MIDAS SHARE TIPS: Plant-based pest control is natural pick for investors

Farmers are not known for their optimism – and small wonder. Not only do they have to contend with unpredictable weather, constant pricing pressure and sporadic changes in policy, but their crops are under continual threat from birds, insects and blight.

Every year, farmers worldwide spend more than £45 billion on treatments to ward off pests and disease. However, most are made from synthetic chemicals and there are growing concerns about their effect on the environment, on wildlife and ultimately on all of us.

Eden Research offers an alternative approach. The Oxford-based company makes crop protection products from terpenes, natural compounds that can be found in plants, particularly fir trees.

Eden shares are just 3.65p but they have been as high as 19p and should hit that level again, as the company has made huge progress in recent times and should reap the rewards this year and beyond.

Agricultural goods are heavily regulated and, much like the drugs market, new products can take years to gain regulatory approval. When Eden was floated in 2012, regulators had accepted the use of terpenes as basic ingredients, but the group needed specific approval for end products – and for their use against particular diseases.

Stopping the rot: Eden Research produces Mevalone, which protects grapes from botrytis or ‘noble rot’

Stopping the rot: Eden Research produces Mevalone, which protects grapes from botrytis or ‘noble rot’

Eden gained its first licence several years later with Mevalone, which protects fruit and vegetables from fungal disease. Initially, Eden was only allowed to sell Mevalone in southern Europe as a treatment for botrytis in grapes. Known as noble rot, the condition can devastate yields, often flaring up close to harvest time, when chemical fungicides cannot be used.

Today, regulators the world over are saying yes to Mevalone with new approvals granted in Poland, New Zealand, Florida and California over the past six weeks alone.

The product can also now be used to treat more diseases on a host of different crops, such as strawberries, cucumber and lettuce.

Last year alone, sales soared 45 per cent and further growth should come this year, following those recent new licences.

Chief executive Sean Smith has other products on his roster too. Cedroz works on root knot nematodes, worms that attack the roots of fruit and vegetables, from aubergines and tomatoes to carrots, courgettes and cucumbers.

As with Mevalone, approvals for Cedroz have been rising as regulators increasingly look to more environmentally friendly treatments for common agricultural diseases.

Now Smith’s hopes are riding high on Eden’s latest offering, Ecovelex, which stops birds from eating or pecking at crop seeds. This can have drastic consequences for farmers, cutting yields by up to half. Yet most seed treatments are toxic, potentially harming birds and farmers too.

Ecovelex merely makes seeds smell bad so feathered friends fly off in search of other food.

Not only does Ecovelex play neatly into regulatory trends and consumer preferences, but it has also been developed in conjunction with US agricultural giant, Corteva, a $38 billion (£30 billion) company and one of the biggest producers of seeds in the world.

Last week, Eden and Corteva applied to the EU for regulatory approval for Ecovelex, with an application to UK regulators expected in a few weeks. The timing is propitious. Some chemical seed treatments have already been banned, others are about to be – and farmers are in uproar.

Plant-based Ecovelex offers them an alternative that is safe, effective and benefits the environment.

Regulatory authorisation can take a couple of years, but emergency approvals are sometimes given if the need is pressing. Ecovelex may fall into this category, allowing the treatment to be sold in time for next year’s harvest. Corteva is using its considerable muscle to make a case for the new product and farmers are desperate for help, knowing crops could be in peril without some kind of remedy.

Analysts expect a 55 per cent increase in Eden’s annual revenues to £2.8 million this year and growth could be even more turbocharged in 2024 if Ecovelex gains emergency authorisation.

Even if approval takes longer, Eden faces a bright future. The firm has been loss-making to date but profits are expected in the next couple of years.

Eden is also working on insecticide treatments and Smith has developed Sustaine, a technology that allows pesticides to be formulated without using micro-plastics.

Today, micro-plastics are an essential ingredient of most pesticides, despite the environmental harm they cause.

Sustaine offers an alternative. Currently deployed on Eden’s own product range, Sustaine could be implemented by numerous other businesses, curbing plastic waste on land and sea.

The partnership with Corteva offers real potential too.

Midas verdict: Regulators have been clamping down on chemical pesticides, while consumers are increasingly inclined to choose more ‘natural’ foods if the choice is there and prices are affordable. Eden’s plant-based pesticides allow crops, fruit and vegetables to grow and mature unencumbered by disease or synthetic treatments. At 3.65p, the shares are a buy.

Traded on: AIM Ticker: EDEN Contact: edenresearch.com or 01285 359555

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