Evogene Ltd. (EVGN) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to Evogene's Second Quarter 2021 results conference call. [Operator Instructions] As a reminder, this conference is being recorded August 11, 2021. 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, risks and uncertainties regarding business strategy, operations and future performance and results of Evogene. I encourage you to review Evogene's filings with the U.S. Securities and Exchange Commission and read the note regarding forward-looking statements in today's earnings release, which states that statements made in the earnings release and in a similar way, on this earnings conference call that are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For example, Evogene is using forward-looking statements in this call when it discusses its expected paths to value creation and its belief that turning one or more of its subsidiaries into public companies will be beneficial to its shareholders. Evogene and its subsidiaries' expected trial studies, product advancement, commercialization, launches, pipeline, milestones, potential collaboration, cash usage and other plans for 2021 and 2022, the potential advantages of its technology and its anticipated entry into new fields of activity. All forward-looking statements made herein speak only as of the date of the announcement of results. Many of the factors that impact whether forward-looking statements will come true are beyond the control of Evogene and may cause actual results to differ materially from anticipated results. Evogene is under no obligation to update publicly or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as otherwise required by law. We expressly disclaim any obligation to do so. 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. That said, I would now like to turn the call over to Ofer Haviv, Evogene's CEO. Ofer, please go ahead.

Thank you, and good day everyone. We appreciate your joining us today for our second quarter 2021 conference call. Joining me today are Ms. Sarit Firon, Evogene's new Chairperson; and Ms. Dorit Kreiner, our CFO. Sarit will start the conference call with a short introduction and provide her vision of the Evogene Group. I will then discuss our plan for unlocking the value of our subsidiaries and provide an overview of our recent achievements. Dorit will summarize Evogene's financial results for the second quarter and first half of 2021. We will then open the call for your questions. Before I hand over to Sarit, our new Chairperson, I would like to address Martin Gerstel, our former Chairman. As you know, in June this year, after 2 decades of chairing Evogene since our founding, Martin felt he should take a well-deserved retirement from Evogene. I would like to take this opportunity to thank Martin wholeheartedly for his constant leadership and vision as our chairperson and his ongoing invaluable contribution to Evogene's development. And on a personal note, I would also like to thank him for his guidance and support of me in the role of a CEO. I would like to welcome Sarit as Evogene's new Chairperson. Sarit has been a highly effective member of our Board since 2016 and knows Evogene and its subsidiaries very well, which will ensure a smooth transition into her new role as Chairperson of the Board. Sarit brings to Evogene more than 27 years of global investment and operational experience across Silicon Valley, New York and Tel Aviv. She is one of Israel's most accomplished investors and is well known for helping to build companies from their early stage to successful IPOs and acquisitions. Sarit currently serves as the managing partner of the Team8 Group and managing partner of the Team8 Capital, the investment arm of the group. She's held numerous operational and leadership roles, serving as Chairperson and Board member, CEO and CFO at prominent hi-tech companies. I cannot think of anyone better suited to assume the role of a chairperson at the present time, and I'm truly excited that she has agreed to this role. On behalf of all the management, employees and investors in Evogene, I would like to wish her much success. Sarit, please.

