Eden Research plc (LON:EDEN), the AIM-quoted company focused on sustainable biopesticides and plastic-free formulation technology for use in the global crop protection, animal health and consumer products industries, has announced its interim results for the six months ended 30 June 2021.
Financial highlights
· Revenue for the period of £0.79m (H1 2020: £0.60m*)
· Product sales of £0.66m (H1 2020: £0.56m*)
· Upfront and milestone payments of £0.10m (H1 2020: £0.02m)
· Operating loss for the period of £1.75m (H1 2020: £1.00m)
· Cash and cash equivalents of £5.75m (2020: £7.29m, H1 2020: £8.66m)
*See prior-year adjustment – note 17
Business & Operational highlights
· Exclusive Commercialisation, Supply and Distribution Agreement signed with Corteva Agriscience (NYSE: CTVA (“Corteva”)), the fourth largest agriculture input company in the world, for Eden’s first seed treatment product
· Received the London Stock Exchange’s Green Economy Mark in recognition of London-listed companies that derive over 50% of their total annual revenue from products and services that contribute to the global green economy
· Authorisation received for the sale of Eden’s bio-fungicide in Spain for use on a range of new crops for the control of an increased number of fungal pathogens
· Eden’s commercial collaborator, Eastman Chemical Company, received authorisation for the sale of Cedroz™ in Italy
Lykele van der Broek, Chairman, commented:
“Values based upon sustainability, biodiversity and climate have become increasingly important to consumers, businesses, investors, and campaigners concerned about the future health of the planet and society. Despite the disruption and distraction of the global COVID-19 pandemic, the prioritisation of these issues has actually accelerated as we look to reset and reboot our global economy with a more sustainable approach.
We were, therefore, very pleased to start 2021 by being awarded the London Stock Exchange’s Green Economy Mark, which recognises London-listed companies that derive over 50% of their total annual revenue from products and services that contribute to the global green economy. I am proud to state that 100% of our revenue contributes to the global green economy.
In addition, the Company has been working hard to solidify its formal Environmental, Social and Governance (“ESG”) credentials, which we hope will be well-received by our stakeholders and, in particular, ESG investors, for whom a concrete sustainability mission, set of goals and impact are paramount.
Of course, a successful business is not simply built on its ‘green’ credentials and so I am pleased to report that we continue to make commercial progress. Most notably in May, Eden signed a landmark, exclusive Commercialisation, Supply and Distribution Agreement with Corteva, the fourth largest agriculture input company in the world, for Eden’s first seed treatment product.
At the same time, the pandemic has continued to hamper regulatory processes, which means we are awaiting product approval in a number of countries for our biopesticide products, Mevalone and Cedroz. Furthermore, the pandemic and associated restrictions on travel and gatherings has hindered some commercial activities, including events and meetings that support the active and direct promotion of our products which are relatively new to the market and, therefore, would have benefited from more aggressive sales campaigns. Nevertheless, there are signs that the pace of regulatory activity is picking up, as we have received a number of key approvals in the first half of 2021, such as Cedroz in Italy and a key label extension for Mevalone in Spain, both major markets for Eden. Meanwhile, we continue to await approval in the vital US market for our three terpene active ingredients, as well as Mevalone and Cedroz. We anticipate there will be material progress to report towards the end of 2021.
Despite the obvious challenges of the past 18 months, impacting the whole of the agricultural sector, I want to reflect on Eden’s resilience during this period. Eden has grown significantly over the past few years and the Company boasts high commercial potential, which the team at Eden is working hard to nurture and realise. We now possess internal skills and capabilities that we could only dream of just one year ago, and our operating environment continues to evolve rapidly in Eden’s favour. I believe that we are well positioned to seize the market opportunity and truly live up to our full potential.”
