Evogene (EVGN) is a computational biology company. It concentrates on product discovery and development in life science industries, including human health and agriculture, with the help of its Computational Predictive Biology (CPB) platform.
Evogene’s subsidiary, Canonic, brought its novel cannabis strains to the Israeli cannabis markets. The move ensures a significant revenue increase for Evogene in Fiscal Year 2022.
Lavie Bio, another subsidiary of Evogene, will bring its biostimulant for wheat to market during 2022, adding another revenue stream. I am currently neutral on the stock and recommend that investors watch the company’s 2022 reports for further developments. (See Analysts’ Top Stocks on TipRanks)
Back in February, the company’s stock hit its 52-week high of $10.24. Since then, it has been on a downtrend and currently trades in the $2.50-$3.00 price channel.
The current target price between $8 and $10 is realistic for the stock. The company’s price-to-book ratio of 1.65 indicates that it is currently undervalued. Higher revenue and a higher valuation multiple should bring its stock price up.
Evogene’s Artificial Intelligence Platform
Evogene oversees four subsidiaries, each one using the company’s proprietary AI platform. The company‘s computational predictive biology software is used differently by each of its subsidiaries.
Biomica uses it to develop microbiome-based drug candidates for treating cancerous tumor growth as well as gastrointestinal disorders. AgPlenus uses the software to locate plant traits which are resistant to certain herbicides. Canonic employs the technology to develop certain plant traits in medical cannabis.
Launching Novel Medical Cannabis Strains
Evogene’s Canonic has been in collaboration with Tikun Olam-Cannabit for some time. The two companies have been hard at work developing novel cannabis strains with specific plant traits. Canonic and Tikun Olam-Cannabis also entered into a supply and distribution partnership for bringing these new strains to the Israeli cannabis markets.
In August, Canonic announced the pre-launch of its new strains of packaged dried flower for limited release through its partnership with Telepharma, an Israeli medical cannabis provider. Canonic received positive feedback about its medical strains from the limited audience. The company has now begun the full release of the product in the Israeli medical cannabis market.
The new strains, under the company’s MetaYield banner, have been bred to produce dense trichomes, high THC levels, and larger yields of efflorescence. The company was aiming for a THC potency between 16-24%. The new product line is called G-nnovation, and features two new strains.
Canonic will continue developing its strains for even more specific plant traits. Under the company’s Precise banner, strains that are more effective at reducing pain and mitigating inflammation will soon be introduced. The company plans to bring these cannabis strains to market in 2023.
Evogene Will Announce Third Quarter Results Next Month
Evogene’s Q2-2021 report showed revenue of $0.1 million, which comes from partnerships and licensing agreements. The company generated a net loss because its four subsidiaries are in the research and development phase. It stays afloat through equity offerings.
Evogene has a strong cash position of $65.4 million and no debt. The revenue from its new cannabis products will increase the company’s valuation and financial performance. The company’s next report (Q3-2021) will be out in November, and the predicted revenue is $0.12 million.
Wall Street’s Take
According to Wall Street, Evogene has a Strong Buy consensus rating, based on three Buys assigned in the past three months. At $8.33, the average Evogene price target implies 219.2% upside potential.
Conclusion
Evogene’s Canonic has reached a major benchmark as its novel cannabis strains arrive on the Israeli medical cannabis market. The company has long been developing these novel cannabis strains which produce higher/denser yields and higher THC potency.
The company’s distribution agreements for the product are firmly in place and they have already received positive feedback from the pre-launch. With this achievement, the company will begin to see significant revenue growth and a higher valuation.
I rate Evogene’s stock as neutral for now, but I expect it to reach higher price channels as financial performance improves. I recommend that investors keep an eye on the company.
Disclosure: At the time of publication, Alan Sumler had a position in Evogene.
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