Allergy Therapeutics plc (LON:AGY), the fully integrated specialty pharmaceutical company specialising in allergy vaccines, has announced its unaudited preliminary results for the year ended 30 June 2022.
– Phase I VLP Peanut PROTECT trial, incorporating ground-breaking VLP technology, commencing shortly
– Highly successful exploratory field trial for Grass MATA MPL, achieved 40% improvement in combined symptom and medication score compared to placebo, with pivotal Phase III trial on track to start in Q4 2022
– Robust 2022 trading with revenue of £72.8m (2021: £84.3m) on streamlined portfolio
– Continued growth of key commercial products, Pollinex, Venomil and Acarovac
Highlights (including post-period events)
Financial
– Robust sales of £72.8m (2021: £84.3m) from commercial portfolio. Strategic streamlining of older products to focus on high value growth products has resulted in a decrease of 14% in actual terms (9%* in constant terms)
– Operating profit pre-R&D of £3.4m (2021: £16.9m) reflecting portfolio streamlining, COVID-19 headwinds and investment in supply chain
– Strong cash balance of £20.5m (2021: £40.3m) providing ongoing support for the Group’s two key clinical trials
– Full year net loss of £13.8m (2021: Net profit of £2.9m)
– Announced the fundraise today for £7m (before expenses) and loan notes to the value of £10m to complete funding of October’s Phase I VLP Peanut PROTECT trial, Phase III Grass MATA MPL trial as well as preparations for use of placebo arm of Grass MATA MPL trial to increase safety database and Phase II development of VLP Peanut. Fundraise supported by a number of the Company’s largest shareholders.
Operational
– Acceptance by the US FDA of IND application for VLP Peanut with Phase I PROTECT trial in the US due to commence shortly
– Highly successful exploratory field trial for Grass MATA MPL, achieving 40% improvement in combined symptom and medication score compared to placebo
– Continued growth of key commercial products, Pollinex, Venomil and Acarovac, in streamlined portfolio
Manuel Llobet, CEO of Allergy Therapeutics, stated:
“Over the past financial year, we have made significant progress in advancing our clinical pipeline and we are excited to be approaching the start of two key clinical trials in our innovative immunotherapy pipeline. The first-in-human PROTECT trial of our peanut allergy vaccine candidate and the pivotal phase III trial for our grass pollen immunotherapy are significant milestones in our journey to bring these potentially life-changing treatments to patients.
“While market conditions remain challenging for many companies, our leading core European commercial business has been resilient. With a solid cash position and strong, established commercial capabilities that set us apart from solely R&D focused health companies, we are uniquely positioned to create value for our shareholders.”
*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 Business Innovation, will host a meeting and webcast for analysts and investors at 12pm UK time today. Please contact Consilium Strategic Communications for more details on allergytherapeutics@consilium-comms.com.
Chairman’s Report
Introduction
2022 has been an important year of evolution for our business: firstly, preparing for entry into the US market with the start of two significant clinical trials and, secondly, strategically streamlining our commercial portfolio with a focus on differentiated, high margin and innovative allergy treatments. We are uniquely positioned to create shareholder value, combining a strong commercial business with an innovative R&D business. As such, we continue to benefit both from a solid trading performance and from the future opportunities provided by our innovative technologies.
Impressive results from the exploratory field trial investigating the Group’s short-course grass pollen immunotherapy, Grass MATA MPL, alongside the industrial scale up and acceptance of the US Food and Drug Administration’s (FDA) Investigational New Drug (IND) application for VLP Peanut, our peanut allergy vaccine candidate, incorporating virus-like particle (VLP) technology, have both set the business up very well for the coming year.
2023 will be a calendar year of great significance for our clinical development programmes as we anticipate clinical trial results from these two pipeline candidates which have potential to reshape the Group’s future portfolio. Grass MATA MPL and VLP Peanut are both highly innovative products that could offer a paradigm shift in the treatment of allergic disorders.
