Evogene Ltd. (NASDAQ:EVGN) Q2 2024 Earnings Call Transcript

Evogene Ltd. (NASDAQ:EVGN) Q2 2024 Earnings Call Transcript August 22, 2024

Evogene Ltd. beats earnings expectations. Reported EPS is $-0.11, expectations were $-0.12.

Operator: Welcome to Evogene’s Second Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded August 22, 2024. Before we begin, I would like to caution that this presentation contains forward-looking statements relating to future events and Evogene Ltd., the company may, from time to time, make other statements regarding our outlook or expectations for future financial or operating results and/or other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995 and other securities laws, as amended. Statements that are not statements of historical fact may be deemed to be forward-looking statements.

Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimated, intend and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers: commercialization, efforts and timing, product development and launches, estimated market sizes and milestones, pipeline as well as our capabilities and technology. 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. Readers are cautioned that certain important factors may affect the company’s actual results and could cause such results to differ materially from any forward-looking statements that may be made in this presentation.

Therefore, actual future results, performance or achievements and trends in the future 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 our control, including without limitation, the current war between Israel, Hamas and Hezbollah and any worsening of the situation in Israel, such as further mobilizations or escalation in the northern border of Israel. Those described in greater detail in Evogene’s annual report on Form 20-F and in other information, Evogene files and furnishes with the Israel Securities Authority, and the U.S. Securities and Exchange Commission, including those factors under the heading Risk Factors. Except as required by applicable securities laws, we disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statements that may be made to reflect future events or developments or changes in expectations, estimates, projections and assumptions.

The information contained herein does not constitute a prospectus or other offering documents nor does it constitute or form part of any invitation or offer to sell or any solicitation of any invitation or offer to purchase or subscribe for any securities of Evogene or the company, nor shall the information or any part of it or the fact of its distribution form the basis of or be relied on in connection with any action, contract, commitment or relating thereto or to the securities of Evogene or the company. The trademarks include herein are the property of the owners hereof and are used for reference purposes only. Such use should not be construed as an endorsement of our products or services. Now I would like to turn over the call to Ofer Haviv, President and CEO of Evogene.

Mr. Haviv, please go ahead.

Ofer Haviv: Hello, and good day, everyone. In today’s conference call, I would like to start with a review of financial and business highlights for the second quarter, continue with an overview of Evogene’s activity and conclude with the achievements of our subsidiaries that took place from the last analyst call. Following my part, I am pleased to have Casterra’s CEO, Yoash Zohar, present the Casterra’s activity, recent achievement and his view on future company growth. After that, Evogene’s CFO, Yaron Eldad, will provide a financial update of the second quarter activities. Then we will open the Q&A session. Let’s start with the financial and business highlights. In the first six months of 2024, total revenues reached approximately $5.1 million compared to $1.3 million in the first half of 2023.

We anticipate continued revenue growth in the rest of the year compared to the previous year. This is based on our expectation for Casterra to initiate the supply of seeds that fulfill existing orders, totaling over $8 million starting this month. In Q2 of 2024, total revenues reached approximately $914,000 compared to $654,000 in Q2 2023. In the first six months of 2024, loss was approximately $9.8 million compared to $14.8 million in the first half of 2023. The decline in the company’s loss continues. In Q2 2024, the loss was approximately $6 million compared to $7.8 million in Q2 2023. The projected cash usage for 2024 without Biomica and Lavie Bio did not change from our last call, and it is approximately $8 million compared to $12.5 million in 2023 and notable 36% decrease year-over-year.

We recently undertook a reverse split of our shares in the ratio of 10:1. Yaron will go into more details on this later in the call. Now I would like to highlight the main achievements made by Evogene’s subsidiaries this quarter, starting with Casterra. Casterra received an additional purchase order from an existing customer valued at approximately $440,000 to supply castor seeds to a new African country. The company successfully completed its castor seed growing and harvesting season in Brazil, with seed planned to be shipped during the third quarter of 2024. The castor seeds produced in 2024 in both Brazilian and African territories are expected to enable Casterra to meet all its existing orders amounting to approximately $8.4 million. Moving on to Biomica.

