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Allergy Therapeutics plc

Allergy Therapeutics Excellent performance shown in FH1’17 Interim results – Zeus Capital

Allergy Therapeutics Plc (LON:AGY) the UK-based, specialty pharmaceutical company focused on the development, manufacture and sale of vaccines and other products for the treatment and prevention of allergies, today reported its Interim results for the 6 months to Dec 31, 2016, traditionally the company’s strongest half due to the clinical seasonality of allergy vaccination programmes. These Interim results provide greater detail on the company’s excellent performance, as indicated in January in the trading update, and support our upgraded full year revenue forecasts at that time. Net sales grew by 39.3% (18% at CER) to £40.4m, giving rise to adjusted EBITDA pre-R&D of £12.3m and net cash of £24.4m (as at Dec 31, 2016). Importantly, in broadly flat markets AGY continued to increase its share (to 13% from 12%), a reflection of the strong quality and advantages of its leading Pollinex® Quattro allergy vaccines. On the basis of this performance our sales forecasts for FY2017 and beyond were upgraded. We are increasingly confident that the strength of the core business combined with the advancing product pipeline (with PQ Birch now in phase III and Acarovac MPL in phase I) will be duly recognised by investors and that the current share price represents an attractive entry level relative to our risk-adjusted NPV of 69p per share.

Strong financials: In the 6 months to Dec 31, the core business manufacturing (UK-based) and selling AGY’s highly competitive ultra-short-course PQ allergy vaccines into mainly European markets generated £40.4m net sales. Currency movements benefitted net sales by approximately £6.2m (assuming constant currency at last year’s rates). Excluding this effect, sales grew by 18% from £29.0m (FH1’16) to £34.2m (FH1’17). Gross sales (pre-German rebate) at CER reached £37.4m (FH1’16: £31.4m, +19%). Gross margin during the period increased to 78% compared to 75% in the prior year period reflecting the currency impact on the top-line. Adjusted pre-R&D EBITDA was £12.3m, up from £8.9m in FH1’16, reflecting the lower R&D £3.8m spend in FH1’17.

Outlook: Given the solid FH1’17 sales performance highlighted in the January trading update we raised our net sales forecasts for FY’17 to £61.0m (previously £54.8m) which assumes growth of 26% y.o.y. AGY’s gross profit will continue to benefit from currency movements (74% margin forecast). With the European PQ-Birch301 phase III now underway and the phase I clinical trial of Acarovac MPL also ongoing, we now expect AGY to invest around £11.5m in R&D in FY’17. We expect AGY will report a small EBITDA loss in FY’17 of £2.3m, but we believe this is justified by the longer-term value of having ultimately approved PQ products. Excluding these investments in R&D, we expect the company would generate positive adj. EBITDA of £9.2m in the current year.

Commenting on the interim results, Manuel Llobet, Allergy Therapeutics Plc Chief Executive Officer, said: “In the first half of this year, we delivered an increase of 18% in revenue at constant currency, despite flat or low growth in European markets, driven by the quality of the Group’s highly convenient, ultra-short course, aluminium-free therapy enabling us to continue to gain market share. This, linked to the recent announcements on progress with our pipeline projects, illustrates that the approach of investing both in the current business as well as the pipeline is working, paving the way for our long-term strategic international plans for a world-class allergy vaccines portfolio.”

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