Evogene enters medical cannabis sector

Arnon Heyman Photo: PR

Evogene is setting up a subsidiary called Cannonic to engage in the medical cannabis sector.

Israeli agritech company Evogene Ltd. (Nasdaq: EVGN; TASE:EVGN), which announced several months ago that it was considering entering the cannabis field, today announced that was indeed doing so, and detailed its plans. Its activity will be split off into a subsidiary named Cannonic. Evogene market cap was NIS 158 million at the start of today's trading on the TASE.

Evogene, originally founded as a spinoff of biological computation company Compugen, has developed computational systems for analyzing big data in order to mine insights about plant genetics and functioning. Its capabilities are therefore very suitable for the cannabis field.

The company has a number of activities that are currently in the process of being split off into several subsidiaries: a company that improves plant characteristics by changing the genetics of the seed (through both genetic engineering and smart hybridization), a company that adapts insecticides to the plant on the basis of insights from the computer system, a subsidiary that manipulates the plant's bacterial environment in order to improve its features, and a medical company that researches microbiome (bacterial composition) and its connection to health.

Evogene CEO and president Ofer Haviv says, "I grew up in a generation in which cannabis was considered a very negative thing, so it took me a long time to finally decide to enter the sector. In the past, I refused to begin activity in tobacco, and it was important for me to reconsider the sector in depth in order to make sure that we weren't getting into an ethical problem, and that this activity wouldn't affect the connection with the corporations that are our potential partners." Gradually, however, the sector shed its negative image, while at the same time, the medical cannabis field developed, and Haviv recognized the match between his company's capabilities and the requirements of this sector.

"The market realized that in this sector, it's not enough to grow and market cannabis. Success requires a good product that is differentiated from the others," says Dr. Arnon Heyman, head of Evogene's Ag-Seeds division.

What needs in the cannabis industry are currently unsatisfied? A plant with a larger crop: not just a bio-mass of plant, but a crop of a product with a higher concentration of active ingredients. Another need is very important for medical purposes: a stable plant - a plant that does not change dramatically as a result of slight changes in its growing conditions. A third need is realization of the connection between the active ingredients in the plant and the diseases that a specific composition of active ingredients in the plant can be used to treat. This is the point at which a big data system and expert knowledge about both the plant and human health (like what Evogene accumulated in its microbiome activity) can make the difference.

Heyman explains, "Cannabis is a plant that no agriculture concern tried to improve for many years. In contrast to corn or soybeans, which have been repeatedly improved, and it is now more difficult to come up with innovations, cannabis is almost a virginal plant in this context."

In the first stage, Evogene is not utilizing its genetic engineering capabilities, believing that the public is likely to oppose this. It is therefore operating in the cannabis field solely through grafts. Later, if it turns out that the sector is open to accepting products based on genetic engineering, the company can use its capabilities in this aspect, but it is not currently part of its plans.

Evogene also plans to sell knowledge to cannabis companies, but its aim is also to independently develop unique strains (although it will probably not be responsible for marketing them). Evogene was burned in the past when it based its business on cooperation with seeds companies. These cooperative efforts generated good revenue for the company, but the products did not progress in these companies' development pipeline at the planned pace. Since then, Evogene has striven to establish activity under its control, and which it can bring more quickly to market, although it does not yet have products in the market. Evogene hopes that in the cannabis sector, it can bring products to market relatively quickly because of the great need, the paucity of direct competition in the specific niche in which it operates, and the rapid pace at which the sector is developing.

In the first two activities in the cannabis field that Evogene is planning to enter, crop improvement and stabilizing the plant, while maintaining the concentrations of active ingredients in it, the company can do this on the basis of its existing computational systems.

Published by Globes, Israel business news - en.globes.co.il - on April 3, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Arnon Heyman Photo: PR
Arnon Heyman Photo: PR
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018