Evolva: A Little Known Synthetic Biology Stock
Synthetic biology is a rapidly growing field of interest to investors in multiple industries such as pharmaceuticals and energy. In 2010, an organism was created by Synthetic Genomics which was the first self-replicating species on the planet which had its biological recipe created by a computer. This was the first recorded instance of mankind creating artificial life. The potential of nanotechnology has often been talked about as “self-replicating machines that create things for us to use” and that’s exactly what synthetic biology is enabling. One little known Swiss company, Evolva, is using genetically modified yeast to create things that are typically found elsewhere in nature.
Evolva (SWX:EVE) began trading through a reverse merger with a publicly traded company called Arpida which had lost nearly all of its value after its lead drug candidate did not receive regulatory approval. At that time, Evolva had 75 employees and 3 drug candidates in and around the Phase 1 testing stage. Fast forward to today and the Company’s operations are now organized in two segments: Products (Resveratrol, Vanilla, Stevia, Saffron, Pomecins and Agarwood ) and Legacy Products (EV-077 for diabetic complications and EV-035 for bacterial infections).
As the name “Legacy Products” implies, their focus on drug development is now being retired. Just three weeks ago, they completed the sale of their drug candidate, EV-035, to Emergent Biosciences for around $5.5 million with potential regulatory milestone payments of up to $65 million and a royalty of 10% on net sales of future drug products. All of the remaining “legacy products” have now been either out-licensed or sold leaving Evolva to focus on their yeast platform that can produce a variety of ingredients. The company strengthened their pipeline and capabilities in 2014 by acquiring Prosarix and Allylix. Founded in 2002, California based Allylix was a VC backed biotech startup that had taken in $27 million in funding to develop terpene products for flavor and fragrance, food ingredients, pharmaceuticals, and other markets. With a 140 employee workforce, Evolva now has 225 individual patents protecting their platform along with 200 more filed patent applications.
While the process is quite sophisticated, the end result is a self-replicating yeast organism which contains the genetic recipe to produce any one of hundreds of potential natural ingredients. With many ingredients to choose from, the Company created a pipeline of candidates which showed the most commercial promise. The most advanced products in this development pipeline can be seen below:
While these products aren’t being sold in meaningful quantities yet, Evolva’s revenues were up 23% in 2014, to reach $11.6 million USD and Evolva expects that revenue number to increase by at least 30% in 2015. About 89% of 2014 revenues came from corporate partnerships in the form of research fees and milestone payments from Cargill, IFF, Ajinomoto, Roquette and L’Oréal along with an upfront license payment from Emergent. While product sales were minimal in 2014, they are expected to be impactful in 2015. Evolva’s stock price has been steadily increasing since it bottomed out in 2012 giving the company a current market cap of $592 million USD.
For U.S. investors, Evolva’s stock can be purchased as an ADR on the OTC market under the symbol (OTCMKTS:ELVAF). However, this is not very liquid and probably has a very high bid-ask-spread which penalizes investors. Alternatively, shares can be bought on the much more liquid Swiss exchange.
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