Allergy Therapeutics Plc Pollinex Quattro driving US market opportunity

Hardman & Co ReportAllergy Therapeutics Plc (LON:AGY) is a long-established specialist in the prevention, diagnosis and treatment of allergies. It has an underlying profitable and cash generative business despite its lead product being available only on a ‘Named Patient’ basis. However, protocols agreed with EU and US regulators are in place to get Pollinex Quattro approved as a biological. The US opportunity is enormous and only two players have shortcourse treatments. There is a valuation mis-match between AGY and its peers, which either have no growth or little marketing experience, which provides scope for considerable upside towards our risk-adjusted DCF valuation of 93p per share.

► Strategy: AGY is a fully integrated pharmaceutical company focused on the treatment of allergies. There are three parts to its growth strategy: approval of its lead product, particularly in the US; geographical expansion of its product portfolio; active participation in industry consolidation.
► Key product: Pollinex Quattro is the only short course allergy vaccine available in the market that has the added benefit of being aluminium-free. The focus is to move the availability of this product from ‘Named Patient’ in Europe only to full marketing approval in both Europe and the US and open up a $5bn market.
► Valuation: Based on our forecasts for market share gains in the US, our risk adjusted DCF valuation is 93p per share. This upside potential is supported by an apparent mis-match between the value of AGY with its peers, which have either limited growth opportunities or little commercial experience.
► Risks: AGY must undertake some additional clinical trials in order to achieve regulatory approval. However, given that protocols have been agreed with both EU and US regulators and that Pollinex Quattro has been used in 200,000 patients to date, the risks have been minimised.
► Investment summary: Allergy Therapeutics Plc is a very promising opportunity. Not only does it have a profitable and cash generative underlying business, regulatory approval of Pollinex Quattro would be a transformational event. The market is valuing AGY similarly to its low-growth peers suggesting that little or no value is being afforded PQ in the US which, given the FDA trial agreement, is unrealistic.

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