Zeus Capital Healthcare Research Director Dr Gary Waanders caught up with DirectorsTalk for an exclusive interview to discuss Allergy Therapeutics plc (LON:AGY)
Q1: Allergy Therapeutics plc H1 trading update showed strong sales growth in the 6 months to December 31st, Gary what’s driven that growth?
A1: So, according to the trading update sales in H1 are expected to come in at £40.4 million compared to £29 million in the same period last year so that’s roughly 39% growth on a ‘as reported’ basis and about 18% at constant currency. So, the main drivers of that performance were firstly, organic growth in market share in Germany, Austria, Spain and the Netherlands and that’s based mainly on the competitive profile of the company’s injected allergy vaccines on the Pollinex Quattro platform.
Secondly, certain key European competitors have been weakened by their own issues: ALK (ALK-Abello A/S – CPH:ALK-B) had to temporarily shut down some of its manufacturing facilities for its injected vaccines as these needed upgrading. Allergopharma is feeling the effects of, I’d say, strategic uncertainty as its German parent, Merck (Merck KGaA – ETR:MRK), is looking to divest the business. Stallergenes (Stallergenes Greer PLC – EPA:STAGR), in France, is coming out of its own manufacturing problems last year and has not regained market share that it lost to competitors like Allergy Therapeutics plc.
Finally, the relative strength of the euro vs the pound, the vast majority of Allergy’s sales are euro-denominated so it benefited from that weakness.
Q2: Are these factors also likely to have a full-year effect?
A2: Yes, we believe so and because of that we’ve actually upgraded our sales forecast in the current year from what was £54.8 million up to £61 million. We expect gross margins will also have improved as the majority of the costs of goods sold of Allergy Therapeutics’ production is actually UK-based labour. Against this with the pound trading in the range of 1.15-1.20 EUR, we expect to see the European costs increasing so particularly in R&D, in sales, marketing and distribution. So overall, our forecasts have been updated to reflect these changes.
Q3: Now, aside from the current trading, what other things should we be focussing on for Allergy Therapeutics plc?
A3: The company, over the past few years, has invested quite heavily in European operational infrastructure and in R&D so whilst significant clinical trials and results from those are not expected in 2017, we do hope to see evidence of new clinical trials starting to recruit patients. So probably the most important of those is a key European Phase III trial of the Pollinex Quattro Birch Pollen vaccine, this will be starting during the year as well as further trials on the Pollinex Quattro Grass Pollen which will include a small safety study being conducted in the USA and those findings Phase II trial in Europe. So, plenty of pipeline development news there, not results but certainly study initiations.
