Cats wake up investors to potential of AIT market
A surge of investor interest in allergy immunotherapy (AIT) brought about by Circassia’s high-profile float plans seems to have helped catalyse a 50% rise in Allergy Therapeutics', (AGY) share price in the past two weeks. Yet in terms of value, Allergy still ranks in a distant fourth position to its rivals: ALK-Abello (market cap c £750m), Stallergenes (c £640m) and Circassia (presumed £365-420m). Allergy, which has just gained Health Canada blessing for its trial plans for Pollinex Quattro (PQ) Grass, hopes the potential imminent US approval of its competitors’ AIT products will help it attract a US partner for its PQ platform. Such a deal would materially transform Allergy’s prospects and substantially increase our valuation.
Cat allergy sparks interest in allergy immunotherapy
The planned flotation of cat allergy company Circassia on the London Stock Exchange has sparked new investor interest in AIT and seems to have highlighted the valuation disparity between Allergy and its key quoted rivals, ALK-Abello and Stallergenes. Both these companies have sublingual AIT products (for grass pollen allergy) that are expected to receive FDA approval in the coming weeks, while Circassia is in a Phase III study with its lead product Cat-Spire (cat dander allergy). Allergy hopes that the development of a US AIT market will help catalyse renewed partner interest in its PQ platform.
Health Canada approves CTA for PQ Grass with MPL
Meanwhile, Health Canada has approved Allergy's proposal to submit a full Clinical Trial Application (CTA) for a new trial for PQ Grass. This decision, together with the lifting of the FDA clinical hold in August 2012, enables Allergy to plan the North American Phase III trial.
Financials: Operating profits in 2013
Allergy managed to grow its share in a declining AIT market in Europe, where cost pressures and regulatory changes had a significant negative impact. The company remained profitable (operating profit was £0.7m).
Valuation: EV of £60m and EV/EBITDA of 24.7x
Our financial model does not include the US opportunity for historic reasons, which will be revised following a licensing deal, when the development programme has been clarified. On our current forecasts, our EV of £60m is equivalent to an FY14e EV/EBITDA of 24.7x, falling to 18.9x in FY15e.
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