Zeus Capital Healthcare Research Director Dr Gary Waanders caught up with DirectorsTalk to discuss Allergy Therapeutics plc (LON:AGY)
Q1: This morning Allergy Therapeutics reported their preliminary results for the year ended June 30th, how do the results look?
A1: This is a solid set of results which came in slightly ahead of our expectations, net sales of £48.5 million, it grew by I think an impressive 12% as reported, which was 19% at constant exchange rates despite the market being broadly flat. This translates to a market share gain of 200 basis points in its core European market and this includes Germany, Italy, Spain, Austria, the Netherlands and a few other small countries, at 71% gross margin this was 100 basis points better than we’d expected given that the Euro for most of the 12 month period was quite weak. The company continues to control costs very well so adjusted EBITDA pre-R&D spending came in at £6.3 million compared to our £4.9 million forecast and net cash at the end of June stood at £20 million which is roughly £3 million better than we’d expected.
Q2: So with this in mind Gary, has your view of the company changed in any way?
A2: Well I’ve always been fairly positive on stock but yes it has changed, we were most impressed with the growth the company has achieved and so have raised our forecast for the next few years. For example, we were previously forecasting net sales in the current year to June 30 2017 of £52.1 million but we’ve now increased this to £54.8 million, we’ve also increased our growth margin expectations, particularly following the strong margin performance in the year just reported when the Euro was weak. So just as a reminder most of this company’s sales are denominated in Euros, so now that it’s stronger currency we’ve increased our gross margin expectation to 72.5% from 71% which means gross profits of £39.7 million should they deliver up from our previous forecast of £37 million and this is a £5.3 million improvement on the year just reported. We’ve also moved our R&D forecasts somewhat to reflect the new timing of a US Phase III trial on Pollinex Quattro Grass given the inconclusive results of a dosing study reported just after the year-end. The result of all of these changes is that our adjusted EBITDA forecast now shows a smaller loss in the current year of £1.2 million compared to our previously forecasted £7.5 million, we expect now that net cash at the end of June 30th 2017 will be £17.5 million, previously that number was £6.3 million so quite a change.
Q3: What should we be looking out for in terms of news flow over the next 12 months?
A3: So I think the next 12 months promises to see certainly improved trading as the company continues to grow its top line and consolidates its market share, also we expect to see a clinical trial authorisation in Europe for the company to start a Phase III trial of its Pollinex Quattro Birch vaccine. Elsewhere the pipeline will also be developing further as the company advances its Acarovac Quattro vaccine candidate for house dust mite allergy, this is expected to move into Phase I testing in Europe, and we’d also expect to hear more about the discussions with the FDA concerning a new Phase II Pollinex Quattro Grass dosing study in the USA. So there’s plenty happening in the short term as the company moves towards its longer terms goals of obviously having multiple Pollinex Quattro based vaccines approved both in Europe and the USA.