Chief Executive’s Statement for the six months ended 30 June 2021
Introduction
Eden remains the only UK-quoted company focused on biopesticides for sustainable agriculture. We are operating at the heart of a sector on the rise – the biopesticide market specifically is growing at a rate of 15% per annum, due to increasing awareness amongst consumers, and consequently regulators, about the health of the planet and how and where food is produced and sourced.
All the while, as the population of the planet continues to grow and global standards for quality and safety increase, the pressure on our global food systems and farmers is higher than ever.
Eden exists to meet the need of global food producers seeking sustainable and effective alternatives to conventional chemical pesticides. Our mission is to be the leader in sustainable crop protection, supporting farmers by protecting their crops, improving yield and marketability, in order to keep up with rising global demand.
Through the first half of of 2021 the ongoing state of uncertainty and disruption caused by the COVID-19 pandemic globally, as well as the UK’s exit from the European Union, persisted. However, despite these factors, Eden has become increasingly resilient as a business in the face of the unprecedented global upheaval and has steadfastly continued to progress its strategy, capabilities and growth plans.
Meeting our strategic objectives
In the near term, our strategic focus continues to be on:
– Registering and commercialising our two approved products, Mevalone® and Cedroz™, in new territories and for new applications, including the United States;
– Developing the use of our novel microencapsulation technology, Sustaine®, with third-party active ingredients, including conventional agrochemicals;
– Building on existing opportunities with Corteva Agriscience, Sipcam and other collaborators;
– Advancing the development of our first insecticide product.
These objectives build on the work and achievements of H1 2021, which provide firm foundations from which we will continue to pursue our strategic and commercial goals.
Notable commercial highlights from H1 2021 include:
· New authorisation for the use of our biofungicide, Mevalone®, in Spain, where over 24% of the European Union’s production of fruit and vegetables originates;
· Regulatory approval for sale of Cedroz™ in Italy, covering tomato, eggplant, pepper, chilli, pepino, cucumber, melon, courgette, pumpkin, and strawberries;
· The receipt of the London Stock Exchange’s Green Economy Mark.
Post period updates include:
· New authorisation for the use of our products:
o Romania, the sixth largest wine producer in Europe, authorised Mevalone® for use on wine and table grapes;
o Morocco, which authorised the use of Cedroz on tomatoes and cucumbers. This is Eden’s first registration in this important territory
· New distribution agreement with Sipcam covering four North African countries; Egypt, Morocco, Algeria and Tunisia. Sipcam will sell Mevalone locally under the trade name Araw,for use against Botrytis on wine and table grapes, strawberries, tomatoes and cucurbits, including cucumber, courgette, squash, melons.
Forging landmark partnerships
In addition to the above, in May 2021, we were delighted to sign an exclusive Commercialisation, Supply and Distribution Agreement with Corteva Agriscience, the fourth largest agriculture input company in the world, for Eden’s first seed treatment product. This deal followed a successful multi-season evaluation of the use of Eden’s products and technology. The proposed product is based on our active ingredients and is delivered using our Sustaine® encapsulation technology.
This partnership, with a recognised industry leader, is testament to the potential of Eden’s products and technology. It marks a major inflection point for Eden as a company and represents our ambition to expand our technology to new product categories, crops, and applications globally.
Moving into insecticides
As well as developing our first seed treatment product, we are investing in the development of an insecticide for future commercialisation.
Open-field and glasshouse trials which will be used for regulatory purposes are underway in various parts of the world and a number of potential partners have shown an interest in undertaking field trials with a view to acquiring distribution rights to the insecticide product.
It is envisaged that commercial discussions with those interested parties will begin in early 2022.
Driving positive impact through sustainable solutions
Eden received the London Stock Exchange Green Economy Mark in January 2021, highlighting our credentials as a business driving positive environmental transformation. This accolade is given to London-listed companies that derive over 50% of their total annual revenue from products and services that contribute to the global green economy. The Green Economy Mark accreditation recognises the positive impact Eden’s products have on the global agricultural industry and Eden’s credentials as a company with sustainability at its core.
