Plant Health Care sees ‘encouraging’ growth in Harpin 𝜶β sales in 1H21
In an update for the six months to 30 June 2021, (PHC ) said it expects trading for the full year to be in line with management expectations as sales remain solid.
The Group, which provides patent-protected biological products to global agriculture markets, saw revenue increase by 13% year-on-year to $3.5m compared to $3.1m in 1H20.
In-market Harpin 𝜶β sales growth in 1H21 were “most encouraging”, the Company reported, as the division’s revenue increased by 26% to $2.4m, up from $1.9m in 1H20.
Sales in the EMEAA region came to $1.3m, up 76% on 1H20. US in-market sales showed continued strong growth but sales ex PHC were flat at $0.6m, as customer inventory reduced further while sales to Brazil for sugarcane ($0.3m) were affected by drought, it said.
Cash used in operations in 1H21 fell by 29% to $1.5m despite opex up 18%, while cash reserves were $11.1m at period end in preparation for investment in PREtec acceleration.
Despite Covid-19 having impacted sales growth in Brazil and Mexico by limiting field promotion activities, sales in Europe grew strongly, noted Dr Christopher Richards, CEO of PHC, “particularly in citrus in Spain and in potatoes and the turf market in the UK,” he said.
In a research note, Arden Partners said 1H21 has come “with a trajectory of demand which suggests a good second half to come, traditionally the seasonally stronger part of the year.”
‘Europe has seen further increases, particularly in Spain and although Brazil has been held back by drought, there are signs of recovery, boosted by Harpin’s demonstrably strong performance in drought conditions which positions it well going forward,’ analysts wrote.
PHC’s cash reserves at 30 June 2021 were $11.1m with $9.1m raised in March 2021 which is expected to accelerate the market entry of its biological products, PHC279 and PHC949.
The Company highlighted to investors that preparation for the launch of Saori (PHC279), a seed treatment for soybeans, is advancing well in Brazil. Meanwhile, the regulatory submission of PHC279 in the USA is also on track, with approval expected in 3Q022.
“Following the successful equity raise in March 2021, the Board has approved measured investments to accelerate the market entry of PHC279 and PHC949, which are expected to pay back in 2023 - 24. The Board intends to maintain a conservative approach to cash management, targeting cash break even within existing cash reserves,” said Richards.
‘The US submissions and regulatory process for PHC279 are also on track for likely approval in Q3 2022 to target first revenue in Q4 2022 while PHC949 could follow in 2023,’ said Arden.
Plant Health Care expects to announce its interim results to 30 June 2021 in early September 2021.
View from Vox
Back in April 2021, Plant Health Care delivered year-on-year revenue growth to FY20 with the Group's commercial business turning profitable and cash flow positive for the first time.
Looking ahead, Plant Health Care said it is ‘well-positioned’ for growth in 2021 with Harpin αβ ‘gaining traction’ together with very strong distributor partners, it told investors.
‘Current high agricultural commodity prices are very supportive of grower investments in crops and new products, and the Group’s operations in the US through key distribution partners appear to have had a strong start to the year, continuing the trends from 2020,’ Arden wrote.
At the time, the Group also highlighted that its PREtec product pipeline is ‘looking stronger’ after PH279, which is now known and branded as Saori™, became the first product from the PREtec platform to be commercialised to receive federal approval for sale in Brazil.
According to data presented in today’s statement, Brazilian soybean farmers spent $2.85 bn on disease control in the 2019/20 season, around 90% of which was for ASR control.
PHC said it is set on ‘a highly ambitious plan’ with its current pipeline of PREtec products targeting markets with a value of more than $5bn. ‘With outstanding grower benefits and an excellent sustainability profile, we are confident of a bright future for PREtec products,’ it said.
Analysts at Arden remain positive on the stock with their research confirming a “huge market opportunity'' for PREtec, which it believes is only partly reflected in the current share price.
‘With continuing investment in the PREtec platform, the launch of Saori in Q4 2021 and new products being prepared for registration, the Group’s 2021 activities look to be moving along well and we anticipate good news flow over the coming quarter,’ the research firm noted.
Shares in Plant Health Care have increased by over 11% since the beginning of 2021. The stock was trading 2.26% lower this morning at 14.27p following the announcement.
Reasons to PHC
London-listed Plant Health Care is a leading provider of proprietary agricultural biological products and technology solutions focused on improving crop performance.
Its commercial business is driven by sales of Harpin αß, a recombinant protein which acts as a powerful biostimulant, promoting the yield and quality of crops. PHC sells the proprietary soil treatment Myconate in selected countries and sells both Harpin αß and Myconate through specialist distributors globally. In Mexico, PHC distributes third-party biological products.
PHC utilises its PREtec platform to generate numerous products and it is focusing on three products targeting very large market opportunities with a value of more than $5bn.
The Group said these products are currently under evaluation with six potential commercial partners. Meanwhile, PHC also continues to evaluate further candidate products from its robust pipeline of development candidates for additional crops and indications.
In a trading update released in January 2021, the Group reported robust in-market sales growth of Harpin αβ with in-market sales in Brazil for sugarcane coming in at three times those of 2019, while in-market sales to corn came in at 1.8 times higher than the prior year.
Meanwhile, the Group hailed its progress in bringing the first products from the PREtec platform to market. It highlighted it is planning for initial commercial launch in Brazil during the second half of 2021.
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