The company’s preliminary Phase 1 trial results showed a promising trend for BMC128 when combined with nivolumab, in treating patients with refractory renal cell carcinoma, non-small cell lung cancer and melanoma. The data indicated potential efficacy and safety, marking a crucial step forward in the development of this microbiome-based therapeutic. These results were presented at the ASCO 2024 Annual Meeting in May this year. Now to Lavie Bio. ICL and Lavie Bio achieved a significant milestone in the collaboration for developing yield-increasing biostimulants for row crops under extreme weather conditions by leveraging AI, Lavie Bio identified over dozen novel microbial candidates within 12 months, utilizing its BDD technology platform. The company announced the commercial expansion of its bio-inoculant product Yalos to winter wheat following the successful trial.

I will provide more detail on the achievement of each subsidiary later in the presentation. Moving on to the review of Evogene. In our vision, we see Evogene as pioneering company for creating groundbreaking life science products rooted in microbes, small molecules and genomics to improve life, quality and longevity. To achieve this vision, we focused on merging life science knowledge with dedicated big data and cutting-edge computational technologies. This concept supported the creation of our following three AI tech-engines which provide effective discovery and optimization of life science products. MicroBoost AI, directed and accelerate the development of micro-based products, ChemPass AI for small molecule-based products and GeneRator AI for products based on genetic elements.

The value proposition of our AI-driven tech-engines stem from the efficient finding and optimization of the most promising candidates, therefore, increasing the probability of successfully reaching a breakthrough product within competitive timeframe and in cost-efficient manner. Our three AI tech-engines were structured to be compatible with the tremendous potential of various market segments, not limited to only one specific segment. Each tech-engine is at the center of potential development of many product types, addressing the needs of different life science industries. Although this technology holds enormous potential, each market segment requires specific expertise for its product development and, of course, financial resources and advanced development and production infrastructure.

So how do we capture the value inherent in our technology. Our business strategy is targeting maximum potential with minimum risk. To capture the value of our AI tech-engines, we aim to establish diverse collaborative partnership for life science product development. The partner we collaborate with are expert in specific field that complement our technology. We adopted this approach to maximize the potential of our tech engines while aiming to reduce financial and development risk. This is a current snapshot of the status of our business model with Evogene owning four subsidiary companies, and in additional market segments not covered by our subsidiaries, we have collaborations with leading companies, all working on developing innovative life science products.

I’m very proud of our achievement to date, reflected by the growing list of commercial and financial partners, the Evogene group is engaged with. Since the beginning of 2024, Lavie Bio announced partnering with two additional world-leading ag companies, Syngenta and Bayer. Casterra disclosed its engagement with ENI, a world-leading oil and gas company. AgPlenus announced partnering with Bayer and Evogene itself established together with the Kitchen Hub, Finally Foods, a new company focused on protein production in plant. Moving on to our subsidiaries achievement. I would like to start with Casterra. Evogene’s fully owned subsidiary, which focus on developing an integrated solution to enable large-scale commercial cultivation of castor, benefiting from its unique elite seed varieties.

Casterra’s solutions aim to address the global demand for stable castor oil supply mainly for the biodiesel industry. The company is utilizing GeneRator AI tech engine to direct and accelerate the development of its unique elite castor seed varieties. On June 25, Casterra announced receiving a $440,000 purchase order to supply castor seed to a new African country. This order from an existing customer, expand Casterra operations and strengthen its position in the biofuel market. The order is expected to be supplied in 2024. On July 31, Casterra announced the successful completion of its castor seed growing and harvesting season in Brazil, with shipments planned to be initiated from the third quarter of 2024. Additionally, the castor harvest season in Africa has begun as scheduled.

