Evogene Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone 2021 Q4 report. Financial statements are prepared under IFRS as issued by the IASB and presented in U.S. dollars.
Business context
Evogene is an Israeli computational biology company using its Computational Predictive Biology platform to support product discovery and development across agriculture, human health and industrial applications. Its subsidiaries focus on ag-biologicals, ag-chemicals, seed traits, microbiome therapeutics, medical cannabis and castor seeds. FY2021 revenue remained primarily collaboration R&D payments, with initial medical cannabis and castor seed sales.
Key financial metrics
| Metric (US$ millions, except per-share data) | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | 0.93 | 1.04 | Down 10.6% |
| Gross profit | 0.16 | 0.47 | Down 65.0% |
| Gross margin | 17.5% | 44.8% | Down 27.3 percentage points |
| Operating loss | (30.95) | (24.81) | Loss widened 24.7% |
| Net loss | (30.45) | (26.21) | Loss widened 16.2% |
| Loss per share | (0.69) | (0.83) | Improved; higher weighted-average share count |
| Operating cash flow | (24.72) | (19.51) | Cash use increased |
Research and development expense rose 22.2% to $21.1 million, mainly reflecting third-party preclinical work and GMP production for Biomica, Lavie Bio field trials, and reduced grant participation. General and administrative expense increased 36.3% to $7.3 million, including higher D&O insurance and personnel costs. Business development expense was $2.7 million, up 2.4%.
At December 31, 2021, cash and cash equivalents were $32.3 million, short-term deposits $3.0 million and marketable securities $18.5 million; together these totaled $53.9 million. Working capital was $50.0 million. Government-grant liabilities were $4.4 million, including $4.3 million long-term; lease liabilities totaled $2.7 million. The filing reports no material claims. Total assets were $76.3 million and total equity $63.4 million.
Changes and notable developments
- Revenue decreased as agriculture collaboration revenue fell, partly offset by initial product revenue in human health.
- Operating cash use increased by $5.2 million year over year. Financing activities provided $30.3 million, including $29.6 million net proceeds from share issuance; cash and cash equivalents declined by $13.9 million.
- Shares outstanding increased from 35.6 million to 41.2 million during 2021. The company raised approximately $28.0 million gross in an ATM offering early in the year and approximately $2.6 million gross under a subsequent ATM agreement.
- Canonic began commercial sales of medical cannabis products in Israel in October. Lavie Bio launched its Result inoculant product for the 2022 spring wheat season. AgPlenus reported proof-of-concept progress for an herbicide tolerance trait, and Biomica reported positive preclinical results for oncology and IBD programs.
- Biomica received Israeli Ministry of Health clearance in January 2022 for a first-in-human Phase I study of BMC-128 with Opdivo. This is a subsequent development, not FY2021 revenue or an approval for commercial sale.
Outlook, risks and contingencies
- Management expected available cash and investments to fund operations for at least 12 months from the report date at then-current annual expenditures. The company also said R&D and business development expenses were expected to increase in 2022, and it was discussing potential subsidiary financings and strategic investment. Future funding needs and terms remain uncertain.
- Management expects to pursue product development, commercialization and new strategic collaborations. The company has not generated royalty revenue and remains dependent on collaboration payments, future milestones, product sales and potential financing.
- Principal risks include prolonged development and regulatory timelines, failure of product candidates or commercialization, dependence on a limited number of agriculture collaborators, production scale-up and distribution challenges, competition, funding needs and potential dilution of subsidiary ownership.
- Other material exposures include Israeli shekel appreciation against the U.S. dollar, interest-rate and securities-price changes, COVID-19-related operational disruption, talent shortages and wage inflation, intellectual-property protection, cannabis regulation and reputational risk, and potential restrictions or repayment obligations associated with Israeli Innovation Authority grants. Grant-funded know-how transfers outside Israel may require prior approval and additional payments; the company reported approximately $8.6 million of IIA grants received, including accrued interest, and $4.3 million of outstanding grant liabilities.
- The company believed it was a PFIC for U.S. tax purposes in 2021 and disclosed significant risk of PFIC status in 2022. U.S. investors should assess potential tax consequences with their advisers.
Most important facts for investors to verify
- Whether the $53.9 million of cash, deposits and marketable securities and management’s stated 12-month runway remain adequate given forecast higher R&D and commercialization spending.
- Whether product sales—particularly Canonic and Lavie Bio’s Result—translate into material, recurring revenue and acceptable margins.
- Progress, financing requirements, regulatory milestones and partner commitments for Biomica’s clinical program and the other subsidiaries’ pipelines.
- Future ATM or other equity issuance, resulting dilution, and any changes in Evogene’s ownership stakes in subsidiaries.
- Actual effects of currency movements, marketable-security valuations and IIA grant restrictions or liabilities.
- The audited financial statements received an unqualified audit opinion, and the auditor also gave an unqualified opinion on internal control over financial reporting as of December 31, 2021.