There was no paradise for Eden Research PLC (AIM:EDEN) this morning as its shares dropped after it revealed that its 2016 revenues are set to halve year-on-year, which offset news of a commercialisation deal for one of its products.
The agrochemicals and animal health firm said its revenues for the year to the end of December are expected to be around £400,000, compared to the £883,312 it made a year earlier.
Eden has this year shifted its business model from licensing its technology to product sales, which has meant it has received lower upfront payments.
It said this, combined with delays in securing regulatory approval for its products in certain countries, has weighed on its income.
In reaction, Eden shares dropped 16%, or 2.25p lower to 11.75p.
Eden added that it remains confident on its medium-term outlook, with sales of its 3AEY fungicidal product, for treating botrytis in wine grapes, due to start in France in 2017, subject to still-pending regulatory approval being received.
Commercialisation lift ...
The revenues warning overshadowed news of the deal with a subsidiary of US-based Eastman Chemical Co, which will give it exclusive right to develop Eden's nematicide formulation for commercial sales.
The product, a type of chemical pesticide used to kill plant-parasitic nematodes, will be marketed under the Cedroz brand name.
Eastman will pay Eden an undisclosed upfront fee as part of the deal, in addition to milestone payments through to 2019 when it is anticipated sales of the product will commence. The agreement will cover 29 markets globally, Eden said.
In a note to clients, analysts at house broker Shore Capital said that they “believe the agreement with Eastman is encouraging as has been the performance of 3AEY during the year but the financial performance is disappointing.”
They added: “The underperformance is a function of the decision to evolve the operating model of the company which we presume is because of the enhanced returns on a longer term basis at the cost of the short term gains alongside slower than expected regulatory approvals.
“We hope to gain further insight into both issues shortly and will provide updated financial expectations in due course.”