As the only AIM quoted company focused on sustainable and plastic-free bio-pesticides, we are ahead of the curve when it comes to offering sustainable alternatives to traditional pesticide chemistries.
We offer farmers effective alternatives to the conventional chemical pesticides which have historically dominated production, so that they can fill the gap created by shifting consumer demands and regulatory changes that have and will continue to remove many pesticides from the market. In addition, our Sustaine® encapsulation technology provides crop protection product companies with a plastic-free alternative technology to encapsulate active ingredients, in response to a greater awareness of the importance of biodiversity and soil/land health, as well as impending regulatory restrictions on the use of microplastics in agricultural products.
Financial Review
Revenue for the half-year increased to £0.79m (H1 2020 (restated – see note 17): £0.60m).
The focus for the business remains to grow revenue through product sales which will ultimately provide a sustainable, consistent source of income for the Company. In the first half of 2021, product sales increased to £0.66m (H1 2020 (restated – see note 17): £0.56m).
The cash position at the half-year was £5.75m (H1 2020: £8.66m).
As planned, administrative expenses in the year increased to £1.27m (H1 2020: £0.97m) with the introduction of new team members and additional costs in respect of the new office and laboratory facilities. Consequently, operating loss increased to £1.75m (H1 2020: £1.00m). The increase in operating loss is due to the aforementioned increased staff and facilities costs, as well as amortisation of £0.32m (H1 2020: £0.26m) and share based payment charges of £0.54m (H1 2020 £0.05m).
Brexit
As previously stated, the Company understands that the ownership of its EU approvals of Mevalone and its constituent active substances are not impacted by Brexit, since guidance has been published stating that the owner of such approvals can continue to be a UK resident company.
However, seeking regulatory approval in the UK market for Eden products has become somewhat more challenging due to the introduction of parallel, but not identical, regulations and the Company is now weighing up market opportunities and costs under the new regulatory framework. We are now better placed than before to navigate what are likely to be complex regulatory challenges following our investment in an in-house regulatory affairs team.
From an operational perspective, the Company has not experienced any significant issues with continuing to use toll-manufacturing facilities in mainland Europe, though it is monitoring this situation. The Company also has manufacturing capabilities in the UK as well as the US which would provide some flexibility in the event that this situation changes. In addition, it continues to be feasible for Eden to manage some of its operations through its Irish subsidiary, should this be necessary. Raw materials are currently sourced from outside of the EU and so there has been minimal impact on this part of the supply chain.
COVID-19
The past 18 months have been an exceptionally challenging period for the industry. Despite disruption, farmers globally had to maintain production levels and a united effort was required to ensure that the provision of fresh food and produce was undisrupted, whilst the COVID-19 pandemic continued. Eden has continued to provide its products and technologies to the global crop production industry through its global partnership network.
At the onset of the pandemic in March 2020, there was no direct operational impact for Eden, and our stakeholders were reassured by our strengthened balance sheet, following our March 2020 fundraising.
Some disruption was experienced as the pandemic unfolded, including reduced import and export activities, limitation on field trial capacity due to reduced workforces, and limited promotional activity. Some regulatory authorities were working at reduced capacity and we experienced delayed product approvals as a result. However, we have continued to make good progress with new authorisations from late May onwards. We have also been able to execute on some key operational plans such as opening our new facilities in Oxfordshire and making key hires.
Our position on how we are addressing the COVID-19 pandemic is as follows:
1 We Are Funded for Future Growth
In March 2020, we raised £10.4 million (gross) from investors, an achievement that the whole team is proud of particularly given the volatility and uncertainty in the markets at the time. This vote of confidence from our shareholders (both existing and new) has helped us capitalise on the global shift towards more environmentally friendly methods of crop protection, driving us to become a leading provider of sustainable solutions for global agriculture. Though the coming months will still present challenges for the Company, our employees and our partners, Eden remains debt-free and has a strengthened balance sheet allowing us to execute on our exciting plans. Our outsourced manufacturing model means that we retain flexibility over our choice of manufacturing locations with a low fixed cost base.
