We wrote about London AIM-listed Eden Research early in September when we reported that the company had had a hard time of it in 2016 and that its woes seemed to continue into 2017, with the result that its share price suffered a gradual decline. However, the group’s interim results for the six months ending on June 30 2017 were released on September 29 and they suggested that the company’s fortunes were improving.

Eden was floated on AIM in 2014 and by late 2015 reached a share price high of 25 pence. The shares then began their descent and by early September 2017 they stood at 11.50p. Since then they have fluctuated between a low of 9.38p and a high of 14.50p. So what has gone wrong? Well, nothing cataclysmic. A company with a market cap of £20.25million obviously has value.

The company’s poor share price performance stems from the reality that many start-up concerns involved in technological innovation and on the frontiers of scientific research need substantial funds to establish patents, acquire intellectual property rights, develop products and get over regulatory hurdles. This process can quickly eat up the start-up monies.

Eden describes itself as an early stage revenue company that provides natural bio-control products and microencapsulation technologies to the global agricultural and animal health industries; finding solutions to problems in these two sectors.

In Eden’s case something in the region of £12million 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.

Eden Research gains traction with its breakthrough insecticide for bortrytis on grapes,: photo: www.edenresearch.com

The company was not exactly idling throughout 2016. First, there was a capital raise of £2.6m which gave the company elbow room to develop its products. Second, early in 2016 Eden received recognition of  its first agrichemical product 3AEY, a fungicide which targets botrytis on grapes. Approvals for commercialisation were authorised in Kenya, Malta, Greece, Bulgaria, Spain, Italy, Cyprus Albania, Italy and Spain.

Perhaps most encouraging of all is the change in the company’s sales model instigated early in 2017– what Sean Smith has called ‘the evolution of our business model from a technology licensing model’.

House broker Shore Capital commenting on this said: “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.

All of this, of course, was not enough instantaneously to change Eden’s fortunes. But as the interims report shows these developments started to bear fruit in the first half of 2017. Early in this year France also gave its approval for 3AEY use and first commercial sales were achieved. This was significant since with Spain and Italy on board with 3AEY it means the approvals are in place in three of the largest grape producing countries in the world.

Also in the period Eden successfully concluded a series of commercial agreements with one of its existing partners Sipcam SPA which paid the company a fee of Euros 0.6m (£0.5m) for certain rights to Eden’s agrichemical products in a number of important territories. Additionally, Sipcam made a strategic investment in Eden subscribing to £2.2m in new shares and consequently has become a significant shareholder with a 9.9 per cent stake in the company.

Revenue for the first half of 2017 was £1.03m against £0.11m in the first six month of 2016. Pre-tax profits for the period were £0.21m compared to a H1 2016 loss of £0.86m. Cash and cash equivalents were £3.66m (H1 2016: £2.01m).

Commenting on these results Shore Capital is forecasting revenue of £1.7m for year but says they are still anticipating a loss of £1.5m before tax due to management investing in more resources.

This might explain why the shares are still bumping along near the 52-week low at 9.75p  today. But the broker also says: “We remain of the view that the group is now well placed to drive value creation going forward.”