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

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!

Queen. Thanks for you comments. One might wonder why one bothers to post. Actually, there is a very good reason - it helps to clarify your own thinking. But it does surprise me that people don't look around - mind it seems some sort of trigger before I will visit a new thread. Of course, when (not if) the good news comes everyone will come flooding in - after the major opportunity has gone!

Yeah, you are a bit lonely Eric, here, have an olive.

I'm well down on these, have averaged down 3 times already and still have a foolish confidence, but this stock is just too long term potential for most people and the sp is very depressing. *looks down to see empty olive jar*

Eric - you're welcome

Harry6 - lol!

AZM's 2005 results were 21st April.
2006 10th march.
This year 19th feb ?
Hang in there folks (no pain no gain).

Well, visitors to the site! Includes the Queen and Harry but where are Charles and William? Fasten the belts ready for take off (just look at the chart!). Hope Olive is on board.

Eric

just had a look at the maps. Notice I was lucky enough to sell out 181p, but since that date it has been pie in the sky and I would have felt safer on the Titanic.



















However, if it does break up 90p will be worth putting on a lifebuoy and testing the water.

Hi Eric don't feel too alone I've still got these tucked away in my long-term ISA fund
Regards Ruthie

Oh well done Fred, so happy to hear your news. *bangs rusty nail into foot*

Eric and Queen and now Ruthie and maybe Neil, shall we have a little friendly competition as to where we each think the sp may be at the end of March?

Bit of fun, like...

Harry, difficult to read. I am happy with the prediction that it will end the year above 200p. The difficulty is in predicting time of break upwards. My prediction is May/June for a deal in Cetilistat based on an informed view that such a deal takes 6 months to negotiate and the appointment of NovaQuest was November. The climb upwards could start on Monday but we would need to have a statement to the effect that AZM were in negotiations with pharma companies regarding a licensing deal; i.e. more than one gives a level of competition and will help the price. My odds on such a statement are 50% which doesn't help a price prediction for end of March. Probability between 75p and 85p of 40%; 85p and 1 of 30%; 1 and 150p of 20%; over 150p 10%. Take your pick!

Eric

Well that's about covered it! Given those options I'll plump for between 85p and 1.

I'll shoot for between 1 - 115p.
I've always been stupidly optimistic.

Blimey Eric, what did you do with the rest of your life?

Anyway, that's Neill at 1.07 1/2, HRH in at 92 1/2 and me at 82 (confident? nah...) I'll put Eric in at his most pessimistic, 80.

Now, remind me why I suggested this...

Im with you all but well down too. Been following for quite few years now and enthusiasam is slightly dampened now. But I havent sold and look foward to big profits........tomorrow, next month, next year, in a decade???????? But i aint selling (unless they run out of money).

ps according to market laws how soon after starting discussions with possible partners do they have say they are in such talks??

that would be seriously price sensitive, so almost immediately

I suspect that there are a lot of discussions of potential company sales, for instance, which never see the light of day. There would clearly be no obligation to make an announcement until a deal is agreed which probably means that due diligence has been done. However, things have a habit of leaking out; if there is a speculative movement in sp which could be linked to inseider knowledge or leaks then I believe the company has an obligation to make a statement.

With AZM, little likelihood of a company sale until the licensing deal game is played out. It may well be in their interest to provide an up-to-date position unless there is only one potential player and negotiations are sensitive. Experience of Alizyme suggests that management are quite conservative: they love to talk about their products but are quite cautious when it comes to anything commercial (big contrast with Stenalco!).

Harry, I see that my 'weighted average' is 90p - mind, they do say that there is no such thing as the average person although I do call my Mrs, 'Mrs Average' - for heavens sake, she reads the Mail, doesn't she! As for me, I'm always swimming against the tide and must be the archetypal Mr anti-average!

Anyway, we will know more (or hope we do) this time tomorrow - I'll be on the golf course so will be looking for the big blue % when I look at the screen

Eric

Results have been quite well received with volume of buying building later in the day. The most positive aspect is the expression of strong confidence. The CEO change is confirmed as being to put greater emphasis on achieving commercial arrangement. 2007 is looked on as the year of transformation. Timing remains uncertain but I am sticking with my 200p plus forecast by the end of the year.

Eric

Eric - good stuff, I too liked the wording of the statement, very positive I though. Anyway, how as the golf?

It is always good to believe the chief. Ie, Blair, Bush, Hitler in recent memory stand out.

Show me the contracts.

I don't hold but I think, if I did I would sell on any rise!

Thanks, Harry: golf was a 3&1 win which wasn't bad after hibernation. Not impressed with Fred's post - has he done any research into company?
Eric