NRGene Technologies Ltd.

Investor Presentation • Sep 13, 2022

INDEPENDENT EQUITY RESEARCH

NRGENE TECHNOLOGIES LTD - UPDATE REPORT 13.09.2022

Expansion of intellectual property development business model to derive revenues from end-product sales; first project with Granot Group; stock price target remains unchanged.

NRGene Technologies Ltd (TASE: NRGN) is an AgTech company engaged in the research and development of technology in the field of artificial intelligence, including software tools, in order to analyze genetic information based on Big Data, for the acceleration and improvement of natural development of crops and animals in the global agriculture and food industry.

Key events in Q1 2022 and the passing months:

• Development of intellectual property: First collaboration of the fully owned daughter company with Granot Group, a major player in animal food manufacturer in Israel including funding of USD 2 million, for the development of seedlings for dairy cattle feed.
• Genetic Checks: new contracts with several new clients for a total of USD 1.1 million (double that of 2021).
• Services and software licensing: continue support existing clients for strategic collaboration.
• Total revenues in H1 2022 were USD 1.5 million compared to USD 2.1 million in the same period in 2021, due to focusing in long-term projects on the expense of one time deals and ending the agreement with Bayer.
• Reduction in the operating loss due to the change in the business model and reducing the sales and marketing costs.

Strategy – The company continue to implement the change in it's business model, to become a one-stop shop for all plant and animal breeding genomic requirements, including ownership (exclusive or joint) of the IP (pharma like model). We deem that NRGene is in strong position for growth due to its large customer base, scalability potential, know-how, and agile business model.

Bottom line, the company is operating according to an orderly strategic plan including changing the business model (from one-time sales to the pharma company model). In our opinion, the company has enough capital to implement its strategy, and the contract with Granot Group is significant because of the expected revenues and because of the implementation of the new business model. In light of this, the target price remains unchanged. We will continue to monitor the company's progress in the next quarter.

Lead Analyst Dr. Tiran Rothman Equity.Research@frost.com Tel.: +972-9-9502888

NRGENE TECHNOLOGIES LTD 13.09.2022

Key events in the passing months and Q2 2022 (as detailed in the company's annual report for 2021, in the company's presentation to the capital market published by the company on 15.8.2022, and the immediate reports published during the quarter):

• On August 11 2022, by the Company's subsidiary in Canada, the company initiated its first collaboration project with Granot Group through its Canadian subsidiary – developing seedlings for dairy cattle feed.
  • o Granot will contribute USD 2 million to the financing of the project and will provide its significant experience and knowledge in the production of feed for dairy cattle. NRGene Canada shall be responsible for the additional funding, as required. Upon the completion of development, NRGene Canada and Granot will establish an equally owned (50%-50%) company to focus on wheat grains production and their commercialization to be grown as seedlings to vertical farming facilities worldwide. The project will focus on the European and North American markets, which together comprise 30 million dairy cows. The Company estimates that a 1% market share consisting of approximately 300,000 cows would generate USD 110 million in annual revenues. The Company and Granot agreed to examine additional plants (e.g., barley, corn and legume) suitable for vertical farming to feed other farm animals and/or other uses.
  • o The contract with Granot Group is the first contract in intellectual property development business model to derive revenues from end-product sales
• On August 15, the company reported about an increase in the company's EBITDA (during H1 2022 compared to the same period in the previous year, due to continue executing the company's strategy that focus on creating growth infrastructure and developing the intellectual property business model.
• In addition, the company reported their operating profit margin decreased compared to the same period last year, mostly due to decrease in the income from licensing to the company's software.

Investment Thesis

Agriculture is one of the oldest areas of technology and innovation in existence. Its objectives have changed little throughout history: finding ways to increase yields and maximize key traits of crops or animals, such as size, flavor, color, and resistance to pests. Agtech startups provide farmers with a variety of strategies and technologies to help improve crop resiliency and output. These include agrifinance tools, biotech solutions that can improve yields and resiliency, farm management software, and an emerging focus on data-driven AI & ML that can help automate decision making.

