Allergy Therapeutics Plc Progress towards EU reg approval

Hardman & Co ReportAllergy Therapeutics Plc (LON:AGY) is a long-established specialist in the prevention, diagnosis and treatment of allergies. It’s lead product, Pollinex Quattro is available in Europe only on a ‘Named Patient’ basis. However, protocols have been agreed with EU and US regulators for a programme of clinical trials to get full regulatory approval of Pollinex Quattro as a biological. AGY has reported positive outcomes from one of the trials required for EU approval. There remains a considerable valuation mis-match between AGY and its peers, which provides scope for considerable upside towards our risk-adjusted DCF valuation of 89p per share.

 
► Trial strategy: AGY has an agreed three trial programme with the regulator by which Pollinex Quattro will receive full European approval as a short-course allergy vaccine. AGY has reported headline data from the second trial, PQ204, which will allow dose selection for the final Phase III trial starting early 2017.

► PQ204: This multi-dose, multi-centre, double-blind placebo-controlled Phase II trial was conducted in 371 patients sensitive to birch pollen. The aim of the study was to explore the safety and efficacy of Pollinex Quattro Birch (PQBirch) with the objective of identifying the optimal dose for the Phase III trial.

► Results: All doses (5,000-27,300 standardised units) of PQBirch produced a significant response compared to placebo, which was dose-dependent, thereby meeting the primary end-point. PQBirch was well tolerated and there were no safety concerns.

► Valuation: Allergy Therapeutics Plc has made considerable progress over the last 12 months towards de-risking its short course SCIT for target allergies in both Europe and the US. Despite this its valuation remains stubbornly below its peers, trading at an EV 4.0x to 9.7x lower, suggesting considerable upside potential ahead.

► Investment summary: Management is delivering on its goal to have its short-course allergy immunotherapy fully approved as a biologic in both Europe and the US. One-by-one the necessary trials are completing, keeping the regulatory filings on track for 2018. At some point the market will wake up to the growth prospects of the company and re-rate the shares more in-line with its peers.

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