Thank you, Ofer, for your warm introduction. It's an honor to have the opportunity to lead Evogene as its new Chairperson. Evogene is an extraordinary company with highly differentiated predictive discovery and development capabilities and an impressive product pipeline through its subsidiaries. I look forward to working with my fellow directors, Ofer and the entire senior management team. Together, we will take Evogene and its subsidiaries to the next level in value creation and subsequently, gain recognition by the capital market. I would like to join Ofer in thanking Martin for his significant contribution made to Evogene since its inception. Martin should be extremely proud of Evogene's journey from its establishment to where we are today as one of the key leaders that build the foundation for a promising future ahead. Our vision is to change the way life science companies are developing their products to substantially increase the probability of success. And at the same time, reducing the time and cost of life science product development. To execute this vision, our strategy is to focus on utilizing the most advanced computational biology we developed. Over the last 2 decades, Evogene has developed a unique computational predictive biology platform at an investment of tens of millions of dollars incorporating the scientific understanding, together with big data and artificial intelligence. We then established subsidiaries who have developed strong product pipelines very rapidly by utilizing this advanced technology. And now our subsidiaries are reaching a level of maturity, where their underlying value is becoming apparent. As Ofer stated in his introduction, throughout my career, I've taken companies to the next level by realizing their value potential through IPO, acquisitions or other financial transactions. I'm excited to bring this experience to Evogene and its subsidiaries to help in unlocking the inherent value in each individual subsidiary. We will ensure that each subsidiary is focused on its key strengths that will enable it to realize its unique value. Ofer will elaborate on our strategy later in the call. So now I would like to hand it over to Ofer, and I look forward to continuing updating you about our progress and achievements in the future. Ofer, back to you.

