Eden Research’s trading update for 2018 suggests it is moving significantly closer to commercialism

Eden Research describes itself as a company that provides natural microencapsulation technologies to the global agrochemicals, animal health and consumer products industries. By the time Eden was floated on London’s AIM in 2012 the company had developed its first agrochemical product that was called 3AEY (now known as Melavone) which is a fungicide which targets botrytis, a mould that causes diseases in grapes.

The flagship Melavone started to gain recognition and interest amongst investors and by late 2015 the shares reached a price high of 25pence a share. As 2016 and 2017 rolled on, however, the shares began a gradual decline as there were few signs that a meaningful revenue stream was emerging. At one point the share price dropped to 7.50p.

The company’s poor share price performance stemmed largely from the fact that, like the other young or start-up groups involved in technological innovation, Eden had been an early stage revenue group. The company haemorrhaged funds (to the tune of £13million) over four years overcoming regulatory hurdles and proving its products’ commercial possibilities.

Eden’s problems were compounded by the fact that, in large part, it depended on technology licensing for its revenue. Realising that this method could not deliver in terms of meaningful cash flow, in the second half of 2017 Eden started to evolve from licensing to a system of sales to distributers and partners. This brought on quicker payments and improved gross margins. Eden became competent in managing its own supply chain.

This not only meant it could grow its Melavone business but also it would be able to enter into commercial agreements in other sectors such as human and animal health. Some of the benefits from the new sales strategy happened quickly. By Christmas 2017 Eden had gained approvals for Melavone use from ten countries including Italy, France and Spain.

These three are the world’s top wine producing countries. All three achieved first commercial sales. Three more countries including Australia were on the line. But Eden determined not to be a one product company. It continued to develop a pipeline of products for animals and humans in the second half of 2017 and the first half of 2018.

Eden’s flagship product is Melavone a fungicide which targets botrytis, a mould that causes diseases in grapes

The Half Yearly Report for the six months ended 30 June 2018 was released on 24 September 2018. From a first glance at the financials you wouldn’t know that the progress made in the second half 2017 continued in 2018.Revenue for the first half 2018 was £0.68m against £1.03m in the same period in 2017). The operating loss was £0.93m against a profit of £0.21m for the first half 2017. But the foundations for a more successful business had been laid.

A year-end trading update for 2018 was issued on 15 January 2019. Although there were a couple of black blots on the update release, the key financial was glowing. Eden said the loss before tax would be approximately £1m (2017: loss of £0.8m.) Against this, though, the company expected to deliver revenue for 2018 of £2.8m, up 48 per cent compared to the £1.9m achieved in 2017. The majority of revenue was product sales which doubled in 2018 to circa £1.6m.

The group’s cash position and balance sheet had benefitted from an injection of £2.2m as a strategic investment from Sipcam SpA, which gave the Italy-based multinational agrichemical group a 9.9 per cent interest in Eden. Sipcam also started acting as distributors and agent for 12 countries where Melavone has received regulatory approval.

Other diversification projects which began to crystallise in the second half of 2018 include the pending approval of Cedroz, a nematicide product which is a treatment for  parasitic worms. The partner here is Eastman Chemical. In October 2018 Eden announced its associate company Terpene Tech had received approval for its head lice product in the European Economic Area (EEA).

Finally, the update said that the launch of animal health products by Eden’s partner, Bayer Animal Health, has been delayed due to additional formulation work needed on one of the three initial products Bayer has developed. It is now anticipated that the launch of these products will take place this year.

Commenting on all this broker Shore Capital said: “Eden Research is advancing a number of product applications which our analysts think remain potentially exciting”.

The £23.23m market cap company’s share price was 11.75 pence last evening against a 52-week low of 7.50p and a high of 15.75p.

 

By | 2019-01-23T09:20:32+00:00 January 22nd, 2019|Eden Research Plc|Comments Off on Eden Research’s trading update for 2018 suggests it is moving significantly closer to commercialism