Sales growth well above market average

Allergy Therapeutics (AGY) is a long-established specialist in the prevention, diagnosis and treatment of allergies. Pollinex Quattro (PQ) is an ultra-short course subcutaneous allergy immunotherapy (AIT) platform, which continues to make strong market share gains in a competitive environment. Several products using the PQ platform are in late-stage development, with the aim of moving them to full registration under new regulatory frameworks in both the EU and the US. AGY has just announced another solid operating performance and market share gains in its traditionally strong first half, with associated positive cashflow.

• 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.
• 1H’20 trading: Underlying product sales were very solid again in 1H’20, rising 9% to £50.5m (£46.7m), suggesting further European market share gains. The gross cash position at the period-end was exactly in line with our forecast, at £39.7m, benefiting from the £3.2m settlement of legal costs with Inflamax.
• Trial update: The statement also highlighted progress made with two upcoming trials. First, AGY is taking a stepwise approach to the US Grass MATA MPL Phase III study, with the initial part starting in 2020. Secondly, peanut vaccine GMP material is being manufactured to support a Phase I trial.
• Risks: The risks inherent in subjective clinical trial outcomes were clear in the Phase III Birch trial. However, AGY prudently included an objective secondary endpoint of activity, which will be used in EU regulatory discussions about the way forward, and to adjust the pending US Phase III trial protocol.
• Investment summary: Over the last year, we have highlighted consistently that AGY is at an exciting juncture. While continuing to invest in its profitable European SCIT business, it is leading the race to have its SCIT products fully approved and regulated as biologicals in the US. Despite this, the current EV/sales appears too low for a company with a long and profitable product history, and well below the multiples commanded by direct competitors.