Performance
The actions of firstly, strategic streamlining the Group’s non-differentiated older products and secondly, repositioning the portfolio to maintain focus on high value, innovative and highly differentiated short-course subcutaneous immunotherapies (SCIT) are key to the continued success and growth of Allergy Therapeutics. The short-term revenue reduction from this streamlining, alongside continued headwinds from the COVID-19 pandemic and wider challenging economic conditions, during a time of regulatory uncertainty as the German therapy allergen ordinance (TAV) process comes into its final years, have challenged the business. From 2026, all allergy therapies in Germany will need to have acquired marketing authorisation through this process, underlining the importance of the Group’s focus on high quality clinical evidence to support its portfolio. Despite the challenging environment, the business has remained resilient throughout, achieving a positive trading position, which is a testament to the quality of the team and the robust business model that Allergy Therapeutics operates.
Board changes
As we shift our focus towards a global future, with entry into the US market, we have strengthened our Board of Directors with a key addition.
We have appointed Cheryl MacDiarmid, Head of Global Commercial Strategy at ViiV Healthcare (a joint venture between GSK, Pfizer and Shionogi), as a Non-Executive Director. Cheryl brings unparalleled, industry-leading experience of commercialising products in the US as well as excellent general management skills as a former member of the GSK US Executive team leading the respiratory sales and marketing team. She is a values-driven leader with significant experience managing commercial risk, compliance and alliance governance.
Nick Wykeman will step down as Chief Financial Officer in order to pursue a non-executive career, leaving the business in November 2022. On behalf of the Board and everyone at Allergy Therapeutics I would like to take this opportunity to thank Nick for his contribution and wish him the very best for the future.
Outlook
Allergy Therapeutics is built on a mission to deliver transformational outcomes for allergy patients through its pioneering research and products. The coming year will be key to advancing this mission as we commence our pivotal Phase III Grass MATA MPL trial and Phase I VLP Peanut PROTECT trial. The successful progression of these trials has the potential to transform both this business and the lives of allergy patients.
Whilst we anticipate a return to near double digit revenue growth next year, our portfolio adjustment and ongoing business requirements, including an increase in clinical development delivery, will shift the performance of the business to target a trading profit pre-R&D that is in the low millions. This will also reflect further investment in the supply chain and the likely continuing challenging trading environment.
Finally, I would like to thank all our employees at Allergy Therapeutics for their performance during the year and their continued commitment to make 2023 a year of significant progress.
CEO Report
Introduction
Allergy Therapeutics’ focus on innovative allergy immunotherapies with the potential to transform the lives of patients is proving successful, illustrated by the promising results seen within our innovative pipeline. Our grass pollen immunotherapy candidate, Grass MATA MPL, showed an unprecedented 40% improvement in the combined symptom and medication score compared to placebo in an exploratory field study and our peanut allergy vaccine candidate, VLP Peanut, which will very soon enter the clinic, has continued its excellent progress through strong pre-clinical trials and scale-up.
The second pillar of our strategy, our commercial business in Europe, has performed well in its fundamentals, despite trading challenges from factors affecting the wider market. This reflects the quality of the Group’s portfolio and the robustness of the business.
The third pillar of the strategy, entry into the US market, moves closer, with the upcoming pivotal Phase III Grass MATA MPL trial. The total US allergy immunotherapy market is estimated to be worth $2bn with around 25% of the patients suffering from grass allergy. This indicates potential peak sales for Grass MATA MPL of approximately $300 to $400m per annum.
Clinical development
Delivering a step change in the management of grass pollen allergy
Clinical development of our short-course grass pollen immunotherapy, Grass MATA MPL, has continued to deliver positive results with the highly successful exploratory field trial (G309) achieving an efficacy of 40% in an extended posology, a result which, we believe, has not previously been achieved by any allergy company in a field trial. The purpose of the trial was to evaluate efficacy and safety, and the results indicated a significant reduction in daily symptoms and use of relief medication among participants receiving Grass MATA MPL. Both dosing regimens used in the trial were safe and well tolerated.
The exploratory field trial incorporated a novel study design and methodology to examine multiple endpoints, minimise the placebo effect and enable extensive biomarker analysis. Learnings from the trial, alongside the excellent results, have allowed us to optimally design our upcoming pivotal Phase III field trial (G306), which includes increasing the confidence level of the trial, to maximise the likelihood of success and support our future regulatory plans for entering the US market.
