NRGene Technologies Ltd.

Investor Presentation • Dec 12, 2021

INDEPENDENT EQUITY RESEARCH

NRGENE TECHNOLOGIES LTD - UPDATE REPORT 12.12.21

Signed numerous agreements with leading international companies; collaborating in R&D and commercialization with international companies; approved for funding for development of AI-based CRISPR technology from Israeli government; price target remains unchanged.

NRGene Technologies Ltd (TASE: NRGN) is a global genomics company that provides several innovative solutions for many agricultural applications. At its core, NRGene is a software company that uses AI to analyze big genomic data to optimize and accelerate the natural breeding of plants and animals used in agriculture. NRGene's mission is to provide an enabling platform for naturally strengthening the structure and performance of plant and animal genomes through cost-effective bioinformatics. The solutions provided by the company have been widely accepted by research organizations and key industrial players across ~300 projects.

Key events in Q3 2021 and the passing months:

• The company signed a number of agreements with international companies for access to its crop analysis software for a variety of crops.
• The company is working with an international company to collaborate on the production of improved cherry tomato varieties.
• The Israeli Innovation Authority approved financing of NIS 5 million through CRISPR-IL.

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

On the next page, we further elaborate on the main events in Q3 2021.

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

NRGENE TECHNOLOGIES LTD

12.12.21

Key events in the passing months and Q3 2021:

• On July 1, the company announced that it entered into a multi-year subscription agreement with a leading international seed company in the field of genetic testing in corn in the sum of approx. \$700 thousand
• On July 3, the company's Canadian subsidiary entered into an agreement with Protein Industries Canada, a corporation funded by the Canada Innovation, Science, and Economic Development Authority (PIC) to receive 50% of the actual cost of the Pea and Hemp Improvement Project as a meat substitute. Funding will be provided to the Canadian subsidiary by way of reimbursement of expenses up to \$700 thousand.
• On July 28, NRGene entered into an agreement with a leading international seed company to grant a non-exclusive license for the cultivation and commercialization of varieties resistant to the Tomato Brown Rugose Fruit virus (ToBRFV). The company estimates that, based on an analysis of the potential market size of the products and the chances of success of their commercialization, its revenues from royalties during the term of the agreement may add up to a substantial amount of revenue.
• On September 29, the company entered into an agreement with an international agrochemical company (a repeated customer of NRGene). In exchange for the provision of genetic information analysis services and the development of a DNA testing kit to improve the Canola plant, the company will be entitled to a payment of approx. \$400 thousand.
• On October 1, NRGene entered into an agreement with Top Seeds International Ltd. (Mitsui & Co. subsidiary) in which the two companies will jointly conduct R&D and the subsequent commercialization of cherry tomato varieties with improved traits.
  • o According to the agreement, NRGene will apply its AI tools for the acceleration and precision of the breeding process and will bear the costs of the research and development stages. Top Seeds will cover the costs of the production, business development, and commercialization of the improved varieties for farmers.
  • o If the project is successfully completed, NRGene will be entitled to royalties from the sale of improved varieties at rates in the range of 35% - 70%, depending on the composition of the varieties. The company estimates its expected investment in the project is approx. \$400 thousand and the expected date of receiving royalties is 2025.
• On November 30, the company received approval from the Innovation Authority for financing in the amount of NIS 5 million. The funding will be provided through an association called CRISPR-IL for the second 18-month project period, which begun in November 2021. This is the second stage of the CRISPR-IL project that started on May 2020. As part of the project, the goal is to develop an AI-based system for streamlining and precision genetic editing processes for a variety of uses, such as: medical needs, agriculture, aquaculture, organic waste treatment, and more.

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 a leading global genomics company that provides several innovative solutions for many agricultural applications. At its core, NRGene is a software company that uses AI to analyze big genomic data to optimize and accelerate the natural breeding of plants and animals used in agriculture. NRGene's mission is to provide an enabling platform for naturally strengthening the structure and performance of plant and animal genomes through cost-effective bioinformatics. Notable, NRGene has successfully demonstrated that its AI-enabled trait prediction tool is superior in the marketplace (e.g., the company successfully assembled the full genome of the hexaploidy wheat in just ten days).

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. To name a few, Syngenta, Bayer Crop Science, Mondelez, Bridgestone and Nestle are using NRGene's AI tools to improve agriculture production in various industries, including food & beverage, rubber, and paper & pulp industries.

