By Stewart Dalby
On 21 February this year we published an article which said, “Eden Research suffered a blip in its fortunes in 2019, but expects better times in the rest of 2020”. Simply put, Eden’s flagship product had a bad patch for a period in 2019. Following this blip the company started to put greater emphasis on finding another flagship product to bolster the first one, so that the company could at least return to the status quo ante and rebuild. That was the theory. Six months on from the Trading Update issued on 14 January 2020, shareholders might want to ask what progress has been made.
Eden Research, which was floated on London’s AIM in 2012, describes itself as: A company that provides natural micro-encapsulation technologies to global agro-chemicals, animal health and consumer products industries”.
After spending a large amount of money (around £12 million) proving up products, overcoming regulatory hurdles, establishing markets, creating patents and enduring losses, in 2018 Eden came up with a winner, which was initially, somewhat non-commercially, called 3AEY but is now named Mevalone. The fungicide Mevalone targets botrytis, a mould that causes diseases in grapes. Promoting Melavone during 2018, Eden found it was gaining recognition and investor interest, in that it was seeing sharply rising income, falling losses and a good share price increase.
In the first half of 2019. Eden had become competent in managing its own supply chain. Eden’s partner and main distributor, Sipcam, the Spanish Agrichem group, had become responsible for distributing Mevalone in 12 wine producing countries, including the three biggest, France, Italy and Spain and were in discussions with five new markets in central Europe including Germany and Poland.
But it seems that there had been a big hiccup in the company’s progress in the middle of 2019, which meant revenue was going down while losses were rising and the share price was sinking. This was contrary to the forecast of revenue for 2020 of approximately £2m (2018: £2.8m) with a loss before tax of around £1.4m (2018: £0.5m). So, what happened?
The problem was well-publicised. Extremes of hot and dry weather during the peak growing season badly affected conditions across southern Europe. This meant the use and development of Mevalone to tackle Botrytis was negatively impacted. The company maintained, however, that not everything was gloom and doom. It commented that the crop protection market is well known for its sensitivity to growing conditions and extreme weather situations. It added that as the company’s geographical footprint and product portfolio expanded, it expected the company’s operations to become more insulated from the variability of the weather.
Moreover, Eden had long determined not to be a one product company. It claimed it would develop in other markets while continuing to enhance Mevalone’s development. The revenue figure for 2019, though battered, was robust enough to grow its Mevalone business further from the said 12 countries plus where approvals have been given. It would also be able to enter commercial agreements in other sectors such as human and animal health. ‘
On 7 May 2020 the actual Final Results for 2019 were released. These fleshed out the points made in the Trading Update. The report said that in terms of diversification, the company had made progress. In particular, the company had been active in promoting Cedroz as its second commercial product. Cedroz is a bio-nematicide that targets plant -parasitic nematodes; which are microscopic soil-dwelling worms. The nematode population can cause considerable damage to a wide range of value vegetable crops and horticultural species.
In April 2019, Eden received zonal authorisation under the EU process for the registration of plant protection products. This meant that approvals were likely across Spain, France, Belgium and the Netherlands in due course. Also, in April 2019, through its distributor, the Eastman Chemical Company, Eden received authorisation for the first sales of Cedroz in Italy. These sales were made following the use of Cedroz, primarily on bell peppers, tomatoes and melons.
In October 2019, Eastman Chemical company received full authorisation for Cedroz from the Belgium Ministry of Agriculture to be used on a wide range of crops including cucumbers, courgettes, melons, aubergines and peppers. Cedroz gained entry into the important US agricultural market following successful trials in Mexico..
By then the marketing prospects of Mevalone seemed to be better. An exclusive distribution agreement was signed in December 2019 with SumiAgro Europe for Eden’s first flagship Mevalone in five new markets across Europe including Germany and Poland
In January 2020, in the post period end Eden signed a one-year exclusive Evaluation Agreement with Corteva Agriscience, the fourth largest agriculture input company in the world, which should move the business into a key, new area of seed treatments, presenting significant revenue potential. Finally, Eden successfully completed a £10.4m (gross) fundraise in March 2020, which puts the company in a position to capitalise on all the initiatives that have been launched.
The one negative development in the first part of the year has been that the management has started to see some disruption from Covid19 in terms of regulatory approvals slowing down and travel restrictions affecting the ability of distributors to work effectively. All this, as the company sees it, could jeopardise its investment in agrochemicals
An impartial observer would probably feel that this negative has to be set against the crop of positive developments the company has seen. The welter of new products in the pipeline shows that progress surely has been made. The problem is that the management has not attempted to quantify what has happened in 2019 and early 2020 in terms of better revenue and reduced losses. Revealing some figures would probably solve things.
But perhaps a look at the current share price would suggest that shareholders are happy with the state of affairs. On the evening of 8 July, the share price of the £31m market cap company was 8.15 pence, far off from the 52-week high of 10.98p, but a good way above the low of 4.65p.