As stated earlier, the castor seeds produced in 2024 in both Brazilian and African territories are expected to enable Casterra to meet all its existing orders amounting to approximately $8.4 million, which we anticipate completing by the end of this year. Later, we will hear from Yoash Zohar, Casterra’s CEO more about Casterra and its trajectory. Continuing with Lavie Bio a global leader in developing next-generation ag-biological products utilizing Evogene’s MicroBoost AI. On July 2, Lavie Bio announced the commercial expansion of its bio-inoculant Yalos to winter wheat following successful trial with sales starting across the U.S. for the ’24-’25 season effectively doubling its market potential. On July 17, ICL and Lavie Bio announced a significant milestone in developing biostimulant solution for row crops facing extreme weather conditions.

By leveraging AI to identify over a dozen novel microbes within 12 months using Lavie Bio’s proprietary BDD technology platform. I’m happy to share that Lavie Bio’s pipeline is advancing according to plan with field trials initiated in Q2 in most of the company programs following successful optimization process. Results are expected during Q4. Now to Biomica, which specializes in developing microbiome-based therapeutics for human health utilizing Evogene’s MicroBoost AI tech-engine. On May ’23, Biomica announced promising preliminary results for its ongoing Phase 1 clinical trial of the microbiome-based therapeutics, BMC128, in combination with nivolumab for treating non-small cell lung cancer, melanoma and refractory renal cell carcinoma. The trial includes 11 patients who had experienced disease progression despite prior immunotherapy treatments.

The initial funding suggested potential benefit for patients with advanced stages of these diseases. Those results represented some of the first positive evidence emerging from the field of cancer therapies that leverage gut microbiota. These results were presented at the prestigious ASCO Annual Meeting in June this year. In May, Biomica presented preclinical results of its IBS program from the research collaboration with New York University at a prestigious DDW conference. Further clinical data from the Phase 1 cancer study will become available and analyzed through the next few months to gain a deeper understanding of the therapeutic potential of BMC128, in combination with nivolumab in cancer treatment. We look forward to continue the evaluation of BMC128 beneficial activity in future of clinical development.

I’m pleased to pass the presentation to Yoash Zohar, Casterra’s CEO, to present Casterra activity, recent achievements and his view on future company growth.

Yoash Zohar: Hello and good day. I’m pleased to participate in Evogene’s quarterly analyst call and share with you my perspective on Casterra, which I joined at the beginning of this year. Casterra’s vision is to establish itself as a leading provider of sustainable veg oil feedstock for the global bio-based industries. We are particularly focused on contributing to the biofuel sector where the demand for renewable and sustainable resources is rapidly increasing. Our mission aligns with this vision by offering an integrated ag solution to grow commercial scale castor efficiently and sustainability combining our elite castor seed varieties with advanced cultivation techniques. It’s important to emphasize that castor oil is used for a variety of bio-based products and in the last years, there is a growing interest in castor oil as a potential major feedstock for biofuels.

Next slide. The castor oil value chain begins with the development of elite castor seed varieties, targeting high yield, high oil content and resistant to abiotic stresses to allow cultivation in marginal and/or semi-arid soils. Next step is the seed production targeting replication of the elite seed varieties performance with high germination rates and other important rates. Now we move to commercial scale cultivation of the castor seeds, to produce high-quality grains. In this phase, professional growing protocols are crucial to capture maximum value from the castor plant. Using mechanized harvesting and other agricultural machinery such as dehulling machines can ensure maximum yield and efficiency with minimum cost and losses. The grain is then shipped to the oil extraction facility with two main products: Castor oil and castor cake.

The cake is a nitrogen rich organic fertilizer obtained as a solid residue from the processing of grains for castor oil. The castor oil can be now used as feedstock for biofuel or other bio-based industrial products. The global castor oil market is projected to reach $1.68 billion by 2028. This growth is driven by increasing demand in bio-based industries particularly for sustainable and renewable resources. As we look at the global supply chain for castor oil, we see significant challenges. Most of the castor oil supply is currently coming from India, where traditional cultivation methods are still prevalent. Castor is grown their primarily as a tall shrub and the harvesting process is done manually, which significantly limits scalability.

