeners on today's call, I would like to briefly review Evogene's core technology and our value proposition. Evogene has been using its computational predictive biology platform, the CPB to direct and accelerate the development of life science-based products. The CPB is at the foundation of our three AI tech engines. MicroBoost AI supports the development of micro-based products, ChemPass AI supports small molecule-based product and GeneRator AI supports product based on genetic elements. Our AI-driven tech engines aim to tackle the main challenges in life science product development, candidate discovery and optimization. Identified winning candidates from a set number of prospects and meeting complex criteria for success in commercial products. The value proposition of our AI-driven tech engines stems from the efficient finding of the needle in the haystack; therefore, increasing the probability of the success within a competitive timeframe and in a cost-efficient manner. After reviewing our technology on to our business model, our business model revolves around two main strategies: for leveraging our AI technology licensing. Evogene offers time limited license to third parties, such as our subsidiaries on related entities allowing them to use our tech engine for product development within a specific commercial domain. This model typically generates revenue through license fee, R&D reimbursement, but more importantly, dividends to Evogene as a shareholder over significant onetime payments upon an exit event, particularly if Evogene is a major shareholder. Collaboration. Evogene collaborate with industry leaders to jointly drive product development. In these ventures, our partners often take the lead in later-stage development and commercialization, while we contribute our unique tech engine to identify and optimize product candidates. Revenue from this model usually came from upfront payment, R&D fees and royalty from sales of future end products. And now, we are commercializing MicroBoost AI through licensing agreements with Lavie Bio for ag-biological and with Biomica for human microbiome based ag development, and Evogene is also collaborating with Verb Biotics to develop probiotic product. ChemPass AI is commercialized through a license agreement with our subsidiary, AgPlenus for chemical product development. GeneRator AI is commercialized through license agreement with Casterra for castor seed varieties and Canonic for medical cannabis products. Evogene is also collaborating with Colors Farms Ltd. on crustacean gene editing technology through GeneRator AI. I would like now to review in more detail the collaboration of Evogene is engaged in with third parties and then briefly review the main achievements of our subsidiaries. At the beginning of February 2024, we proudly announced a partnership between Evogene and Verb Biotics, an innovative probiotics company. Our collaboration with Verb Biotics allows us to tap into the growing probiotics market using Evogene's MicroBoost AI tech-engine. Together, we are working on identifying and designing probiotic bacteria that produce highly sustainable quantities of microbial metabolites known to improve human health and vitality with the probiotics market projected to double to around $114 billion by 2031. We are seizing the opportunity to revolutionize this industry and provide cutting-edge solutions for consumer worldwide. Earlier this year, we reported collaboration with Colors Farm and Ben Gurion University to crustacean gene editing technology aiming to enhance crustacean traits. The collaboration is powered by a grant from the Israel Innovation Authority and utilize Evogene's GeneRator AI tech engine. Another milestone worth mentioning is that our Ag-Seed Division secured the EUR 1.2 million grant to develop oilseed crops with enhanced CO2 simulation and drought tolerance. The program known as the EIC 2022 Horizon program supports business addressing climate focus and sustainable crop development. In this program, we utilize the Evogene's GeneRator AI tech engine capabilities as well. These partnerships exemplify our business approach and demonstrate how we use our tech engines to bring innovative products to market in sectors not covered by our subsidiaries. It's important for me to emphasize that all of these collaborations are all generating revenue to Evogene. Now let's review our subsidiaries' achievements. I would like to start with Casterra. Evogene's fully owned subsidiary, which focuses on developing an integrated solution to enable large-scale commercial cultivation of castor beans benefiting from its unique and listed varieties, utilizing GeneRator AI tech engines. Casterra solutions aim to address the global demand for a stable customer oil supply, mainly for the biodiesel industry. The past year was pivotal for Casterra. Its vision of becoming a significant player in the biodiesel industry progresses with seed order from award leading oil and gas company, totaling $11.3 million for castor cultivation in Africa. In September, Casterra