Modern Agtech startups began attracting venture funding roughly a decade ago, with the industry raising \$322.2 million in 2010. Since then, VC funding in agtech has grown to \$6.1 billion in 2020, a 33.8% CAGR. This explosive growth is a direct result of two primary factors: population growth and climate change. The global population is expected to swell to 9.8 billion people by 2050, driving more demand for food.ⁱ At the same time, greenhouse gases and warming climates are creating increasingly frequent extreme weather events that threaten crop yields.

NRGene Technologies Ltd. is an AgTech company engaged in the research and development of technology in the field of artificial intelligence, including software tools, with the aim of analyzing genetic information based on Big Data, for the purpose of accelerating and improving natural development of crops and animals in the global agriculture and food industry. The company does this through the development and commercialization of artificial intelligence (AI) technology and software tools for genetic information analysis in order to improve and streamline the natural improvement process of crops and animals. The uniqueness of this technology lays in its ability to analyses all gene combinations, locate the optimal genetic composition and enable the improvement of plant or animal traits naturally, by creating new varieties in an accelerated way.

NRGene's technology is widely used to create disease-resistant and climate-resilient varieties with healthier nutritional compositions and maximizes yield potential. In the field of plant genomics, the company offers a vast proprietary database and AI-based technologies. The solutions provided by the company have been widely accepted by several research organizations and big industrial players across ~300 projects.

The core of NRGene's technology is its cloud-based AI tool coupled with its extensive database of genomic information, field performance data, and information on pests, diseases, and seed and irrigation considerations. This information is fed into NRGene's AI model and computationally predicts elite varieties that consider the mentioned variables. Once the predicted variety is identified, then the variety is produced either using an expedited breeding process, gene editing, or CRISPR. This process allows improved varieties to develop in half of the time and at half the research and development costs.

NRGene's solution can be applied and utilized early in the R&D cycle to identify interesting or problematic genes. NRGene intends to continue and grow its seed and traits royalty business to solve specific challenges on the farm directly and to breeding organizations (seed, food & beverage, processor, retailer, etc.), including offering diseases resistance, drought-resistant, and pest-resistant varieties.

The company has an extensive R&D team that offers innovative solutions in the field of genomics. These capabilities have been combined and have allowed the company to easily identify several proprietary traits across a wide set of plant genomes that it can license in the future.

NRGene's long-term go-to-market strategy is to become a one-stop shop for all plant and animal breeding genomic requirements. We deem that NRGene is in a strong position for growth due to its initially large customer base, scalability potential, know-how, and agile business model.

Market

The following three markets encompass significant portions of NRGene's addressable market: bioinformatics technologies, genotyping, and seeds (both genetically modified (GM and non-GM).

The bioinformatics technology market for agricultural applications generated revenue of \$3,296 million in 2020 and is expected to generate \$7,509 million in 2026, growing with a CAGR of 14.7% in 2021-2026. Due to the rise of the need to use bioinformatics to identify and cultivate unique traits and the amount of unaddressed opportunities across the world, it is expected that the demand for bioinformatic technologies will be immense. In general, Frost & Sullivan expects that revenue growth will range from 13% to 25%, dependent on the target application.

A key growth opportunity in the bioinformatics sector is addressing the need for integrated solutions and systems. NRGene's solution could help bioinformatics firms compensate for the lack of skilled personnel that hampers the market growth and facilitate their transition into integrated solutions and systems companies.

The seed market generated revenue of \$42,424 million in 2020 and is expected to generate \$54,926 million in 2026, growing with a CAGR of 4.4% in 2021-2026. Non-GM Seeds will also grow during the forecast period as some farmers, consumers, governments, and other relevant stakeholders slowly move away from GMproduced varieties. Non-GM crop demand is rising in Asia and the EU, and consequently, these crops command premia over GM varieties despite possible lower yields.

NRGene could help GM/non-GM companies boosting their R&D efforts and quickly achieve varieties with desirable traits such as increasing resistance to pests and tolerance to herbicides, and adverse weather )e.g., drought(.

The genotyping technology market generated revenue of \$1,855 million in 2020 and is expected to generate \$3,087 million by 2026, growing with a CAGR of 8.9% in 2021-2026. With the rise in the adoption of technologies in the plant and animal genomics market post COVID-19 pandemic, and the Russian invasion to Ukrain, the market size of support services is expected to grow simultaneously by 2026 to facilitate the adoption of services amongst the researchers and industrial giants.

