Growth 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. Trials designed to obtain regulatory approval for PQ approved as a biologic in both Europe and the US are well advanced. Meanwhile, although underlying sales growth was weaker than expected in 1H’18, this was on the back of an unusually shorter and lower pollen season in central Europe, suggesting that AGY has continued to make further 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: In 1H’18, underlying sales grew 1.3% to £42.2m (£40.4m), which was about 10% below expectations, largely because of an unexpectedly weak pollen season. Timing of R&D spend, coupled with careful control of costs and working capital, generated a cash position of £25.8m (£27.8m).
• Pollen season: Reports show that the pollen season was very weak in 2017, particularly in AGY’s key markets of central Europe, Germany, Austria and Switzerland. Therefore, there is reason to believe that the low sales growth in 1H’18 was still sufficient for AGY to make further market share gains.
• R&D spend: Clinical trials designed to get full regulatory approval of Pollinex Quattro (PQ) as a biologic continue apace. The Phase III PQ Birch trial is fully recruited, with results due to be released in 2H calendar 2018. The Phase II PQ grass trial is still recruiting. Timing of R&D spend does affect the cash position.
• Investment summary: AGY is going through an exciting period, with a clear vision, gaining market share from competitors, and 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.