That pivotal Phase III trial is expected to commence before the end of 2022, recruiting approximately 1,200 patients at sites across Europe and the US. The first data read out is planned for Q4 2023. Treatment will last for an extended 13 weeks with a six-injection posology. Subject to success with this trial, the only further requirement before a Biological Licence Application (BLA) can be filed with the FDA will be completion of the safety database. To submit a regulatory filing in Germany, a one-year paediatric trial will be required. This is budgeted in clinical development plans for 2023 and 2024, subject to a successful outcome of the phase III trial and further funding. Data from that paediatric trial can also potentially be used to support the paediatric US filing.
We strongly believe that this product candidate has the potential to be a best-in-class therapy for patients suffering from allergic rhinoconjunctivitis due to grass pollen and could demonstrate higher efficacy compared to standard care, with improved adherence due to its short course nature. Although rarely a life-threatening condition, allergic rhinitis can lead to ‘Asthma March’, a gradual progression of asthma symptoms, which can potentially become life threatening. New treatment approaches are vital.
A positive outcome of the upcoming Phase III trial would create the potential for Allergy Therapeutics to commercialise the only ultra-short course allergy vaccine in the world. No other company has been able to overcome the enormous difficulties associated with the major placebo effect that we were able to do in our exploratory field study. The innovative methodology tested in that study should allow us to successfully develop a state-of-the-art grass pollen immunotherapy that aims to guarantee patient compliance. Such a product profile has the potential to establish the Group’s MATA MPL platform in a dominant worldwide position in the specific immunotherapy market.
Once the Phase III Grass MATA MPL trial has been completed, the Company intends to undertake its paediatric trial investigating Grass MATA MPL as well as a Phase III Birch MATA MPL trial in order to strengthen the approved product platform in Europe and potentially the US.
A next-generation peanut allergy immunotherapy
Our highly innovative peanut allergy vaccine candidate, VLP Peanut, has been successfully scaled up ready for the first-in-human Phase I PROTECT trial, which is expected to begin dosing trial participants via subcutaneous injection shortly. Following acceptance by the US FDA of the Group’s IND application and successful site initiations, skin prick tests among peanut-allergic patients are about to start, marking another major milestone in the clinical development of this product. The Group expects to communicate the transitions between cohorts that will serve to update on the trial’s progress.
VLP Peanut is a truly novel, next-generation allergy immunotherapy candidate with potential to be disease-modifying. The likely posology of VLP Peanut is just three injections, followed by a further boost after a number of years, representing a significantly lower burden of dosing for patients compared with currently available oral treatments. These only increase tolerability to the peanut allergen and require daily dosing over many months or years, which can limit adherence. While transient monoclonal antibody treatments have shown potential in the field of peanut allergy therapeutics, they remain expensive, require regular treatment and are not disease modifying.
The availability of a safe and effective short-course vaccine that provides long-term protection and induces a long-lasting protective immune response would present a paradigm shift in how peanut allergy can be managed and has the potential to be a significant product in the $8bn worldwide food allergy market. VLP Peanut reflects the Company’s commitment to the development of transformative treatment options, with the ultimate goal of improving the patient experience and delivering better patient outcomes.
Financial Performance
Overview
The Group performed robustly, achieving sales of £72.8m. This represents a 14% reduction in actual terms (9%* in constant currency terms) compared to £84.3m in 2021. This short-term revenue decrease is primarily due to the previously disclosed strategic streamlining of older products to maintain focus on high value and highly differentiated SCIT and innovative allergy treatments. The underlying business continues to perform.
Rapid spread of the COVID-19 Omicron variant impacted Group performance, with physicians in Germany being redeployed to support the COVID-19 vaccination efforts. The challenges to the supply chain caused by the continued spread of COVID-19 and manufacturing upgrades, which led to delays in shipping in 2022, are expected to improve in 2023. The regulatory environment continues to be a challenge. The Group is managing this by continuing to invest in market access expertise. The Group sees the transition from a named-patient product market to a registered market to be an important mid-term opportunity. This is being capitalised on through investments in clinical trials such as the upcoming Grass MATA MPL Phase III trial and VLP Peanut’s Phase I PROTECT trial.