successfully delivered its first shipment of high-yield high-oil castor seeds from Brazil and Zambia to an African region generating revenue of approximately $1 million. As published earlier this week, the Company recently signed agreements with existing and new seed producers in Brazil and Africa to increase its production capabilities of castor seeds in 2024, which are expected to add approximately 400 tons. This new agreement will enable the Company to support the existing state orders. Looking forward to 2024, Casterra is committed to expanding its castor seed production capacity through securing agreements with additional subcontractors in Brazil and Africa on which we expect to update. Finally, on January 2024, we welcome you Yoash Zohar as Casterra's new CEO, who will enter present himself. Yoash brings a wealth of experience in global ad projects, and I'm confident in his ability to propel the Company forward. I wish him and the rest of Casterra's team would luck. Now I would like to review our wholly owned subsidiary, AgPlenus aiming to discover next-generation innovative crop protection products, including herbicide, insecticide and fungicide and commercialize them through collaboration with world-leading partners. AgPlenus utilized Evogene ChemPass AI tech engine to accelerate and direct its product development. Major agrochemical companies dominate today's crop protection industry. Still, they look to smaller ag tech companies to discover new target brought in and small molecules that inhibit such target proteins, serving as the active ingredient in commercial crop protection product. AgPlenus is the Company that addresses this need. As I stated in the previous call, there is a growing interest in AgPlenus product pipeline. And recently, we were fortunate to see that interest materialize. In February 2024, AgPlenus announced signing of a licensing and collaboration agreement with Bayer's Crop Science division. Under the agreement, AgPlenus will use its AI-driven computational modeling technology to design and optimize the molecules identified for their broad-spectrum herbicidal activity, targeting the APTH1 protein, a new mode of action identified by AgPlenus. Bayer will have the exclusive license for developing and commercializing products developed within the collaboration. AgPlenus will be entitled to receive an upfront payment ongoing research funding, milestone payments and royalty based on future product sales. Another impressive and important announcement was the milestone achievement in the ongoing collaboration with Corteva for the development of novel herbicides. The milestone marks the successful identification of a new family of molecules exhibiting herbicidal effect through a novel mode of action, APCO-12 discovered by AgPlenus. In the next phase, the collaboration will optimize the identified molecules towards commercial level products, utilizing AgPlenus cutting-edge computational technology powered by Evogene's ChemPass AI tech engine. These two collaborations strengthened AgPlenu's financial position and overall perception in the agriculture market. Last, but not least, we introduced Dr. Dan Jacob Gelvan as AgPlenus new CEO, that's extensive experience and proven track record well positioned him to guide AgPlenus through its next phase of growth and innovation. AgPlenus former CEO, Dr. Brian Ember, has transitioned to Chief Business Officer. I would like to thank Brian for his contribution and leadership to AgPlenus, and I look forward to continuing our work together in his new role. AgPlenus is looking towards an exciting year with new management in place, the collaborative agreements signed with Bayer in February and the maximum reach in the Corteva collaboration in March. 2024 is looking bright for the Company. Alongside those AgPlenus will continue to advance its pipeline based on the ChemPass AI tech engine and seek additional collaboration with existing and new partners. I would like now to continue with the two subsidiaries using MicroBoost AI to accelerate and direct their product development, Biomica and Lavie Bio. Biomica specializing in developing microbiome therapeutics for human health, utilizing Evogene's MicroBoost AI tech engine to discover and optimize microbes with therapeutic potential. In April 2023, Biomica completed a $20 million financing round with Shanghai Healthcare Capital investment of $10 million. This investment made as a post-money valuation of $50 million served as an external validation of Biomica's long-term potential. Biomica's flagship product candidate, BMC128, targeting immune-oncology patients is currently undergoing Phase I clinical trial. The trial initiated at Rambam Health Care Campus in Israel aims to assess BMC128 safety and durability in combination with Bristol-Myers Squibb’s Opdivo immune therapy. In August 2023, Biomica expanded its operations by opening a second site at The Davidoff Cancer Center in Israel to facilitate additional patient recruitment for the clinical trial. In January 2024, Biomica reached a