Shareholders in London AIM-listed Eden Research had a hard time of it in 2016 and for that matter the first half of 2017. The company was floated on AIM in 2014 and in 2015 reached a share price high of 25 pence. The shares collapsed towards the end of 2015. They are now 11.50p having moved between a high of 14.2p and 9.38p for the past year and a half. The question is given this is a £23.8 million market cap company and has value, why have the shares been bumping along the floor for 18 months?

The company describes itself as an early stage revenue company that provides natural bio-control products and microencapsulation technologies to the global agrochemicals and animal health industries. Eden’s encapsulation technology harnesses the biocidal efficacy of naturally occurring chemicals produced by terpenes (plants).

Stripped of the jargon, this means Eden is like a pharmaceutical group but rather than looking for breakthrough drugs and medicines to cure human diseases and alleviate illnesses, the company is working on the frontiers of scientific research mainly trying to find insecticides and other solutions to agricultural problems in plants, crops and animals. Although it also aims to develop consumers drugs for humans.

The company’s poor share price performance stem from the reality that many start-up concerns involved in technological innovation need substantial funds to establish patents, acquire intellectual property rights, develop products and get over regulatory hurdles. This process quickly eats up the start-up funds.

Eden gains traction with its breakthrough fungicide against bortrytis on grapes,

In Eden’s case something in the region of £12m has been invested in developing and protecting its intellectual property and seeking regulatory approval for products that rely upon the company’s technologies. While this money was being spent CEO Sean Smith said that apart from being an early stage revenue company, it was also operating under funding restraints.

The company had two developments. First, in March 2016 some £2.6m before expenses was raised from new and existing institutional shareholders. The raise was run by Shore Capital Stockbrokers — which registered Eden Research as a house stock — through the issue of 25,365,854 new ordinary shares of 1p each at a price of 10.25p each. This gave the company a breathing space from its financial stresses.

Second, early in 2016 Eden received approval for its first agrichemical product 3AEY, a fungicide which targets botrytis on grapes. Approvals for sales were authorised in Kenya, Malta, Greece, Bulgaria, Spain, Italy, France, Cyprus and Albania. There were actual sales in Greece, Italy and Spain. This was seen as significant as Spain and Italy are two of the largest grape producing countries in the world,

All of this of course was not enough to instantaneously change Eden’s fortunes. When the final results for 2016 were eventually released on May 22, revenue came in at £0.4m compared to the £0.9m for 2015.and Eden adjusted reported an EBITDA loss of £1.1m compared to a loss of £0.2m in the prior year. These results depressed the share price on the day. But there were some positive developments for the future in the results report. Towards the end of 2016 it was announced that Eden had signed an exclusive, global commercialisation agreement with Taminco BVBA, a subsidiary of Eastman Chemical Company’s global crop protection division, for Eden’s nematricide product which will be marketed by Taminco as “Cedroz”.

Since the end of 2016 France has also given its approval for 3AEY, which means the approvals are in place for 3AEY in three of the largest grape producing countries in the world. Most encouraging of all is the change in the company’s sales model, what Sean Smith has called ‘the evolution of our business model from technology licensing model’.

Shore Capital commenting on this says: “Eden has now taken control over the supply chain for its products so will receive a gross production margin on top of the licencing model where it receives royalties and milestone payments. We remain of the view that the group is now well placed to drive value creation going forward.”