Evogene Ltd. — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020; this annual filing does not provide standalone fourth-quarter results. Financial statements are prepared under IFRS and amounts below are in U.S. dollars unless stated otherwise.
Business context
Evogene is an Israeli computational biology company using its Computational Predictive Biology platform to develop products across agriculture, human health and industrial applications. Its subsidiaries and divisions are developing ag-biologicals, crop-protection chemicals, seed traits, microbiome therapeutics, medical cannabis and castor seed solutions. Most programs remain in development; castor seed sales are the exception, and the company reported no royalty revenue.
Key financial metrics
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $1.040 million | $0.753 million |
| Cost of revenue | $0.574 million | $0.334 million |
| Gross profit / gross margin | $0.466 million / 44.8% | $0.419 million / 55.6% |
| Operating expenses | $25.280 million | $21.585 million |
| Operating loss | $24.814 million | $21.166 million |
| Net loss | $26.206 million | $19.115 million |
| Loss per share | $0.83 | $0.70 |
| Net cash used in operations | $19.514 million | $17.666 million |
Revenue rose about 38%, but cost of revenue grew faster, reducing gross margin. Operating expenses increased about 17%; research and development was $17.287 million, business development $2.672 million, and general and administrative $5.321 million. Net loss widened about 37%, including $2.951 million of financing expenses, versus $0.555 million in 2019. The increase principally included a $1.944 million non-cash revaluation expense for pre-funded warrants.
At year-end, cash and cash equivalents were $46.229 million, short-term bank deposits $2.000 million, and working capital $42.147 million. Total current assets were $51.823 million and current liabilities $9.676 million. The company reported $3.694 million of long-term government-grant liabilities and $2.440 million of lease liabilities; pre-funded warrants were a $4.144 million current liability at year-end and were exercised in January 2021. Total liabilities were $15.033 million. No marketable securities remained at year-end.
Cash flows included $9.415 million provided by investing activities, largely from deposit withdrawals and securities sales, and $20.374 million provided by financing activities. The latter included $18.658 million net proceeds from ordinary-share issuance and $1.989 million from pre-funded warrants. Cash and cash equivalents increased $11.481 million during the year.
Changes versus the prior period and notable developments
- Revenue increased from $0.753 million to $1.040 million, mainly reflecting a collaboration that contributed $0.5 million in 2020. Revenue remained highly concentrated: two customers represented 48% and 17% of total revenue, respectively.
- Operating loss increased by $3.648 million. Higher R&D spending reflected third-party preclinical work for Biomica and field trials for Lavie Bio; general and administrative costs rose partly due to higher directors’ and officers’ insurance costs.
- Financing income decreased to $1.591 million from $2.630 million, while financing expenses increased to $2.951 million. Share-based compensation expense rose to $4.097 million from $1.578 million, including $3.742 million attributed to non-controlling interests.
- Cash and cash equivalents increased from $34.748 million to $46.229 million. The company issued shares in September and November 2020 for gross proceeds of $22 million. Shares outstanding increased to 35,600,088 at year-end from 25,754,297 a year earlier.
- In January and February 2021, Evogene raised $28 million gross through an at-the-market offering; it also entered a separate ATM agreement allowing sales of up to an additional $50 million, with no obligation to sell.
Outlook, commentary and risks
- Management stated that year-end cash, cash equivalents and short-term deposits, together with the $28 million raised in early 2021, were expected to fund projected cash requirements for at least 12 months. The company expects to rely on existing funds, collaborator payments and potentially further financing; continued operating losses and negative operating cash flow remain central risks.
- For 2021, management expected business-development and general and administrative expenses to remain at current levels, and expected COVID-19’s operational impact to be minimal if conditions remained at the level then prevailing. It also anticipated facility maintenance and improvement capital spending, funded from available cash.
- Development targets included an expected 2022 launch for Lavie Bio’s spring-wheat bio-stimulant and Canonic’s first cannabis product family in Israel, and an expected 2023 launch for Canonic’s Precise family. These are plans, not assured outcomes. Biomica expected to initiate a first-in-human immuno-oncology study in 2021.
- Reported 2020 progress included positive Lavie Bio field-trial results, advancement of AgPlenus herbicide candidate APH1 to the lead phase, and positive preclinical results and GMP scale-up work for Biomica’s BMC128 candidate. None establishes commercial approval or sales.
- Material risks include long and uncertain development and regulatory timelines; dependence on a limited number of collaborators and concentrated revenue; future financing needs and possible dilution; potential dilution of subsidiary ownership; intellectual-property and product-performance risks; foreign-exchange exposure to NIS appreciation; COVID-19 disruption; and Israeli grant restrictions on transferring funded know-how or manufacturing outside Israel.
- Evogene stated it believed it was a passive foreign investment company (PFIC) for U.S. tax purposes in 2020 and that there was substantial risk of PFIC status in 2021. U.S. investors may face adverse tax consequences.
- The auditor issued an unmodified opinion. Its critical audit matter concerned impairment testing of finite-lived intangible assets, carried at $16.139 million; the filing does not report an impairment charge for 2020. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not attest to internal controls.
Important facts for investors to verify
- Confirm the timing and terms of the 2021 ATM share sales, subsequent share count and remaining authorization; assess dilution against the reported cash runway.
- Review operating cash burn, funding assumptions and the path to revenue beyond R&D collaboration payments; no royalties had yet been generated.
- Check customer concentration, collaboration milestones, termination rights and the status of revenue from major customers.
- Track whether pipeline targets and launches are achieved, including required field trials, clinical studies, registrations and commercial distribution arrangements.
- Assess impairment sensitivity for Lavie Bio-related intangible assets and the assumptions underlying projected cash flows and discount rates.
- Evaluate NIS currency exposure and IIA grant repayment, approval and technology-transfer obligations; consider PFIC implications with a tax adviser if relevant.