SMALL CAP IDEA: The transformation of allergy therapies has redefined its trajectory

Allergy therapy is writing a story of resilience and transformation. Leaving manufacturing setbacks behind, the company has redefined its trajectory with a bold strategy focused on innovation.

Its pioneering short-term therapies, designed to address conditions such as hay fever and peanut allergies, promise to not only disrupt traditional treatments but also drive significant growth and value in the process.

Its August results hinted at a turning point. In the second half of the financial 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 Institute (PEI) gives the green light, the treatment could be on the market this time next year.

“We have worked day and night to make the commercial business grow again,” says general director Manuel Llobet.

“The Peanut project is very interesting, but perhaps in the short term the most interesting thing is the regulatory filing we have made (for Grass MATA MPL), where the primary endpoint was met.”

A change of emphasis

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

The company is now seeking fully licensed therapies, with the goal of achieving a more standardized and globally accessible business model. Crucially, it also has its eyes set on the United States, the most lucrative drug market in the world.

This transition is not simply a process; It’s about ambition. Authorized medicines unlock larger markets and open doors for pharmaceutical partnerships. It is also worth noting that they meet rigorous regulatory standards, which reinforces credibility with both doctors and health systems.

The company’s flagship PQ platform, which focuses on grass and tree pollen allergies, exemplifies this shift. Currently in clinical trials, it may challenge established players in allergy immunotherapy once they gain regulatory approval.

For Allergy Therapeutics, this move isn’t just about scalability: it’s about reshaping the way allergy treatments are perceived and implemented. Unlike traditional therapies that focus on symptom control, the company’s approach is to modify immune responses and address allergies at their root.

As we approach 2025, the near-term value catalyst is Grass MATA MPL, which, as mentioned above, is now being examined by PEI following the successful conclusion of a comprehensive Phase III trial.

This is called subcutaneous immunotherapy (SCIT) designed to address the root cause of allergic rhinoconjunctivitis caused by grass pollen.

The injection combines tyrosine-adsorbed microcrystalline allergoids with the adjuvant monophosphoryl lipid A (MPL), which enhances the immune response.

The treatment has been developed to modify the allergic response with a regimen of just six injections prior to grass allergy season.

With the validation process of the file underway before the PEI, the company hopes to obtain marketing authorization in the third or fourth quarter of next year. A pediatric indication is also being evaluated.

Potentially a bigger commercial advantage would come from the approval of the immunotherapy in the United States. However, more regulatory work would likely need to be done, including (but perhaps not limited to) a safety trial before the all-powerful Food and Drug Administration gives the green light.

As Grass MATA MPL undergoes regulatory scrutiny in Germany, Allergy Therapeutics’ news flow has been augmented by an encouraging update on VLP Peanut’s progress in its Phase I/IIa PROTECT trial.

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

Reduce treatment burden

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

It cannot be underestimated what success could mean for the company, given 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 in 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.

In addition to the two main assets, the company has a significant product portfolio with birch and ragweed formulations in MATA MPL format. In preclinical research, possible treatments for melanoma and asthma are being evaluated.

Allergy Therapeutics is pursuing a growth strategy focused on expanding in Europe, advancing its portfolio and preparing to enter the United States.

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

Solid balance

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

This kind of backing suggests Allergy Therapeutics may be onto something big, a claim backed by analysts at research house Cavendish.

Using a discounted cash flow model, they have set a 13p price target for Allergy Therapeutics shares, a 124 per cent premium to the current share price.

Specifically, Cavendish’s number crunchers believe VLP Peanut could achieve blockbuster status in the US with annual sales exceeding $1 billion, while they expect a not-insignificant peak sales of between $300 and $400. million dollars of Grass MATA MPL.

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

In summarizing the 37-page research “work,” Cavendish said he believes Allergy Therapeutics has the ability, based on its two key assets, to generate “significant potential future value for shareholders.”

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

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