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 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 is also among the most trusted emerging cloud-based genomic data solution providers with applications in both animal and plant breeding. 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 genomic requirements. We deem that NRGene is in a strong position for growth due to its initially strong market penetration, 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, 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 a leading global genomics company focused on innovative trait and variety development for a wide number of agricultural applications. At its core, NRGene is a software company that uses artificial intelligence to analyze big genomic data (e.g., bioinformatics) so as to optimize and accelerate the natural (e.g., non-GM) breeding of plants and animals used in agriculture. NRGene's technology is widely used to create disease resistant and climate resilient varieties with healthier nutritional compositions and maximizes yield potential throughout the value chain. In the field of plant genomics, the company offers a vast proprietary database and AI-based technologies to several largest seed and agriculture companies. The company's tools and services are already being deployed by several agribiotech companies and research institutes around the world for innovative trait and variety development. The company's solutions have been broadly implemented across ~300 projects and leading companies, including Syngenta, Bayer Crop Science, Bridgestone, Nestle, Suntory, and Mondelez are using NRGene's AI tools to improve agriculture produce in a variety of industries including food & beverage, rubber, and paper & pulp industries. Today, the company's annual turnover is \$US 7 to 8 million but revenue growth is expected to cumulatively grow between 150%-250% over the next two years. Below is a selection of NRGene's key solutions:

• DeNovoMAGIC: A genome assembly tool which constructs and reveals the full genome content (usually in the order of hundreds of millions to billions of DNA letters) of any individual by assembling small DNA pieces (150-15,000 DNA letters long) in the right order.
• GenoMAGIC: The company offers an advanced breeding analytic platform, to support key breeding decision making and to organize and efficiently store massive genomic data.
• PanMAGIC: This tool allows for the accelerated discovery of genomic and structural variations for a given species which provides a full genome-to-genome map of the trait for more effective exploration of genomic variation which enables comprehensive gene comparisons.

• TraitMAGIC: TraitMAGIC allows customers to discover the phenotype-genotype correlations in any organism with a complete trait-mapping package by generating a high-resolution recombination map which is used to reveal the complete segregation pattern in each progeny.

• SNPer: SNPer is based of vast genomic data analysis on a broad breeding population and the discovery of the minimal DNA marker set best representing the natural genetic diversity exists in the breeding population.

• SNPro: SNPro™ is an optimized and predesigned solution for soybean genotyping that uses NRGene's unique sequence-based diversity analysis to design SNP sets which significantly reduces genotyping costs.
• CannSCAN: CannSCAN™ is a genotyping analysis solution that provides breeders with a unique dated, genetic ID for each plant, as well as an analysis of relatedness between samples.
• QuickGENETICS: QuickGENETICS helps in analyzing the breeding population and generates unique genetic markers that enable the customer to stack the desired traits in elite varieties.
• Comprehensive Genomic Databases for a given crop/animal: The database helps in searching and discovering novel gene candidates and in designing DNA markers for the development of key traits.
• Full genomic solutions: The Company also offers full tailor-made genomic solutions based on customer's specific needs.

NRGene's mission is to provide an enabling platform for naturally strengthening the structure and performance of plant and animal genomes through cost-effective bioinformatics. NRGene intends to deliver on this vision by leveraging its core advantages including the improvement of variety development, enabling lower cost, more efficient, and shorter duration of R&D projects, broader data usage in decision making process, increased cost efficiency in genomics big data management that relies on cloud technologies (AWS), and a strong network of reliable and efficient genomic analytics partners.

NRGene's long-term go-to-market strategy is to become a one-stop shop for all plant and animal genomic requirements independent of where their partners and customers are in the agriculture value chain, from data production (development) with laboratories and other R&D services to support variety identification to production of the variety to providing the seeds\varieties to various breeding entities that support farmers around the world. Since year 2020 the company is actively involved in partnering with its customers in several crops/animals and geographies. The company and the customer co-invest into breeding new crop/animal, and following commercialization, the company is entitled for royalty from sales. The company currently has two main activities centers to realize its objective in becoming the preeminent plant and animal genomics company – (1) the GENOMICS Excellence Center and (2) IP codevelopment. The GENOMICS Excellence Center, located in Saskatchewan, Canada is a local cash crop-

oriented center (e.g., wheat, canola) focused on solving local production challenges. The other center of NRGene's long-term go-to-market strategy is IP co-development with major agricultural companies and breeders. Through these collaborations, NRGene will license its proprietary traits to these major breeders with the footprint to address global demand.