Thank you, Sarit. My remarks in today's call will focus on our strategy for unlocking the value created within the Evogene subsidiaries for the benefit of Evogene's shareholders. In addition, I will describe the major achievements of our subsidiaries over the past 6 months and an outlook for their continued operations this year. To set the common ground for our discussion, I would like to recap the main topics I covered in our previous quarter's call. First, our broadly applicable computational predictive biology platform, the CPB and the 3 tech engines relying on this platform, MicroBoost AI, ChemPass AI and GeneRator AI. As stated many times, we believe this technology engine provides a significant competitive advantage in the discovery and development of life science-based products in multiple industries. Second, our proven ability to create subsidiaries in multiple life science-based fields by utilizing the CPB platform and the 3 tech engines with each subsidiary demonstrating its ability to rapidly discover and develop very promising product pipelines. Lastly, I stated our intention is to continue to initiate new activities in additional life science-based fields. Moving now to what I would like to focus on today that is how do we intend to provide financial benefits to the Evogene shareholders in the near term for our subsidiaries. Our starting point is that each of our subsidiaries contains substantial internal value that is created through its rapidly developing pipeline and through the use of Evogene's unique technology. I would like to elaborate. As you know, investing in innovative life-science based companies, such as those within the Evogene group, presents both financial advantage and risks for investors. The primary advantage is that, in general, if successful, innovative life sciences based products can be very profitable. In addition and very importantly for investors, innovative companies with promising life science based products in their pipeline as Evogene's subsidiaries can have a significant market value long before their products are actually commercialized. On the other hand, the primary risk in advancing in innovative life science-based companies is that such products typically have very high failure rates. Furthermore, those that are successful generally take a relatively long time to be commercialized. We believe that Evogene's unique technology that is available to each of our subsidiaries for their field of focus provide a substantial advantage with respect to dealing with those challenges of high failure rates and time to market as demonstrated in our subsidiaries' discovery and early development pipeline. So if our subsidiaries enjoyed the benefit of their rapidly developing pipeline. And their utilization of Evogene's technology is expected to reduce time to market and increase probability of success. Why isn't our subsidiaries' potential fully reflected in Evogene's market value? We think that Evogene Group's current structure of a public company with a variety of privately held subsidiaries operating in different fields of activities create difficulty for the capital market to properly value each subsidiary. Therefore, we believe that if our individual subsidiaries were valued separately, it would result in a far greater combined market value for the Evogene Group. Based on these assumptions, our general strategy for unlocking the value of our subsidiaries for the benefit of Evogene's shareholders is to facilitate an independent valuation of each of our subsidiaries, regardless of Evogene or the other subsidiaries, and we are currently exploring ways to achieve this target. We believe that one way to achieve this in a manner that will be beneficial to our shareholders is to turn one or more of our subsidiaries into public companies that will trade independently of Evogene. In this regard, among the paths that we are exploring is a distribution of a portion of Evogene's holding in one or more of those subsidiaries to our shareholders. Of course, the decision if, when and how to spin off a subsidiary company will depend on many considerations, including market conditions, the subsidiary financial needs, pipeline maturity, valuation, applicable regulations, et cetera. However, as stated, our current intent is to facilitate an independent valuation of each of our subsidiaries in the near term and to do so in a manner that provides financial benefit to the Evogene's shareholders. We look forward to providing additional information regarding the implementation of this very exciting strategy. I would now like to move on to an overview of our recent achievements. I am pleased to report that both Evogene and our subsidiaries have been progressing, and I would like to highlight the following activities and advancements, all made in the first half of 2021 and what can be expected for the second half of 2021. We will start with Biomica, focusing on the development of drugs based on the human microbiome, utilizing Evogene's MicroBoost AI tech engine. In the first half of 2021, Biomica has continued to advance preparations for the initiation of its first-in-man proof-of-concept study in the immuno-oncology program and continued with its pre-clinical program for gastric disorders. Two important announcements have been released by Biomica during the first half of the year. In Q1, Biomica released impressive correct clinical data for its rationally designed microbiome therapeutics candidate, BMC128, in immuno-oncology. BMC128 in combination with immuno checkpoint inhibitors, ICI, in breast cancer mouse model demonstrated pronounced antitumor activity as manifested in an increase of almost 50% in objective response rate in comparison to ICI alone. In Q2, Biomica reported that BMC128 has significantly increased antitumor activity in combination with ICI, but this time in melanoma. These positive preclinical results could indicate the potential of BMC128 to become best-in-class in the treatment of various types of solid cancer tumors and support the validation of Biomica conceptual based drug design approach. As for the second half of 2021, Biomica expects to initiate its first in human proof-of-concept clinical trials in Israel later this year in its immuno-oncology program. As preparation for this milestone, Biomica initiated the scale-up processes and moved to GMP production of its drug candidates as well as submitted the relevant documents for the regulatory approval. We also expect to receive preclinical results for the IBD program. Let's move to the second company in the field of human health, Canonic. Canonic's vision is to become the world leader in developing and commercializing effective, precise and stable medical cannabis products based on novel cannabis varieties. To achieve this vision, Canonic utilized Evogene's GeneRator AI tech engine. With eyes on the global market, the company is making its first steps in the Israeli market with impressive progress, indicating big potential. In the first half of this year, Canonic invested significant resources to establish its production and marketing infrastructure in preparation for product launch in Israel in 2022 as planned. Two important announcements have been released by Canonic during the first half of the year. The first was signing production and distribution agreement in anticipation for commercialization of its first product in the MetaYield program in 2022. The second was announcing an agreement for joint development of novel medical cannabis products with Cannbit-Tikum Olam. This is part of Canonic's precise product program. During the second half of 2021, Canonic will continue with the preparations towards selection and commercialization of its first generation MetaYield premium products and will focus its research and development efforts on next-generation MetaYield varieties. In addition, Canonic expects to achieve its milestone for the precise product program and identify lines that exhibit distinct effects in model systems for reducing pain or inflammation. Now I will move to AgPlenus, our subsidiary in the Ag industry segment. AgPlenus mission is to develop and commercialize novel and safe crop protection products to control pests and produce higher yields, supporting the growing demand for high-quality foods. To achieve this vision, AgPlenus utilized Evogene's ChemPass AI tech engine. During the first half of 2021, AgPlenus focused on 2 important activities, making considerable progress in its collaboration with Corteva to develop novel herbicides and continuing to develop and test additional compounds in its internal herbicide program. AgPlenus recently announced it achieved positive results in a proof-of-concept experiment, developing resistance trait for herbicide candidates targeting APTH1, AgPlenus Target Herbicide 1. Its leading novel mode of action for herbicides in its internal program. This POC demonstrates the ability to generate resistance traits in target crops to herbicide targeting the new mode of action APTH1. This is a significant milestone as a resistant trait enables farmers to kill weeds without damaging the commercial crop. In the second half of 2021, AgPlenus will focus on 3 main targets: advancing its strategic collaboration with Corteva, expanding its product pipeline with the aim of reaching the lead phase for an additional candidate targeting APTH1 and lastly, advancing commercialization effort for APTH1. Our second subsidiary in the ag industry in Lavie Bio. Lavie Bio's mission is to improve food quality, sustainability and agricultural productivity through microbiome based Ag biological technology and products. To achieve this mission, Lavie Bio utilized Evogene's MicroBoost AI tech engine. The main focus of the company in the first half of 2021 has been on advancing its product pipeline. And the core of its activity is the LAV211, bio-stimulant for spring wheat as the first target crop. And LAV311, 312 biofungicide for grapes at its first target crop. Our lead biostimulant LAV211 is expected to be launched in 2022. Commercial trials are continuing, and there has been further advancements of the formulation and product readiness. As part of the company's preparation for commercialization, it's commercial team expanded with the appointment of VP commercial, building the path to market in North America, the initial target market for our biostimulants. For the next 6 months, Lavie Bio will continue to prepare for the expected lead biostimulant LAV211 commercial launch in 2022, which we anticipate will include an agreement with a potential distribution partner. In relation to our lead biofungicide LAV311, 312, we are advancing an additional season of multi-location field trial in Europe and the U.S., which are focused on advanced validation of an optimized and improved generation or formulation. In addition, trials for expanding the use of the bio-fungicide into additional potential and lucrative crops are being conducted. With respect to LAV311, 312, our lead bio-fungicide, we expect to finalize the formulation protocol and initiate data generation for regulation filing in 2022. Last but not least, is our seed traits division. It aims to develop high-quality food based on improved seed with high commercial value, leveraging computational genomic and biology. To achieve its target, the division utilizes GeneRator AI tech engine. In the first half of 2021, the purpose of the seed traits division was on developing a technology for seed improvement using genome editing technologies, enabling deletion or modification of specific genomic origins in the crops genome without inserting foreign DNA to the plant. During this period, the seed traits division completed the establishment of the first version of the computational and biological genome editing platform for the utilization of CRISPR technology in different crops, currently focusing on soybean and tomato. In the frame of the division's genome editing activity, Evogene participates in the CRISPR-IL consortium with Dr. Eyal Emmanuel, Evogene's VP New Directions, serving as the president of the consortium. We were very pleased to announce at the beginning of the 2021, the completion by this consortium of the first version of the artificial intelligence-driven platform for genome editing. During the second half of the year, the seed traits division aims to leverage the CRISPR technology for the development of disease tolerant and high-quality trait in soybean and tomato lines. Another important project, the division is involved in targets improving its carbon assimilation by plants, reducing carbon pollution, which aims to slow the damage of the global warming. In this project, which is funded by the European Horizon 2020 Program, our seed division collaborates with world-leading academic institutions, such as Max Planck, the Weizmann Institute and the Imperial College London. With that, I would now like to turn the call over to Dorit Kreiner, our CFO. Dorit?

