SMALL CAP IDEA: Allergy Therapeutics’ transformation has redefined its journey

Allergy therapies writes a story about resilience and transformation. After production setbacks, the company redefined its trajectory with a bold strategy focused on innovation.

The groundbreaking short-term therapies, designed to tackle conditions such as hay fever and peanut allergy, promise to not only disrupt traditional treatments but also drive significant growth and value in the process.

The August results indicated a turning point. In the second half of the fiscal year, the company posted its first revenue growth since 2021, a milestone that signals progress but also serves as a prelude to something potentially transformative.

That journey has already begun with the Grass MATA MPL treatment – ​​for grass pollen allergies – which was submitted for regulatory approval in Germany late last month. If the Paul-Ehrlich-Institut (PEI) gives the green light, the treatment could be on the market this time next year.

“We have been working around the clock to get trading activity back to growth,” said CEO Manuel Llobet.

“The Peanut project is very exciting, but perhaps even more interesting in the short term is the regulatory submission we submitted (for Grass MATA MPL), where the primary endpoint was met.”

A shift in emphasis

Historically, Allergy Therapeutics has operated in a niche market, relying on the named patient model – a system in which customized treatments are prescribed under regulatory exemptions. While this approach provided a reliable revenue stream, it limited scale and broader market penetration.

Now the company is pursuing fully licensed therapies, with the goal of a more standardized and globally accessible business model. Crucially, the country is also eyeing the US, the world’s most lucrative drug market.

This transition is not just about the process; it’s about ambition. Licensed medicines unlock larger markets and open doors for pharmaceutical partnerships. It should also be noted that they meet strict regulatory benchmarks, increasing credibility with both physicians and healthcare systems.

The company’s flagship PQ platform, which focuses on grass and tree pollen allergies, is an example of this shift. Currently, the stakes in clinical trials are set to challenge established players in the allergy immunotherapy field in seeking regulatory approval.

For Allergy Therapeutics, this move isn’t just about scalability; it’s about reshaping the way allergy treatments are perceived and administered. Unlike traditional therapies that focus on symptom management, the company’s approach focuses on modifying immune responses and tackling allergies at their root.

As we move into 2025, the near-term value catalyst is Grass MATA MPL, which, as mentioned above, is now under scrutiny by PEI following the successful completion of an extensive Phase III study.

It is a so-called subcutaneous immunotherapy (SCIT), designed to tackle the cause of allergic rhinoconjunctivitis caused by grass pollen.

The shot combines microcrystalline tyrosine-adsorbed allergens with the adjuvant Monophosphoryl lipid A (MPL), which strengthens the immune response.

The treatment is designed to influence the allergic response with a regimen of just six injections prior to the grass allergy season.

With the dossier validation process underway at PEI, the company hopes to obtain a marketing authorization in the third or fourth quarter of next year. A pediatric indication is also assessed.

Greater commercial benefit could potentially come from US approval for the immunotherapy. However, further regulatory work would likely need to take place, including (but perhaps not limited to) a safety trial before the all-powerful Food & Drug Administration gives the green light.

While Grass MATA MPL is undergoing strict surveillance in Germany, the news stream from Allergy Therapeutics has been supplemented with an encouraging update on VLP Peanut’s progress from the Phase I/IIa PROTECT trial.

Early data from the study showed that the purported treatment appeared to reduce sensitivity to peanuts and reduce allergic reactions.

Reducing the treatment burden

The analysis focused on 12 patients divided into three groups. An important finding was a dose-dependent reduction in skin sensitivity to peanut allergens.

It cannot be understated what success the company could bring, considering that in the US alone, 4.6 million adults (and another 1.5 million children) are allergic to this food.

VLP Peanut is planned to be administered as a series of three injections, followed by a booster dose after several years (although the exact regimen will be finalized in Phase II and confirmed in Phase III).

This approach significantly reduces the treatment burden compared to existing oral therapies, which require continuous daily dosing.

Beyond its two core businesses, the company has a bulging pipeline of birch and ragweed formulations in the MATA MPL format. In preclinical research, it assesses potential treatments for melanoma and asthma.

Allergy Therapeutics is pursuing a focused growth strategy focused on expanding in Europe, advancing its pipeline and preparing for entry into the United States.

To fund its commercial, regulatory and clinical ambitions, the company has amassed significant financial firepower, including just under £41 million from an equity financing last October.

Strong balance

More recently, Allergy Therapeutics has strengthened its financial position with a new £40m debt line from Hayfin Healthcare Opportunities, comprising a £20m five-year committed term loan and a £20m uncommitted additional facility. In addition, it has increased an existing loan facility by £10 million to £50 million.

This kind of support suggests Allergy Therapeutics is on to something big, a claim backed by analysts at research house Cavendish.

Using a discounted cash flow model, they set a price target of 13 cents for Allergy Therapeutics shares – a 124 percent premium to the current share price.

Specifically, the Cavendish number crunchers believe VLP Peanut could reach blockbuster status in the US with annual sales of more than $1 billion, while the company expects not insignificant peak sales of $300 to 400 million from Grass MATA MPL.

Cavendish also predicts strong revenue growth from the previously sedentary legacy commercial business and believes the company’s technology provides a strong moat (Warren Buffett’s term for competitive protection) for the company.

Summarizing the 37-page research work, Cavendish said it believes Allergy Therapeutics, based on its two key assets, has the ability to generate “significant potential future shareholder value.”

As always, we caution readers to do their due diligence and remember that this is a risk-reward scenario, and not a risk-free gamble. Although the Allergy Therapeutics team, led by CEO Manuel Llobet and CFO Shaun Furlong, has done a lot to minimize the potential downsides.

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