Development efforts are focused on Pollinex Quattro, a group of ultra short course allergy vaccines for the treatment of allergies to grass, tree and ragweed pollens and Japanese Cedar
Allergy Therapeutics, a specialist pharmaceutical company focused on allergy vaccination, announces a share placing of £19million.
This additional capital will primarily fund the completion of the company's development pipeline of innovative ultra-short course allergy vaccines, Pollinex Quattro, through to registration.
Allergy treatment is one of the largest therapeutic markets worldwide, with estimated annual sales of $11 billion.
Allergy Therapeutics' strategy is to establish a position as a market leading provider of novel therapies for the prevention and treatment of allergies by providing a comprehensive range of innovative, patent protected, high value, allergy vaccines.
The company's development efforts are currently focused on its leading product, Pollinex Quattro, a group of ultra short course allergy vaccines for the treatment of allergies to grass, tree and ragweed pollens and Japanese Cedar.
These products use tyrosine as a depot in combination with the innovative patented adjuvant MPL to which the Group has certain licensed exclusive rights.
Pollinex Quattro, the group's four-shot a year allergy vaccine, is the only ultra-short course allergy vaccine on the market and the funds raised at this placing, supplemented by the company's existing cash reserves and the operating cash flows from the business, will be used primarily to fund the completion of its development, through to registration.
On a 'named patient product' ('NPP') basis, Pollinex Quattro is already a marketed product in certain EU territories.
Over 140,000 treatment sets have been sold to date and this represents a considerable body of evidence in support of the product's development.
In the financial year ending 31 December 2005, Pollinex Quattro generated sales of £7.2million (2004: £5.1million) and sales have continued to grow in the first half of the current financial year.
This growth was achieved through a targeted approach to marketing in key areas.
In Germany, which accounts for approximately 70% of the group's sales, winning the prestigious MMW Arzneimittelpreis, an award for pharmaceutical innovation, had, in the directors' view, a positive effect on sales.
Through its own sales force in Germany, Italy, Spain, the UK, Austria, Czech Republic, Slovakia and Poland and indirectly in more than 20 additional countries (including six countries through licensing agreements), the group currently sells and distributes four families of allergy vaccine products, injected and sub-lingual.
In addition to Pollinex Quattro, the group has a range of non-MPL-based short-course vaccines, registered in certain markets for the major allergens of grass, tree and ragweed and sold under the TA Mix and Pollinex brand names.
The group's portfolio is completed with Oralvac, a sublingual product range and Venomil, a vaccine for allergies to bee and wasp stings.
A range of approximately 125 skin-prick allergy diagnostics is also sold.
With its established business and current infrastructure, the directors believe that the group has the basis to build a market leading allergy-focused specialist pharmaceutical business through product development, in-licensing of products and, in the longer term, the acquisition of both products and businesses.
Allergy Therapeutics' development objective is to create modern allergy vaccines capable of use as a first line therapy in the treatment and cure of allergic diseases including allergic rhinitis, allergic conjunctivitis and allergic asthma.
The board believes that Pollinex Quattro, which requires only four injections per year, has the potential to transform allergy treatment, by providing a convenient, safe, effective and potentially curative method of treating seasonal allergic rhino-conjunctivitis (hayfever).
In mainstream pharmaceuticals, the products prescribed by physicians across the world must have marketing authorisations, granted by national regulatory authorities such as the FDA (tasked with the regulation of human medication in the United States of America) and the Emea (the European Union equivalent).
The granting of such authorisations is commonly referred to as 'Registration' and requires rigorous proof of product quality, safety and efficacy through clinical trials culminating in pivotal 'Phase III' studies.
Allergy vaccines have traditionally been made-to-order for individual prescription according to the specific allergen causing the patient symptoms.
This has meant that, in general, allergy vaccines fall outside the normal registration system and are sold as NPPs.
As part of Allergy Therapeutics' aim of transforming allergy treatment by modernising allergy vaccination, the group has embarked on a programme of clinical trials with the objective of gaining registration in all the major markets worldwide for the Pollinex Quattro standardised products which are suitable for a broad range of patients.
The proceeds of the Placing will primarily be applied to achieving this end and to put in place the additional internal and external resources this will require.
Subject to regulatory approval, Allergy Therapeutics intends to initiate the pivotal Phase III clinical trial programme during 2006 and to run the trials throughout the 2007 pollen seasons.
Three trials will be conducted, one for each of the three most prevalent hayfever-causing allergens: grass, tree and ragweed.
These studies will be multi-centre, multi-national and conducted in both North America and Europe.
