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Allergy Therapeutics record level of pre R&D operating profit

Allergy Therapeutics plc (LON:AGY), the fully integrated commercial biotechnology company specialising in allergy immunotherapy, has announced its preliminary results for the year ended 30 June 2020.

Financial Highlights

·      7% revenue growth at constant rate* and 6% at reported rate to £78.2m (2019: £73.7m)

·      25% increase in pre-R&D operating profit to £14.2m (2019: £11.3m) as a result of sales growth and lower overhead cost growth

·      Strong cash balance of £37.0m at 30 June 2020 (2019: £27.4m)

·      Net profit of £7.1m for the year including one-off, legal settlement of £3.2m (2019: Net profit of £3.5m)

Operating Highlights (including post period)

·     Good growth across all key products in the portfolio with further incremental increase in market share in European business

·     Exploratory field study for Grass MATA MPL will begin in Q4 2020, moving on to the second stage Phase III trial in H2 2022 to improve outcome and mitigate risk

·      Licence agreement signed with Saiba and DeepVax, VLP partner to explore new therapeutic areas, including solid cancer tumours and asthma

·      Signed exclusive rights to multi-allergy oral product ImmunoBON

·      VLP-based Peanut product Phase I trial due to commence in 2021

Manuel Llobet, CEO at Allergy Therapeutics, stated: “The robust, all-round performance of the business this year has shown the key qualities of Allergy Therapeutics, with strong financial results, a fast response to the COVID-19 challenge and continued development and expansion of our commercial portfolio and pipeline. These present new opportunities for us to strengthen our leadership in the allergy immunotherapy field and, longer-term, explore the broader immunology space, with the potential to deliver increased value to shareholders and the patients we serve.”

*Constant currency uses prior year weighted average exchange rates to translate current year foreign currency denominated revenue to give a year on year comparison excluding the effects of foreign exchange movements. See table in finance review for an analysis of revenue.

Analyst briefing and webcast today

Manuel Llobet, Chief Executive Officer, Nick Wykeman, Chief Financial Officer, and Alan Bullimore, Head of Communications and Market Development, will host a virtual presentation for analysts to provide an update on the Group, followed by a Q&A session, at 09.30am BST.

Dial-in details are:

Webcast link: https://www.lsegissuerservices.com/spark/AllergyTherapeutics/events/6b256adc-9c2f-4e00-985b-d90848ce4fd0

UK dial-in: +44 (0) 203 107 0289

US dial-in: +1 (918) 922 6506

Conference ID: 4299121

Chairman’s Report

Performance

Despite major challenges caused by the global COVID-19 pandemic, Allergy Therapeutics finished the year by announcing earnings ahead of expectations in July 2020, achieved through a combination of a robust operational performance, cost efficiencies and the timing of research and development spend. The relatively limited impact of COVID-19 on the business in 2020 could not have been achieved without the efforts of the management team and the Company’s employees, and I would like to take this opportunity to thank them for their continuing flexibility in ensuring that performance was, and is, being maintained to enable us to transform patients’ lives.

Innovation

As well as managing through the COVID-19 challenge, the Group has been active bringing new products into its commercial portfolio and further strengthening the pipeline. Having licensed exclusive rights to oral product ImmunoBON from Biomedical International R+D GmbH in July 2020, we intend to launch the product in Germany and Austria in the spring of 2021, providing patients with an add-on option in the allergy space.

The signing of the contract with Saiba AG and DeepVax GmbH in September 2020, which expands our licence to explore the potential of their VLP technology in new therapeutic areas, including solid cancer tumours, atopic dermatitis, asthma and psoriasis , is a key development of the business into the broader immunology space. This, in time, will allow the business to operate in a broader immunology market, while also using technologies that the Group has extensive experience with from the development of its peanut allergy vaccine candidate.

Intention to conduct audit tender

The Board has agreed that the Company will conduct an audit tender process during the autumn of 2020. The process is expected to complete with a recommendation from the Audit Committee to the Board by the end of October. The outcome will be announced once it has been agreed by the Board. 

Outlook

Allergy Therapeutics continues to evolve, with a solid European business and a strong pipeline of innovative, patient-focused products. This is in line with our three cultural objectives of visionary thinking, commitment to our stakeholders and fairness and honesty – or as we call it due to our large German presence, menschlichkeit. There are still a number of uncertainties to the performance of the Group over the short to medium term, including the cost and logistical impact of a hard Brexit in December 2020 and a changing regulatory environment. Of course, there also remains the potential for further waves of COVID-19, but we believe we are in a robust position to respond swiftly to ensure the best outcome for all stakeholders.

On behalf of the Board, I would like to say how proud I am of the strong team of dedicated people across all the markets in which we operate. Their commitment, determination and creativity has enabled us to continue delivery of our products to patients throughout this intense period. 

CEO Report

This year’s performance has shown that our Group is resilient and has the ability to respond swiftly to changes in the market. Further, the business is developing on many fronts while continuing to trade well.

