PowerHouse Energy Group (PHE); reports ongoing commercialisation of DMG® process

Commercial revenues in 2020

Carbios 16 April 2019 Update
Download PDF

Carbios

Commercial revenues in 2020

Annual update

Industrial support services

16 April 2019

Price

€7.96

Market cap

€37m

Net cash (€m) at 31 December 2018

5.1

Shares in issue

4.7m

Free float

59%

Code

ALCRB

Primary exchange

Euronext Growth

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.1

64.8

2.7

Rel (local)

(1.8)

43.9

0.2

52-week high/low

€9.5

€4.3

Business description

Carbios develops enzyme-based processes for biodegradation and biorecycling of plastics, with a long-term aim of displacing current recycling and production processes.

Next events

FY19 interim results

September 2019

Analyst

Graeme Moyse

+44 (0)20 3077 5700

Carbios is a research client of Edison Investment Research Limited

Carbios's FY18 results were slightly in advance of our estimates and the company remains on track to generate commercial revenues in 2020. We have adjusted our forecasts following the results and our DCF valuation remains at €15/share. However, a key factor in determining Carbios’s short-term valuation will be the nature of the financing for the PET bio recycling demonstration plant, which has yet to be disclosed.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/17

1.0

(4.6)

(86.0)

0.0

N/A

N/A

12/18

1.1

(4.3)

(67.0)

0.0

N/A

N/A

12/19e

1.2

(4.8)

(74.0)

0.0

N/A

N/A

12/20e

1.6

(4.2)

(64.0)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

FY18 results marginally ahead of forecasts

Carbios's FY18 results were slightly in advance of our estimates. While revenue matched our forecasts, lower than anticipated costs helped reduce reported operating losses to €4.2m, versus our forecast of losses of €4.6m. The other significant feature of the P&L was the higher than forecast tax credit (FY18: €1.2m vs Edison FY18e: €0.7m) due to an increase in R&D expenditure eligible for the credit. Net cash at year-end FY18 totalled €5.1m and Carbios believes it has sufficient resources to pursue current developments for the next 12 months. Significantly, however, current developments do not include financing the demonstration of its PET bio recycling technology, for which it will need to seek additional funding.

Scientific and commercial progress

Carbios continues to make scientific progress and advance towards the commercialisation of its technology. During FY18, Carbios revealed that it had depolymerized 97% of PET plastic in 16 hours and signed a letter of intent with KEM ONE to construct a PET bio recycling demonstration plant (c 200 tons pa) on KEM ONE’s industrial site at Saint-Fons. Since the year end, Carbios has received a further €4m grant from ADEME, produced the first PET bottle with 100% recycled plastic waste and announced, significantly, that it had signed a multi-year agreement with Novozymes. Under the terms of the agreement, Novozymes has committed to become a long-term exclusive supplier of Carbios’s plastic degrading enzyme. The commercial launch of Carbiolice is expected in 2020.

Valuation: Small increase in DCF valuation

In the absence of profits or significant short-term commercial revenues, we continue to consider a DCF based approach to be the best method for providing an indicative valuation. However, we need to add a caveat that the timing and scale of future cash flows remain highly uncertain. Following the release of the FY18 figures we have made minor adjustments to our forecasts and updated our DCF. Under our central case scenario, the valuation remains at €15/share, although this takes no account of the potential impact of financing the PET demonstration plant.

Managing the transition to commercial activity

FY18 results show reduction in losses

Carbios's FY18 results were slightly in advance of our forecasts. While revenue (mostly research service fees from Carbiolice – €0.72m out of total revenue of €1.083m) matched our forecasts, lower than anticipated costs (salaries, wages, social security and depreciation) helped reduce operating losses to €4.2m, versus our forecast of losses of €4.6m.

The other significant feature of the P&L was the higher than forecast tax credit (FY18: €1.2m vs Edison FY18e: €0.7m) due to an increase in R&D expenditure eligible for the tax credit. Overall net losses of €3.1m are c €0.8m better than FY17 and ahead of our forecast FY18 loss of €3.9m. Net cash at year-end FY18 totalled €5.1m, lower than our forecasts due to lower debt raising/receipt of repayable loans from funding bodies (despite €1.5m from Bpifrance). Nevertheless, due to the lower than anticipated cost base (and lower levels of underlying cash burn) Carbios now believes it has sufficient resources to pursue current developments for the next 12 months. Significantly, however, current developments do not include financing the demonstration plant (estimated cost €15–20m) for its PET biorecycling technology, for which it will need to seek additional funding.

