Profit from the market's Allergy reaction

The group's leading product is Pollinex Quattro, which is used as a vaccine against severe grass allergies. Traditionally, such vaccinations require a huge number of injections, but Allergy's product requires just four - a big benefit to both patients and physicians. Pollinex Quattro is the second generation product of its kind from Allergy Therapeutics and is rapidly gaining sales across Europe; at the half-year point the product accounted for 49 per cent of overall group revenue. A recent trading update suggests that total revenue for the year end is expected to be £48.5m - just under a fifth up on last year's results.

Although Pollinex Quattro is currently just used for grass allergies, there is huge scope to expand the range to treat many allergies. For instance, Allergy Therapeutics is currently conducting a phase-two trial into birch-tree allergy - Pollinex Quattro Birch - and is investigating the potential to treat dust-mite allergies, which would reduce the seasonal bias in sales.

The real excitement, however, is the fact that the group has recently relaunched a clinical trial for Pollinex Quattro grass in the US - the world's biggest healthcare market, which is hugely underserved in terms of allergy therapies. Assuming clinical success and ultimate approval, the launch of Pollinex Quattro in the US would enable Allergy to enter into a market for specific treatment potentially worth $2bn. Yet last month Allergy's management announced that the mid-stage clinical trial into the dosage level for the treatment had proved inconclusive, requiring the trial to be repeated. This means that the final trial and subsequent launch of Pollinex Quattro in the US has been delayed by at least a year.

The rise in costs associated with clinical trials will push the p&l account deep into losses (see table). That said, two large fundraisings in 2015 mean that Allergy still has more than £30m of cash; that's enough to complete all of the current clinical trials, including the repeat of the US dosage study. Plus, those allergy treatments currently on sale in Europe are highly cash generative, which helps prop up the cash position.