Allergy Therapeutics

A bigger slice of the cake
Allergy Therapeutics has continued to grow its market share in Germany and other European markets while working on securing a US partner for Pollinex Quattro (PQ). The company has a US licensing campaign but is also exploring alternative ways of developing the US opportunity. The US allergy immunotherapy (AIT) market is potentially large, but undeveloped, and Allergy needs to secure a partner to commercialise PQ in the US. The US PQ opportunity is not included in our valuation; a licensing deal would transform Allergy’s prospects and substantially increase our valuation.

Diversification strategy
Allergy has made progress on its strategy to diversify its portfolio, expand into new geographical markets and identify new in-licensing opportunities. 2013 revenues in markets outside of Germany, the company’s largest market, accounted for 40% compared to 27% in 2009. Allergy introduced three new probiotic products for different allergies in 2013 and Arovac Plus, a novel product for perennial mite allergy, was also launched in Spain. The registration of mite allergy products has been initiated in Peru and Venezuela, while the registration of various allergy vaccines in Portugal will be completed in H114. A PQ Birch dose ranging study in Germany, Austria and Poland began in September 2013.

Diversification strategy
Allergy has made progress on its strategy to diversify its portfolio, expand into new geographical markets and identify new in-licensing opportunities. 2013 revenues in markets outside of Germany, the company’s largest market, accounted for 40% compared to 27% in 2009. Allergy introduced three new probiotic products for different allergies in 2013 and Arovac Plus, a novel product for perennial mite allergy, was also launched in Spain. The registration of mite allergy products has been initiated in Peru and Venezuela, while the registration of various allergy vaccines in Portugal will be completed in H114. A PQ Birch dose ranging study in Germany, Austria and Poland began in September 2013.

Business development campaign for PQ opportunity
Allergy needs to secure a partner to complete Phase III trials and commercialise PQ in the US. It launched a licensing campaign, the outcome of which may become apparent later this year, and is also exploring alternative ways of developing the US opportunity. The US AIT opportunity is significant (c US$1.7bn), but is contingent on Allergy being able to secure a partner to fund the pivotal trials and to provide the infrastructure to commercialise PQ.

Financials: Operating profits in 2013
FY13 net revenues of £39.3m were essentially flat, in line with expectations and largely affected by foreign exchange movements. Operating profit was £0.7m; EPS was 0.13p (basic); net cash was £1.0m.

Valuation: EV of £30.5m and EV/EBITDA of 12.6x
Our financial model does not include the expected German regulatory approval or the US opportunity, which will be revised following a licensing deal, when the development programme has been clarified. On our current forecasts, our EV of £30.5m is equivalent to an FY14e EV/EBITDA of 12.6x, falling to 9.6x in FY15e.
Allergy needs to secure a partner to complete Phase III trials and commercialise PQ in the US. It launched a licensing campaign, the outcome of which may become apparent later this year, and is also exploring alternative ways of developing the US opportunity. The US AIT opportunity is significant (c US$1.7bn), but is contingent on Allergy being able to secure a partner to fund the pivotal trials and to provide the infrastructure to commercialise PQ.

Financials: Operating profits in 2013
FY13 net revenues of £39.3m were essentially flat, in line with expectations and largely affected by foreign exchange movements. Operating profit was £0.7m; EPS was 0.13p (basic); net cash was £1.0m.

Valuation: EV of £30.5m and EV/EBITDA of 12.6x
Our financial model does not include the expected German regulatory approval or the US opportunity, which will be revised following a licensing deal, when the development programme has been clarified. On our current forecasts, our EV of £30.5m is equivalent to an FY14e EV/EBITDA of 12.6x, falling to 9.6x in FY15e.

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