Eden Research PLC (LON:EDEN) is advancing a number of product applications, which Shore Capital’s analysts think remain “potentially exciting opportunities”, albeit they will only model their financial impact once authorisations come through.
In a note to clients following a year-end trading update from the biopesticides products developer, the ‘house’ broker’s analysts said: “Overall, we see FY2018 as a year of good progress for Eden as it demonstrably builds a product portfolio capable of driving attractive medium-to-long term prospects.”
They added: “Whilst authorisations need to come through, the length and breadth of activity is genuinely encouraging to our minds and we expect momentum to further build in FY2019, especially if permission come through in the USA, the largest market for crop protection products in the World.“
The Shore Capital analysts said they will update their full-year 2019 financial forecasts for Eden Research after the preliminary results due in March.
But they continue to believe the group is “very well-placed for future development and penetration into the market with a growing and more diverse product development pipeline plus a broader array of commercial partners.”
READ: Eden Research expects to report 48% jump in revenue, modest operating profit after year of “pleasing growth”
In its update, Eden Research said it expected 2018 revenue to be around £2.8mln, below the Shore Capital analysts’ estimate of £3.1mmln but still a significant improvement year-on-year compared to the £1.9mln reported in the previous year.
The analyst noted that the strong revenue performance was delivered despite the business experiencing challenging market conditions in many southern European countries for its Mevalone fungicide product due to hot and dry summer conditions, once again.
The group expects to report a pre-tax loss of £1.0mln for 2018 broadly in-line with Shore Capital’s expectations for a £0.9mln loss.
A good year of momentum for Eden
“Eden has made good progress in FY2018 in our view with the Group's most recent success coming from its collaboration with ‘Sipcam’, its commercial partner exercising an option (£0.8m fee) over the exclusive distribution agreement for Mevalone, which is Eden’s aforementioned fungicide product,” the Shore capital analysts continued.
As a result of this agreement, Eden will be the exclusive distributor of Mevalone across 12 countries including Italy, Spain, USA, China, Brazil and Japan.
READ: Eden Research grape fungicide set for push into US and other regions as commercial partner picks up distribution option
The analysts noted that Eden Research awaits approval from the Environmental Protection Agency (EPA) in the USA for regulatory approval for Mevalone, Cedroz - a nematicide product, marketed by its partner Eastman Chemical - plus three active ingredients, decisions that are expected to come through before the end of 2019.
They said: “We concur with management that such approvals would be a significant strategic and financially positive events for Eden.”
The analysts also pointed out that Eden Research has also submitted applications for the authorisation of Mevalone in Australia, having gained approval in Macedonia already, while Eastman is also actively pursuing registration of Cedroz in 29 countries.
“Despite being subject to the regulatory review in each country, initial authorisations are also anticipated in 2019, making the current year an important one for the Group with this product, where momentum could be further built,” they added.
Additionally, the analysts noted that Sustaine, Eden's patented natural micro-encapsulation technology is being evaluated by more parties, including Sipcam, offering further potential in due course.
Broadening the market scope
In addition to its crop protection work, the Shore Capital analysts pointed out, Eden Research has also been focusing on broadening its reach by entering the consumer and animal health markets.
In October 2018, Eden research announced that TerpeneTech, an associate company which sells a head-lice product, had been granted regulatory clearance across the European Economic Area.
As a result, the analysts noted, TerpeneTech has been working closely with its distribution partner to launch the product in the UK in 2019 whilst also building a foundation with other distribution partners to further expand its offering in Europe and USA.
Meanwhile, Eden Research’s partner for its animal health products, Bayer was originally supposed to launch its goods in the USA but this has been delayed due to the need for what the group states is additional formulation work on one of the three initial products.
Subject to successful completion of the formulation work, which Bayer and Eden Research are working closely together to solve, the two companies anticipate that the products will be launched in full-year 2019, the Shore Capital analysts said.
Overall on Eden Research, the analysts concluded: “We see structural growth opportunities in its marketplaces, especially with the demand and awareness for natural solutions being at the forefront of Agri-Food minds compared to the long-standing but more challenged chemical-based solutions, from a societal perspective, which continue to carry potentially harmful effects.”
Eden Research shares were changing hands at 11.50p in Tuesday afternoon trading, down 6% on the previous session’s close, taking the stock’s decline in the year-to-date to around 12%.
However, on a one year view, the stock remains over 22% higher, having peaked at a high of 15p in April last year.