Steady performance in a tough market

AGY is a long-established specialist in the prevention, diagnosis, and treatment of allergies. Pollinex Quattro (PQ) Grass, the subcutaneous allergy immunotherapy (AIT), continues to gain market share despite being available in the EU only on a ‘Named Patient’ basis. The Phase III trial, designed to obtain approval for PQ Birch as a biologic in Europe, is well advanced and will report data shortly. As explained at the interim stage, underlying 1H’18 sales growth was affected by a low pollen season in central Europe. A trading statement indicates that this has remained a difficult market, but one in which AGY has continued to make market share gains.

• Strategy: AGY is a fully integrated pharmaceutical company focused on the treatment of allergies. There are three parts to its strategy: continued development of its European business via investment or opportunistic acquisitions; the US PQ opportunity; and further development of its pipeline.
• Trading update: Underlying sales growth in the year to end-June 2018 was 3.5%, which increased to 6.6% on a reported basis, to £68.3m (£64.1m). Given reports of a low pollen season and a correspondingly tough market in 2017, this suggests that AGY saw a good performance and further market share gains.
• Costs: Careful control of marketing and operational costs, combined with timing of R&D spend, resulted in a stronger net cash of £12.2m (£18.8m) at 30 June 2018, £3.7m above forecasts. This suggests that pre-tax profit will emerge nearer -£9.1m in 2018, compared with our previous forecast of -£9.5m.
• Risks: AGY’s primary risk lies in the timings of the regulatory approval process, mostly outside of its control, related to the PQ Birch immunotherapy and the European TAV process for full approval as a biological. Ongoing clinical trials do represent a risk, but this is limited by the products’ use on a named patient basis.
• Investment summary: AGY is going through an exciting period. It has a clear vision, is gaining market share from competitors, and is leading the race to have its products fully approved and regulated as biologicals – first in Europe, then in the US, where the regulators are demanding change. Read-out from the EU Phase III PQ Birch trial in 2018 will provide the next major value inflection point.