The business has performed robustly and continued to grow in most markets in 2022. Pollinex, Venomil and Acarovac sales all grew, while Pollinex Quattro was affected by the market disruption as a named patient product in Germany.
A new Paper Wasp (Polisties) allergy immunotherapy treatment, based on the Group’s Venomil product, was launched in Spain in June, where the incidence of this type of allergy, as well as the need for new treatment options, is high.
The Group has successfully implemented cost saving strategies to achieve the planned operating profit pre-R&D. Capital investment in infrastructure and personnel training is also ensuring the Group’s continuing compliance with the latest GMP standards, with further investment expected in future years to maintain the required high levels of quality.
Post period, on 29 September 2022, the Company announced a subscription to raise £7 million (before expenses) along with £10m of loan notes and the issue of associated warrants. The fundraise is conditional on shareholder approval at a General Meeting to be held on 18 October 2022. This funding will complete the funding of the Phase I VLP Peanut PROTECT trial and the pivotal Phase III trial for Grass MATA MPL, enable preparation for the future extension of the Grass MATA MPL field trial to treat placebo patients (reducing the size of the final safety database trial) and manufacture clinical batches for a Phase II VLP Peanut trial. The Board continues to review the Group’s funding requirements, including opportunities to further de-risk its clinical trial programmes to optimise future value creation. These options include, but are not limited to, a potential path to a Nasdaq dual listing once conditions in the market improve.
Outlook
Next year will be an important year for the business with the pivotal Grass MATA MPL Phase III trial expected to read out in Q4 2023 and results from the Phase I VLP Peanut PROTECT trial also becoming available in the summer of 2023.
The trading business is in a transition process with the Grass and Birch MATA MPL products in the TAV process. This means that the outlook for next year is likely to show a recovery, with near double-digit growth expected.
While expenses in the current financial year have been suppressed by the effect of COVID-19 on business travel and a reduced scientific conference circuit, alongside robust cost control measures, this is unlikely to continue next year. The end of COVID-19 restrictions will allow for a return to scientific conference attendance and execution of a normalised commercial strategy. The Group also intends to make further investment in the supply chain. This is likely to create an operating profit before R&D in the low single millions.
Financial Review
Overview
The Group made an operating profit excluding R&D1 of £3.4m (2021: £16.9m) for the year to 30 June 2022 reflecting the planned strategic streamlining of the product portfolio, COVID-19 and commercial headwinds in Germany. Including R&D expense of £15.7m (2021: £12.9m), the Group reported an operating loss of £12.2m (2021: operating profit of £4.0m). The net loss after tax for the period was £13.8m (2021: net profit of £2.9m). The impact of IFRS 16, Leases for 2022 has been similar to that of 2021, with all the Group’s leases shown on the balance sheet as a ‘right‑of‑use’ asset and lease liability with the 2022 EBITDA uplifted by £1.8m (2021: £1.9m) and the operating profit by £0.2m (2021: £0.2m).
Revenue
Reported revenue decreased by 13.6% to £72.8m (2021: £84.3m). The weighted average Euro exchange rate in the year was €1.17 to £1 compared to €1.12 in 2021. Revenue at constant currency2 was 9.4% lower, as shown in the table below.
Revenue from Germany was 59% (2021: 64%) of total reported revenue, reflecting the streamlining of the product portfolio which solely affected Germany, COVID-19, supply disruption due to upgrades and commercial headwinds. Sales of Venomil, Pollinex and Acarovac continued to grow. Total sales from other products contributed £3.3m for the year ended 30 June 2022 (2021: £4.0m).
Revenue in Germany decreased in the year with revenue at constant currency2 down to £44.8m (2021: £53.8m), a decrease of 17%.
Some European markets exhibited good sales growth at constant currency2 with Spain showing 11%, the Netherlands 8%, Czech Republic 7% and UK 5%. The Group continues to develop new and existing markets to broaden its reach and reduce reliance on any one market or product.