significant milestone by completing Phase I trial enrollment for its microbiome-based immuno-oncology drug with preliminary results showing promising outcomes. Initial data point readout is anticipated during 2024. In July 2023, Biomica reported positive interim results from preclinical studies on its IPS program conducted in collaboration with Professor Kara Gross Margolis Lab at New York University. These results demonstrate the efficacy of Biomica's live bacterial consortia, BMC426 and BMC427 alleviating visceral pain, a major symptom of IBS, presenting promising new treatment avenues. Biomica intends to conduct further preclinical studies on BMC426 and BMC427 to prepare for clinical trials. Looking ahead, Biomica remains committed to advancing its efforts and aim to submit an IND application for BMC128, targeting immuno-oncology patients. During the third quarter of 2024, a pivotal step in preparing for Phase II clinical trial in the U.S. In addition, the Company will continue to expand its candidates in the IBS and IBD programs towards Phase I clinical trials. Now to Lavie Bio, who leverages Evogene's MicroBoost AI tech engine to develop next-generation ag-biological products. In addition to Evogene's majority ownership, Lavie Bio has two additional major shareholders Corteva, New York listed multinational ad tech giant and ICL a New York listed global minerals and ad-tech company. In July 2023, Lavie Bio entered a licensing agreement with Corteva considering exclusive rights for Corteva for advancing and commercializing Lavie Bio’s lead bio-fungicides, LAV311 and LAV312 targeting fruit rots. This agreement follows two years of independent field validation trial conducted by both companies. Under the agreement, Lavie Bio received an initial payment of $5 million and will also be eligible for additional future milestone payments and royalties from Corteva's future sales of the product. Another major step for Lavie Bio was the recent announcement in February 2024 of the agreement with Syngenta for the discovery and development of new biological insecticide solution. The collaboration will leverage Lavie Bio's technology platform to rapidly identify and optimize bioinsecticide candidates. These two collaborations strengthen Lavie Bio's financial position and overall perception in the agriculture market. Now let's move from collaborations to product sales. Lavie Bio's first bio-inoculant Yalos achieved several impressive milestones. In May 2023, Yalos obtained regulatory approval from the Canadian Food Inspection Agency, expanding itself territory significantly and tripling its reach. In November 2023, Yalos expanded its scope to include durum and barley varieties across the U.S. and Canada. This expansion followed successful field trials in 2023, demonstrating an average of approximately 7% of yield increase in durum and barley. In December 2023, Lavie Bio secured an exclusive distribution agreement with WinField United Canada for Yalos aiming to drive sales growth in key Canadian agriculture regions including Saskatchewan, Alberta and Manitoba. The focus of the distribution agreement is on spring wheat, durum and barley crops. Overall, Yalos made significant strides in regulatory approval, product expansion and distribution partnerships, positioning it as a valuable tool for enhancing productions and addressing environmental challenges in the agriculture industry. Looking forward to 2024, Lavie Bio will continue to focus on three main pillars: the first will be to grow the sales and distribution of the Company's bio-inoculant product Yalos in the U.S. and Canada. The second is to continue driving the Company's pipeline of innovative product towards commercialization, including special focus on the Company's strategic partnership with Corteva, ICL and the recent one with Syngenta. The last pillar will be to continue advancing the Company's unique technology platform ability powered by Evogene MicroBoost AI tech engine with new tools and capabilities. Finalizing my review of our subsidiaries, I would like to update on economics, which provides tailored medical cannabis products. Following my previous update in Q3 2023 in which we noted that we have decided to reduce our investment in economics. Due to the challenging market conditions of the medical cannabis sector, we have recently engaged in advanced discussions relating to the potential transfer to a third party of Canonic's operations. There is no assurance that such transfer will be completed or on what terms. We will continue to update you on this better. No doubt, 2023 was an exciting year for the Evogene Group filled with achievements. Looking forward to 2024, we expect that to see continued growth and additional collaborations benefiting from Evogene 3 AI tech engines. We ended 2023 with a solid cash balance of approximately $31.1 million and are expecting additional cash injections from collaborations and product sales. This concludes my review of the Evogene Group activities. Now Yoash Zohar, Casterra's new CEO, will take the leader.