Exhibit 1: Carbios’s FY18 financial highlights versus FY17 and Edison FY18e forecast

€m

FY17

FY18

Change
(%)

Edison
FY18e

Revenues

0.98

1.08

+10.2%

1.10

Reported Operating profit/(loss)

(4.65)

(4.24)

+8.8%

(4.60)

Finance income/(expense)

0.02

(0.03)

N/A

(0.01)

Income before taxes & exceptional items

(4.63)

(4.26)

+7.8%

(4.61)

Extraordinary items

(0.01)

(0.04)

N/A

0

Income tax credit

0.70

1.19

+70.0%

0.70

Profit/(loss)

(3.94)

(3.11)

+21.1%

(3.91)

Cash at end of period (excludes repayable advances)

7.55

5.15

-31.8%

8.53

Source: Edison Investment Research, Carbios

FY18 commercial and scientific progress

FY18 was a year of continuing scientific progress. In March, Carbios announced that it had successfully depolymerized polyester fibres from textile waste and in July it revealed that it had depolymerized (carried out in a reactor of 1,000 litres) 97% of PET plastic in 16 hours (eight hours quicker than it had announced in April). On a commercial level, Carbios contributed (€1.1m out of a total of €3.35m) to the second round of financing of Carbiolice in July, and in November signed a letter of intent with KEM ONE to construct a PET biorecycling demonstration plant at KEM ONE’s industrial site in Saint-Fons. Dr Philippe Pouletty joined the Board of Directors as a representative of the largest shareholder, Truffle Capital, in September and Ian Hudson was appointed chairman in December (with effect from January 2019). Mr Hudson spent significant periods with ICI and DuPont de Nemours, and was also a member of the Foundation Board of IMD and a member of the Swiss-American Chamber of Commerce. After serving as chairman for three years, Jean Falgoux will continue as a member of the Board of Directors. Since the year end, Carbios has received a further €4m grant from ADEME, announced a joint venture development agreement with Novozymes and produced its first PET bottles from 100% recycled plastic waste. The commercial launch of Carbiolice remains on schedule for 2020.


Carbios: Strategy and business model

It is worth re-emphasising that Carbios’s business model is based on the use of enzymes produced by natural micro-organisms to degrade the polymers that make up plastic materials. Carbios is currently developing two new bioprocesses/products applicable to its targeted markets of polyethylene terephthalate (PET) and polylactic acid (PLA):

fully biodegradable plastics with a controlled lifespan (biodegradation);

infinite biorecycling of plastic waste, enabling the production of new plastics of the same quality as the original product (biorecycling); and

The financial model adopted by Carbios is based on licensing its products (enzymes, technologies and bioprocesses), either directly or via joint ventures, to other industrial companies. The licences are designed to generate revenue in the form of upfront payments, royalties and/or dividends. Subsidiary, Carbiolice, is expected to start generating commercial revenues from 2020, but it is worth examining the progress that has been made by Carbios in its key markets of PET and PLA.

PET

PET is strong and naturally transparent, and is one of the most commonly used polymers in the world. The global market for PET is worth c $100bn (70m tons) according to figures used by Carbios (sourced from Euromonitor) and is growing at a rate of 4% pa. PET is produced by the polymerization of ethylene glycol and terephthalic acid, and is mainly used to make bottles and textile fibres. Although PET is not biodegradable, it is widely recycled (EU recycling rate 52% according to Euromonitor). With a Chinese ban on the importation of plastic waste, there will be increased pressure to deal with plastic waste locally and, given the problems associated with landfill and the incineration of PET (it is not energy efficient and can produce harmful dioxins) alternative approaches will be required.

The process developed by Carbios for the degradation of PET is a biological one (most other techniques rely on chemical processes) and its enzymatic depolymerisation produces purified terephthalic acid (PTA) and monoethylene glycol (MEG), which are the building blocks used to manufacture polyester fibres and PET plastic products. Other degradation techniques produce bis-hydroxyethyl terephthalate monomer (BHET) or dimethyl terephthalate (DMT). Carbios argues that its technology and process offer advantages in terms of cost and ease of handling for PET producers.