Thank you, Ofer. I will begin by reviewing our cash balance. Evogene continues to maintain a strong financial position for its activities with approximately $65.4 million in consolidated cash, cash-related accounts, bank deposits and marketable securities as of June 30, 2021. Approximately $10.6 million of Evogene's consolidated cash is appropriated to its subsidiary Lavie Bio. During the first half of 2021, the consolidated cash usage was approximately $11.3 million or $8.9 million, if excluding the Lavie Bio. These sums excluded $28 million net raised through our ATM offering and excluded $0.5 million proceeds from exercise of options. During the second quarter, the consolidated cash usage was approximately $5.7 million or $4.5 million, if excluding Lavie Bio. These sums exclude $0.8 million net raised through our current ATM as detailed below. During the first half of 2021, and in particular, during the second quarter, the burn rate was higher than the same period in 2020 for the following reasons. First, during the second quarter of 2020, the burn rate was unusually low due to certain measures the company took to mitigate the impact of COVID-19 pandemic on the company, including a temporary reduction in salary-based expenditure and a cut back in secondary activities. Second, during the second quarter of 2021, Evogene's subsidiary increased their investment substantially in advancing the product development pipelines including Biomica's continued preparation for initiation of first-in human proof-of-concept study in the immuno-oncologic program later this year. Lavie Bio's activities towards expected commercialization launch of its lead biostimulant in 2022. And Canonic's establishment of its production and marketing infrastructure in preparation for expected product launch in Israel in 2022. We continue to estimate that our cash usage for the full year of 2021 will be within the anticipated range of $20 million to $22 million. These guidelines exclude cash usage of our subsidiary, Lavie Bio. Under our current ATM, which we announced in March 2021, we raised $0.8 million net with a weighted average price of approximately $4.7 per ordinary share. The company does not have bank debt. Let's now turn to the statement of operations. Revenues for the second quarter of 2021 were $0.1 million in comparison to $0.3 million in the same period the previous year. R&D expenses for the second quarter of 2021 which are reported net of grants received were $5.0 million in comparison to $3.9 million in the second quarter of 2020. The increase in R&D expenses in this quarter was mainly attributed to product development activities of the company and its subsidiaries as mentioned above. Business development expenses were approximately $0.7 million for the second quarter of 2021 in comparison to $0.5 million in the second quarter of 2020. The increase is attributed mainly due to Canonic's and Lavie's preparation towards expected launch of their first products in 2022. General and administrative expenses for the second quarter of 2021 were $1.8 million in comparison to $1.1 million in the second quarter of 2020. The increase is attributed due to the increase of the cost of directors and officers insurance. Operating loss for the second quarter of 2021 was $7.4 million in comparison to $5.2 million in the second quarter of 2020. The loss for the second quarter of 2021 was $6.9 million in comparison to loss of $4.8 million during the second quarter of 2020. With that said, we would now like to open up the call for any questions you may have. Operator?