The traditional methods used in these regions result in low yields. These factors contribute to a supply chain that will not keep up with the expected rapid increase in global demand for castor oil, particularly as industry seeks sustainable bio-based resources. Addressing these challenges is critical to ensuring a sustainable and scalable supply of castor oil in the future. In response to the challenges in the traditional castor supply chain, Casterra has developed a comprehensive integrated agricultural solution. Our approach includes the development of proprietary elite castor seed varieties that are specifically bread for higher yield and better adaptability to various growing conditions. These elite seeds are supported by advanced agrotechnical practices including growing protocols and mechanized harvesting and dehulling, ensuring cultivation methods that are optimized for large-scale castor grain production directly addressing the limitations of manual harvesting methods.

Casterra’s integrated solution is not just about increasing production. It’s about ensuring a stable and reliable supply chain of castor oil globally as demand for bio-based products continues to grow, our solution positions us to be a leading supplier in this essential market. Next slide. So after we reviewed the castor market value chain, challenges and Casterra’s offering, I would like to highlight several points. Casterra operates within the rapidly growing castor oil market, which is increasingly recognized as a sustainable energy source that can help reduce the reliance on fossil fuels. This global market and its derivatives are projected to reach over $1.6 billion by 2028, with a compound annual growth rate of 4.3%. This presents a significant opportunity for Casterra to capitalize on.

At the core of Casterra’s operations is our unique technology platform, which enables us to develop elite castor seed varieties with superior traits tailored for high performance in diverse agricultural environments. Casterra’s value proposition offers an integrated agricultural solution that includes elite castor varieties, extends to the entire farming process on growing protocols to mechanized harvesting and dehulling a solution that ensures efficiency and scalability. Casterra formed an alliance with ENI, a leading global oil and gas company and is proud to support ENI’s initiatives in the biofuel sector. This partnership underscores the strategic importance of castor oil as a sustainable energy resource and aligned with the global effort to transition to renewable energy sources.

Casterra’s portfolio includes proprietary castor seed varieties such as EVF716, EVF712 and EVF701, which have been bred for improved trades and are suitable for commercial scale cultivation. These varieties represent the culmination of our scientific and technological efforts, offering farmers reliable and high-yield option for large-scale production. In summary, Casterra’s involvement in the castor oil value chain is comprehensive from seed to grain. Our efforts are aligned with market trends and demand, ensuring that we contribute significantly to the global castor oil supply while driving innovation and sustainability in the industry. Next slide. I would like to highlight some of Casterra’s key commercial achievements, underscoring its significant economic impact.

As previously announced in 2023, we secured our first major order from ENI, a global leader in the oil and gas industry, amounting to over USD 11 million. This represents a pivotal milestone in our journey. While our initial plan was to fulfill these orders in 2023, unforeseen challenges in seed production caused delays resulting in only a partial supply within the year. Next slide. Since the beginning of 2024, Casterra has been dedicated to expanding and stabilizing its seed production infrastructure, which is primarily supported by a network of seed growing subcontractors. In the first half of the year, we announced an expansion in both the number of seed growers we collaborate with and the geographical locations of our operations. We are now active in both Brazil and Africa, covering over 900 hectares.

We believe we are on course to fulfill all remaining orders by the end of the year and have already begun addressing our growing backlog for 2025. Additionally, in 2024, we secured a further seed order, which we expect to deliver within this year. Next slide. I’m proud to announce the successful completion of our castor seed harvesting season in Brazil with over 130 tons of high-quality seeds now ready for shipment from one of our trusted seed growers. This milestone reflects the effectiveness of our agricultural practices and the dedication of our team on the ground. These seeds will primarily support our valued customers in Africa, driving sustainable agriculture and innovation. Simultaneously, we have also commenced the castor harvesting season in Africa.

Combined, the seeds from these two regions are expected to fulfill an $8.4 million in order, received in 2023 and in 2024. The successful harvest are a testament to our strategic planning and execution capabilities. They also highlight Casterra’s ongoing commitment to delivering value to our customers for dependable supply chains and superior products. We take great pride in this accomplishment and look forward to maintaining this momentum as we progress further into 2025. Next slide. I’m pleased to inform you that we have initiated discussions with our customers to assess their seed requirements for the 2025 growing season and beyond. We anticipate that by the next quarter, we will be able to provide a comprehensive sales forecast for 2025.