Carbios’s solution is a ‘plug-and-play’ unit which can be attached to the front end of any operational plant to break down plastic waste. Carbios believe that its plug-and-play technology cannot be applied to rival processes. The company is currently in contact with PET plant owners, brand owners and enzyme producers regarding the deployment of its technology and remains confident that it will sign additional partnerships. It has already entered in to an agreement with L’Oréal and many brand owners are coming under pressure to make their packaging more environmentally friendly and, as a result, have made significant commitments to reduce the use of plastic, or recycle it. Evian, for example, has a stated ambition of using 100% recyclable plastic by 2025. Unilever has committed to ensure that all of its plastic will be recyclable, reusable or compostable by 2025. Enzyme producers also see the potential of the PET market (c $100bn pa). However, sourcing recyclable plastic, the feedstock in this process, will clearly be central to its success.

Carbios is expected to confirm in May that it will build a demonstration plant (sited in Lyon on the site of the second largest European PVC provider), with a view to the plant being up and running in late 2020 (Q4) or early 2021.

Carbios’s strategy will be to license its process and sell enzymes. Its preferred customers are PET producers, which by necessity are integrated down the chain into a requirement for PTA (a raw material of PET). However, customers could also include PTA producers not downward integrated into PET production. Carbios will aim for its first commercial PET plant in 2023 and will work on the basis of licensing its process at the rate of one plant a year until 2026. From 2027–30, Carbios will aim for two plants a year. The initial plants will be 100–200k tons pa, but will gradually increase in scale to 400k tons pa. Carbios will also consider selling its catalyst to PET producers operating its process through a tolling arrangement with enzyme producers.

The market for the biorecycling of PET remains in its infancy with no dominant market player. Carbios’s competitors include Loop and J-Plan. Loop’s technology breaks down PET into intermediate organic compounds, DMT and MEG, without heat or pressure. Loop has signed a multi-year supply agreement with PepsiCo Inc.

PLA – Carbiolice

Carbiolice was created in September 2016, and is an industrial and commercial joint venture with Bpifrance and Limagrain Céréales Ingrédients (a global seed producer). In the short term, Carbiolice produces corn-based compounds and biopolymers for plastic manufacturers involved in the production of bags/mulching films and derives some revenue from this business. However, in the longer term, Carbiolice will operate its patented enzymatic biodegradation technology (licensed from Carbios) to produce enzymated pellets (in master batch form). PLA is fully bio-sourced plastic, but not biodegradable in normal conditions and requires industrial composting. However, by embedding Carbios’s enzymes into the plastic material, the plastics are able to fully biodegrade over a controlled life span into base molecules. According to Carbios, these base molecules can be assimilated by the micro-organisms in nature but, crucially, the incorporation of its pellets into the plastic material leaves the performance of the polymers unchanged and does not require any modification to the plastic production facilities. Carbios’s technology can be applied to a variety of plastic products, including bags, disposable tableware and food packaging.

The progress towards commercial operation was confirmed in January of this year when Carbios announced that it had signed a multi-year agreement with Novozymes, under the terms of which Novozymes has committed to become a long-term exclusive supplier of Carbios’s proprietary plastic degrading enzymes (Evanesto). At the same time, Carbios confirmed that it expects to receive royalty payments from Carbiolice from 2020. We anticipate that Carbiolice will receive royalty payments of between 3–8% and that it will be entitled to c 30% of Carbiolice’s revenues. Carbiolice will target the global bioplastics market (1,000 tons/year) worth c $1bn and expected to grow by 50% by 2025. Carbiolice will initially operate one industrial plant capable of producing 4,000 tons (increasing to 8,000 tons by 2024) per year of master batch pellets (facilitating a mix of between 60–80,000 tons of PLA per year) and will ultimately target one-third of the market in the EU for soft biodegradable plastics.

Until the commencement of commercial operation, the Carbiolice project is funded by an €18m financing package, including €11m from Bpifrance. The €18m is scheduled to be released in three phases, over four years, on completion of technical and commercial objectives. The three partners of the project invested €4m in 2016 and in July 2018 a second round of financing of €3.35m (€1.1m from Carbios) was put in place. Carbios retains some additional financial commitments to Carbiolice which are milestone dependent (€1.1m in 2019 and €2.3m in 2020). Carbios will also receive R&D collaboration revenues of c €2.5m (over a three-year period), which will help support the industrial development of Carbiolice and serve as an additional source of income for Carbios.