[Operator Instructions] The first question is from Kristen Kluska of Cantor Fitzgerald.

So I'll start with one big picture question here. As you're nearing a potential commercialization for your first 2 programs next year, MetaYield and LAV211. Could you remind us how you view the initial market opportunities. And I would imagine that most of the customer you or a partner would be looking to get in front of would be perhaps looking to make a switch from another products that are currently used. So what do you view as the main selling points or advantages to get there?

This is Ofer. Thank you for your question. We didn't disclose the specific numbers or guidelines with respect to potential revenue of the first product. But what I can share is that with respect to Lavie Bio first product. We are talking now with a few local distributors that are going to -- will be responsible on the sales of our products in the target location. At least for the first year, we are not expecting to -- something significant. The expectation is just from the second year then the numbers will be more material. And what is really nice is that the distributors we are working with them is the one that we are also using them to conduct a field trial experiment. So they are the ones that really see the performance in their fields. They are the ones that collect the data. So in a way, they are our best ambassadors to the quality of our product. It's not that we supply them the data, they actually generate together without the data. And what is really nice and this is something that we disclosed already is that the performance of our products compared to existing commercial available products is better. So I think that our strength with the yield improvement, compared to the competitor, this will be the key message that we are going to use in order to promote our products. With respect to Canonic, over here, we are expecting to reach to the market using local distributor that we already signed with them on agreement. And we are expecting to reach to the customers next year through local pharmacy, pharmacy at the Internet and we are organizing a campaign -- a marketing campaign to drive the sales of our products for next year. One thing we are planning to do is that our statement why to buy the Canonic product and not our competitor's product is the quality. And the quality will be based on the cannabinoid profile and how the crop looks in the perspective of the consumer, the patient. What we learned is that the way that the flowers look, it's very important for the consumers, and our variety are showing a very high rate in this parameter. During the growing season in the selection, we brought to our farm potential customers, people that they are buying medical cannabis products. We show them our variety, and we use their recommendation as part of their breeding process, as part of the selection process. And we feel that we have the type of product that will fall into the premium category, and this will be our main statement why our products are more suitable to the needs of the potential customers.