Valuation summary

NRGene is a growth firm. Thus, we based our valuation on current and future market trends and the company's assumption for future operations. Due to the high growth in the Ag Biotech market and the uniqueness of NRGene solution, we estimate the company is well-positioned to generate significant growth in the foreseeable future.

We conducted NRGene's valuation using market benchmarks from recent deals and analysis of VC's activity; Given the assessments and findings mentioned above, we value the company's stock price target in the range of NIS 29.4 to NIS 32.4, and a mean of NIS 30.9.

1. Company Overview

1. Company Description

NRGene Technologies Ltd. is an AgTech company engaged in the research and development of technology in the field of artificial intelligence, including software tools, with the aim of analyzing genetic information based on Big Data, for the purpose of accelerating and improving natural development of crops and animals in the global agriculture and food industry. NRGene's technology is widely used to create disease - resistant and climate - resistant varieties, with healthier nutrients and maximizes the yield potential throughout the value chain. In the field of plant genomics, the company offers a huge database and artificial intelligence based technologies to some of the largest seed and agriculture companies. The company's tools and services are already in use by a number of AgTech companies and research institutes around the world.

During 2021, the company focused its activities through two complementary business models - an intellectual property development model against royalty income and a model of SaaS-based offering (subscription model) and genetic information analysis and production services.

The following is a summary of the company's key solutions:

• Intellectual property development: In this framework, the company commercializes the products of the intellectual property development process (exclusively or jointly) to customers or partners who purchase from the company a license (right of use) of the developed product in exchange for royalties from the products developed by the company. As of this date, the company has 10 intellectual property development projects against royalty income and has already begun the commercialization of some of these projects to its clients.
• Genetic testing – SNPer (Genotyping): In September 2020, the company launched SNPer, a product that helps streamline genetic testing (Genotyping) processes and gather more information while reducing the cost of standard DNA testing by up to 70%. SNPer is based on a huge genomic data analysis of the population extensive growth and discovery of the minimal set of DNA markers that best represents the natural genetic diversity that exists in the breeding population. The company offers a fully customized genetic testing solution that leverages the company's experience and data in a variety of species. Following the insights created for the company as part of its activities in genetic testing projects, the company began to develop dedicated DNA kits based on the company's unique databases in selected crops, including soy, canola, wheat, corn, hemp, tomato

and more. These DNA kits allow the company to discount significantly the costs of producing the genetic information required for the use of the computational tools in the analysis of the genetic tests.

• GenoMAGIC: The company offers an advanced analytical platform for the field of breeding which supports the making of key breeding decisions and the efficient organization and storage of massive genomic data. GenoMAGIC is an artificial intelligence technology based on big data and cloud that allows to reveal the full genomic composition of an individually tested sample as part of the breeding program. The system can analyze millions of details simultaneously and helps identify the individuals (crops/varieties) with the best genetic content that will serve as parents to create the next generation of offspring during the breeding process thus enabling predicting all stages of the process development of varieties and traits on the computer thus saving and streamlining all breeding processes. The GenoMAGIC product uses, among other things, other computational tools (algorithms) developed by the company, such as DeNovoMAGIC, PanMAGIC and TraitMAGIC. The tools mentioned above are offered, among other things, to the company's existing and potential customers as genetic information analysis and production services.
• Genetic information analysis and production services: In this framework, the company provides its customers with genetic information analysis and production services, in which the customer receives the results of the analysis of the genetic information in accordance with the specific requirements defined by him. The company markets the genetic information analysis services, including products of this type, under a number of trade names, the main ones of which are:
  • o DeNovoMAGIC As part of this product, the company provides an information analysis service that decodes the genomic sequence of an organism fully and with great accuracy.
  • o PanMAGIC a product that provides information analysis service that compares multiple genomic sequences of crops or animals of the same species and locates the differences in their DNA to provide a more comprehensive and less biased infrastructure for further information analysis.
  • o TraitMAGIC a product that provides an information analysis service that aims to find the unique genetic components that control a trait of commercial importance such as color, growth rate, protein composition and more.

