ECO Animal Health has established a research collaboration with Moredun Research Institute aimed at developing a potential first-in-class vaccine against poultry red mite, a blood-feeding parasite with welfare and production implications for egg-laying hens. The move represents ECO’s second new academic R&D collaboration this year and follows an agreement signed with Imperial College last month to develop vaccines against porcine infectious diseases.
Moredun is an independent, although largely government funded, scientific research institution based in Scotland focussed on animal/veterinary health. The three-year project appears to build on the work of Moredun’s researchers, who have notably been able to establish a laboratory colony of poultry red mites and have tested a prototype vaccine based on extracts from the mite. The project intends to use a reverse vaccinology approach to identify epitopes by analysing bio-informatic data from an infection model across the developmental stages of the mite. The aim will be to generate a synthesisable vaccine that can be tested in Moredun’s poultry red mite challenge model.
Poultry red mite (Dermanyssus gallinae) is one of the most important causes of production losses in laying hens, including by acting as vectors for pathogenic bacteria (including salmonella, E. coli and mycoplasmas) and viruses. The mite can feed on up to 5% of a bird’s blood overnight, causing anaemia and stress that can induce feather pecking, cannibalism and increased feed consumption. As there are no effective non-chemical solutions, insecticides are used to kill the mites but this has its own risks including the potential for chemical residues in the eggs/meat and development of resistance. Over 90% of farms in Western Europe are infested with poultry red mite.
ECO’s shares have fallen to their lowest point since October 2008, primarily on concerns around weakness in the Chinese pork market, as the economics of pork production are a key driver of demand for Aivlosin. Chinese pork prices have been highly volatile over the past three years, after an African Swine Fever outbreak in 2019 and its knock-on effects, compounded by the pandemic and the government’s zero-Covid policy. Chinese pork prices fell throughout 2021 (from an unusual high) and into 2022. However, since May they have recovered to a level where Aivlosin demand should stabilise.
ECO is due to report its financial results shortly, with consensus suggesting sales of c. £81.5m and adjusted EBITDA of £6-7m. Both will be lower than exceptional levels seen in 2021. ECO’s enterprise value is currently £54m (based on forecast cash of c £18m), suggesting an EV/sales ratio of <0.7 and EV/EBITDA of ~8-9, both of which are well below norms in the animal health sector. ECO resumed payment of a dividend in 2021, at 1p/share, that if repeated, would offer a yield of 0.9%.
