LONDON (ShareCast) - (ShareCast News) - As well as signing a commercialisation deal for its environmentally friendly pesticide with a US chemical giant, Eden Research warned on Wednesday that full year earnings would be lower than expected.
AIM-listed Eden is transformed its business model from technology licensing to product sales, which it said had resulted in lower upfront payments, with the effect exacerbated by a delay in receiving regulatory approval in certain territories.

Sales of its 3AEY plant protection product reaped more than €1m at distributor level, with over 85,000 litres sold, which was well above what Eden had forecast.

The company issued financial guidance for the year, with revenue expected to be circa £0.4m, an EBITDA loss of roughly £1.1m with a net cash balance at the year end of around £1.4m.

The company said it had signed an exclusive agreement with a subsidiary of Eastman Chemical, with which it has been working since 2014.

Eastman will pay Eden an upfront fee, as well as annual milestone payments until 2019 when it is expected that sales will commence, and will also take on the responsibility for the registration of 'Cedroz' across 29 countries, including the largest markets for nematicide products globally.

Chief executive Sean Smith said, "Eastman has been a leader in nematode control for several decades, and through their market development of Cedroz, they will extend this position and grow in the important post-fumigant nematode control market with an effective and safe bio-control product developed by Eden.

"Eastman's global reach and the robust, versatile and unique technology and formulation expertise that Eden has provided should produce a strong solution for growers challenged with the control of these pests that affect global agriculture by lowering crop yields."

House broker Shore Capital had been forecasting revenue of £1.7m, EBITDA of £0.2m and net cash of £2.4m, and so after the statement said it was putting its forecasts under review.

"Overall, we believe the agreement with Eastman is encouraging as has been the performance of 3AEY during the year but the financial performance is disappointing," analysts said. "The underperformance is a function of the decision to evolve the operating model of the company which we presume is because of the enhanced returns on a longer term basis at the cost of the short term gains alongside slower than expected regulatory approvals. "

Shares in Eden, having recently recovered close to six-month highs, fell 20% to 11.25p by Wednesday aftrernoon.

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