Additionally, we are increasingly encountering large castor oil consumers who are interested in expanding the use of the oil, but prefer not to participate in castor grain cultivation or oil production themselves. Instead, they are interested in directly purchasing castor oil. Consequently, we have begun to explore the economic implications of expanding our operation in the value chain to castor oil production, where Casterra would take the lead in grain production and collaborate with established oil producers. I look forward to updating you on this matter should we make any progress. In closing, I am honored to serve as the CEO of Casterra, a company with a promising future and significant economic potential. Thank you very much. Evogene’s CFO, Yaron will now take the lead.

Yaron Eldad: As of June 30, 2024, Evogene held consolidated cash, cash equivalents and short-term bank deposits of approximately $20.9 million. This amount does not include $8.4 million of expected payments for the open purchase orders of Casterra. The consolidated cash usage during the second quarter of 2024 was approximately $5.7 million. Excluding Lavie Bio and Biomica, Evogene and its other subsidiaries used approximately $2.7 million in cash. Projected cash usage for 2024, excluding Lavie Bio and Biomica is expected to be around $8 million, marking a notable 36% decrease from approximately $12.5 million in 2023. Revenues for the first half of 2024 were approximately $5.1 million, a significant increase from $1.3 million in the same period the previous year.

This growth was primarily driven by revenues recognized from Lavie Bio’s licensing agreement with Corteva and AgPlenus new collaboration with Bayer. Revenues for the second quarter of 2024 were approximately $900,000 compared to $700,000 in the same period the previous year. The increase was mainly attributable to increased revenues in Lavie Bio. Evogene anticipates continued revenue growth in the second half of 2024 compared to the previous year, mainly based on Casterra’s forecast for seed order supply. R&D expenses, net of nonrefundable grants for the first half of 2024, were approximately $8.8 million, a decrease from $10.2 million in the first half of 2023. The decrease in expenses is mainly due to the cease of economic activities and a decrease in certain development expenses in Biomica as compared to the same period in the previous year.

Research and development expenses net of nonrefundable grants for the second quarter of 2023 — sorry 2024, were approximately $4 million and decreased significantly as compared to approximately $5.4 million in the same period in the previous year. The decrease is mainly attributable to decreased expenses in Canonic and Biomica, as mentioned above. Sales and marketing expenses for the first half of 2024, were approximately $1.9 million, a slight increase from approximately $1.7 million in the same period in the previous year. The increase is mainly attributable to increased sales and marketing activities in Casterra during the first half of 2024 as compared to the same period in 2023. Sales and marketing expenses for the second quarter of 2024 were approximately $0.9 million and remained stable as compared to approximately $0.9 million in the same period in the previous year.

General and administrative expenses for the first half of 2024 decreased slightly to approximately $3.2 million from approximately $3.3 million in the same period last year. General and administrative expenses for the second quarter of 2024, decreased to approximately $1.5 million compared to approximately $1.8 million in the same period of the previous year, mainly due to decreased noncash compensation and salary-related expenses in Lavie Bio and Biomica, respectively, in the second quarter of 2024. Other expenses, the decision to cease Canonic’s operations in the first half of 2024, resulted in other expenses of approximately $0.5 million, mainly due to impairment of fixed assets in the first quarter of 2024. The operating loss for the first half of 2024 was approximately $10.2 million, a significant decrease from approximately $14.7 million in the same period of the previous year, mainly due to increased revenues, as mentioned above.

The operating loss for the second quarter of 2024 was approximately $6.1 million, a decrease from $7.9 million in the same period of the previous year, mainly due to decreased operating expenses as mentioned above. Financing income net for the first half of 2024 was $379,000 compared to financing expenses net of $86,000 in the same period of the previous year. This increase was primarily due to increased interest income and a revaluation of the convertible SAFE. Financing income net for the second quarter of 2024 was $138,000 compared to financing income net of $144,000 in the same period of the previous year. The net loss for the first half of 2024 was approximately $9.8 million compared to approximately $14.8 million in the same period last year.