Yoash Zohar: Thank you, Ofer, and good day, everyone. I would like to start by thanking the exceptional team at Casterra for welcoming me during this pivotal moment for the Company and expressing my sincere gratitude to the Evogene management for their support. As we face the challenges ahead, and feel with optimism, driven by the great potential we see in Casterra. Ensuring a reliable and stable supply of castor seeds is crucially meeting our customers' demand while contributing positively to local economies. Our recently signed agreements with seed producers in Africa and Brazil, strengthened our supply chain and market strategic change towards diversifying our production sources. I believe Evogene's innovative AI technology will play a crucial role in shaping the future of castor seeds, solidifying Casterra's position as a world leader in the field. Together, I'm confident that we will leverage this technology to maintain Casterra's competitive edge and achieve on parallel success in the global market.
Yaron Eldad: Thank you, Yash. As of December 31, 2023, Evogene had consolidated cash, cash equivalents and short-term bank deposits of approximately $31.1 million. Evogene together with Casterra, Canonic and AgPlenus possessed an aggregate of $12.4 million in cash, Biomica $12.7 million and Lavie Bio $6 million. In July 2023, the Company entered into securities purchase agreements with institutional investors in a registered direct offering of shares only. The gross proceeds from the offering were approximately $8.5 million. Looking ahead to 2024, we expect an approximate cash usage of $8 million excluding Lavie Bio and Biomica, which is significant decline compared to $12.5 million in 2023. This decline is mainly attributable to an expected increase in revenue in 2024 and a decrease in expenses due to the decline in economic activity. The total consolidated burn rate is expected to decline in 2023 as well to $21 million compared to $23.1 million in 2023. We do not have any bank debt. I would like now to highlight some specific items on the P&L. Revenues for 2023 were approximately $5.6 million in comparison to approximately $1.7 million in 2022. The increase in revenues was primarily due to $2.5 million generated by Lavie Bio as a licensing fee in the frame of its collaboration with Corteva as well as direct revenues recognized from Casterra sales of castor seed. R&D expenses for the fourth quarter of 2023, which are reported net of non-refundable grants received were approximately $5.5 million in comparison to approximately $4.8 million in the same period in the previous year. R&D expenses for the full year 2023 were approximately $20.8 million and remained stable compared to 2022. The main contributors to R&D expenses during 2023 were Lavie Bio activities and Biomica's development efforts. Sales and marketing expenses for the fourth quarter of 2023 were approximately $1 million, reflecting a slight decrease compared to approximately $1.2 million in the same period the previous year. For the full year 2023, sales and marketing expenses were approximately $3.6 million in comparison to approximately $3.9 million in 2022. General and administrative expenses for the fourth quarter of 2023 were approximately $1.2 million in comparison to approximately $1.7 million in the same period in the previous year. For the full year 2023, general and administrative expenses were approximately $6.1 million in comparison to approximately $6.5 million in 2022. The decrease was mainly attributed to the decrease in the cost of directors and officer's insurance. Other income in the fourth quarter of 2022, the Company received $3.5 million from Bayer under the joint seed trade collaboration agreement as part of a restructuring and release of the patent filing, prosecution and maintenance obligation under the collaboration. Operating loss for the fourth quarter of 2023 was approximately $7.6 million in comparison to an operating loss of approximately $3.8 million in the same period in the previous year. The increase in the operating loss was mainly due to the other income recorded in the fourth quarter of 2022, as mentioned above. Operating loss for the full year of 2023 was approximately $26.5 million in comparison to $26.9 million in 2022, mainly due to the significant increase of revenue in 2023, offset by the other income recorded in 2022. Financing income, net for the fourth quarter of 2023 was approximately $287,000 compared to approximately $6,000 in the same period in the previous year. Financing income net for the full year 2023 was approximately $521,000 compared to financing expenses of approximately $2.8 million in the same period in the previous year. The difference between periods was mainly due to the U.S. dollar and the new Israeli shekel exchange rate, a change in the value of marketable securities and an interest income compared to the same period in the previous year. Net loss for the fourth quarter of 2023 was approximately $7.3 million in comparison to a net loss of approximately $3.8 million in the same period in the previous year. The increase in net loss during the fourth quarter of 2023 is mainly due to other income received in 2022, as mentioned above. Net loss for the full year 2023 was approximately $26 million in comparison to a net loss of approximately $29.8 million for 2022. With that, both Ofer and I would now like to open the call for any questions you may have.