Here are some examples of leading clients and partners by major target markets:

• Seeds and agrochemistry: BASF, Syngenta, Bayer Crop Science, Nuseed, TopSeeds, Sakata Seed America
• Food & beverage: Nestle, Mondelez, Suntory
• Natural Raw Materials: Bridgestone, FuturaGene, Cotton Incorporated
• Cannabis and Hemp: Scotts, Cronos Group, Aurora, Kayagene, PureGene

NRGene's mission is to provide artificial intelligence-based solutions that enable the enhancement and streamlining of natural plant and animal improvement processes. NRGene intends to fulfill this vision by leveraging its core benefits, including improving variety development processes, providing lower cost, streamlined and shortened R&D projects, wider use of data in the decision-making process, and increased cost-effectiveness in managing Big Data genomics which relies on cloud technologies (AWS), and a strong network of reliable and efficient partners for genomic analysis.

Strategy

NRGene's long-term strategy is to become a one-stop shop for all genomic requirements in the development of crops and animals regardless of the location of partners and customers in the agricultural value chain, from data generation with laboratories (including the laboratory in Canada) and through other R&D activities including Identification of the genetic diversity for the production of new varieties until the supply of seeds / varieties to various organizations that support farmers around the world. Since the end of 2020 the company has been actively involved in partnership with its customers in a number of agricultural and animal crops and geographies. The company (exclusively or through a partner) invests in the development project of new varieties of crops and animals, so that the company owns the improved varieties and / or traits and benefits from the commercialization of traits or varieties in exchange for royalties from sales.

Business Model

During the reporting period, the company operated using a number of complementary business models:

1. Intellectual property development model against royalty income - As of the date of the report, the company focuses most of its efforts on intellectual property development projects that may generate royalties for the company, and as they mature into commercialization, have the potential to carry long-term value to shareholders and customers. In this model, the company initiates and leads intellectual property development projects with partners (such as pea and hemp development for the alternative protein industry or high-quality cherry tomato varieties

development) or develops property independent of the partner (such as breeding canola resistant to clubroot (fungal disease)).

To date, the company operates in 3 main categories in the model of intellectual property development:

• Improving the development of unique traits
• Development of new / unique elite varieties
• Improving and developing food ingredients

In a mutual development project, the partner receives the final product (varieties or traits) and pays the company royalties from its revenues. Therefore, the financing and business risk of the partners is decreased since the payment to the company depends on the achievement of the development goals and the future income of the customer. Royalties for developed traits can range from 1% -15%, and for certain traits and varieties between 35% -70% of the partners' income (less production, marketing, and distribution costs), in projects where the company is responsible for the breeding process. In some cases, the partners also pay a down-payment for securing the right to integrate the developed trait or variety. As of the date of the report, the Company has assessed several material projects as follows:

Project	Development	Commercialization	Expected	Potential	Expected
	period	status	period for	market per year	royalties (Life
			initial	(seeds/varieties)	Time Value of
			royalties		10 years)
ToBRFV	2020-2022	10 signed	2023	Higher than 500	100 million \$
resistance in		commercialization		million \$ / year
tomatoes		agreements
Clubroot	2021-2025	Not yet begun	2025	Higher than 300	75 million \$
resistance in				million \$ / year
Canola
Alternative	2021-2023	Not yet begun	2024	Higher than 150	50 million \$
Protein from		(part of consortia		million \$ / year
Pea and Hemp		agreement in
(alternative		Canada)
protein)
high-quality	2021-2023	Not yet begun (the	2025	Higher than 25	10 million \$

cherry tomato	partner	is	million \$ / year
varieties	responsible	for
	commercialization)

• 1. Genetic testing (Genotyping) As of the date of the report, most of the company's commercialization activity focuses on the analysis and production of various types of genetic information for the benefit of improvement processes, including information derived from genetic testing designed by the customer or by specialized companies. In this model, the company provides its customers with a complete DNA testing solution that includes custom project planning, data production, off-the-shelf DNA kits (generic panels) and genetic testing analysis. These tests effectively identify the individuals (plant/variety) within the broad breeding population with the best genetic structure. The company estimates that its solution costs are significantly lower compared to existing solutions in the market. In addition, following results from the company's existing projects, its solution achieves even more accurate results than other existing solutions in the genetic testing market. In October 2021, the company launched the Saskatoon Laboratory in the province of Saskatchewan, Canada. As of the date of the report, the laboratory activity has begun and it will serve existing customers and new customers regarding crops such as: canola, wheat, hemp, legumes, corn, soy and more.
• 1. SaaS-based offering (subscription model) and genetic information analysis and production services - In this model, the customer enters into a transaction with the company (project or multi-year), to access the software through cloud computing and to receive support and auxiliary services, of his choice. As of the date of the report, the sale SaaS-based subscriptions and production of genetic information that accompanies it is the company's main source of revenue. The company continues to develop existing software tools, and add new tools offered to customers along with other company software products. The company supports its customers in long-term strategic projects, where the support is complete and includes services tailored to the needs of the project, such as: complex analyzes, cloud solutions, etc.

