2018 full-year results: solid growth

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 by the end of 2018. As discussed at the interim stage, underlying sales growth was affected by a low pollen season in central Europe. Full-year results suggest that this has remained a difficult market, but one in which AGY has continued to gain market share.

• 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.
• FY’18 results: Underlying sales growth in the year to end-June 2018 was 3.5%, which was boosted to 6.6% on a reported basis to £68.3m (£64.1m). Given a weak and short pollen season in spring/summer 2017 and a correspondingly tough market, this was a good performance, with 1pp market share growth.
• Profit: Careful control of marketing and operational costs, combined with timing of R&D, resulted in stronger net cash of £12.5m (£18.8m) at 30 June 2018. As a result, pre-tax profit emerged at -£6.5m in 2018, compared with our forecast -£9.1m. Excluding R&D, operating profit improved 26% to £9.6m.
• 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. Ongoing 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.