Operator: [Operator Instructions] The first question is from Ben Klieve of Lake Street Capital. Please go ahead.
Ben Klieve: A few questions, the first couple regarding Casterra. You talked about the kind of increased access to farmers supplying you with castor seeds. I'm wondering, if you can characterize if you feel confident that you have enough inventory to fill the entirety of the initial $11.3 million order in 2024? Do you guys feel comfortable with the inventory that you're going to have to do that or you think there's going to be variability there?
Ofer Haviv: Ben, this is Ofer. And Yoash is also online. Yoash is the CEO of Casterra. We believe that we would be able to supply the orders we received in 2023 during 2024. A fraction will come from a seed production that was initiated during 2023. And now, it's on its way, the rest will come from production that we are going to conduct during this year, which this is apart from what we announced during the last quarter. So, the answer to your question is yes.
Ben Klieve: And so, a follow-up question to this then is regarding a follow-on order from this on the energy quarter. Can you characterize what is needed in order for a follow-on order to be received? So, do you guys need to deliver fully before you think they will commit to a follow-on order, is their ongoing discussions about a follow-on order currently? What can you help us understand about expectations and timing around that?
Ofer Haviv: So, we are already starting to talk with our partners with respect to orders for year 2025. I believe that the main challenge is still to be able to produce the needed quantity for year 2025. So, in a way, our plans for the year 2024 is to produce castor seeds not just in order to supply the existing purchase order we received in 2023. Our target is also to end the year with inventory and seed production in the field that will support the demand for 2025. So bottom line, as part from our progressing in supplying seed for this year, we are expecting also to receive order for next year, and we will start the production during 2024 as preparation for 2025.
Ben Klieve: That's very helpful. Thank you Ofer. The tipping over to Canonic. In your prepared remarks, Ofer, you talked about kind of a strategic review that's going on there and looking at your options, is your hope for Canonic this is something that Evogene will still retain ownership of, but maybe in a different structure than it is today or is this an operation that you think is one that is potentially going to be noncore and something that would be outside of Evogene here in coming quarters?
Ofer Haviv: So, I think that our final target is that starting from this year, Canonic activity won't be material in our P&L. And the way that we are planning to achieve is by integrate Canonic activity to other third parties that we are talking with. We still -- it's under discussion. But that is that we will stay a minority shareholder in a company, but we won't continue to invest in this activity the way that we did in the previous years. So bottom line, we might stay with some right through equity or through other mechanism in this field, but we will start to invest in the cannabis industry.