And then in terms of your announcement this morning regarding the strategy of potentially exploring the idea of turning 1 or more subsidiaries into public companies. Could you talk about the timing as to why you believe now this is something that you're looking to consider? And generally speaking, since your subsidiaries range from early preclinical stage to near commercialization. Is there a certain point you're looking to make these changes?

I think that at least a few of our companies are really advancing nicely to commercialization, and they are really -- and this is Canonic and the Lavie Bio. And Biomica is advancing very nicely towards the clinical trials. They are all active in a very hot status, where investors are looking for investment opportunities. I don't think that we are planning to take all of them into the public market, but probably we will evaluate one by one. And when the market condition and the development on these companies, when we should say that we think this will be the right time. So this is what we are planning to do. But I think that we are getting close to this stage. And I believe that this will be for the benefit of Evogene's shareholders. We are -- we can -- instead of investing the money that Evogene invests as part from its promoting our subsidiary, we can do it as part from in a public offering. Or we can do it also as a part in the private round together with additional financial investors. I think the main target that we would like to do is to give to each subsidiary -- what we like to do is to give to our -- to the capital market, the opportunity to evaluate each activity separately. Because we believe that when you will accumulate all the value of its subsidiary, you will get a much higher valuation than the current valuation of Evogene. So we will start with one. We see you -- and hopefully, we'll see the positive effect on Evogene's share, and then we can start to move with the other companies. So this is the main purpose for this strategy. And of course, we need to make sure that we are doing it for the benefit of our shareholders. This is why we also consider that, in some cases, may be to distribute to our shareholders a portion from our holding in the subsidiary. So they can benefit also from the growing value of our subsidiary. And as I said, the main reason is to allow the capital market to evaluate at least part from the Evogene Group activity in an easier way since it will be isolated from the other activities.

And then last question from me. I think each of these subsidiaries has a pipeline beyond the main programs that you've discussed. Particularly as validation has been achieved, they've looked at other avenues, the CPB platform could be utilized. So through this strategy, how do you think about each potential subsidiary exploring value beyond the initial focus and pipeline if they should have added resources on hand. And then how does some of the other spaces that you're considering like aquaculture and drug optimization fit into this strategy as well?

Okay. So first, and this is somehow related to the reason that we want to spin out our subsidiary. We have currently 4 subsidiaries and each one of them have a very, very promising product pipeline. And the product pipeline of our subsidiary contains more than what we are -- disclosed in our press release and through the analyst call just because we can't cover everything. And I think this is really part of the reason why the market cannot really evaluate each subsidiary by itself. So yes, in addition to the product -- in addition to the lead product of its subsidiary that I emphasized in my speech, there is more candidates which are advancing very nicely. And I can -- I would like to recommend each one of the audience to visit our subsidiary website and really look into their pipeline. Because there is many other promising stuff than what I'm just sharing with you mainly due to time constraints. With respect to additional activity, the license that we are giving to our subsidiary to use the Evogene technology is limited to a very specific scope, and this is the area that they are focusing on. They cannot use the Evogene technology outside of their scope. And so if Evogene -- if they want to expand their focus to additional area, so the need to ask for -- from Evogene to extend their license. So this is with respect to the subsidiary. But with respect to Evogene, we -- one of the reasons that we want to spin out those subsidiaries because then it will give us -- will allow us to focus on new opportunity and that we -- some of them we already start to explore. You mentioned microbiome for the aqua agriculture, this is one of the areas that we validate. Another area is using our technology to optimize drug candidates, which are based on small molecules. And another area that we validate is maybe using the GeneRator technology for developing alternative protein from veggie protein to replace mammalian proteins. So I think that this is -- all of this area, if we really want to start to explore and to start to expand into, I think it will be a little bit easier, if one of our -- if one of more of our subsidiary will be completely independent from Evogene with their own financial resources when we are just supporting them through our technology and being a shareholder. And this will allow us to expand our technology and we can do it then through a separate subsidiary or through collaboration. Or we can always decide it will be part of Evogene, but probably, I believe it's to be through subsidiary -- new subsidiaries or through collaborations.

