Plant Health Care expects to gain the first US regulatory approval for one of the products in its New Technology portfolio, PHC279, a PREtec (plant response elicitor) in 2020, leading to market launch in 2021. The PREtec products, which address markets worth over US$5bn, complement the company’s existing range of biological products for boosting plant yields, which are already approved for sale in 16 countries.
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15 March 2019 |
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Plant Health Care expects to gain the first US regulatory approval for one of the products in its New Technology portfolio, PHC279, a PREtec (plant response elicitor) in 2020, leading to market launch in 2021. The PREtec products, which address markets worth over US$5bn, complement the company’s existing range of biological products for boosting plant yields, which are already approved for sale in 16 countries.
Results from field trials encouraging
During FY18 three additional partners started to evaluate the PREtec technology. Results from US field trials of seed treatments for corn and soy based on three of the PREtec platforms continued to be promising with several partners continuing trials into FY19. Although results from the Brazilian trials of one of the platforms for control of Asian soybean rust were not sufficient to reach a licence agreement with the partner, field trials focused on yield improvements are continuing. Given the uncertainty over when partners will licence the technology, management is developing additional routes to market so it can be sure of launching products as soon as the appropriate regulatory approval is obtained. Progress on manufacturing methodology shows potential for cost-effective production.
FY18 revenues helped by shift to high volume crops
Preliminary results for FY18 show revenues rising by 7% year-on-year to US$8.0m with strong growth in the US (following the launch of a new product for corn), and in Brazil (adoption for sugar cane), Spain and Mexico was partly offset by a slow draw-down of inventory in South Africa caused by drought. Following a Placing and Subscription in February 2018 raising £5.0m (gross), cash (there is no debt) increased from US$3.9m at end FY17 to US$4.3m. Management believes that this is sufficient to take the company to cash breakeven in FY20.
Product launches underpin strong growth in FY19
Management is confident of strong sales growth in FY19, backed by the new US product for corn, the new product for soy that is currently in “soft launch” and the ramp-up of products for sugar cane in Brazil. This supports consensus estimates showing 26% year-on-year sales growth in FY19. We note that the company’s shares are trading on prospective EV/sales levels substantially lower than Eden Research (1.3x vs 6.2x for the year ending December 2018 and 1.0x vs 4.8x for December 2019). This methodology is of limited value, however, as it does not explicitly ascribe value to the potential revenues realisable should the PREtec products gain meaningful share of their target markets.
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Consensus estimates
Source: Company data, Refinitiv |
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