2 Our Industry Has a Pivotal Role to Play
The agriculture industry has a vital role to play in feeding the world through the crisis and minimising the economic fallout. Plant protection products play a fundamental role in agricultural production – without them, we would not be able to cope adequately with global emergencies such as COVID-19. The biopesticides market outlook remains undoubtedly positive, with a clear demand from consumers for sustainably grown produce and in response, a notable shift from growers towards greener farming practices. As we step into the ‘new normal’, consumer demand for a chemical-free supply chain will only grow further. Not only do people need food to survive, they remain conscious of where it comes from and care about the supply chain. The choices people are making to put healthy food on the table are driving what farmers grow in their fields and how they grow them with an increasing emphasis on sustainable practices and produce that is free from pesticide residues. This is the future of farming, and Eden is in the forefront of the movement towards sustainable farming practices.
3 Supporting Our Employees and Partners
As always, we are working closely with our partners as they continue to maintain their business of supplying our products to growers in an increasing number of countries. Our team is reviewing the situation every day so that we can adapt to any changes that may be experienced by our partners and ensure the health and safety of their workers is paramount. Closer to home, Eden’s team continue to avoid unnecessary travel and work remotely, part of the time. I want to thank our partners and, of course, the farmers who cannot carry out their work remotely and who are working hard each day to ensure that we have enough to eat now and in the future. Their work cannot stop, and we are grateful now more than ever for their efforts.
Dividend
There was no dividend paid or proposed for the six-month period. The Board continues to monitor its dividend policy.
Outlook
For the first time in 18 months, there are real signs of life and work returning to normal as the effects of mass vaccinations in developed countries come into effect. We are hopeful that a return to pre-pandemic levels of international travel and face to face business meetings will result in new revenue streams in the near future.
Despite these hopeful developments, we are conscious that the disruption to the agricultural industry is likely to remain for many months and years to come with key stakeholders impacted at all levels; from small-scale farmers, to regulators, to agricultural giants. We continue to be realistic about demand for high-value crop inputs, including Eden’s products, and expect demand to remain dampened for the remainder of H2 2021, but we are hopeful that conditions will gradually pick up thereafter. Adverse weather has also had an impact in a number of countries, including France, where hard late frosts have significantly impacted grape production.
For Eden, although we are pleased to say that our daily operations remain predominantly unchanged by the pandemic, delays to regulatory processes globally continue to negatively affect the rate of product roll out and commercialisation in most territories. This continues to adversely affect Eden’s sales growth. Nevertheless, in the past couple of months, we have already seen pick up in the pace of progress with new approvals for our products across Europe and North Africa and we are hopeful that this will continue as we move into the second half of the year.
In H2 2021, the Company expects to further establish itself and build on the initial sales achieved in the territories where it received approvals in 2021 so far, including Spain, Romania and Morocco.
The Company currently anticipates that the US EPA will approve the sale of Mevalone® and Cedroz™ in the United States in time for the 2022 growing season. However, there is little doubt that the current situation with COVID-19 and the consequential shutdown of certain government services, coupled with a fundamentally changed working dynamic, will have an adverse impact on operations at the regulator and, subsequently, the pace of approvals. Although the Company might expect to see some level of channel stocking, the overall levels of sales in 2021 still depend largely upon the timing of approvals relative to the growing season.
Whilst the various complexities of regulatory approvals, Brexit and a global pandemic have been challening, in addition to those always faced by any growth company, I am pleased with the progress that we are making and am confident that we will flourish. I am grateful to our new team, our partners and our shareholders for all of their support in helping us to realise Eden’s full potential. We are on the right track with the right resources and capabilities, and we are focussed upon exciting opportunites that should reward our efforts and patience in the future.
Sean Smith, Eden Research Chief Executive Officer
