Evolva — New year, new product launch

Evolva (SW: EVE)

Last close As at 27/03/2024

0.10

0.00 (0.00%)

Market capitalisation

113m

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Research: Consumer

Evolva — New year, new product launch

Evolva is starting FY21 with the launch of a new product, L-arabinose (previously known as EVE-X157/Z4). It is a natural sugar blocker and reducing sugar used in health ingredients and flavours and fragrances. It is fully renewable, sustainable and made by fermentation. The product is already FEMA GRAS-approved for use in food and beverages and has a wide range of applications. Evolva estimates the current market for the product at CHF250m. Commercial discussions with major customers are ongoing and Evolva expects to supply its first volumes in FY21. The launch of this new product shows the breadth of Evolva’s offering and the strength of its pipeline. As a reminder, our model assumes no contribution from L-arabinose.

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Consumer

Evolva

New year, new product launch

New product launch

Consumer

20 January 2021

Price

CHF0.22

Market cap

CHF181m

Net cash (CHFm) at 30 June 2020

25.3

Shares in issue

822m

Free float

100%

Code

EVE

Primary exchange

SIX Swiss Exchange

Secondary exchange

OTC US

Share price performance

Business description

Evolva is a Swiss biotech company focused on the research, development and commercialisation of ingredients based on nature. The company has leading businesses in Flavours and Fragrances, Health Ingredients and Health Protection.

Analysts

Sara Welford

+44 (0)20 3077 5700

Russell Pointon

+44 (0)20 3077 5700

Evolva is a research client of Edison Investment Research Limited

Evolva is starting FY21 with the launch of a new product, L-arabinose (previously known as EVE-X157/Z4). It is a natural sugar blocker and reducing sugar used in health ingredients and flavours and fragrances. It is fully renewable, sustainable and made by fermentation. The product is already FEMA GRAS-approved for use in food and beverages and has a wide range of applications. Evolva estimates the current market for the product at CHF250m. Commercial discussions with major customers are ongoing and Evolva expects to supply its first volumes in FY21. The launch of this new product shows the breadth of Evolva’s offering and the strength of its pipeline. As a reminder, our model assumes no contribution from L-arabinose.

Year end

Revenue (CHFm)

PBT*
(CHFm)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/18

8.9

(25.4)

(3.0)

0.0

N/A

N/A

12/19

11.6

(15.6)

(2.0)

0.0

N/A

N/A

12/20e

9.8

(16.8)

(2.1)

0.0

N/A

N/A

12/21e

16.8

(11.8)

(1.4)

0.0

N/A

N/A

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

L-arabinose is a naturally occurring ingredient used in products ranging from yoghurts to cereals and confectionery. Evolva expects its market to grow at c 5% per year as it helps create healthier food and beverage solutions for increasingly health-conscious consumers. L-arabinose works by blocking the body’s ability to digest sucrose (it inhibits the sucrase enzyme, which breaks down sucrose in the small intestine), so it can be used both as a health ingredient and within flavours and fragrances. The former market is larger and – as highlighted by Evolva in November – the health ingredients space has also been more resilient during the pandemic as consumers have increasingly focused on health and wellbeing. The product is FEMA GRAS-approved (Flavour and Extract Manufacturers Association of the United States generally recognised as safe) for use in food and beverages.

As with Evolva’s previous launches, we expect initial volumes of L-arabinose to be low, as commercial discussions with major customers continue and customers’ existing products may require reformulation.

We continue to value Evolva on a DCF basis with a 25-year model, assuming cash break-even in FY23, in line with management guidance. Our fair value remains CHF0.38/share. As a reminder, nootkatone contributes c 50% of our fair value for Evolva, with most of this coming from its use in pest control and we assume no contribution from L-arabinose.

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