The $5 million decrease in net loss was primarily due to increased revenues, decreased operating expenses, partially offset by the onetime $0.5 million of the other expenses related to ceasing Canonic’s operation and an increase in financial income. The net loss for the second quarter of 2024 was approximately $6 million compared to approximately $7.8 million in the same period last year. The $1.8 million decrease in net loss was primarily due to decreased operating expenses as mentioned above. Operator?

Operator: [Operator Instructions] The first question is from Ben. In your prepared remarks, you noted Casterra is positioning to fulfill its growing backlog for 2025. What is the current 2025 backlog. And if Casterra evolves from seed production to oil production, would this be based in Africa or Brazil. If in Brazil, can soy crush facilities be used for grain processing?

Q&A Session

Ofer Haviv: Hi Ben, this is Ofer. It’s great to have you with us. I will address the first question, and Yoash sitting next to me, will address the second one. So as Yoash mentioned, yes, we — Casterra started to work on its backlog for 2025. But as he also mentioned, we believe that we will be able to disclose numbers only at the next analyst call. And probably we will do so. So I feel — and we feel that currently, it’s a little bit too early. But yes, we feel quite positive about next year production and sales. With respect to second question, I would like — I will ask Yoash, to take the lead on. I just want to emphasize that we don’t have any attention to leave the seed business even if we decided in the future. Again, it’s still under evaluation, even if we decided to move to the oil production. So the seed production will always be the basic activity for the company and the oil production could be in addition. Yoash?

Yoash Zohar: Yes, Ben, regarding your question, we are currently evaluating both locations in Africa and in Brazil. I can’t say yet — can’t say, which one will be chosen. In regarding to using soy crushing facilities to do castor, technically, it’s possible. I mean you’re talking about the same machinery. There are other issues. I’m not sure whether soy crushers will be incentivized enough of the castor. But currently, there is overcapacity of castor crushing in Brazil. We’ve talked to a couple of crushers, at least for the initial stages of such operation, there’s no problem where to crush the oil. The operation will grow somewhat then we’d love to find other solutions.

Operator: The next question from [Steven Goldman]. Can you provide an update on AgPlenus?

Ofer Haviv: Hi Steven, this is Ofer. Next to me, Dan Gelvan, the CEO of AgPlenus is sitting, and he will address this question. But in high level, the reason we put specific information about AgPlenus is mainly because there was no press releases coming from AgPlenus this quarter, and we prefer to focus only on significant milestones in my report. But then, yes, we can give some update on the AgPlenus activity. Dan, can you take it?

Dan Jacob Gelvan: Yes. Thank you very much, and thank you for the question. We are very busy at AgPlenus since we announced that we had entered collaborative agreement with Bayer. Essentially, our entire pipeline has been partnered. We have a couple of projects going with Corteva and one with Bayer. We are very limited in giving updates about these unless we hit a milestone, which we did with Corteva and one of them where we declared inactive, which was also in the first quarter. So right now, we have not been able to release any data. We are happy with the progress of these programs, and we believe our partners are also happy. In parallel, we are now starting to build a new pipeline. Again, they’d be partners when we can. Our focus is right now on fungicides.

We are very, very excited about what we are doing. We thought we’ll be able to have some press releases and something more to share about these programs. We’re going after some of the biggest fungi diseases whether it’s the rusts or the blotches or the blasts or the smuts, we are working on these. So I would say the work on this are focused on generating new candidates and finding new partners for these candidates. So I hope that next quarter, we’ll be able to give something more detail whether about the collaborations or our own pipeline.

Operator: The next question is from Scott Henry of AGP. Could you talk about the trajectory of the Casterra castor seed launch in 2H ’24, timing of revenue realization. And what is the current capacity of castor seed production in 2024? And how could that change in 2025. And what is the current gross margin profile of Casterra and where could it go with higher scale? And with regard to the Yalos launch, when should we expect a material revenue contribution. How should we think about the launch curve for the product?

