Header updated on 24th April 2008

Market has been looking for an announcement re a licensing deal for Cetilistat, the obesity drug; instead it has been hit with the withdrawal of Renzapride, colonitis drug, following an unauspicious performance at Phase III. Folloiwng has been edited to reflect the situation

Alizyme is a speciality biopharmaceutical company that has been developing product categories for inflammatory gastrointestinal disorders, obesity and supportive cancer care . It is currently trading at a five year low of around 27p with a market cap. of around 60m. Prudential owned a near 20% stake (reduced in sale today?) There was good institutional taku-up of a placing in March rasing 10m at 50p; no wonder there has been "angry" selling. The directors hold 3.34million shares or about 1.7% of the equity (of which Tim McCarthy, CEO has 1.1million); thus, after some 10 years of development effort, they must be comletely focused on the success of the company and multiplying the value of their holdings (but with real doubts about their marketing competence). Alizyme had previously raised capital sums in the past three years at around 70p and 100p so it was somewhat surprising to see the share fall through its 70p support level. Clearly one reason is the current disaffection with the biopharm. market. Another has to be disappointment for the failure of the CEO, Tim McCarthy, to deliver on his expectation that 2007 would be a transformative year. The key question is whether 2008 will be that year and when is it likely to happen? The following points are relevant:

1. Alizyme did sign one deal in late-2007: with Prometheus Labs (U.S.) for the Colal-Pred, at a potential market of $250m, the smallest potential of their four products. Prometheus pay $2.5m up-front with a total of $15m payable upon future development milestones. They are responsible for all US development costs and will pay Alizyme undisclosed royalty rates which will increase with net sales. The deal was followed by a Japanese licensing agreement (which also gave Alizymen access to additional potential drug candidates).

2. This perhaps sets a precedent for subsequent deals for their other products. Cetistat (obesity) has an estimated potential of $1 billion p.a. sales and ATL-104 (mucositis) has a potential of $500m sales. The U.S. FDA has encouraged AZM to also launch a Phase III exercise for Cetistat for all diabetes sufferer because of positive II results for diabetes sufferers who also suffer from obesity.

3. Whilst the development programmes for the other drugs are on-going and appear to be satisfactorily funded from present resources, this is not the case for Cetilistat. The "Product and Company Update statement" (7th Jan 2008) says that 'the Phase III development programme is now ready to commence following the conclusion of a commercial deal'. So, perhaps for the first time, the development programme would be delayed if there was not a funding deal in either the U.S. or Europe. The reason for the sp shooting to nearly 200p in 2004 was the signing of a deal with Takada of Japan for some $50M development funding.

In response to a question at the Conference to report the Renzapride fiasco, McCarthy seemed pleased that there were six potential bidders for Cetilistat; however, that implies any announcement is some time away. When it comes, however, taking a line from the Takada and Prometheus deals it would seem likely that there would be of the order of $100m funding to support development. Of course, the major cash flow will be from licensing of actual sales. The analysts do their own discounted cash flow exercises; those seen tend to dwarf current valuations of the company.

There is not a strong argument for jumping in unless and until the sp establishes a baseline. Given the peaks in the sp, the time will probably come when there will be a very significant jump. An alternative scenario, is that management continue to rpove their level of incompetence and a buy-our results. Clearly the strength of the company is in their biochemists.

Eric

do you think our patience will be repaid, im down nearly 50% now. I am not sure about all this hype we read about this type of share and it seems there nothing but disappointment. Skyepharma skp, cenes cen, and bioprogress bprg, (and others) all seem to have similar stories. Could they all just be just of of favour at the moment or something more sinister. Why are the shares higher at pjase 1 than they are phase 3 it dont make sense to me.

Kivver Sometimes you just have to do your analysis and then stick with it. Ofter a falling price does not say anything specific about the real value of the company. I think in this case somehave become impatient. We are just not used to the longer timescale for investment, as for instance in Germany. If you look at pe ratios for instance, investors are typically looking one year, perhaps two, ahead. That is why there remain such good obvious investments as ASOS where you can see the run ahead for three or four years at least due to the pretty well definite continued switch to the internet. With AZM, I feel that I am sitting there with a really good hand of cards playing a pretty long game; others are staching theirs in because they are bored. But there hand is stacked full of trump cards! Do challenge me further.

