If upcoming results from a Phase III trial of a new birch allergy drug are positive, Allergy Therapeutics’ (AGY) share price could find renewed momentum. The shares lost steam last year after bosses said the results would be delayed, but with data now due in the first quarter of 2019, would-be investors with room for risk in their portfolio could take advantage of the depressed share price.
Strong recent trading
Upcoming phase three birch results
First human trial for peanut allergy vaccine
Meetings with US regulators
Equity fundraising dilution risk
High cash burn
As the birch trial is 'blinded' and complex the delay is not worrying. And not only is data due from this trial, but the group has also confirmed that maiden in-human trials for its Polyvac peanut allergy product are expected to start in 2019, while data from a phase one trial of a dustmite allergy drug is also expected in the first half.
Following last year’s £10.6m fundraising at 26.5p, meetings have now been set with US regulators at the Food and Drug Administration (FDA) and German regulators at the Paul Ehrlich Institut (PEI) to discuss the group’s Phase III PQ Grass vaccine trials during the first quarter of 2019. A successful phase two study has paved the way for a final trial of the first long-acting, aluminium-free treatment for grass allergies – this time across a larger patient population – which is expected to begin in the second half of the 2019 financial year.
Like most drug developers, the success – or more likely the failure – of such trials and regulatory meetings could have a greater impact on the share price than its financial performance. The group does have a profitable business in Europe (which has clocked up 10 per cent compound annual growth in net sales since the company was formed in 1999), but meaningful value will only be derived via the future product pipeline and the eventual entry of new drugs into the US market. It’s believed the allergy immunotherapy market there is worth $2bn (£1.6bn), while the company’s grass allergy product could earn revenues in the range of $300m-$400m, if approved.
In the meantime, a recent six-month trading update confirmed the group is trading in line with expectations, with reported revenues for the six months ended 31 December 2018 expected to land at £46.7m (£42.2m in 2017) when half-year numbers hit the market in early March. That would represent 10.6 per cent growth on both a reported and constant currency basis. Meanwhile, operating profits excluding the company's hefty £16m research and development (R&D) bill rose 26 per cent to 9.3m.
| ALLERGY THERAPEUTICS (AGY) | ||||
| ORD PRICE: | 14p | MARKET VALUE: | £88m | |
| TOUCH: | 13.75-14p | 12-MONTH HIGH: | 31p | LOW: 14p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 3.6p* | NET CASH: | £15.5m | |
| Year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 48.5 | -12.1 | -2.3 | nil |
| 2017 | 64.1 | -2.0 | -0.4 | nil |
| 2018 | 68.3 | -6.9 | -1.3 | nil |
| 2019* | 73.8 | -9.3 | -1.6 | nil |
| 2020* | 79.7 | -9.8 | -1.6 | nil |
| % change | +8 | - | - | - |
| Normal market size: | 10,000 | |||
| Beta: | 1.08 | |||
| *Includes intangible assets of £4.9m, or 0.8p a share | ||||
| *Panmure Gordon forecasts | ||||