Ofer Haviv: Hi Scott, this is Ofer. I will try to address maybe the first question. The other two questions I will ask Yoash to go. And we also have with me with us here, Amit, Lavie Bio, CEO, so he will help me with the last question. With respect to revenue recognition, so our target is to be able to transfer all the existing purchase order we had from 2023 and from 2024 hopefully until the end of this year. So I hope that we will be able to recognize most of the amount, meaning the $8.4 billion during the second half of 2024. I think that we already mentioned that we already are in the process to start to shift seeds from Brazil to our partners in Africa. And it will be even much easier when we start to finish the harvesting season in Africa, it will be in a few months because the sowing was in a different time slot.

And because then shipping it from Kenya to other territory in Africa it will be much easier. So as I said, bottom line, we hope and target ourselves to be able to deliver all the seeds during the second half of 2024. There could be small delays, but at least this is our intention. With respect to the second question is what is the current capacity for castor seed production in 2024 and how could it change in 2025? I will ask Yoash to address this question.

Yoash Zohar: So the current capacity for 2024 is that we are actually growing a bit over 1,000 hectares together in Brazil and Africa. We expect at the bare minimum, at least 800 tons of seeds and possibly significantly more than that. For 2025, we can easily continue and do the same quantity, but we also poised to increase and even double if it will be required.

Ofer Haviv: I think the good news coming from Casterra in 2024 is that thanks to the activity of the company, I don’t think that seed production is a limitation on the company. And I think that now we are more focusing on the quality, the pricing, et cetera, et cetera. So it’s really a very, very step forward in the company’s progress. With respect to the third question, what is the current gross margin profile for Casterra and where could it go with higher scale. So I can’t get into the numbers, but at least to our calculation with respect to seed sales, probably, this is the area with the highest margin. Usually, this is the situation in the ag industry. With respect to — but there is also a very, very nice gross margin according to our calculation in case of oil production.

But this is still, as I mentioned, it’s under evaluation. And of course, if we decided to move forward into this direction, we won’t jump with a significant investment. We will do it step by step to assure that we — our projection became reality. The margin in — with respect to seed is quite high and the main reasons because please remember that we invest in the last 10, 15 years, lots of money in achieving the quality of variety — castor variety we have today. And in a way, this gross margin compensates us on the long-time investment bring us to where we are today. Moving to the last question with regard to the Yalos launch, when should we expect a material revenue contribution? How should we think about the launch curve for the product?

So I will ask Amit to take the lead on this question, Amit?

Amit Noam: Thanks for the question. So just a bit about where we are in the Yalos launch. So we launched Yalos in Canada this year. And we were able to line up a few significant retailers, and it’s an adoption market. So we were able to have retailers start selling and start engaging farmers. Our plan is for this year, we did additional field trials for more significant crops. So our focus is to move from wheat to barley to soybean and canola. We see the biggest potential of Yalos in soybean and canola. And if we see the positive results we expect by the end of this year, next year, we will already be ready to launch these products — the product for soybean and canola in North America. And the curve that we expect to see is next year will be the adoption of the early adopters in soybean and canola and by 2026, we’re supposed to see a material growth in sales for Yalos.

Yaron Eldad: Thank you, Amit.

Operator: The next question from [Steven Goldman]. Assuming the $8.4 million in castor seeds are received by Q4 by Casterra. What do you expect Evogene’s cash position will be by the end of 2024.

Yaron Eldad: Hi Steven, this is Yaron. Thanks for the question. Assuming the $8.4 million of cost of seeds are received by the end of the year, we expect our cash position to be somewhere around $18 million to $19 million. I assume that not all the cash will be received by the end of the year. So the cash position plus receivables from the Casterra sales together will be somewhere around $18 million to $19 million by the end of the year.

Operator: There are no further questions at this time. Mr. Haviv, would you like to make your concluding statement?

Ofer Haviv: Yes. Thank you all for your participating today. We look forward to our next meeting in the coming quarter. Wishing you all a great day ahead. Thank you.

Operator: Thank you. This concludes Evogene’s second quarter 2024 results investor webinar. Thank you for your participation. You may go ahead and disconnect.