Chief Executive Officer's Review for the year ended 31 December 2022

 

Section one: Introduction

 

2022 saw an immense effort by the whole Eden team to achieve a number of significant landmarks which has built the foundations for significant growth in 2023 and beyond.

 

In 2022, we observed some of the hottest temperatures recorded across the globe which led to dry growing conditions across Europe, high food prices, and reduced supply. Furthermore, the war in Ukraine has required companies to navigate difficult supply chain issues while also managing high energy costs against the background of a global energy crisis. This has had an adverse effect on the demand for pesticide products driven by a reduction of fungal disease and a generally reduced demand for pesticides in many major categories.

 

Despite this, Eden has successfully executed several key label extensions across new crop types and target diseases, as well as authorisations in new territories. We have not only beaten last year's sales performance, but we have also outperformed market expectations in terms of both volume and value.

 

Most notably, the Company gained US Environmental Protection Agency (EPA) approval, granting us access to the US market, paving the way for a very significant market entry. This has been the result of the regulatory team's tireless efforts over the past four years, working with the EPA to ensure Eden met its extensive list of strict requirements. At the state level we have currently received regulatory approval in 17 US states for Mevalone®, and 8 US states for Cedroz™. We continue to work to gain approvals from the other states, including key states such as California.

 

Section two: Delivering on our strategy

 

By 2027, it is estimated that the global biopesticide market will be worth more than $11 billion, growing at a CAGR of 15% per annum. On average, the time it takes to bring new conventional agricultural products to the market is estimated at around 10 to 12 years at a cost of $300 million. With that as the backdrop, it is important to note that Eden's leverage of its three registered active ingredients and formulation delivery system, Sustaine®, allows us to move relatively quickly to formulate new products and introduce new solutions to the increasing challenges facing growers, particularly as regulatory compliance becomes more demanding.

 

As the only UK-quoted company developing plant-derived biopesticide formulations and plastic free encapsulation technology, we believe that Eden is uniquely positioned to offer investors exposure to a compelling segment of the sustainable agricultural market.

 

The Company strategy is built on four key objectives:

 

a)    Business line diversification

-     Pursuit of opportunities in seed treatments

-     Development of insecticides

-     Expand crops and diseases treated, increasing the addressable market for existing products

-     Geographic diversification

 

b)    Research, development, and operations

-     Supply chain optimisation

-     Expansion of in-house screening and field trials capability

-     Accelerate commercialisation of Sustaine® for conventional actives

-     Increase self-reliance in R&D

-     Reduce time to market

 

c)    Commercial growth

-     Regulatory clearance in new countries, crops, and diseases

-     Accelerate Sustaine® development

-     Partnerships for Mevalone® in new territories

-     Pursue collaboration with majors and select national partners

-     Route to market optimisation

 

d)    Strengthening and growing the team

-     Added capacity in R&D, including microbiology, plant biology, agronomy, and analytical chemistry

-     Robust approach to data quality

-     Expand commercial team

-     Addition of in-house regulatory expertise - accelerating time to market and reducing regulatory costs

 

Reflecting on these objectives, I believe that we have made significant progress with expanding the growth of our existing products while also continuing to pursue new opportunities through new product development. Eden has been delivering against these objectives in the following ways:

 

a)    Widening our global market opportunities

 

USA EPA Approval

 

In September 2022, Eden was granted regulatory approval from the United States EPA for all five petitions submitted, covering the Company's three active ingredients (eugenol, geraniol and thymol), formulation technology (Sustaine®) and two formulated products (Mevalone® and Cedroz™). It is worth noting that regulatory clearance on a federal level of our active ingredients will allow for easier and faster registration for all future formulations based on these ingredients.

 

Eden stands amongst very few British crop protection companies to obtain approvals for multiple biopesticides in the US. The market potential in the US for Mevalone® and Cedroz™ alone stands at approximately €94 million and €189 million per annum, respectively. This excludes the opportunities for bioinsecticides which are estimated to be worth an additional €237 million. With increasing regulatory pressure on conventional pesticide products across the country and a general steer towards sustainably grown produce, the market opportunities are only likely to expand.

 

Since receiving EPA approval at federal level, Eden has also obtained a number of important state authorisation such as Florida, Washington, Oregon, and New York. With these individual approvals now in place, our distribution partner, Sipcam Agro USA, can start to sell Mevalone® in the 2023 growing season. In December 2022, Eden fulfilled its first order for the US market.

 

Mevalone®

 

Over the course of the year, Eden received various label extensions for Mevalone®, including in Italy where Eden and Sipcam are now allowed to target two new fungal pathogens and a wide range of new crop types with an expanded Mevalone® label (sold in Italy under the brand name 3logy® by Sipcam). We estimate that this expansion of the label for 3logy® adds thousands of hectares of high-value crops to our addressable market.

 

We are currently hard at work to further optimise our distribution network, and we anticipate announcing new partnerships in the coming months; all aimed at adding new territories or expanding our use case in existing countries.  An outstanding example of such optimisation is the appointment of Corteva France as our exclusive distribution partner in France in December of 2022, replacing the incumbent distributor.  Corteva's assessment of the French market is that new opportunities have emerged as the consequence of the removal of key conventional pesticides. 

 

Working with Corteva, Eden is pursuing the significant expansion of the label for Mevalone in France, targeting both downy mildew and powdery mildew and resulting in an up to ten-fold expansion of the addressable market in France.  Preparation of the necessary regulatory submissions is well under way with the efficacy trials data required to support these submissions now complete.

 

Post period end, we were pleased to secure our first regulatory approval for the consumer market with clearance for Mevalone® in Italy for home garden use. This will allow Italian gardeners the same access as commercial farmers to a sustainable fungicide to protect their plants and crops from destructive fungal pathogens.

 

Organic certification

 

In November 2022, it was announced that Mevalone® and Cedroz™ received certification for organic farming in Greece. The certification, received by Eden's regional partner, K&N Efthymiadis (K&NE), follows the authorisation of Eden's three EU-registered active ingredients for use in organic farming in 2020.

 

b)    Expanding our product line and applicable uses

 

Insecticide

 

Field trials in 2021 and 2022 have produced encouraging results for our insecticide candidates. The Company is pleased to be in position where it has now agreed on a final formulation, entered into testing agreements and sent trial-scale samples to multiple interested parties who are undertaking their own trial work. Eden has started to see results from its potential partners come in and we are pleased to say that they are, thus far, in line with our own results. The Company expects there to be a high level of interest for this product, particularly in the key markets of Europe and the US.

 

Seed treatment

 

We continue to make steady progress with the development of our seed treatment product, in partnership with Corteva Agriscience. During the last two years, the companies have worked closely together to undertake field trials and other development work. The field trials conducted during this time yielded positive results with efficacy that is comparable to, or better than, the incumbent product that is being removed from the market. We are now in the final stages of collating the information that is required to make a full submission for authorisation of the product in the EU and selected additional territories. It is expected that launch of the product in the EU will occur in time for the 2024 growing season, although both companies acknowledge that this is an estimate and is subject to revision, dependent on development and product registration milestones being achieved as anticipated and the pace of regulatory action by the authorities.

 

Eden is also pursuing further opportunities in seed treatments, including fungicidal and nematicidal applications.

 

Sustaine®

 

Over the course of Sustaine's existence, Eden has received numerous enquiries about using the technology with third party active ingredients which also require an alternative solution to plastic. Field trials are currently underway with multiple partners to fully exploit its capability and decisions regarding future evaluations based on current trials are expected in due course.

 

c)    New team additions to drive next phase of growth

 

Our recent growth is largely attributable to the core skills and strengths of the team that drives Eden. Over the course of the year, we have hired new staff across vital divisions of our business from regulatory affairs to research and development. The Eden team now has the necessary capabilities to formulate, develop, test and register products that it has created. Our headcount by year end stood at 19, which we view as the optimum level at this time to continue to progress along our high growth trajectory at a faster pace than possible in the past.

 

In September 2022, we welcomed Richard Horsman as a Non-Executive Director to the Company. Richard possesses an abundance of industry, commercial and corporate acumen and expertise which will help drive Eden through our next phase of growth. This not only applies to maximising the potential of our existing opportunities, but also driving new opportunities that share synergies with our core business.

 

Section three: Financial review

 

Revenue for the year was £1.8 million which marked a 50% increase on the previous year (FY21: £1.2m). This reflects a significant increase in product sales which were £1.6m, a 45% rise on last year's products sales (FY21: £1.1m).

 

Our earnings before tax have also improved. In 2022, we recorded a reduced loss of £2.6m which compared favourably to the previous year's performance (FY21: £3.4m loss).

 

Administrative expenses remained flat at £2.7m (2021: £2.7m), while additions to intangible assets, including development costs, reduced to £1.0m from £1.6m in 2021.

 

Our cash balance at year-end was £2.0m (2021: £3.8m).

 

At present, there is currently no near-term plan to pay a dividend. However, the Board continues to review the Company's dividend policy.

 

Section four: 2023 outlook

 

With the groundwork having been laid throughout the course 2022, our strategy for 2023 is to maximise the sales potential of our current products in existing markets, continue to expand our geographic reach and target disease portfolio, and accelerate the development of new products and formulations based upon our terpene-based active ingredients and yeast-derived, plastic-free formulation technology.

 

Continuing our progress in the US market in 2022 (where in September we received authorisation for our portfolio of three active ingredients formulation system and two formulated products, Mevalone® and Cedroz™, from the US EPA), subsequently Eden applied for state-level authorisations in multiple states, including Florida, Washington, Oregon and California. A number of states - including New York State - have already granted their authorisations with more due in 2023, including the largest US market for Eden: California.

 

Eden is also targeting regulatory approval in the United Kingdom where we have submitted an application for authorisation for Mevalone®. While the addressable market potential in the United Kingdom is not as significant as it is elsewhere, the opportunity as a British-based business to provide our products to the British market is exciting. Furthermore, despite its size, the market for botryticides in the UK is growing rapidly as the number of hectares dedicated to wine production increases.  We are looking forward to forming close partnerships locally and being part of the UK's efforts to meet its sustainable agricultural goals.

 

Elsewhere, we continue to pursue other territories across the globe and have numerous applications for regulatory approvals of Mevalone® and Cedroz™ pending. This includes Germany, Poland, New Zealand, Morocco and Tunisia.

 

Eden is also exploring the suitability for Mevalone® application on cannabis in the US and Canada. The market potential for Eden in cannabis production could be significant considering recent legislation changes in the US and the significant need for pesticides on this crop. Furthermore, cannabis has multiple crop cycles per year which require year-round application of crop protection products. Field trials commenced in 2022 and we continue to assess the effectiveness of Mevalone® against several diseases including botrytis.

 

Evaluations in additional areas of significant commercial potential include black sigatoka (banana), potato blight and potato cyst nematodes.  In each case, the initial evaluations have produced encouraging results.

 

Following our first regulatory approval for consumer home and garden use in Italy, we look forward to continuing this momentum as we look at accessing other territories worldwide so the home gardener can also benefit from the safety and efficacy that Mevalone® provides. Our breakthrough in one consumer market is the beginning and the ability to offer home gardeners the same tools serves as another demonstration of the versatility of our sustainable products and technology.

 

Finally, we are working hard to move forward with new products including insecticides, seed treatments, and optimised fungicides. Subject to regulatory authorisation, we expect to see the first sales of our seed treatments developed with Corteva in 2024 and the first sales of our insecticides in the US in 2024/2025 and in the EU in 2025/2026. Ongoing EU regulatory developments around the use of intentionally added microplastics in agricultural products should also prompt accelerated development and deployment of our propriety Sustaine® microencapsulation technology across a number of active ingredients in addition to our own.

 

Section five: Driving positive impact

 

Sustainability lies at the heart of what we do at Eden. We are focused on providing innovative and sustainable solutions to the global agriculture industry and beyond. It is with this philosophy that we aim to perform a fundamental role for farmers looking to adopt sustainable farming practices without adversely impacting their output or bottom line.

 

Sustainability can often pose a systematic challenge for the agricultural industry as it looks to contend with feeding a growing population while also protecting our planet. Our growing portfolio of products helps farmers to protect natural biological ecosystems, as well as their high value crops, meeting the growing demands of both consumers and regulators. The ingredients we use to formulate our products; geraniol, eugenol and thymol, are naturally-occurring materials used by plants themselves as a part of their own defence systems.

 

Moreover, our products have been certified as organic in the EU. This is a valuable classification for Eden as we are seeing rising demand for organic produce amongst consumers and growers, a trend also reinforced by regulation. Under its Farm to Fork strategy, the EU has proposed that at least 25% of the EU's agricultural land should be farmed organically by 2030, and the action plan supporting this change has now reached the public consultation phase.

 

Increasingly, regulatory restrictions over crop protection product usage and a drive towards organic farming is apparent right across the globe and demonstrated quite clearly in the UK with the introduction of the Department of Environment, Food, and Rural Affairs' new Environmental Land Management Schemes (ELMS). Under ELMS, farmers in England will be entitled to a Sustainable Farming Incentive payment which focuses on soil health and reducing the use of damaging inputs such as fertilisers and insecticides. In the context of our regulatory application in the UK, we continue to review the associated opportunities and risks. Moving forward, we look forward to working with our distribution partner and local farmers as these regulations evolve in a post-Brexit environment.

 

TerpeneTech (UK)

 

Sales of geraniol into the biocide sector have continued to increase year on year and TerpeneTech (UK) is investigating the potential to register additional active ingredients under the EU's Biocide Directive.

 

Sales of the head-lice treatment product have still not started outside of the U.K. as had been expected. Eden is in discussion with TerpeneTech (UK) to determine the best way forward with this product.

 

TerpeneTech (Ireland)

 

TerpeneTech (Ireland) was established in 2019 to hold the registration of geraniol under the EU's Biocidal Products Regulation, due to changes brought about by Brexit. As such, TerpeneTech (Ireland) receives royalty income from TerpeneTech (UK) on the sales of geraniol but is otherwise non-operational.

 

Ukraine

 

Eden does not currently have any business activities in Russia or Ukraine and, as such, has not seen any direct impact on its business.

 

The knock-on effect of the conflict on other countries also appears to be minimal and so we do not envisage significant disruption to the current business in the short term.

 

Section six: Summary

 

Eden has pivoted from being a small agrochemical development and licensing company to an operating business with meaningful and growing product sales and a strong development pipeline. This is reflected in our 2022 results which show that we have beaten last year's sales performance and outperformed market expectations in terms of volume and value. With each milestone that we pass, Eden remains ambitious in our plans to continue expanding our regulatory and commercial footprint, growing our network of partners, and increasing the size our addressable markets. We also remain risk-aware to changing consumer and regulatory trends as well as global climatic and economic conditions, and I can confidently say that our business model has so far proven to be resilient to all these factors and we will continue to ensure Eden remains firmly grounded.

 

I am proud of the role Eden is playing in helping create more sustainable agricultural practices as the only UK-quoted company focused on sustainable chemistry for the biopesticide industry. Today we are viewed by our peers as the biocontrol standard for biofungicides. I would like to take this opportunity to thank our team which has played a significant role in delivering the results for 2022, and to our shareholders who have backed us throughout the year.

 

Sean Smith

Chief Executive Officer

 

4 May 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated statement of comprehensive income for the year ended 31 December 2022

 

			2022				2021
	Notes		£				£
Revenue	4		1,827,171				1,228,580
Cost of sales				(997,011)				(667,343)
Gross profit			830,160				561,237
Amortisation of intangible assets				(495,818)				(434,630)
Administrative expenses				(2,749,240)				(2,694,290)
Share based payments				(152,135)				(640,597)
Operating loss	5			(2,567,033)				(3,208,280)
Interest income	8		192				98
Finance costs	9		(22,046)					(32,074)
Foreign exchange gains/(losses)	9		52,736					(97,247)
Share of loss of equity accounted Investee, net of tax	15			(31,444)				(58,177)
Loss before taxation				(2,567,595)				(3,395,680)
Income tax income	10		323,716				618,137
Loss and total comprehensive income for the year				(2,243,879)				(2,777,543)
Total comprehensive income for the year is attributable to:
- Owners of the parent Company				(2,237,262)				(2,788,973)
- Non-controlling interests			(6,617)				11,430
				(2,243,879)				(2,777,543)
Earnings per share	11
Basic				(0.59p)				(0.73p)
Diluted				(0.59p)				(0.73p)

 

 

 

 

 

 

Consolidated statement of financial position as at 31 December 2022