Financial Performance

We are pleased to report a strong set of financials for the year ended 30 June 2020, with net sales of £78.2m, an increase of 6% in actual terms and 7% in constant* terms over the prior year. The growth for the year was tempered by the impact of the COVID-19 crisis, with sales in March to May 2020 affected by clinics and hospitals being closed to all non-urgent cases. The impact was more keenly seen in Southern Europe, where most allergy clinics are situated in hospitals, whereas Northern Europe benefitted from separate allergy clinics that reopened earlier.

Overall, growth in Pollinex Quattro, Pollinex and Venomil were strongest, with most of the portfolio performing well in a tough market. Growth was strongest in our larger markets with only Italy exhibiting a reduction due to the severe COVID-19 impact.

As soon as the crisis hit, the Group took steps to ensure the safety of employees. This was followed by making operating efficiencies to compensate, where possible, for lower expected sales. This has proved very successful with the net effect of the efficiencies being £3.0m greater than the loss of sales. This resulted in the pre R&D operating profit increasing by 25%. This was above market expectations, as announced in the July 2020 trading update.  

R&D spend in the year of £9.0m, excluding one-off legal expenses settlement with Inflamax, has been lower than the prior period due to timing (2019: £13.0m, excluding legal settlement) and has focused on the Pollinex Quattro and Peanut vaccine candidate development.

Overall, the financial performance was strong with a net income of £7.1m, up £3.6m on 2019 and a cash balance of £37.0m (2019 £27.4m).

Trials

Preparations for the pilot field study (G309) in the Grass MATA MPL clinical development programme are well underway with the trial due to start in Q4 2020 and readout expected in H2 2021. The Grass MATA MPL Phase III field trial will start in H2 2022 to improve the outcome and mitigate risk, which we and others have encountered in the past with these types of trials. It will also allow for any changes in the approach to patient selection, which typically starts in the month of August of the year in which the trial starts.

We were pleased in January to see the publication of encouraging preclinical data for our peanut allergy vaccine candidate in The Journal of Allergy and Clinical Immunology. Work on scale up and stability ahead of human trials is ongoing and, despite challenges, the team expects the Phase I trial to start in 2021. A pre-IND (Investigational New Drug Application) meeting with the FDA is planned for Q4 2020 to discuss the protocol for the first in-human study. An ex-vivo biomarker study is planned to take place by H1 2021 using the final product formulation to confirm translation of its hypo-allergic potential and biomarker profile using blood samples from peanut allergy patients. This will support progression to first-in-human studies. 

As announced in July 2020, the analysis of the primary endpoint of the Birch B301 Phase III trial has been declared invalid by the German Regulatory Authority, the Paul Ehrlich Institute (PEI), owing to technical issues encountered in the study, which made it impossible to reconstruct the data. The Group intends to repeat the trial after the Grass Phase III Trial (G306) has met the expected endpoints.

The Grass MATA MPL Phase III programme and the initial Phase I peanut trial are both fully funded. 

Pipeline

We announced on 3 September 2020 the signing of our new exclusive licensing agreement with the Swiss biotechnology companies, Saiba AG and DeepVax GmbH, to use their patented VLP technology platform to develop and commercialise vaccines targeting solid cancer tumours, atopic dermatitis, asthma and psoriasis. This is the first step of a long-term strategy for the Group to move into the broader immunology space while utilising its knowledge of vaccines, the VLP technology, immunotherapy and adjuvant systems. The relationship with Saiba AG has also been deepened with the knowledge sharing agreement in relation to VLP, announced in July 2020, which Saiba AG is using to develop  COVID-19 vaccine candidates. This agreement will provide valuable information to the Group about the development of a VLP product through clinical studies.

As announced on 15 July, 2020, the Group has signed a commercial agreement for the exclusive rights to ImmunoBON, a patented protein-based oral product for the general treatment of allergies based on the lower allergic incidence shown by people who live near or are brought up on a livestock farm, the so-called “farm effect”. This product adds to our strong portfolio of allergy products based on patient convenience and short course treatment. ImmunoBON comprises a three-month treatment period and therefore has the advantage of potentially higher compliance than longer course treatments.

Outlook

The outlook for the next financial year is hard to predict accurately, given the lack of clarity over the impact of COVID-19 over the next 12 months and the potential impact of a hard Brexit. Management expects that sales are likely to grow at a similar rate to 2020 due to the anticipated reduction of new patients in the autumn, caused by the reduced number of patient clinic visits made in spring and early summer 2020 resulting from COVID-19 restrictions.  

Costs are expected to increase by a low double-digit percentage next financial year following the low levels this year, due to the investment in IT, regulatory and sales capabilities.

R&D expenses are anticipated to be approximately 70% higher than in 2020 (excluding the one-off legal settlement of £3.2m) as research continues with Grass MATA MPL and our peanut allergy candidate vaccine.

Overall, the management remains confident about the future of the business and the exciting new opportunities that we are creating in our product portfolio and pipeline. 

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