Financials

Short-term financial forecasts are of less importance to Carbios than the long-term success of its technology. However, following the release of the FY18 results, we have updated our forecasts for FY19 and FY20. The changes are modest, reflecting mainly small adjustments to costs. EPS has however been boosted by an increased assumption for tax credits. The principal adjustments can be seen in Exhibit 2.

Exhibit 2: Changes to forecasts for FY19 and FY20

Revenue (€m)

EPS* (€)

PBT* (€m)

Old

New

% change

Old

New

% change

Old

New

% change

2019e

1.22

1.22

N/A

(0.89)

(0.74)

16.9%

(4.6)

(4.8)

N/A

2020e

1.40

1.60

14.3

(0.83)

(0.64)

22.9%

(4.8)

(4.2)

+12.5%

Source: Edison Investment Research. Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Valuation

In the absence of profits, or significant short-term commercial revenues, we continue to consider a DCF based approach to be the best method for providing an indicative valuation. However, we need to add the caveat that the timing and scale of future cash flows remain highly uncertain. Following the release of the FY18 figures, we have updated our DCF. We continue to project cash flows to 2035 assuming a long-term EBIT margin of c 60%. For our central case, we use a discount rate of 15% and a perpetual growth rate of 2%. Under our central case scenario, the valuation remains at €15/share, although this takes no account of the potential impact of the financing of the PET demonstration plant. The sensitivity of our DCF to changes in margin assumption and discount rate can be seen in Exhibit 3.

Exhibit 3: Margin projection scenarios 2022-31 and valuation using a 15% or 20% discount rate

Scenario

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

15%
€/share

20%
€/share

1

20%

30%

40%

50%

60%

70%

80%

80%

80%

80%

22

9

2

20%

30%

40%

50%

60%

70%

70%

70%

70%

70%

18

8

3

20%

30%

35%

40%

45%

50%

55%

60%

60%

60%

15

6

4

20%

25%

30%

35%

40%

45%

50%

50%

50%

50%

11

4

5

20%

25%

30%

35%

40%

40%

40%

40%

40%

40%

8

3

6

20%

25%

30%

30%

30%

30%

30%

30%

30%

30%

5

1

Source: Edison Investment Research

Exhibit 4: Financial summary

 

 

 

 

 

 

 

 

 

 

 

€m

2014

2015

2016

2017

2018

2019e

2020e

Year end December

 

 

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

0.66

0.84

8.87

0.98

1.08

1.22

1.60

Reported Operating Profit

 

 

(3.36)

(4.06)

3.55

(4.65)

(4.24)

(4.63)

(3.99)

Net Interest

 

 

 

0.05

0.08

0.08

0.02

(0.03)

(0.16)

(0.16)

Profit before tax (reported)

 

 

(3.32)

(3.98)

3.63

(4.63)

(4.26)

(4.79)

(4.16)

Reported tax

 

 

 

1.09

0.94

1.32

0.70

1.19

1.34

1.16

Profit after tax (reported)

 

 

(2.23)

(3.05)

4.95

(3.93)

(3.07)

(3.45)

(3.00)

Extraordinary gain or loss

 

 

0.02

(0.02)

(0.03)

(0.01)

(0.04)

0.00

0.00

Net income (reported)

 

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.45)

(3.00)

 

 

 

 

 

 

 

 

 

 

Basic average number of shares outstanding (m)

 

3.75

3.78

3.85

4.57

4.62

4.66

4.66

EPS - basic reported (€)

 

 

(0.59)

(0.81)

1.28

(0.86)

(0.67)

(0.74)

(0.64)

Dividend (c)

 

 

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

 

 

 

 

 

 

 

 

 

 

 

Revenue growth (%)

 

 

-26.2%

26.1%

959.7%

-88.9%

10.2%

12.5%

31.7%

 

 

 

 

 

 

 

 

 

 

 

BALANCE SHEET

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

 

0.67

0.91

1.17

2.26

3.40

3.11

3.04

Accounts payable

 

 

0.20

0.34

0.49

1.43

1.06

0.77

0.70

Other current liabilities

 

 

0.47

0.57

0.67

0.83

2.34

2.34

2.34

Total Non-Current Liabilities

 

