Allergy Therapeutics PLC outperforming the market

Not to be sneezed at: Allergy Therapeutics' ground-breaking allergy vaccines address several lucrative markets
Allergy Therapeutics PLC outperforming the market
May contain nuts ... food allergy represents a significant new area for the company

Armed with a cash pile of £33.2mln allergy vaccine specialist Allergy Therapeutics PLC (LON:AGY) is poised to accelerate growth.

The first half of the current financial year saw the company outperform the market with further market share gains across Europe, as it delivered 12% year-on-year revenue growth (on a constant currency basis) in the six months to the end of 2015.

“This double-digit growth against a (broadly) flat market has been driven by a combination of our winning proposition of lifestyle enhancing short course aluminium-free vaccines boosted by our successful sales strategy,” chief executive Manuel Llobet told investors.

The company raised £12mln in a share placing towards the tail-end of 2015, which strengthened the balance sheet and left it well-positioned to invest in new product development.

ATLANTIC CROSSING

The company's core markets have traditionally been Germany and Spain, augmented by contributions from the Netherlands, the UK and Austria, but now the US is beckoning.

"Our business is gaining significant scale and momentum in Europe through both organic and acquisitive growth and we expect this to continue as we further invest in our commercial infrastructure and prepare to take our products over to the US,” Llobet said.

Its Pollinex Quattro vaccine for the treatment of seasonal allergic rhinitis from grass, tree or ragweed pollen allergy is already established in Europe, and the board is confident the success can be replicated in the US, where it will enjoy first mover advantage in a market potentially worth $2bn.

The clinical development programme for Pollinex Quattro Grass in the US is progressing well, the company revealed in a statement accompanying its interim results.

In December 2015, Allergy Therapeutics announced the initiation of the Phase II study (G204) for grass allergy and the company continues to expect to file for US Food and Drug Administration (FDA) approval at the end of 2018.

As in the company's core adoptive European markets, the US allergy immunotherapy market has historically been serviced by injected (subcutaneous) vaccines subcutaneous rather than beneath the tongue (sublingual) compounded vaccines. Allergy Therapeutics is therefore confident that the availability of an FDA-approved subcutaneous vaccine will lead to fast penetration of the market and broad acceptance of the product.

Other products in the Allergy Therapeutics pipeline include treatments for peanut allergy and dust mite allergy, while various feasibility studies are in progress on drugs that can act on the immune system in a therapeutically helpful manner (immunomodulators), and adjuvants – substances added to a drug formulation to increase efficacy.

FROM THE BOSS

BROKER COMMENTARY

Broker Shore Capital noted the global market for peanut allergy treatments is around $8bn and Allergy sees it as a ”significant strategically important new area”.

Half-year profit before tax fell to £1.37mln from £7.52mln in the corresponding period of 2014, but the decline is largely accounted for by an increase in research & development costs to £6.53mln from £1.07mln the year before, as Allergy progressed two Phase II trials in the US and Germany.

“[Post-tax] Profit for the period was £1,054,000, but the company typically makes a loss in the second half given the seasonality of the business. Longer-term the company expects to continue to outgrow both competitors and the broadly flat/low-growth markets in which it operates, it expects growth in its European business at low double digit rates over the years and is targeting entry into the US market in 2019 with its subcutaneous allergic rhinitis vaccine, potentially the first in the seasonal segment of the US allergic rhinitis market,” Shore Capital said.

ABOUT THE COMPANY

Allergy Therapeutics has an 80-year history and is no “jam tomorrow” drug development company.

It has a profitable core business and, as the name suggests, a number of ground-breaking allergy vaccines that trade under various brand names. Its most commonly prescribed vaccines are used to treat pollen-related allergies, particularly allergies to grasses and trees.

It has has a strong presence in Europe with established operations in Germany, Italy, Spain, Austria, Switzerland, the Netherlands and the United Kingdom, while in other markets it often makes its products available through distribution partners.

In the year to 30 June, 2015, it saw revenues grow to £43.2mln from £42.0mln the year before, though this would have been an 11% rise to £46.6mln had it not been for unhelpful foreign exchange rate movements.

Profit before tax slipped to £654,000 from £1.08mln the year before, as research & development costs rose to £3.12mln from £2.96mln and administration expenses climbed to £10.22mln from £7.99mln.

Cash at the end of 2015 stood at £33.2mln.

THE SHARE PRICE

At 27.55p, the shares are up almost 9% over the last year, during which time the FTSE 100 fell almost 11%.

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