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Allergy Therapeutics bears hefty R&D burden

The allergy specialist's big spending across the pond might have helped revenue accelerate but it created a drag on costs
September 26, 2016

The increasing popularity of grass allergy vaccine, Pollinex Quattro, is helping Allergy Therapeutics (AGY) chip away at the European market. The group increased its market share to 12 per cent in the period under review, an increase of 2 percentage points, which helped drive revenue up by 19 per cent at constant currencies. This encouraging performance also fed through into an 11 per cent increase in operating profit in the core business to £4.3m.

IC TIP: Buy at 17.6p

At first glance, investors might baulk at the bottom line, but it reflects an ambitious product rollout in the making. Allergy has moved back into a heavy loss-making position due to a fivefold increase in research and development (R&D) costs. That said, progress in R&D has been mostly positive; a Phase II study into the birch tree allergy product has been successfully completed, while two new products are inching closer to human trials. The only black spot in the period was the failure of the US Pollinex Quattro trial to provide conclusive dose results, meaning the study must now be repeated. This has set back the stateside launch of the 'best-in-class' product by at least a year.

Broker Panmure Gordon expects pre-tax losses of £3.9m for the June 2017 year-end, giving a loss per share of 0.8p, compared with comparable negative readings of £12.1m and 2.3p in the reported period.

ALLERGY THERAPEUTICS (AGY)

ORD PRICE:17.6pMARKET VALUE:£104m
TOUCH:17.3-18p12-MONTH HIGH:34pLOW: 18p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:5.1pNET CASH:£20m

Year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201241.30.60.3nil
201339.30.50.1nil
201442.01.10.2nil
201543.20.70.02nil
201648.5-12.1-2.3nil
% change+12---