Ben Klieve: And then one last one for me and then I'll get back in queue as it pertains to Lavie Bio. And I had to hop in and off of a call here when you were talking about this. So, if I'm making you repeat yourself, I apologize. But can you talk about the supply chain of Lavie Bio and -- that I know had some challenges last year. I believe you have that supply chain really secure to really enable more material, commercial launch of Yalos here in 2024. But can you just confirm that really the inventory build-in support of commercial launch in place? Or are there any supply chain challenges that you're still working through?
Ofer Haviv: So, I think that in this case has good news. So, it's really nice to see that you remember that we had some challenges in producing Yalos in 2023 -- in 2022, but I'm very happy to report that we successfully produced the quantity that we were targeting and even a little bit more than what we were targeting for the sale season of 2024. So, we are in good shape. We changed the tool manufacturer, and we are very happy with this performance and the quality of the product.
Operator: The next question is from Ben Haynor of Alliance Global Partners (NYSE:GLP). Please go ahead.
Ben Haynor: Wanted to focus on AgPlenus and the agreements we have there and Corteva on APCO12 and APTH1. What do we expect kind of from a development time line there? And when and how large do they something you can discuss like some of these upfront milestone payments, royalties, et cetera, be as part of these agreements here.
Ofer Haviv: Thanks, Ben, for this question. First, I was asking to use this question and to share with the participants call, how proud we are that we are in a position that Lavie Bio our subsidiary in the world of ag-biological is collaborating and working with third monitor in the ad industry, ICL, Corteva and Syngenta. And we also have AgPlenus who's working with Corteva and also with Bayer's. It's really incredible that today in the Evogene group, we're working with almost all the first-year type of company. I think that is the only company that we are not working yet and probably this is the only question of time. So, I think that it is something that's worth to note. Well, with respect to your question, I think that both ongoing collaboration with Corteva and with Bayer, they are an important part from funding of AgPlenus activity for the next few years. There is a reason why we report on the Bayer collaboration agreement in a six-day format. I can disclose, of course, the numbers. But as we mentioned, this agreement includes upfront payment, R&D fee and then, of course, milestone payment and royalty. I think what is important in these two announcements is that the first -- another first-tier company choosing AgPlenus to work with to develop one of the most important products in the ag-chemical industry herbicide. And the second announcement, if you think about it, this is the first time that we have confirmation from a third party that our tech engine ChemPass and the AgPlenus succeed to achieve a milestone. So, I think this is a very important news. Now as I said, we expect that the significant portion from AgPlenus expense budget will be covered by these two collaborations and I hope and believe that there will be more in the future. And I think that what we should expect in the near future is achieving additional milestones that will present the progress of this collaboration. With respect to royalty, it still will take some time. But like in the ag-biological arena, what is important is advancing in the pipeline because the value creation scheme is rapidly increase when you are moving from a hit to lead to optimize lead, et cetera, et cetera, et cetera. So, this is a great news for AgPlenus that we achieved first milestone in the collaboration with Corteva and we are looking at to the next challenges and milestones, which we believe will achieve them.
Ben Haynor: And maybe just a follow-up on the near-term milestones. Are any of those expected to hit this year?
Yoash Zohar: Can you repeat what you said just now?
Ben Haynor: Sure. I think you said that near-term milestones, milestone payments, is that upcoming milestone payments. Are any of those expected to be recognized this year?
Ofer Haviv: So,, there are some milestones that we are trying to reach during this year, not necessarily in AgPlenus. There is other agreements in the group that we are targeting for, but it also depends on research activity. So yes, we are looking forward to see the progress. In some cases, we hope and believe that we will be able to achieve them. There is always a challenge with respect to R&D estimate. It might take a little bit longer. But we are excited to see the current progress in all fronts with respect to our activities in our subsidiaries.
Ben Haynor: That's fair enough. And then if I missed this earlier, on the 400 tons, I can't just -- is that sufficient? I thought at the end of the response to one of the earlier questions. Is that enough to meet the current order and the beginning of supply for 2025? Or can you clarify on what that 400 tons of production capacity gives you?
