Carbios has achieved key milestones towards industrialisation, having concluded the enzyme production stage and launched its pre-pilot production platform for biodegradable plastics. This has finalised the third stage of its development, following collaborative research and proof-of-concept. It is an important step towards scaling up as well as commercial licensing development. Importantly, it will enable the company to eventually file for IP protection for each individual endproduct – a very strong cornerstone to long-term IP. Carbios has also produced a second biodegradable plastic, PLA-based, which shows that its string of processes continues to progress as targeted. In H1, it strengthened its board by appointing Professor Alain Marty as chief science officer and Jean Falgoux, whose industrial and governance experience should be of great benefit

H1 results support our full-year forecast. The reported net operating loss of €1.9m is in line with our full-year expectation for an operating loss of €3.6m. We have adjusted our tax credit forecast on the back of the current run rate. As a result, our 2015e EPS increases to -€0.73 from -€0.79. Carbios had cash of €9.6m at the end of June, after net cash spend of €1.5m. This supports our forecast of net cash spend of €3.1m for the full year and year-end net cash of €7.8m. 

We value Carbios on a DCF methodology with risk-adjusted cash flows. We value the most advanced processes individually based on potential market sizes, achievable royalty rates and market shares to 2030. Our fair value range is unchanged at €23-37 per share (WACC 20%). Commercialisation and licensing will be key to de-risking cash flows.