Gross profit
Cost of sales increased to £23.3m (2021: £22.1m) reflecting investment in the supply chain and the fixed nature of the manufacturing facility costs. The gross margin was 68% (2021: 74%) reflecting investment in manufacturing, leading to a gross profit of £49.5m (2021: £62.2m).
| 2022 | 2021 | |||||
| Germany£m | Other£m | Total£m | Germany£m | Other£m | Total£m | |
| Revenue | 42.6 | 30.2 | 72.8 | 53.8 | 30.5 | 84.3 |
| Adjustment to retranslate at prior year foreign exchange rate | 2.2 | 1.4 | 3.6 | |||
| Revenue at constant currency2 | 44.8 | 31.6 | 76.4 | 53.8 | 30.5 | 84.3 |
1. Operating profit (pre-R&D) is calculated by adding back total R&D expenditure for the year to the operating (loss)/profit of the year to arrive at an operating profit (pre-R&D) of £3.4m (2021: £16.9m).
2. 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.
Operating expenses
Total overheads were £3.7m higher than prior year at £62.5m (2021: £58.8m). This included R&D expenditure that rose by £2.8m to £15.7m (2021: £12.9m) due to investment in the VLP Peanut and Grass MATA MPL studies.
Non-R&D operating costs of £46.8m increased by £0.9m (2021: £45.9m) due to further investment in compliance and rising labour costs partly offset by cost savings.
Sales, marketing and distribution costs increased by £0.8m to £26.0m (2021: £25.2m) mainly as a result of recovery post COVID-19. Other administration expenses were broadly in line with last year at £20.8m (2021: £20.7m).
Other income in the year of £0.7m (2021: £0.6m) was due to R&D tax credits in the UK.
Tax
The current and prior year tax charges are predominantly made up of provisions for tax in the Italian and German subsidiaries.
The overall charge in the income statement is £1.1m (2021: £0.8m). IFRIC23 continues to impact the overall charge.
Balance sheet
Property, plant and equipment (including IFRS 16) increased by £0.5m to £20.2m (2021: £19.7m) reflecting investment in the Worthing energy centre and upgrade of plant in the UK.
Goodwill remained the same at £3.3m (2021: £3.3m), whilst other intangible assets increased by £0.3m to £1.7m (2021: £1.4m).
Total current assets, excluding cash, increased to £21.9m (2021: £17.6m). Inventory increased by £0.6m due to more raw materials being held to protect against worldwide shortages resulting from COVID 19. Trade and other receivables have increased by £4.2m, mainly due to prepayments related to R&D trial activities. Cash and cash at hand decreased to £20.5m from £40.3m and there was a net cash outflow of £20.2m in the year (2021: net inflow of £3.7m) as a result of trading losses, investment in R&D and capital items.
The fair value of derivative financial instruments was a liability of £0.1m in 2022 (2021: asset of £0.5m) due to exchange rate fluctuations.
Currency
The Group uses forward exchange contracts to mitigate exposure to the effects of exchange rates. The current policy of the Group is to cover, on average, about 70% of the net Euro exposure for a year on a declining basis.
Financing
Post period, on 29 September 2022, the Company announced a subscription to raise £7 million (before expenses) as well as loan notes to the value of £10m with associated warrants. The subscription is conditional on shareholder approval at a General Meeting. This funding will enable Allergy Therapeutics to secure complete funding for the Phase I VLP Peanut PROTECT trial and the pivotal Phase III trial for Grass MATA MPL, and enable preparation for the future extension of the Grass MATA MPL field trial to treat placebo patients. The funding will also allow the production of the batches for the Phase II VLP Peanut trial, reducing the timeline of development as well as supporting the extended R&D in house resources for the trials in process and to come.
The Group’s existing bank debt on its balance sheet consists mainly of bank loans arranged to fund development of products in the Spanish market. Group borrowing totalled £2.4m (2021: £3.4m) at 30 June 2022. In February 2022 the Group agreed a secured revolving credit facility (RCF) of £10m with NatWest Bank plc. The RCF replaced the previous £7m overdraft facility provided by NatWest Bank plc. The facility is for a three-year period with the ability to extend annually for a further two years. This new facility is intended to provide additional security to the Group’s credit facilities. The £10m RCF was unused at 30 June 2022
The Directors believe that the Group will have adequate facilities for the foreseeable future and accordingly they continue to adopt the going concern basis in preparing the full-year results. For further details, see Note 1, Going concern.