NRGene is in this strong position for growth through the successful implementation of its strategies due to the following factors:

• Initially strong market penetration: NRGene has already successfully signed deals with worldwide market leaders which provides the companies the needed case studies it needs to continue to drive market penetration growth
• Scalability: The company is ready to scale up its AI systems after completing ~300 projects focused on product improvement
• Knowledge, experience and expertise: NRGene has curated a robust knowledge base, based on data accumulation including exclusive expertise in all key cash crops
• Agile Business Model: The company offers a unique range of services and products (e.g., seeds) with proven capabilities to deliver value in various industries

At the beginning, customers and partners engaging with NRGene were very much on a bespoke project basis. Through these projects not only did the company's internal database grow exponentially (in many projects the company received the approval to use the established data) and the AI tools were constantly improved, but also the natures of its relationships with market leaders change. NRGene then moved to provide a subscription- based model that provided customers and collaborators access to its database and software solution. Specifically, the customer engages in a multi-year agreement and receives a cloudaccess to the company's software and analytics to support their breeding programs. This ensures that the revenue was coming into the company on more regular and predictable basis and provided the company a strong foundation to support continued growth. Today, the company is yet again evolving its business model aimed at deriving long-term returns on traits that would only be possible with the support and use of NRGene's unique tools and bioinformatics technologies. The company joins forces with its clients to conduct co-development of new elite varieties (IP) (e.g., Mitsui & Co.). The revenue includes one-time down-payment plus royalties from sales of the co-developed products. Specifically, NRGene is licensing its novel IP (seed traits and or varieties) to seed companies/distributors in return for royalties from seed sales to farmers. For example, NRGene discovered a tomato trait in Ecuador for a known disease after its

customer asked it to make a hybrid tomato using varieties from Ecuador and from Israel. NRGene and customer co-own the IP on disease resistance tomatoes, and it has already begun licensing this trait. To date, it has already signed five deals some are market leaders and NRGene will earn royalties from all tomato seed sales that harbor NRGene's trait for 10 years since first commercialization.

All of the aforementioned factors positions NRGene to being one of the most innovative companies in the plant and animal genomics market. The solutions offered by the company have been widely accepted by several research organizations and big industrial players and allows for the company to consider a wide range of go-to-market strategies to capture the value it's creating in the agriculture value chain. The company has an extensive research and development team, which mainly focuses on developing innovative products in the plant and animal genomics market with its large network of R&D facilities in the U.S. and Israel.

2. Business model

Until recently, NRGene provided AI-based software solutions through two complementary business models:

• 1. Subscription to access a genomic data analysis software The customer engages in a multi-year agreement and receives access to the Company's software and services.
• 2. Data analysis services The Company provides computational and bioinformatic services to support the R&D efforts of its customers, aiming to develop new elite varieties. The Company revenue is comprised of payments for those services.

As part of its strategy, the company decided to focus on long-term and recurring transactions. As estimated by the company, these types of engagements are preferable for its clients as it reduces the involved risk for them and expands NRGene's profit at the same time.

We believe that this model benefits NRGene for two main reasons:

• A. The company could accumulate know-how with each project, which will support its future growth and will be a crucial differentiator.
• B. The mentioned business model allows the company to unlock a portion of the potential value stored across the value chain that wasn't accessible beforehand (through royalties received from its clients).

3. Intellectual Property

The company has successfully assembled over 500 genomes of several species of which some are housed in its internal database using its proprietary AI model. The database includes plants 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 plants that generate the most revenue for producers (e.g., cannabis). The company is also among one of most trusted emerging cloud-based genomic data solution providers with applications in both animal and plant 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.

4. 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	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 (TBRFV)	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 >100 versatile species of plant and animals using its generic 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 four segments 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 seed royalty business aimed at directly solving specific challenges on the farm including offering varieties 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 ana a simple roadmap to advance their breeding programs. Once the predicted variety is identified, then the variety is produced either using an expedited breeding process, gene editing or CRISPR. This process allows for improved varieties to 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 favourable 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 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

NRGene's total revenue for H1 2021 amounted to \$2.1M (\$1.5M from Subscription, and the rest from Data analysis services), compared with \$2.8M in H1 2020. The Company's backlog as of June 31, 2020, was approx. \$6.6M. As of June 30, 2021, the company's backlog was estimated at approx. \$6.1M.

As of June 30, 2021, the company had \$21.9M in cash, \$5.0M in short term bank deposits and an insignificant amount of loans; the company equity was NIS 20.5M; net loss in H1 2021 was \$4.7m, compared to a loss of \$1.9M in H1 2020.

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

Revenue By Product (in thousand USD), 2019-2021

Subscription to access a genomic data analysis software Data analysis services Total

In light of the shift to recurring and royalties-based revenue, we expect the company revenues in 2021 to decrease compared with 2020. Yet, we believe that the Company's potential will be seized in the next few years, as projects currently under development will reach commercialization and generate significant revenues.

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 NRGene iii . 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.