Eden Research CEO on more regulatory approvals to come (LON:EDEN)

Eden Research plc (LON:EDEN) Chief Executive Officer Sean Smith caught up with DirectorsTalk to discuss the need for state approval, why California is one of the most important states for their products and what else we can expect in terms of regulatory approvals going forward.

Q1: Sean, why do you need state approval, I thought you already had national approval?

A1: The way the US works is that there is one national level of approval which is managed by the US Environmental Protection Agency and that basically covers all 50 states.

However, just to make life more interesting, each state then has its own regulatory approval process, some of those I won’t call them ‘rubber stamps’ but there’s simple reviews of the EPA decision and then there are endorsement or permit to sell product and some of those states are much more rigorous than that. California would be an example of that where it’s basically another comprehensive review, similar to the one that EPA has done.

So, it is required to get both and, in most cases, you have to do the national level, followed by the state level before you can proceed.

Q2:The company has indicated that California is one of the most important states yet you don’t have approval there at the moment? What does that mean exactly and what’s the impact on your forecast for the year?

A2: Good question, and probably the questions a lot of people following the story are asking, and it’s absolutely the case that California for both products is one of the most meaningful states for us.

For Avalon in particular, the grapevine fungicide market in California is by far the largest in the US, and of course for Cedroz, California is a major producer of a wide range of horticultural crops which, you’ll appreciate, we have a long list of crops for which we’re approved now in the US.

California is, as I mentioned a little bit earlier, one of the most rigorous states when it comes to their assessments and for a very long time, California has a reputation of having very strict environmental standards for good reasons. So, at the end of the day, they run their own process.

We are in a programme they call the concurrent review programme, which means they’ve done the bulk of the assessment work in parallel with the work that EPA was doing. That doesn’t necessarily mean that we’re then granted approval immediately upon EPA approval, there is a process that they’re going through.

We are engaged directly with the California regulator, which is called the DPR, the Department of Pesticide Regulation in California, and we know roughly the timeline they’re working to but  if I’ve learned anything over the last few years, I’ve learned never to speculate too wildly on the pace of regulatory action.

So, ‘what does this mean in terms of our forecasts’ which I think is the question a lot of shareholders will be asking.

It doesn’t really affect our forecast because over the years we’ve learned to be very cautious about predicting the pace of regulatory action. So, whilst certainly we may not realise the level of sales that we considered to upside in the current financial year, this won’t cause us to revise our forecast downward.

What is frustrating is we know there’s a very strong pent-up demand for products like this, even the regulators themselves confirm that’s the case. So, it’s just a matter of getting there, it’s a matter of when, not if, and I know people might want to ask me the question of ‘when will it be?’, I can only tell you that we expect it through the course of this year.

Now, I don’t want to speculate too much more than that other than to say that we believe we are fairly close but again, making these guesses is the way to set unrealistic expectations. So, I do very much look forward to updating the market on when we do have the California authorisation.

In the meantime, we do have approval for both products in a good number of important states like Washington state, Oregon state, New York state, even Pennsylvania and Virginia are major producers of some of these crops. So, we are very much looking forward to getting on with that and we’re working with our distribution partners to do that.

Q3: What else are you expecting in terms of regulatory approvals?

A3: Well, of course, California is a big one and we’re eagerly awaiting that.

We are also going through regulatory processes in Europe at the moment and we are expecting authorisation of Mevalone in what we call Central Europe so I’d consider countries such as Poland, Germany etc. imminently. So, we’re hoping to have some good news on that front I would say within the next 3-6 months but again, with the same cautionary label that it’s very difficult to predict exact timing for regulatory actions.

In parallel with that, we are going through this process with CRD in the UK so we’re very much looking forward to having approval for Avalon in our home market which will be very exciting. Of course, the number of hectares under grapes in the UK is growing all the time so it’s a very exciting opportunity for Eden Research.

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