We believe that the above complementary models are beneficial to NRGene for two main reasons:

• A. The company will be able to accumulate knowledge and genetic information in each project, which will enhance its competitive advantage and support its future growth and will be a crucial differentiating factor.
• B. The mentioned new business model allows the company to advance in the value chain and achieve the maximum potential value over the agricultural value chain that was not previously accessible (through royalties received from its customers).

As of the date of the report, the balance of the financial means (cash, and short-term bank deposits) available to the Company are approx. USD 15.8 million (gross), and the company expects to be able to meet its needs in accordance with its business plans, without the need for additional financing. In addition, the company works to locate and obtain financing alternatives such as government grants.

2. Intellectual Property

The company has successfully assembled ~300 projects (over 600 genomes) of more than 80 species of crops and animals which some are stored and used in its internal database by applying proprietary AI models. The databases include crops that are the most commonly planted in the world (e.g., wheat, maize, rice and soybean), the most fecund (e.g., sugar cane, sugar beets and tomatoes), and crops that generate the most revenue for producers (e.g., hemp and cannabis). The company is also among one of most trusted emerging cloud-based genomic data solution providers with applications in both plant and animal breeding. The company has an extensive R&D team that offers innovative solutions in the field of genomics. These capabilities have been combined and has allowed the company to easily identify several proprietary traits across a wide set of plant genomes that it can license in the future.

Current & Expected Intellectual Property Deals:

3. Key Projects and Grants

Below is a summary of NRGene's key projects, partnerships and collaborations:

Partner	Type
Protein Industries Canada, Farmer's Business Network Canada, Inc., Pulse Genetics and Manitoba Harvest	Partnership and Collaboration
Government of Saskatchewan (NRC-IRAP and Innovation Saskatchewan)	Business Expansion
BGI	Partnership and Collaboration
Macrogen Corp	Partnership and Collaboration
Bridgestone	Partnership and Collaboration
Bayer Crop Science	Licensing Agreement
Syngenta	Licensing Agreement
Mitsui & Co. (TSI)	Partnership and Collaboration
Philoseed (ToBRFV)	Partnership and Collaboration
CRISPR-IL	Partnership and Collaboration
GAIN4CROPS consortium under Horizon 2020	Partnership and Collaboration

2. Technology overview

1. Main Applications

NRGene has completed comprehensive genomics projects for over >80 versatile species of crops and animals using its proprietary technology. This vast experience enables NRGene to address a wide range of markets that rely on agricultural crops and animals. However, four key end industries are targeted where the value of NRGene's technology has been demonstrated. These key industries include seed and agricultural chemical companies who are investing in R&D in order to discover new varieties, food & beverage companies who are seeking specific ingredients to improve their product's quality and reliability,

natural raw material companies (e.g., paper & pulp, rubber, natural fiber) who are seeking the same thing, and cannabis & hemp companies who are always looking for high quality varieties to produce value-adding products in order to stay competitive. NRGene's solution can be applied and utilized early in the R&D cycle in order to identify interesting or problematic genes and NRGene also intends to grow its IP development in exchange for royalty revenues business aimed at directly solving specific challenges on the farm including offering varieties and traits that are disease resistance, drought tolerant, and pest resistant.

2. Summary of Technology

The core of NRGene's technology is its cloud-based AI tool coupled with its extensive database (e.g., Big Data) of genomic information coupled with information on pests, diseases, and seed and irrigation considerations. This information is fed into NRGene's AI model and computationally predicts the most favorable genetic makeup of elite varieties that include all the aforementioned considerations. This information is easily integrated into the development phase of their customers and generates insight and a simple roadmap to advance their breeding programs. Once the predicted variety is identified, then the variety is produced either using an expedited natural breeding process, gene-editing or CRISPR technologies. This process allows improved varieties to be develop in half of the time and at half the research and development costs.

