Buy Allergy Therapeutics before Circassia float

In 2009, management transformed Allergy into a more revenue-focused business, but the innovative biotech side of the operation still exists. As sales of the group's four-injection pollen-allergy vaccine, Pollinex Quattro, thrive in Europe, the product is still battling its way into the US market - healthcare's golden calf.

A suspension of late-state trials of Pollinex was ordered by the US Food and Drug Administration (FDA) in 2007 after a patient started experiencing neurological problems. This has been a serious setback for the company, but in August last year the suspension was finally lifted. Now the priority is making up for lost time in North America and good progress is being made on this front.

Health Canada - the Canadian health authority - has approved a new clinical efficacy study for Pollinex, which will involve two sites in the US, as well as one in Canada and will treat over 600 patients. The lower cost of the Canadian trials, and the relative ease of then seeking FDA approval, if successful, should effectively allow Allergy to take Pollinex further up the value chain before needing to find a development partner or buyer.

Chief executive Manuel Llobet believes the trial is a fresh start for the company. The board is committed to working with the health authorities "one programme at a time", he says, as the company wins back trust in the wake of the suspension. "The US market is a big one," Mr Llobet adds. "We have the potential to reach between two and three million additional patients."

Allergy Therapeutics is not the only company trying to break into the US. Direct competitors, including Alk-Abelló and French company Stallergenes, have similar - albeit oral - products expected to enter the US market by the end of 2014, well before Pollinex is likely to. But Mr Llobet is unfazed: "We can let them open doors and tackle the commercial hurdles," he argues. "Meanwhile, we could attract the attention of big pharma if there's a good response to their products."

In the meantime, existing operations are gaining traction. Allergy's European sales have become less reliant on its single largest market, Germany, and the registration of its dust mite allergy products in Peru and Venezuela prove opportunities in emerging markets are on the company's radar.

Recent trading has also been encouraging. Last month, the share price benefited from news that half-year revenues will grow 12 per cent year on year when the company reports results in March. While the rating, especially the forward PE, is high, we'd expect more growth to continue to power the shares higher given the market's current strong sentiment towards biotech. And, importantly, funding should not be an issue. The company is already cash-generative from its European sales, reporting operating cash flow of £3m last year.