StockSlam: Allergy Therapeutics (AGY) @27.5p - 7 June 2018

Tuesday, Jun 26 2018 by

This was the Stockopedia Stockslam pick that I presented at Damian Cannon’s excellent event. I thought I'd put it on it's own thread for discussion/dissection.

Allergy Therapeutics (LON:AGY) sits in my speculative portfolio that contains my picks in my search for the elusive multi-bagger.

Huge Opportunity: The target market is the many millions of people that suffer from allergies – 30% of Europeans and 25% of Americans are allergic to grass pollen alone. So a truly massive potential market for the company that is first to market with a cure. There are of course many treatments for the symptoms of allergy but no fully licensed cure, or in this case a vaccine (immunotherapy), for the underlying cause of an allergic response. Cures need to be specific to the particular allergen (the cause of the allergic response) – grass, tree pollen, dust, pets etc. And each cure that is created will need separate drug trials and a specific licence, so significant time and investment is required for each one. Which means of course that not only is there a huge potential market but competition is likely to be very limited as the barriers to entry are very significant.

Prospects: Allergy Therapeutics (LON:AGY) are in the lead with the development and licencing of several vaccines that target specifically major causes of allergies. Also, Allergy Therapeutics (LON:AGY) has a number of significant factors that enhance their chances of success:  

  • Its lead product Pollinex Quatro has already been prescribed in Europe to over 250,000 grass allergy sufferers on a ‘named-patient’ (controlled) basis; 
  • Recently reported Phase II results were positive; and
  • Its key Phase III trials, towards gaining FDA approval, are fully funded by the £20m raised last year; and
  • Allergy Therapeutics (LON:AGY) has a Mkt Cap of £160m but revenue of £64m (Fin Yr to June 2017) and was profitable (just) in the four year prior to the last two years of high development investment.

The first bullet point is important on two key aspects – firstly, it suggests that the treatment is safe and secondly, that it works! All this de-risks Allergy as an investment and significantly increases its chance of success.

Risky?  Yes certainly, despite…

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Allergy Therapeutics Plc is a pharmaceutical company. The Company focuses on the treatment and prevention of allergy with aluminum-free products. The Company's segments are Central Europe, which includes segments, such as Germany, Australia, Switzerland and the Netherlands; Southern Europe, which includes Italy and Spain; the United Kingdom, and Rest of World. The Company provides information to healthcare professionals about the prevention, diagnosis and treatment of allergic conditions with focus on allergy vaccination, which is also known as specific immunotherapy or desensitization therapy. The Company's products include Pollinex Trees, Pollinex Grasses+Rye, Skin Prick Testing and diagnostic products. Its vaccines trade under various brand names, such as Pollinex Quattro, Polligoid and TA Graser Top. It uses specialized systems to process the Tyrosine to form a suspension microcrystalline tyrosine (MCT) that is combined with some of its subcutaneous injected therapies. more »

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9 Posts on this Thread show/hide all

Richard Goodwin 28th Jun '18 1 of 9

Thanks Maddox. Am interesting one to keep an eye on, a lower risk biotech

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Amanda Heron 11th Jul '18 2 of 9

Thanks Maddox. I'll add this to my Pharma portfolio of stocks to keep an eye on. Like the sound of it although Phase 3 trials always have a risk to them but at least it has past the first two and there is a product already on the market with Pollinex Quatro.

My lead 10 stocks on the Pharma side which I have added over the last three years into one of the Stockopedia portfolios on my site, buying £1000 worth in pretend money. It's an attempt to do better than some of the big Pharma funds out there!

CellavisionAb 355% (Swiss Company)
Bioventix 304%
Dechra Pharmaceuticals 230%
Abcam 186%
Beximco 177%
Scientific Digital Imaging 174%
Alliance Pharm 160%
Advanced Medical Solutions 152%
CVS 138%
Eco Animal Health 132%

I hold Bioventix, Abcam and CVS and wish I'd bought some of the others.

The bottom of the portfolio is littered with some that haven't done so well!! Hopefully, Allergy Therapeutics won't be one of these but I might go and buy some Pollinex Quatro for my husband.

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shipoffrogs 11th Jul '18 3 of 9

What would the base case on this be - have effective vaccines been developed for any allergies by other companies?

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Maddox 12th Jul '18 4 of 9

Hi Amanda,

Interesting selection - do you have a background in pharma? What criteria do you use?