1. Markets overview

Global Bioinformatics Market for Agricultural Applications

The bioinformatics technology market for agricultural applications generated revenue of \$3,296 million in 2020 and is expected to generate \$7,509 million in 2026, growing with a CAGR of 14.7% during the period 2021-2026. The market growth drivers of bioinformatics technology are attributed to the increasing demand for nucleic acid sequencing of the plant due to the reduction in the sequencing cost. Moreover, utilization in analysis, annotation, and storage of data, and expanding initiatives from government and private organizations to cater to the increasing food demand is expected to boost the growth of the market in the coming years. In 2020, the bioinformatics technology segment experienced a significant increase in the plant genome market due to the COVID-19 pandemic as majority of the industries have limited their operation due to lockdown being imposed to contain the spread of the virus. Therefore, the adoption of bioinformatics technologies is expected to rise, owing to the application of bioinformatic technology such as storing, retrieving, and analyzing the relevant biological data.

During the forecast period 2021-2026, the APAC region is expected to flourish as one of the most lucrative markets for plant genomics. APAC region is expected to exhibit significant growth opportunities for bioinformatics market for agricultural applications due to the increased optimism in the economic conditions of these countries. The countries in this region will witness rapid development of its bioinformatics technologies for agricultural applications due to increasing urban population size, growing market penetration of advanced technologies, and favorable government investments on the adaptation of innovative farming technologies.

In general, Frost & Sullivan expects that revenue growth will range from 13 to 25%, dependent of target application. Even row crops, the largest segment at \$1,361 million in 2020 will grow at an expected CAGR of 13.9% and approach \$2,900 million by 2026. The bioinformatics market for cannabis applications is expected to witness the greatest growth. In 2020, the bioinformatics market for cannabis applications was \$61 million and is on track to hit \$232 million by 2026 given a CAGR of 24.8% during the forecast period. Legumes are another category that will become increasingly important for bioinformatics technologies due to the rising demand for alternative meats/proteins. In 2020, the bioinformatics market for legume applications was \$92.4 million and is on track to hit \$248 million by 2026 given a CAGR of 17.9% during the forecast period.

Global Seeds Market

The seed market generated revenue of \$42,424 million in 2020 and is expected to generate \$54,926 million in 2026, growing with a CAGR of 4.4% during the period 2021-2026. The market growth drivers of seeds are attributed to significant gains in GM corn cultivation in developing and growing countries, though discouraging political views might slow down this expected progress. Geographical expansion will support this growth, such as drought resistant corn in Africa, and specific crops in Asia. Newer GM crops in GM crop growing countries such as GM apple and potato, oilseeds with modified fat contents for healthier oil, and oilseeds with higher protein content are also expected to support market growth during the forecast period. Finally, engineering seeds to be compatible with certain pesticides will also support market growth, though this may create product dependence from farmers. Gene-editing techniques offer modified crop traits at much lower costs, making seeds more affordable and easier to increase market penetration.

In 2020, APAC was the largest seed market in the world, reporting annual revenue of \$19,920 million and is expected to grow at a compound annual growth rate of 4.7% during the forecast period. Europe is also a significant region of the seed market, recording \$11,674 million in 2020, though growth is expected to be slightly slower than the global average at 3.7% during the forecast period. The North American recorded total seed market sales of \$3,689 million in 2020 and is expected to grow at a CAGR of 6.0% during the forecast period. The higher than global average growth rate for the U.S. seeds is attributed to farmers seeking greater efficiencies in maize and oilseed production coupled with the string growing cannabis seeds market.