Incidentally, they are testing their support level at the moment. It was encouraging to see the strong buying in the last hour (the late 50K sale was from an hour earlier). Good time to average down!

Eric

EWR - you mean average down for the third time?

Eric, averaged up with these on Friday. Originally bought at 49p, and participated in rights issue at 28p, sold some at 161p, bought again at 86p, sold at 1.29p. Decided it was time to take another little gamble as price has fallen below last placing price. Hope this is the year of significant licensing activity! Good luck to all............Rod

Sparky performance today.

(duplciated)

Super Rod, great minds think alike. Its also my third incarnation. I had a major run up originally from around 30p to round about 180p and then from around 140p back to 180p. I am reckoning we will get to 180p again even before a significant announcement: then? anyon's guesstimate.

I think this has been technically a double bottom (quite sexy!) which is positive indication of the start of a long climb. Must have been some favourable wekend comment - anyone know?

Balance of sells to buys looks a little strange. However there is a 600K plus share trade which is marked VW or volume worked. As I understand it this is the average price and probably worked from start of trading. Almost certainly a but which switches the balance the other way.

Eric

I am interested in the very high proportion of AT trades today, over 80% by volume mostly markes as sells. I am aware that these are automated trades under SETS. But don't these match buyers with sellers so thay should have a neutral overall effect. Can anyone provide ernlightenment? Eric

McCarthy, new CEO, giving corporate investor presentation on Thursday in New York. I expect this is a 'keep the faith' occasion given the slowness in gaining corporate partner(s). But he must be saying something new to justify the occasion, e.g. positive response to partner search - selection from competetive bids. If so, could have positive effect on price, e.g. doubling! Eric

That'd be nice!

Well, if not this week, defintiely this year!

we live in hope, but thats all it seems to be at the moment!! hope i get my losses back!

Preliminary results on Monday, 19th February together with analyst briefing. Last year they were 10th March so perhaps there might be some good news!

Kivver, if you are filled with doubt have a look at the chart on the header and imagine the next mountain; shouldn't be too long now.

Eric

heres hoping Eric, lol. Big mountains 2004, 2006..........2008?????

Three years since the first peak. Shows the long timescales of drug development and the need for patience. But progress has been steady since then. They have done more themselves rather than take the cash from partnership deal(s) early. My view is that we won't have to wait for 2008 but we should be able to guage better with the prelims - what is not said as well as what is said. I have put my money where my mouth is! Eric

Nice little recovery today; could be the foothills!

More progress with decent volumes. Suspect that the balance was in favour of buys, taking into account posts delayed by an hour. The presentation at Merrill Lynch conference is 9.20 (EST) tomorrow; interesting to see when investment action results.
Eric

Quite a strong trading day. Next week should be interesting with the prelims a week Monday - could be some demand in anticipation. However, no aprticular movement after New York presentation yesterday; haven't sen any account of it.

Shares give the resukts date as 12th march but they have been brought forward to the coming Monday. Hopefully a good omen. Shares say

"...when (loss making biotechs) are on the verge of a lucrative licensing deal, there is plenty of potential for the shares to rocket. Alizyme's obesity drug Cetilistat posted stellar phase II data last year and the company should be able to broker a licensing deal in 2007. Its results provide an ideal opportunity to update the market about the progress and any postive news could provide a massive boost for the shares. ... at his elvel it is alos a potential takeover target.

I suspect it is a bit early for a licensing deal to be agreed but I am hoping that they will give some encouraging news re negotiations led by Novaquest. The shares have twice run up to around 2 on hopes of such a deal. It really has to happen this year and it just needs any positive expression to set the bull market rolling.

Eric

You seem a little lonely on here Eric. I sincerely hope that you're right about a new surge this year. I'm well down on AZM but have a strong belief that it will come good.....some day!