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Allergy Therapeutics plc: THE INVESTMENT CASE

Allergy Therapeutics - strong financial showing, solid cash position, progress in the clinic

Allergy, which saw its market share grow by a percentage point to 13%, is in a strong financial position, with £22.1mln in the bank
Woman with tissue facing pollen
INVESTMENT OVERVIEW: AGY The Big Picture
The company is a specialist in allergy treatments

Allergy Therapeutics PLC’s (LON:AGY) preliminary results charted a period of strong financial and operational progress with the company predicting further progress on all fronts this year.

Operating profits (pre-research and development expenditure) rose 72% in the 12 months to June 30 on revenues of £64.1mln, up 32%. The latter figure did benefit from a boost from the weak pound. Even so, at constant currencies, top-line growth was a solid 15%.

WATCH: Allergy preparing the ground for big opportunities in the US

Allergy, which saw its market share grow by a percentage point to 13%, is in a strong financial position, with £22.1mln in the bank.

Strong cash position

That cash will be important when it comes to funding its research programmes.

It has started the recruitment for a Phase III clinical trial of Pollinex Quattro for those with an allergy to birch pollen.

The programme for the Grass MATA MPL product is “proceeding well”, Allergy said. A US safety study has been completed and a Phase II programme is expected to get underway soon.

The first patient has been recruited for a Phase I assessment of Acarovac, for dust mite allergy, which is underway in Spain.

Further progress expected

The allergy treatment specialist has also received positive pre-clinical proof of concept data announced for Polyvac for a reaction to peanuts.

“Our continuing growth and progress on our pipeline reflects the quality of the products and the committed team that works at Allergy Therapeutics,” said chief executive Manuel Llobet.

“We expect further good progress in the coming year."

Minor tweaks

The broker FinnCap said it had made only minor tweaks to its forecasts following the results.

It expects revenues to rise to £72.5mln. Its price target is 47p a share (current price 32.8p).

Market share gains

Finncap sees Allergy with a market share of about 16% in 2020, which equates to revenues of €97mln in a market that the broker estimates will be worth €605mln, assuming market growth over 2017-2020 of 3% per annum.

This is set against the company's aspirational target of “20% in 2020".

An additional 4% share in 2020/21 would imply revenues some €20m higher than currently forecast, which would add a further 10p to the target valuation.

Market share in the yar to Juen just ended grew by 100bps (1%) to about 13% making a gain of 300bps since 2015 in a market that is broadly flat.

Growth was strong in Spain (+13%), Holland (+29%), Austria (+27%) and Germany (+13%).

An 80-year history

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

It has a profitable core business and, a number of ground-breaking allergy vaccines that trade under various brand names.

READ: Allergy Therapeutics strengthens clinical research team with senior appointments

Its most commonly prescribed vaccines are used to treat pollen-related allergies, particularly allergies to grasses and trees.

It 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.

Its Pollinex Quattro vaccine for the treatment of seasonal allergic rhinitis (hay fever) from grass, tree or ragweed pollen allergy is already established in Europe, and the company wants to replicate that in the US, where it will enjoy first mover advantage in a market potentially worth £1.5bn ($2bn).

- -updated October for new finncap comment--

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Allergy Therapeutics plc Timeline

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