In general, the seed market is a mature market, but with the advent of plant genetics, Frost & Sullivan expects that revenue growth will range from 3 to 6% for most crops, depending of target application. Row crops are the largest segment at \$29,552 million in 2020 will grow at an expected CAGR of 4.0% during the forecast period and approach \$37,350 million by 2026. Continued adoption of GM seeds for row crops in new regions will support market growth during the forecast period. The cannabis seeds market is expected to witness the greatest growth; in 2020, the seeds market for cannabis was \$312 million and is on track to hit \$875 million by 2026 given a CAGR of 18.7% during the forecast period. Growth in the use of cannabis products in under-penetrated regions will support market growth during the forecast period. Legumes are another category that will become increasingly important for seed supply due to the rising demand for alternative meats/proteins. In 2020, the legume seeds market was \$2,216 million and is on track to hit

\$3,300 million by 2026 given a CAGR of 6.9% during the forecast period. Vegetable seeds are also a part of a significant market space. Demand growth for vegetable seeds is expected to be 5.0%, compounded annually over the forecast period, and approach \$7,920 million by 2026.

Global Market for Genetic Testing - Genotyping Services (Total R&D Expenditure of Seed Manufacturers and Animal Breeders on Genotyping Services)

The genotyping technology segment generated revenue of \$1,855 million in 2020 and is expected to generate \$3,087 million by 2026, growing with a CAGR of 8.9% during the forecast period 2021-2026. The market growth of genotyping technology is attributed to facilitate the evaluation of genetic inconsistency in existing crops and livestock and to develop the crop/animal with high nutritional content. Moreover, the adoption and utilization of genotyping is rapidly increasing in several research centers and universities across the globe to produce novel products that are also fueling the growth of the market. With the ongoing pandemic, agriculture industries are operating with a limited workforce. Therefore, the research and development for plant and animal genomics will contract due to the ongoing COVID-19 conditions in many parts of the world, thereby impacting the genotyping market.

The US market for genotyping services for agricultural applications generated revenue of \$758 million in 2020 and is expected to generate \$1,153 million in 2026, given a CAGR of 7.3% during the 2021-2026 forecast period, thus making it the largest region in terms of current adoption. The large market share of the region has been attributed to the developing advanced technology-based infrastructure, growing government and academic support and initiatives to adopt innovative technologies in the agriculture industry, and an increasing number of companies, which offer genomics services in the region. Europe is also a significant market segment for genotyping services. The European market for genotyping services for agricultural applications generated revenue of \$468 million in 2020 and is expected to generate \$669 million in 2026, given a CAGR of 6.1% during the 2021-2026 forecast period. The fastest growing region is expected to be APAC. During the forecast period 2021-2026, the APAC region is expected to grow at a compound annual growth rate of 12.6% and reach \$837 million in regional revenue by 2026.

The genotyping services market is in the growth stage of its market lifecycle, though the adoption and utilization of genotyping services varies target crop/animal. Frost & Sullivan expects that revenue growth will range from 7 to 10% for most crops, with some exceptions. Row crops are the largest addressable segment at \$859 million in 2020 and this market segment is expected to grow at an expected CAGR of

7.0% during the forecast period and approach \$1,291 million by 2026. Continued adoption of GM seeds for row crops in new regions will support market growth during the forecast period. Outside of niche crop types contained within the All Other Crops segment, the cannabis market is expected to witness the greatest growth. In 2020, the cannabis segment for genotyping services was \$103 million and is on track to hit \$189 million by 2026 given a CAGR of 10.6% during the forecast period. Growth in the use of cannabis products in under-penetrated regions will support market growth during the forecast period.

2. Competitive Landscape

Overall, the market is highly fragmented and encompasses many private companies. However, there are basically three tiers of companies in the plant and animal genomics market which corresponds to their scale. Each tier is described below.

Tier One: These companies lead the market by the innovation of products, diversification of product portfolio, strong market share, and prominent clientele.

Tier Two: These companies possess strength in the plant and animal genomics market due to their large market coverage.

Tier Three: These companies are either new to the plant genomics market or concentrate on a niche area of the market.