So far as the directors are aware, no other allergy vaccines are being developed on this worldwide basis, which requires the highest standard of evidence of efficacy and safety.
R204 development.
Allergy Therapeutics recently reported the successful outcome of its pivotal clinical efficacy and safety study, R204.
This phase II/III data forms a crucial part of the development of the Pollinex Quattro product line, and is pivotal for the Registration of Pollinex Quattro Ragweed in Canada.
It is estimated that more than 30 million people in North America suffer from allergies to ragweed.
The main outcome of this study showed a statistically significant (p<0.01) achievement of the primary endpoint - a 42% reduction in symptoms versus baseline; this was a 48% relative improvement over placebo.
A six times increase in IgG was also shown (also statistically significant (p<0.001)), confirming that the effect was due to fundamental immunological changes.
The positive R204 study results mark an important step in the development of Pollinex Quattro, since they: support the group's application for registration of Pollinex Quattro Ragweed in Canada planned for the middle of 2006; provide a key element in End of Phase II discussions with the FDA and other authorities prior to initiating Phase III; and contribute to the data on safety and efficacy of the group's other ultra-short course Pollinex Quattro vaccines in grass and tree.
It was on the basis of the excellent R204 results that the board decided that it was in the best interests of the company to advance concurrently into full Phase III studies with Pollinex Quattro vaccines for each of grass, tree and ragweed, giving rise to the funding requirement behind the placing.
The company's interim results for the six month period to 31 December 2005 were announced on 27 March 2006.
The results for the six months to 31 December 2005 were very encouraging and have continued the progress shown in previous years.
The group reported gross sales, before compulsory rebate in Germany, of £14.7m (H1 2004: £14.1m).
This represents an increase of 4% over the previous period, driven primarily by growth of 10% in named-patient sales of Pollinex Quattro, the group's four-shot allergy vaccine.
Year-on-year improvement in operating profit was inhibited by some manufacturing issues, resulting primarily from the demands made on all manufacturing resources in meeting the needs of both the markets and the clinical trials.
The directors are confident that the investments and actions initiated over the period will prevent a recurrence of these problems.
Owing to the seasonality of the allergy market, some 70% of the group's sales are generated in the first half of the company's financial year and as a consequence the interim results do not give a representative indication for the full year performance.
Gross profit grew by 21% to £11.4m, representing a gross margin of 80% of sales, compared with £9.4m and 78% in the same period last year.
This was an expected trend because of the decrease in German rebates.
The initiation of the investment programme in the manufacturing facility and further investment in manufacturing headcount to maintain compliance with good manufacturing practices (GMP) will reduce the gross margin in the short term.
Marketing expenses, the major component of distribution costs, have increased in line with expectations as it has set up new markets in Poland, Austria, the UK, the Czech Republic and Slovakia and intensified the promotional spend on our high margin products.
Costs for marketing and promotion increased to £5.0m (H1 2004: £3.8m), an increase of 33% over the previous period.
Returns on these revenue investments are anticipated in coming years.
Administration costs of £1.7m (H1 2004: £2.0m) were lower by 13%, benefiting by the release in the period of a bad debt provision.
Research and development expenditure increased during the period to £5.5m (H1 2004: £0.7m) as the development activity for the MPL-based vaccine range was progressed.
The operating loss for the period was £0.7m (H1 2004 profit: £2.6m) but before development costs, the operating profit was £4.8m (H1 2004, pre-exceptional costs: £3.9m), an increase of 23%.
Net assets of £19.7m (H1 2004: £24.8m) show a net decrease of £5.1m against the previous period end, due primarily to the investment in R+D over the period.
Net cash outflow before financing for the period was £4.2m (H1 2004 inflow: £1.7m), less than the previous period by £5.9m due principally to the accelerated investment in R+D in the period.
Bank funding.
New funding lines were agreed in principle in March 2006 with the company's bank, Royal Bank of Scotland, to provide a new banking facility of £4m.
This facility will be used primarily to fund the investment required to prepare the production facilities for the United States launch of the Group's products and to support working capital requirements as the group grows.
The placing shares are expected to be admitted to trading on AIM on 5 May 2006.
The placing is conditional, inter alia, upon the approval of the resolutions at the EGM; the placing agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and admission.
The placing is to be effected on behalf of the company by Bridgewell Securities on the terms of the placing agreement.
The placing agreement provides for Bridgewell Securities to use its reasonable endeavours to procure subscribers for the placing shares.
The placing shares represent approximately 23.2 per cent of the enlarged issued ordinary share capital of the company following the placing.
