Allergy Therapeutics’ share price has risen 67% since March’s stock market crash

Allergy Therapeutics’ share price has been climbing in April, can this growth be sustained and is this a pharmaceutical stock worth watching?

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AIM-listed pharmaceuticals company Allergy Therapeutics (LSE:AGY) is enjoying recognition and a boost in its share price. Since falling 31% during last month’s stock market crash, the Allergy Therapeutics share price has climbed back up over 67%.

Specialising in allergy vaccines, the group has gained recognition for its development of biodegradable adjuvants used to enhance the efficiency of allergy treatments.

Biotech stock to watch

It has a market cap of £86m, its price-to-earnings ratio (P/E) is 24 and earnings per share are less than 1p. It has no dividend and a debt ratio of 27%. The group saw 8% revenue growth in 2019 along with a 22% increase in pre-R&D operating profit.

Many patients receiving allergy immunotherapy have an inadequate outcome because their immune system does not respond sufficiently well. Allergy Therapeutics uses adjuvants to boost patient immune responses to the injected allergens. These produce more antibodies and longer-lasting immunity, ultimately improving the efficiency of the vaccine.

An academic paper published this week, acknowledged adjuvants MPL and MCT are each safe and effective. These two are used by the firm in its immunotherapies.

Beating allergies from within

Allergy Therapeutics has developed immunotherapy options as an alternative to antihistamines and prescription steroids. These are used to treat hayfever, house dust mite allergy and allergies to pets. These immunotherapy treatments address the underlying cause of the allergy, rather than just its symptoms.

Some of these, already brought to market, include products for combating pollen-related allergies, particularly to grasses, weeds and trees.

Allergy Therapeutics has also been working on a peanut allergy vaccine for over three years. The successful creation of such a vaccine would save many lives and reduce anxiety for thousands more. Unfortunately, it is unlikely that the group will achieve this soon. Although it has massive potential, it is a very complex process. The first clinical trials of this vaccine are due to begin later this year. Although I imagine the coronavirus lockdown will now cause delays.

The company also hopes to one day use its research and development progress to improve vaccines in areas such as influenza, cancers, and malaria.

Allergy Therapeutics share price fluctuations

I think this is a very interesting company with the potential to create some admirable products. However, as with most companies listed on AIM, it comes with risk. This is because much depends on future outcomes rather than the here and now.

The anticipation of clinical trials understandably brings excitement and positive sentiment. But there is no certainty that a trial will result in a positive outcome. A phase III trial of its birch allergy treatment failed last year. Nevertheless, if it can succeed with some of its ambitious projects, then it would be in a better position to tap into the lucrative US market, thought to be worth in excess of £1.6bn.  

Back in 2017, the Allergy Therapeutics share price reached a high of 38p, only for it to tumble thereafter. At 13p, these look like cheap shares to buy, but its P/E of 24 is high, which means the positive sentiment could already be priced into the share. I think it is a company worth watching and I hope Allergy Therapeutics succeeds in its vaccine developments.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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