The float of allergy specialist Circassia's on London's main market this month served its Aim-listed peer Allergy Therapeutics (AGY) well. Indeed, since our buy tip in February (Buy, 14p, 27 February 2014), which aimed in part to capitalise on the potential for the float to raise Allergy's profile, the shares have risen more than 70 per cent to 24p.
Allergy Therapeutics helped justify some of the recent interest by reporting strong underlying trading in the six months to the end of December. Operating profits grew 26 per cent to £6.7m, underpinned by a 12 per cent increase in European market share and a similar rise in gross revenue to £30m. It also hailed recent recommendations by the US Food and Drug Administration (FDA) for several allergy vaccines, indicating that the US market is opening up for pharmaceutical-quality allergy treatments.
But such stellar gains in less than a month are also a sign of a hot and volitile biotech market. If a reminder were needed of the dangers of investing in such a racy area, it came last Friday when US congress members raised concerns over the price of a hepatitis C drug developed by Gilead Sciences (US:GILD). A letter sent by the House Energy and Commerce committee to the chief executive of Gilead addressing the inflated $84,000 cost per dose of its 12-week treatment, which prompted the Nasdaq biotechnology index to tumble 4.4 per cent - the sharpest decline since October 2011.