Ofer Haviv: Okay. So, our target is that in order to support the demand from the purchase order received in 2023 is coming from three avenues. The first one is from production took place last year, and now we are harvesting the field packaging, the feed and shipping them to our partners. Additional avenue is from the seed production agreement that we announced this quarter. And there is additional ongoing discussion that we are now planning to close the agreement not just to supply the existing demand, but also to start to build an inventory for 2025. So, as I responded earlier, according to our plan, we believe and expected to be able to deliver not just the quantity we obligate last year, but we are also planning to build an inventory or expecting for the future purchase order for 2025.
Operator: The next question is from Brett Reiss of Janney Montgomery Scott. Please go ahead.
Brett Reiss: First question, based on the crop rotation cycle. When will we definitively know that the new group of Brazilian and Kenyan farmers have been able to successfully grow and deliver the seed so we can consummate sales?
Ofer Haviv: So first, one of the reasons that we are growing in different regions is to be able to capture more than one season to grow castor. In addition, in all the areas that we are now engaged, the irrigation system in order to address the issue of water for the castor. I think that we are planning to probably we'll have better understanding during the second quarter or close to the end of the second quarter with respect to this question. And in any event, we -- our plan, we are going to engage with much more than what we need for this year to supply. So, as I said, part of it will be for the inventory for next year. But I think that during the second half -- the second quarter this year, we'll have a better clarity. But at least from what we are doing now, I think that we'll be able to achieve this target.
Brett Reiss: Somebody, one of the prior calls that asked about the 400 tons of production. I'm going to ask it a different way. If you're able to generate 400 tons of production, what capacity of dollar revenues would -- can result if you're able to successfully come in with 400 tons of production?
Ofer Haviv: I can't disclose this information because then our competitors will know what is the price that we are doing in our products. So, I prefer to keep this commercial information confidential. And this is -- we were hesitating what information we can disclose. I think it was important for us to send the message that we are taking care on the production issue. So, this is why we came with this press release. We prefer not to share more information because it's not for the benefit of the Company.
Brett Reiss: And last one, since so much depends on your selecting the right farmers in Brazil and Kenya and monitor them monitoring them. Have you marinated yourself and your team -- have the marinated themselves in Brazilian and Kenyan business culture so that we're sure we're selecting the right farmers, and they deliver what they're contracted to do?
Ofer Haviv: This is a very good question, and we are trying to tackle this challenge in different ways. The first one is that we are -- if in the past, we worked only with two-seed producers. Currently, we are working with more than five and the numbers will continue to grow. And it's in different regions. In addition, we expand significantly the number of Casterra employee, all of them are agronomies that have experience in growing castor and a significant portion from the time they are export, our seed grower in Africa and in the Brazil. As an example, Yoash is currently in the call, but he is looking at it now in Kenya, where he is conducting set of meetings with our existing seed producer and additional producers that we are planning to engage with them for growing for us additional castor seeds. And we have one Brazilian employee that is located in Brazil, and we are planning to open a subsidiary in Kenya that there will be local people that will work for Casterra and they will be on the ground through the years all the time. So, in addition, I think that today, when we are choosing a seed producer, we are visiting his farm. We are checking the facility we have, and we are doing a lot of work before we engage with them. But maybe the most important thing is that we are not choosing one seed producers and give him all the -- and build all of our expectation on him, like maybe we did in the past. Today, we are prepared to work with many seed producers in order to make sure that even if one of them won't achieve his target, still we will get the overall performance will cover our expectations.
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 two hours after the conference. In the U.S, please call 1-888-326-9310. In Israel, please call 039-255-901. Internationally, please call 9723-925-5900. Mr. Haviv, would you like to make your concluding statement?
Ofer Haviv: Yes. Thank you once again for your ongoing support. Together, we will continue to drive our company forward and create long-term value for all stakeholders. Thank you, and goodbye.
Operator: Thank you. This concludes Evogene's fourth quarter and full year 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.
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