At an estimated 22bn euros each year - if not more - bees' contribution to the European economy can hardly be overstated. To try and prevent further worrying declines in the populations of these crucial swarms of insects, the European member states voted to ban pesticides called neonicotinoids on crops that are attractive to bees.

Since the ban, farmers have become desperate for products that are effective at keeping pests at bay, but employ active ingredients that use the natural defence mechanisms of plants rather than traditional agrichemicals.

There are several listed companies buzzing with hope that their products provide the answer. One of these, Aim-listed Eden Resources, recently overcame its seven-year regulatory examination and looks set to accelerate its product commercialisation.

Eden has developed products that use 'terpenes', the natural defence mechanisms of plants - also known as essential oils - as the active ingredient in its products. Therefore, it is able to offer naturally derived, environmentally friendly products that are as effective as, and cost competitive with, traditional chemical alternatives. Eden also owns an encapsulation technology that enables these active substances to be delivered via micro-capsules, in a controlled manner, over a period of time.

But so far, like a biotech drug developer, all Eden’s work has been in the lab or in field tests. Its lead product, the imaginatively named 3AEY, has been slowly crawling its way through the European regulatory process for the best part of the last seven years.

One step closer to making honey

On Monday, April 20th, the European Union granted approval for the three active substances in 3AEY to be used in plant protection products across Europe.

While the effect of this in Europe will not be immediate – as commercialisation still requires a product registration process that will take around 12-15 months, plus individual country approvals – one of Eden’s product partners has a deal in Africa that hinges on the European approval and will pay a milestone payment as a result.

As a licensing company, Eden is a lean operating machine. It does not own large testing facilities or employ hundreds or thousands of staff. Instead, overseen by the former President of the National Farmers Union, Sir Ben Gill, as Chairman, there is a core group of management and scientific staff, with a monthly cash ‘burn-rate’ of only around £60,000. Partners are key and a number of licence deals and options are already in place and should accelerate now that this key regulatory hurdle has been cleared.

Multiple end-markets targetted

Agriculture is by no means the only end-market, as well, with partners such as Bayer in animal health, and an unnamed cosmetics company working with the company on potential applications for perfumes.

In a similar manner, the EU ban on neonicotinoids is just part of the wider picture in the world of agrichemicals. Methyl bromide, a lethal chemical used to kill the nematode worms plant, was deemed to be too lethal and was banned in many countries including the US and Europe.

Eden’s nematocide product uses two of the three approved turpenes and so, says finance director Alex Abrey, “we can register our nematode product quickly and the market is wide open.”

As broker WH Ireland states, “this is a huge victory for the company and enables the first product 3AEY… to move to the next stage of commercialisation”. Furthermore, notes analyst Raymond Greaves, “any new products developed by Eden using combinations of these three substances can go straight to the product registration phase, bypassing the extremely time-consuming EU regulatory approval phase. We see a wide range of applications for Eden’s IP and would expect a steady stream of new licensees and products coming to market going forward.”

With such a low run rate, the company is forecast to become profitable when sales top £1m, which WH Ireland anticipates happening in 2015.

Eden has a terrific amount still to do, however, so for investors who like the idea but want a company a bit further along the road to commercialisation there are a couple of companies on Aim with similar businesses.

For those who are inclined to be less patient...

Plant Impact also uses its own combination of essential oils for its Bug Oil, but is still making revenues sub-£1m.

Plant Health Care is focused on helping plants grow more than batting away pests, and has developed a “natural synthetic” compound that stimulates friendly fungi in the soil and helps crops thrive despite stressful conditions such as drought, with advanced long-term deals with Bayer CropScience and Arysta LifeScience.

A salutary lesson for the sector may be TyraTech, which plunged from its £5 float price in 2007 to less than 5p today after failing to satisfactorily deliver despite its own big name deals.

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