Its technologies are designed to “stimulate the immune system of plants,” says chief executive, Dr Christopher Richards, trying to keep things reasonably high level for me. “Think of them as vaccines for plants,” he continues.
Normally, that ‘stimulation’ is designed to repel the onset of stresses and diseases that can decimate crops.
Its main product today is Harpin αβ, a powerful bio-stimulant with multiple applications.
It is also at the start of the commercial journey with an exciting platform technology, called PREtec, which has the potential to create many differentiated products.
Richards believes in the world of agriculture these bio-scientific advances could be “truly disruptive”, adding that the market opportunity is worth in excess of US$5bn.
Earlier this month, trials of the first treatment from the PREtec platform, PHC279, delivered some stunning results following field trials in Brazil.
Named Saori for the local market, it was deployed on 16 fields to tackle Asian Soybean Rust, which is caused by a fungus that can result in a crop yield loss of up to 90%.
The data demonstrated the potential to deliver disease control and increased crop yield worth an average of US$85 per hectare, or a ‘six-times or more’ return on investment.
PHC said it has now begun commercial discussions with leading crop protection companies in Brazil.
Many of them have planted their own soybean trials to independently confirm the performance of Saori.
The PREtec platform creates chains of amino acids called peptides designed to encourage and increase growth rates, or enhance disease resistance, and are the result of eight years’ R&D and more than US$20mln of investment.
Just the start of the journey
Brazil is just the start for Saori / PHC279 with a ‘broader’ authorisation being sought in the US, where it works with Wilbur Ellis, one of the country’s large agrichemicals businesses.
“We have a joint development agreement with them, and we're looking at a whole bunch of different uses for PHC279 in fruit and vegetables in the US,” says Richards.
“We're also looking at seed treatment in the US for soy and corn, but probably first out of the box will be fruit and veg.”
It is worth pointing out that PHC279 is the first cab off the rank with other PREtec products to follow.
Richards says PHC’s patent estate around its use of peptides in agriculture is significant and broad-based, while casual analysis suggests that three main competitors in this field are some way back on the development and commercial timeline.
The gross margins from the PREtec platform are likely to be at least comparable with Harpin αβ (which are estimated to be around 70%), while the utility, stability and shelf life of these new products are likely to be best-in-class.
About the huge potential of PHC279 and 949 and 414 (which are next off the production line), Richards says this: “PREtec is potentially blockbuster disruptive technology.”
January’s trading statement from PHC revealed the company saw an uptick in revenues to US$6.6mln, which Richards describes as “still modest”.
Certainly, compared with the big beasts of the agrichemical world PHC is small fry; however if the PREtec opportunity crystalises this could change over the coming years.
Not that demand for Harpin αβ is standing still. Sales to Brazil’s sugar cane farmers were three times those of 2019, business with corn producers was up 180%, while sales to Wilbur Ellis doubled.
As well as the proprietary Harpin and Myconate products, the company has a Mexican business that is a third-party distributor of complementary plant treatments.
Substantial opportunity, says broker
The broker Arden has taken an in-depth look at the PREtec opportunity. It said its market analysis “indicated a substantial market opportunity with genuine demand for strong performing yet sustainable crop treatments”.
In its latest note, it said it had modelled PHC279 achieving a 2% share of a market worth US$5bn.
“With excellent gross margins of more than 70% and addressable markets likely to be larger than we model, we expect valuation in the long-term to be materially above this,” said analyst Andrew Simms.
His 30p price target (double the current market valuation) reflects a staged de-risking of the business as milestones are achieved - notably the recent registration of PHC279 in Brazil and the expected launch of the first product in the second half of this year.
Judging from the share price action of the past year, the market is (slowly) tuning into PHC’s potential.