There are 7 levels of value chain in the plant and animal genomics market (the level NRGene operates in are bolded):

• 1. DNA/RNA Sequencing Machine and Reagents Suppliers
• 1. DNA/RNA Data Producers
• 1. Bioinformatics
• 1. Genotyping Services
• 1. Traits
• 1. Breeding
• 1. Seeds

3. Financial Analysis & Valuation

Valuation Method & Approach

In its early stages, a startup company's valuation can be challenging due to limited cash flow (if any) and uncertainty regarding the future. As part of a Discounted Cash Flow (DCF), the accepted method used in financial valuations, there are several modifications to a startup company's valuation. In general, there are four primary methods within the DCF method:

• 1. Real options this valuation method is designated for pre-clinical and early-stage clinical programs/companies. The assessment is binary during the initial phases and based upon scientificregulatory assessment only (binomial model with certain adjustments).
• 1. Pipeline assessment a valuation method used for early-stage companies before the market stage where time-to-market may be a few years for full operations. The company's value is the total discounted cash flow for its products/signed agreements plus unallocated costs and its technology platform assessment.
• 1. DCF valuation this method applies to companies with products that have a positive cash flow from operations.
• 1. Market benchmark this method is based on recent deals (M&A and/or fundraising) within the company's domain and market multiples.

To evaluate NRGene's equity value, we based our valuation on the market benchmark approach.

Company Financial Overview

As of the date of the report, the balance of the financial means (cash, and short-term bank deposits) available to the Company are approx. USD 23 million (gross), and the company expects to be able to meet its needs in accordance with its business plans, without the need for additional financing. In addition, the company works to locate and obtain financing alternatives such as government grants.

In 2021 H1, NRGene closed its TASE listing, raising ~\$30M gross according to approx. \$114.6M post-money valuation.

Last Known Pre-Money Valuation

We analyzed a database of approx. 630 deals of Ag Biotech companies, using data from Pitchbook, a financial database. To form a representative sample, we cleaned the data by removing deals made before 2019, angel/seed deals, or observations that had partial data. Based on the mentioned sample, we calculated the Ag Biotech VC's average last known pre-money valuation size to be \$146.0M (n=22, appendix 2). This benchmark stands in line with NRGene valuation at its IPO of approx. \$114M.

Valuation by EV/Revenue multiple

We used the following multiples for our valuation:

• 1. We examined NRGene's agriculture/farming industry, using data from 32 firms (as of 2020ii). We found that the average EV/Revenue was 1.35.
• 1. We also calculated an AgTech industry revenue multiple based on a similar companies sample using Pitchbook's data set. The average revenue multiple for the mentioned sample is 12.5, and the median revenue multiple is 7.1 (for more details, see appendix 2).

Above all mentioned multiples, we determine that our median AgTech revenue multiple (=7.1) is the most suitable for evaluating NRGene activity.

We believe that NRGene is still in the early stages of penetrating the market with its products and anticipate high growth in revenues in the next 5-7 years. As mentioned above, we deem that the company revenues at 2021 aren't representing its potential.

We applied the First Chicago Method to use valuation multiples, which VCs use to evaluate growth firms like NRGeneiii . NRGene's current revenue doesn't reflect its potential, so we used similar companies' revenues as a benchmark. Based on our sample, the average revenue for a company in the same specific market was US\$39.9M (see appendix 2).

Therefore, assuming it would take NRGene approx. 5 years to reach US\$40M revenues, alternatively, US\$13.1M at present (using our CAPM rate and additional risk we added to reflect future risk). Thus, following the first Chicago method, NRGene's current EV will be US\$13.1M multiplied by 7.1, which equals US\$93.0M. Lastly, we added the cash as a non-operational asset of US\$26.9M. Thus, according to our revenue multiple, we value NRGene activity at \$119.9M.

Valuation summary

NRGene is a growth firm. Thus, we based our valuation on current and future market trends and the company's assumption for future operations. Due to the high growth in the Ag Biotech market and the uniqueness of NRGene solution, we estimate the company is well-positioned to generate significant growth in the foreseeable future.

We conducted NRGene's valuation using market benchmarks from recent deals and analysis of VC's activity; Given the assessments and findings mentioned above, we value the company's stock price target in the range of NIS 29.4 to NIS 32.4, and a mean of NIS 30.9.

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Endnotes

i "World Population Projected to Reach 9.8 Billion in 2050, and 11.2 Billion in 2100," United Nations, June 21, 2017.

ii http://pages.stern.nyu.edu/~adamodar/New\_Home\_Page/datacurrent.html#multiples

iii Rothman, T. "Valuations of Early-Stage Companies and Disruptive Technologies: How to Value Life Science, Cybersecurity and ICT Start-ups, and their Technologies'', Springer Nature, 2020.