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Alliance Pharma building a head of steam in Asia Pacific

Alliance is continuing to build significant growth drivers into its business, Numis Securities asserts. The company's house broker is forecasting 10% revenue growth from 2018 to 2020
Shampoo wash
Alliance's shampoo products have got dandruff and head lice covered

Alliance Pharma PLC’s (LON:APH) is a company transformed over the last three-and-a-half years through the deployment of £220mln of capital into acquisitions.

Its nominated advisor, Numis Securities, has updated its forecasts following the latest acquisition – a £60mln deal to acquire the Asia-Pacific rights to the medical anti-dandruff shampoo Nizoral – and last month’s UK regulatory sign-off for its morning sickness treatment, Xonvea.

READ: Alliance Pharma makes £60mln swoop for Asia-Pacific rights to top-selling anti-dandruff shampoo

“As a result of these events we see a meaningful boost to EBITDA [underlying earnings], but the impact of financing leaves a much lower impact on EPS [earnings per share],” the broker said, as it reiterated its ‘add’ recommendation.

Following the Nizoral acquisition, the Asia Pacific (APAC) region accounts for 23% of Alliance’s sales and holds out the prospect of faster growth than other regions.

“Alliance continues to diversify its platform globally adding US infrastructure through the acquisition of Vamousse (prevention and treatment of head lice) and expanding its APAC footprint through Nizoral. We could anticipate additional synergies from launching Vamousse in APAC in due course,” Numis suggested.

Meanwhile, back in the UK, Alliance is expected to launch Xonvea – known as Diclectin in North America (where Duchesnay Inc holds the rights) – in the autumn of this year, after which Numis expects the group to focus on gaining EU approval for the product to be launched in a single continental EU country before March 29, 2019 - “Brexit” day for the UK.

READ: Alliance Pharma gets boost as morning sickness drug gets UK regulatory green light​

Regulatory uncertainty caused by Brexit means the “launch trajectory” for Xonvea throughout continental Europe is likely to be slightly longer than originally expected by the broker.

“Should Xonvea achieve the prescription penetration seen within the US – at 9% of live births, this could equate to a sales target of £7mln in the UK market. In continental Europe, this could equate to c.£28mln,” the broker said, adding that it sees significant potential with the product.

Numis’s price target for Alliance is 115p; the shares currently trade at 97.2p, up 0.6% today and 45% year-to-date.

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