Eco Animal Health - link to home page


When was ECO formed and why?

ECO began as a “virtual “company around 1995 within Lawrence plc. ECO identified a number of best selling animal health drugs, sourced them and commenced licensing of them. The strategy was to add a range of therapeutic, vet prescribed, drugs for the treatment of food producing animals to complement Lawrence plc’s range of natural feed additives, which it sold internationally. In 2007 Lawrence changed its name to ECO Animal Health as the business had become entirely focussed on animal health.

What is Aivlosin®?

Aivlosin is a highly effective antibiotic that treats a range of specific enteric (gut) and respiratory diseases in pigs and poultry thereby ensuring a rapid return to health and optimum production. It must be prescribed by a veterinarian and is always used at low dose rates and for short treatment durations.

How big is the market for Aivlosin and where is it?

The global market for drugs to treat respiratory and enteric diseases in pigs and poultry is circa $1.5bn split fairly equally between North America, Europe and the rest of the world, mainly Asia. Aivlosin is already licensed in Europe and Asia and we have recently obtained marketing authorisations (or licences) in Canada, the USA, Korea and Russia – all countries with significant sales potential.

How much of ECO’s sales are from Aivlosin and is there more to be achieved with this modern drug?

Approximately 70% of ECO’s global sales are Aivlosin. The additional new licences in North America are for pigs with poultry expected to follow. Substantial ongoing product development and regulatory work covering more formulations, more species and different diseases is expected to broaden the list of indications and the territories in which Aivlosin can be sold, substantially increasing its revenue generating potential.

Why did the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA) license a new drug like Aivlosin?

Aivlosin has passed all the stringent tests required by these regulatory authorities. These tests include proving safety (to animals, to humans and to the environment), product quality and clinical efficacy against specific diseases in the target species while guaranteeing zero antibiotic residues in the meat that is eaten.

Aivlosin has the profile of a modern antibiotic in that it is used to treat specific named diseases, its effective dose rate is low and the duration of treatment is short and must be administered under veterinary supervision. Aivlosin is not used in human medicine. Aivlosin’s profile is very much in line with current thinking regarding the judicious use of antimicrobials in farm animals and the desire to reduce the amounts of antibiotics used in farming.

Why should Aivlosin be the drug of choice for farmers?

That is simple! Aivlosin is highly effective and works quickly and so treated animals return to health faster. In addition to the obvious welfare benefits, animals gain weight faster, digest food more efficiently and get to market earlier which all adds up to more money for the grower.

What else does ECO sell?

We have a range of modern generic drugs, which also require active ongoing licensing support. The range is led by ECOMECTIN®, an endectocide that controls worms, ticks, lice and mange in grazing stock and pigs.

Where can ECO’s share price be seen?

ECO is traded on the London Stock Exchange’s AIM market under the stock symbol LSE: EAH . AIM is the London Stock Exchange’s international market for smaller growing companies. There are various tax benefits available to AIM investors including ISAs and IHT relief treatment depending upon the status of the quoted company. Further information on which types of AIM company qualify for these benefits may be found at links:

The value of any tax benefits will depend on individual circumstances and investors are recommended to take appropriate advice

Why does ECO have a high “PE” ratio?

The price-earnings (P/E) ratio reported in the press and in broker estimates looks high, but is it a true measure of ECO’s value?

Licences are intangible assets that can be sold and transferred to any willing buyer. These assets are commonly valued as a multiple of the gross margin that the licence has generated or is expected to generate over 12 months. With the cost of bringing a new drug to market for food animals currently being in the order of $200m and taking up to 15 years, it is easy to understand the asset value of an existing tradable licence.As our sales and the profits generated have increased, so has the asset value of our licences.

The Company is obliged under IFRS accounting rules to amortise the cumulative cost of obtaining licences over their conservatively estimated useful lives. So far we have spent £60 million in order to obtain a total of over 600 licences. The amortisation deducted from our post-tax profit on ongoing activities for the 12 months ended March 31st 2016 amounted to £2.6 million, leaving profit for the period at £6.7m. Without this non-cash deduction, the profit would have been £9.3m and the P/E ratio would be proportionately lower.

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