The next question is from Ben Klieve of Lake Street.

I got a couple. But first a clarifying question on the launch of LAV211. Is your expectation that, that launch is going to be with the crop -- the spring crop that gets planted in 7, 8 months? Or is the expectation that the revenue event is going to be kind of late '22 for the spring wheat crop in the spring of 2023?

So we expect to be able to use it in the next season, meaning that we can recognize the revenue during 2022.

Okay. Perfect. So then a couple of follow-up questions and given that. I wasn't aware that the distributor -- that you had a distributor working with you on the field trials that you're working with now, the head of commercialization, that's great to hear. Can you characterize the kind of how field trials have expanded over the past couple of years. I know you have 20 events noted in the field trial in your presentation. This year, do you have 20 more field trials ongoing with the same distributor? Any context around how those trials have evolved, would be great.

So I don't have in front of me the numbers of the field trials but I can share with you the following. The numbers of field trials that we conduct this year. I think it's almost -- again, I hope that I'm not mistaken, but I think that we have doubled the size of previous year. So it's really in a very broad acreage. And this is -- was actually very, very important because this year, it wasn't very easy. It's still not an easy year to measure yield improvement because of the drought that really is very severe and not helped people that are trying to evaluate the performance of our biologicals. But because we conduct this experiment in so many places. So I think that we have enough statistics to allowed us to make a final decision should we start to launch the product next year. And I think that we are in a good shape with this aspect.

Got it. And that actually would be my next question here around the drought. The -- with -- how pervasive the drought conditions are, especially in wheat acreage, how is your distributor thinking about launching new products next year? How are they thinking about potentially -- just -- the market is just a mess right now in spring wheat. And so I just -- I'm curious how they're thinking about going to product next year versus past years when it's been a bit more predictable?

I think that this is a little bit too detailed question that I will prefer that maybe, Ido Dor, the CEO of Lavie Bio will address. But I think that the fact that we have results based on the last 3 years -- coming from the last 3 years. And in all of these years, the performance of our product was better than our competitor. And I really hope that this year we will succeed to generate enough statistical data to demonstrate the performance of our product. I think it will be enough information for our distributor to start the marketing of the product in the local region. Agriculture is a very -- sometimes I think that it is almost like a gamble because of the weather condition. And every year, you need to start and hope that this year, things will be according to plan and farmers are really doing their best. So next year, it would be a new game. Hopefully, the condition will be better for farmers. And I think this will be -- will make our distributor's life easier. Maybe the last thing I would like to add, we choose the specific microbes we are using mainly because we felt that they can address, improve yields during rough conditions. Actually, when the weather is optimal, the effect of the microbes exists, but it's not -- it won't be as good as when there is some drought or maybe that the weather is not optimal. So if there is concern that maybe next year, there might be still some drought. Again, if there is no rain, so nothing can grow. But if it will be something in between, the efficacy of our products, it's actually one of the reasons to use it in order to address this challenging weather condition.

Got you. That makes sense. One more for me and then I'll get back in queue. Ofer, at the end of your comments, you talked about the opportunities in developing seed technologies. I think you specifically mentioned tomato and soy, but I'm sure you're working on other things as well. Curious if you could kind of classify how you think about going to market with that down the road? I mean are you looking to develop unique traits and license those traits to the big ag players? Are you looking to potentially get into the sale of seed? How do you really see commercializing that opportunity down the road?