Cheers, Maddox

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Maddox 12th Jul '18 5 of 9

Trading update today, Allergy Therapeutics (LON:AGY) 28.25p yesterdays close.

'Revenues for the year are expected to be in line with market expectations at £68.3m (2017: £64.1m). This performance represents 6.6% annual growth on a reported basis and 3.5% on a constant currency basis which reflects a strong performance during an unusually weak pollen season in 2017. The Group is continuing to gain market share within its core markets in Europe and data for the key markets for the 9 months ending 31 March 2018 showed an increase of 0.7 of a market share point. Expenses are expected to be in line with market expectations due to continuing cost control.'

Plenty of cash to fund the continuing trials: 'The cash balance at the end of June 2018 was £15.5m (30 June 2017: £22.1m).'

'Following the positive Grass Phase II trial, the ongoing pipeline trials continue to progress well and timing remains in line with the Group's strategy. The results of the pivotal Birch Phase III trial for Europe continue to be expected in Q3 2018. '

The Grass Phase III is scheduled to complete in 2019 - and then if successful has to gain FDA approval - so still risk and uncertainty here.

Overall, solid underlying progress and in the meantime 2018 pollen season has been far higher than 2017.  So, my expectation is for positive news flow on trials and performance underpinning the valuation (£168m mkt cap) as we progress towards the key US licencing.

Cheers Maddox 

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Maddox 12th Jul '18 6 of 9

In reply to post #381429

Hi shipoffrogs,

Good question. There are competitors going after this market, such as Anergis a Swiss company, and Circassia (CIS) but their leading product a treatment for cat allergy failed and they are effectively out of the market. Allergy Therapeutics (LON:AGY) are in the lead so they have the potential to take good market share and will establish the base line that others will have to beat. Overall, the market is massive and growing and each different allergy will be a separate market requiring a licensed product - so there should be room for several competitors without it becoming a commodity market.

The other current competition is the treatments for the symptoms - that of course will be cheaper and possibly sufficient remedy for most people.

Cheers Maddox

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Amanda Heron 12th Jul '18 7 of 9

Hi Maddox

I have a medical background but have been out of that for years.

My initial criteria for the Medical portfolio, which I set up three years ago, was to see if I could beat the big Pharmaceutical funds like International Biotechnology Trust and Biotech Growth Trust, both of which were doing really well at the time. I was also very new to investing and trying out different strategies. I initially chose companies with a high Stockrank in the Healthcare sector and then added anything that caught my eye from contributors on Stocko, articles in the press and some I picked up in Proactive Investor.

I haven't actively managed it over the time, but have followed the gainers and put them in my Isa and 3 Isas I run for the family, so no pressure there!! The folio is really to watch and see what happens rather than to make a profit.

I was interested in veterinary companies such as CVS, Dechra Pharmaceuticals, Eco Animal Health and Animalcare which have had mixed results. You only have to go to the local vets to see how busy they are and the eye watering charges they make which we all pay.

There are 46 companies in the fund, of which 31 are in profit and 15 in negative territory, most of which are the ones running trials. The top 10 are in the list above.

Some are in my Fantasy Fund, DB9, which I actively manage. These are Abcam, CVS, Craneware, Angle.

If it is of interest, I could tidy it up and try and do a Healthcare portfolio which is a bit more actively managed. I have benefitted hugely from the Stocko community but I feel my contribution would be far less weighty and considered than some more learned contributions. Maybe it could be a focus for discussion?

Cheers Amanda

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Maddox 13th Jul '18 8 of 9

Hi Amanda,
Well I'd certainly find that interesting, and it would be a focus for discussion. We have so many insightful investors on Stockopedia it would be great to give those with specific pharma expertise a forum.
Cheers Maddox

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Maddox 28th Mar 9 of 9

Well, I'm very disappointed to say that I've sold my holding.

The Birch result was completely unexpected - this and other similar treatments have been prescribed in large numbers and have been gaining the support of practitioners. It even appears that a significant bio-active response was measured in the patients. it seems that the problem is that the control group had a heightened placebo-effect on their subjective assessment of the treatment. I'm really not sure how this can be addressed and as a consequence will sit this out from the sidelines.

I also have some more skin in this game as my son suffers very badly from Birch pollen - not just red eyes and runny nose - he gets very run-down - a cure - even a partial one would be very life-enhancing.

Best of luck to continuing holders.

Regards Maddox

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