1.95

3.01

3.15

3.71

3.71

8.71

13.71

Debt/Repayable advances

 

 

1.95

3.01

3.15

3.71

3.71

8.71

13.71

Total Liabilities

 

 

2.62

3.92

4.32

5.97

7.11

11.82

16.75

 

 

 

 

 

 

 

 

 

 

 

Total Shareholders Equity

 

 

11.12

8.13

13.11

14.55

12.04

8.58

5.58

Common stock / Capital

 

 

2.63

2.65

2.68

3.20

3.26

3.26

3.26

Additional paid-in capital / Share premium

 

13.65

13.70

13.74

18.59

19.13

19.13

19.13

Retained earnings

 

 

(2.96)

(5.17)

(8.24)

(3.32)

(7.26)

(10.37)

(13.82)

Other reserves and surplus

 

 

(2.21)

(3.05)

4.94

(3.94)

(3.10)

(3.44)

(2.99)

Total liabilities and equity

 

 

13.73

12.04

17.43

20.52

19.15

20.40

22.33

Total assets

 

 

 

13.73

12.04

17.43

20.52

19.15

20.40

22.34

Total current assets

 

 

12.64

10.38

6.16

9.17

6.69

5.30

4.46

Cash and cash equivalents

 

 

11.10

9.01

3.99

7.55

5.15

4.79

3.80

Accounts receivable

 

 

1.40

1.22

1.95

1.46

1.48

0.45

0.60

Inventories

 

 

 

0.02

0.01

0.02

0.01

0.02

0.02

0.02

Prepaid expenses

 

 

0.12

0.13

0.22

0.15

0.04

0.04

0.04

Total Non-Current Assets

 

 

1.09

1.67

11.27

11.35

12.46

15.10

17.88

Property Plant and equipment, net

 

0.74

1.25

1.21

1.11

0.97

1.34

1.73

Other intangible assets

 

 

0.13

0.23

0.37

0.57

0.69

0.76

0.85

Other non-current assets

 

 

0.22

0.19

9.69

9.68

10.80

13.00

15.30

 

 

 

 

 

 

 

 

 

 

 

CASH FLOW

 

 

 

 

 

 

 

 

 

 

Cash Flow from Operations

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(2.21)

(3.07)

4.92

(3.94)

(3.11)

(3.45)

(3.00)

Depreciation and Amortization

 

 

0.07

0.17

0.22

0.23

0.30

0.25

0.25

Other items

 

 

 

(1.36)

0.39

(0.51)

1.49

(0.29)

0.73

(0.21)

 

 

 

 

(3.50)

(2.52)

4.64

(2.22)

(3.08)

(2.48)

(2.95)

Cash Flow from Investing

 

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

 

(0.85)

(0.79)

(0.30)

(0.33)

(0.30)

(0.69)

(0.73)

Other Investing Activities

 

 

(0.02)

0.00

(9.53)

0.02

(1.14)

(2.20)

(2.30)

Net cash used in investing activities

 

(0.87)

(0.79)

(9.83)

(0.31)

(1.44)

(2.89)

(3.03)

Cash Flow from Financing

 

 

 

 

 

 

 

 

 

Change in Debt

 

 

0.15

0.07

(0.04)

(0.05)

1.52

5.00

5.00

Change in Capital Stock

 

 

0.17

0.06

0.07

5.38

0.60

0.00

0.00

Other Financing Activities

 

 

0.55

1.08

0.14

0.77

0.00

0.00

0.00

 

 

 

 

0.87

1.22

0.17

6.09

2.12

5.00

5.00

Net Changes in Cash and Cash Equivalent

 

(3.50)

(2.09)

(5.02)

3.56

(2.40)

(0.36)

(0.99)

Effect of Exchange Rates On Cash

 

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Cash and Cash Equivalents - Beginning

 

14.60

11.10

9.01

3.99

7.55

5.15

4.79

Cash and Cash Equivalents - End

 

11.10

9.01

3.99

7.55

5.15

4.79

3.80

Source: Carbios, Edison Investment Research.

General disclaimer and copyright

This report has been commissioned by Carbios and prepared and issued by Edison, in consideration of a fee payable by Carbios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Carbios and prepared and issued by Edison, in consideration of a fee payable by Carbios. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a) (11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues