SMALL CAP IDEAS: Eden Research wins new approvals for its biopesticides

Eden Research has been on a roll this year.

Flagship biopesticide products Mevalone and Cedroz have received regulatory approvals left, right and centre, gaining access to new European markets including Greece, Poland and Italy.

Mevalone was also approved in New Zealand under the brand name Novellus.

Then, in a massive boost to Eden’s IP, California and Florida, the two largest US state for crop production, gave the nod to nematode killer Cedroz.

Florida recently approved Mevalone, the fungus killer mainly used in grape-growing vineyards

Florida also approved Mevalone, the bortrytis fungus killer mainly used in grape-growing vineyards.

An impressive run of approvals no doubt, but it wasn’t easy for Eden to get there.

As chief executive Sean Smith explained in a recent interview, the two-tiered regulatory system in the US was a major struggle.

Federal-level approval from the Environmental Protection Agency (EPA) was the first barrier to entry into the important market.

Typically you could expect a two-year window for approval. For Eden, it took four years to get Mevalone and Cedroz approved.

Smith pointed to Covid lockdowns as the primary cause of this massive delay, but one wonders if the Trump administration’s regulatory budget bonfire didn’t help either.

On the bright side, the EPA actually approved the products’ three active ingredients and the delivery systems that will be the building blocks for future products.

In theory, this should make it easier and quicker to get new products federally approved in the US… but then you have the states to worry about.

Some, Smith explained, simply say ‘thank you very much for your application and your fee, go along and do what you like’.

Others, like California, are more rigorous and demand additional field trials before approval is granted.

By far the biggest market for Eden’s products and a ‘significant force’ in grape harvesting, California has yet to approve Eden’s biggest killer app Mevalone.

‘That’s the next milestone for us,’ stated Smith, who said to keep ears to the ground for news in the coming months.

‘In the meantime, our distributors are cracking on with the job of selling products. In truth, we don’t expect a major revenue impact until the 2024 growing season on the basis that California will have the most impact,’ he added.

Getting in the weeds on revenue potential, it’s clear that, with patience, Eden’s addressable market is huge.

For Mevalone alone, European and US markets are roughly the same – around €101million and €95million ($109million and $102million) respectively, translating to around €3million of sales in each jurisdiction (slightly less in the US) per year for Eden’s range of products at an estimated 40 per cent margin.

For the UK specifically, Mevalone’s addressable market is relatively small compared to other regions, with the 4,000 hectares of vineyards being no bigger than France’s Chablis region alone.

But that pesky, grape-loving bortrytis fungus grows ‘incredibly well’ on the Isles due to favourable weather conditions.

Most UK vineyard operators will cite the fungus as one of their biggest problems if you ask them, says Smith.

Approval in the UK for Mevalone is still pending, but Eden is hopeful for news some time this year.

Conversely, a country like Turkey, a massive grower of grapes to sate the country’s appetite for raisins, is less of a target market due to its hot and dry conditions.

Not only do these addressable market numbers exclude additional pending approvals for Mevalone, they also exclude another huge opportunity for Eden.

As it stands, Mevalone is only approved for a few crops; primarily grapes, but apples in France too, a fruit with a similar disease profile to grapes.

But just as Viagra, to use a crude example, was originally intended for heart disease before rising to the challenge in other medicinal fields, Mevalone has significant potential to branch out into other use cases.

It’s called ‘label expansion’ in pharma parlance, described by the FDA as when ‘additional clinical data have shown the drug can safely and effectively treat patient populations other than those for which it was originally intended’.

In Eden’s situation, this means discovering new use cases far beyond what Mevalone is currently approved for.

Smith explains: ‘The target that we are jointly focused on right now together is to expand the label to include two other disease targets, which will mean that the target market multiplies by size by a factor of 10.’

Clearly massive potential, and Eden has already made steps in expanding Mevalone’s label, including an application in France in the coming weeks.

Not enough expansion plans on the plate for you? There’s also an entirely new product in the works being developed in partnership with US agriscience giant Corteva.

‘We’ve been working with those guys for the last few years on the development of a seed treatment, and we are expecting to have a lot more to say about that fairly soon,’ Smith teased.

Future sales potential for this as yet unnamed seed treatment is €21.6million in the US and €8.6million in the UK and Europe.

As it stands, Eden’s share price has underperformed in 2023, with, at 3.4p, a market capitalisation of £14million.

But it’s hard to deny the potential of the group, even if, as with regulatory approvals, it may require a bit of patience.

Keep your eyes peeled.