Plant Health Care (PHC) unaudited half year results for the six months ended 30 June 2021 highlight double digit revenue growth with operating cash outflow reduced by 29% to $1.5m with $11.1m on the balance sheet.
Financial Highlights
Revenue for the six months increased 13% to $3.5m (1H20: $3.1m) with sales from Harpin up by 26% to $2.4m.
Importantly, sales across the EMEAA increased 76% to $1.3m, illustrating the global nature of the Company’s addressable market.
The Company did reveal however, that as with all things ‘Agri’, somethings are weather dependent with sales to sugar cane farmers in Brazil adversely affected by drought.
Adjusted LBITDA increased to $2.3m (1H20: $1.8m), largely due to the reversal of the intercompany FX gains reported last year, with reported loss before tax reducing significantly to $2.4m for the period (1H20: $4.0m loss).
Whilst cash operating expenses increased 17% to $4.2m (1H20: $3.6m), due to continued investment in the Company’s people, products and marketing, cash outflow from operations decreased 29% to $1.5m (1H20: $2.1m).
The balance sheet remains strong with cash and cash equivalents, including investments, as at 30 June 2021 of $11.1m (FY20: $4.1m) following the successful placing raising $9.1m (net) during the period.
Commercial Product Highlights
The Commercial Products business includes the proprietary product Harpin 𝜶β as well as complementary third-party products.
The commercial business continues to phase out Myconate and ramp sales of Harpin by introducing this product that to date has been the reserve of smaller nice markets into larger row crop markets.
Key to this growth is establishing routes to market via global in-country distributors.
During the period, the Company announced a distribution agreement with Agrii, one of the Worlds largest disributors, specifically for Harpin in the UK.
The Commercial business was profitable and cash generative in FY20 and is now poised to accelerate growth to FY21.
Platform Technology Highlights
PREtec is the Company’s proprietary ‘vaccines for plants’ platform technology that has the potential to generate many unique product offerings that all have similar characteristics that deliver farmers a wide range of specific grower benefits.
PREtec products act by stimulating the plant’s own natural defence mechanisms. Inspired by natural proteins, these peptides can be customised to target features such as growth promotion, disease resistance or drought stress.
Saori to be launched in Brazil
Saori, the first PREtec product, and the brand name for PHC279 in Brazil, will be launched in Brazil in the second half of 2021.
Notably, the Brazilian authorities significantly accelerated the standard agri-chemical approval procedures that usually take up to six years to just 12 months for Saori, as they clearly recognized the significant economic and sustainable benefits the product could bring to their heavily agi-based economy.
Saori is now in trials with 16 independent advisors in the 2020/21 crop season following successful trials in soybeans, which showed increased vigour and better control of a wide range of diseases, compared with conventional treatments with an average yield increase of c.4%; and up to 5.8% in areas of drought, stress or high disease pressure.
Saori has now been successfully produced at a pilot-scale facility at Pennsylvania State University with plans now well advanced with toll manufacturers to establish full commercial scale production.
PREtec product launches in the USA
In November of 2020, the Company signed a Joint Development Agreement with Wilbur Ellis, one of the largest distributors of crop protection products in the USA. The two companies are collaborating on the development and launch of products based on four PREtec peptides, for use in specialty crops (fruits and vegetables) in the USA.
PHC279 is progressing through the regulatory process in the EPA (US Environmental Protection Agency), with early season observations demonstrated good control of late blight in potatoes. EPA approval is expected in mid-2022 with first commercial sales expected in late 2022.
PHC949, from the T-Rex 3G nematode control platform, is showing exceptional results; with nematode control often comparable to pre-existing chemical standards, which is a remarkable for a highly sustainable, biological product. The Company anticipates submitting to EPA for regulatory approval before the end of 2021, with approval expected in mid-2023. Commercial production of PHC949 is being trialed with the same toll manufacturers.
PHC404 and PHC414 are both currently under evaluation by Wilbur Ellis. These biostimulant products are both showing promise in promoting yield and quality in a range of fruit, tree and vegetable crops.
Further PREtec Developments
The Company plans to extend the development of PREtec across Europe and elsewhere over the coming years.
Europe, which is the world’s largest market for sustainable agriculture with annual sales of over $2 billion, is an obvious opportunity for PREtec, but whilst the regulatory regime for biological products within Europe remains unclear and complex, the Company remains cautious on the timing of submissions.
Elsewhere, substantial opportunities exist for PREtec products outside of Brazil in South America, which are cirrently being evaluated internally and prioritised as opportunities arise and resources permit.
Outlook
Preparations for the first launches of PHC279 are progressing to plan, with further PREtec peptides in the 2H21 pipeline, which should drive material revenue growth to FY21 and beyond.
The medium-term prospects for PREtec peptides are also strong, with the Company rapidly establishing routes to markets worth more than $5 billion annually.
The Board has also concluded that the Company has suffcient funds to achieve cashflow breakeven, negating requirmeents dfor further diklution on current growth plans.
Dr Christopher Richards, Chief Executive Officer, commented: “In-market Harpin 𝜶β sales growth in the first half of 2021 were most encouraging. Our distributors in the USA have reported growing product adoption, in line with the prior year, in both corn and specialty crops.
Sales in Europe grew strongly, particularly in citrus in Spain and in potatoes and the turf market in the UK. In Brazil, in-market sales of H2Copla have been held back by drought and limitations on the company’s technical promotion effort caused by the latest wave of Covid-19.
Sales in Mexico were held back by low export prices and Covid-19. The world remains an uncertain place, as shown by the effects of Covid-19 on sales in Brazil and Mexico.
The Board expects trading for the full year to be in line with management expectations.
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 & 2024. The Board intends to maintain a conservative approach to cash management, targeting cash breakeven within existing cash reserves.”
View from VOX
After eight years and more than $24 million investment, Plant Health Care has now established itself at the bleeding edge of the use of peptides for agriculture, with the first patents now granted in the US with low-cost commercial scale production agreements with toll manufacturers expected during 2H21.
With its rapidly expanding distribution network, PHC now has access to markets covering more than 41 million hectares worldwide.
In Brazil, the world’s largest exporter of soybeans with some 38 million hectares, growers spent $2.85 billion on soybean fungicides in 2020 alone.
Following the recent approval of Harpin 𝜶β for use on corn and soybeans in Argentina, the Company also continues to expand its target markets through collaborations with very large global and in-country distributors, which will be the foundation for sustainable sales growth into FY22 and beyond.
Whilst only limited volumes of Saori will be available for commercial sales in 2021, we expect the Company to make an announcement on manufacturing arrangements before the end of 2021.
From an investor’s perspective, PHC stands out as an obvious candidate for significant inflows from ESG investors and the recent award of the LSE’s Green Economy Mark in June 2021 confirms the Company’s sustainability credentials.
Analysts at Arden have a highly positive stance 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”.
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.
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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