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

ps. The 10,20 and 50 day moving average are still downwardly pointing.

The chart looks oversold on a technical basis, and in the context of recent and anticipated value-enhancing news.

The FDA's advisory committee meet to consider an application for Sanofi's Zimulti (Acomplia) on 13th June, the recommendation from which will be made public; and the FDA will make a final decision on that recommendation in July, which will also be made public. This will clarify the competitive position in the US relative to what is known about Alizyme's Cetilistat, and enable a partner to conclude a deal for Cetilistat.

AZM could get $650m in upfront and milestone payments for Cetilistat, starting in 2007, plus double digit royalties on sales.

Takeda are expected to complete Phase 2 Cetilistat in Japan during 2007 and (if it is successful) will give Alizyme another milestone payment before commencing Phase 3.

Renzapride is near the end of Phase 3 and has just secured further patent protection, so is ripe for a deal in 2007/08. It could be worth more than Cetilistat as the market for IBS is poorly served and Novartis's Zelnorm has been pulled leaving Aizyme's Renzapride the only drug left standing in c-IBS.

COLAL-PRED is approaching the end of Phase 3 and will be partnered either before the results or after (if successful).

Note, Alizyme will get even better terms for Renzapride and COLAL-PRED based on the Phase 3 data; so potentially expect some terms even better than for Cetilistat.

Alizyme should soon be basking in substantial upfront and milestone payments, from their three lead drugs.

Obviously, Alizyme is also ripe for a take-over.

Very good and informative post Ludlow Castle. Press comment, inclduing Shares, has always put focus on Cetilistat. It is easy to size the obesity market and the Takada deal gives a good idea of the value. But its right to say that thet there are three drugs in the window for deals.

Regarding the charts, not an expert but it is clear that momentum is changing. This could be an excellent time to buy in.

Eric

Good call Ludlow & EW

Eric, back in again today after selling at 1.20p, I was hoping for 80p again, but didn't think it would get there!!!

Yes, if it is ramped enough.

Good decision, Canary, I think, as was the profit taking at 120p. As I commented above the fall occurred on no great nett volume of shares traded; it seemed to me that the price was engineered down by repetitive AT's (automated trades). A share like AZM would appear to be susceptible to such action because there is no real benchmark to indicate value. Two factors though are clear: (a) given a deal on Cetilistat, perhaps plus the other two Phase III products, would give a very appreciable gain; (b) the odds on such a deal happening must be very good. There may be good trading opportunities but the key thing is to maintain a position.

Eric

Agree, it would be a shame to miss out on deal.
got to admit, i thought about selling @ 1.20 and hoping to to get back in, but did'nt have the balls on this occation.
Well done canary.

Here we go again.

AZM's current share price at 92p is seriously undervalued.

AZM's IBS drug Renzapride looks to currently be worth around 100p alone; even before considering the value of Cetilistat, COLAL-PRED, ATL-104, and the cash in the bank (approx 25m).

Optimist,

Last years profit = -18.97M forecast 2007 =-19.55 M.

Ah well, perhaps I am wrong.

There are those who regularly trade in and out of this stock and make money. My holding began years ago at 26p. it is now 67p. as I have added over time. Anything below 80p is a buy signal for me but my gut feeling is that the price will not fall to that level again. My target is anything above 200p at the end of this year, when I want to turn the paper into cash. I'm hoping the waiting game will pay off! The downside, for me, would be bad news regarding Cetilistat or a take over below my target. However, I regard both of these scenarios as unlikely.

amana - I would have thought the low share price actually makes the company more vulnerable to a takeover.

EWRobson, can I suggest you amend valuations in the last paragraph of the thread header to something more recent:

Valuations & Analyst Recommendations:

2/4/2007
Evolution reiterates "buy" Alizyme, with a 173p target.

http://uk.biz.yahoo.com/02042007/336/broker-recommendations-monday-2nd-april-2007-12-15-pm.html

The above 173p figure was before the announcement on 4/4/2007 of a SPA for Cetilistat and a new patent for Renzapride to 2024, both of which add further to the value.

For a summary of Analyst Recommendations, follow the link below and press the blue GO button:

http://today.reuters.co.uk/stocks/Recommendations.aspx?symbol=AZM.L

Been keeping an eye on Alizyme for a while and puchased an initial holding today at 89.66p. sp been subdued while waiting for further developments

Copied from ADVFN's site:

QAZWSX123 - 6 Jun'07 - 09:23 - 6910 of 6922 edit

According to the British Medical Journal (Drug & Therapeutics Bulletin) on 30th May 2007, British experts are expressing doubts about the benefits of Sanofi's Acomplia (Rimonabant/Zimulti). In contrast, they express continuing positive opinion about Roche's Xenical (which they say will continue to be the drug for obesity) and as we know, AZM's Cetilistat is similar to but has advantages over Xenical.

This all bodes well for AZM's Cetilistat, which looks like it could become the prescription obesity drug of choice with NICE (and thus others) for obese patients, replacing Xenical; and Acomplia may not even get a look in.

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ADDED HEALTH CLAIMS FOR DIET DRUG ACOMPLIA / ZIMULTI QUESTIONED BY EXPERTS
30th May 2007

Claims that diet drug rimonabant (Acomplia / Zimulti) offers benefits beyond those associated with weight loss may not be justified, according to a new report by independent British medical experts.

The diet drug has been sold as Acomplia in the U.K. since June 2006 for treatment of obese and some overweight adults, and developer Sanofi Aventis has claimed some of the improvement in cardiometabolic risk factors observed in clinical trials cannot solely be attributed to weight loss.

Cardiometabolic risk factors -- including low HDL (good) cholesterol, high LDL (bad) cholesterol, elevated fat levels in the blood, high blood pressure and insulin resistance -- in combination increase a person's chance of developing heart disease and/or type 2 diabetes.

Acomplia "has a beneficial effect on blood glucose and lipid levels -- a more beneficial effect than would be expected from weight loss alone," Sanofi claims on its website.

But experts writing in the Drug and Therapeutics Bulletin (DTB), published by the British Medical Journal (BMJ) on May 30th, said there was no proof in the clinical trials that Acomplia had any beneficial effects outside those expected by weight loss.

"It might be related to increased activity based on the lifestyle advice given to participants at the start of the trials," according to their report. "Furthermore, it is not known whether rimonabant's effects on individual risk factors translate into a reduced long-term likelihood of cardiovascular events."

The experts said the trials also showed rimonabant to have no effect on LDL cholesterol and little or no effect on high blood pressure.

While the drug is available in the U.K., the country's National Institute for Health and Clinical Excellence (Nice) is still weighing whether and under what conditions the drug should be paid for by the National Health Service.

"Rimonabant has not been directly compared with other, less expensive, drug treatments for obesity. Also, as with these other treatments, it is not known whether rimonabant reduces the likelihood of obesity-related diseases, such as cardiovascular problems," the researchers concluded.

They said Xenical (orlistat) "is the drug for obesity for which there is the most evidence for efficacy and safety to date, and we have previously concluded that it is a reasonable option for obese patients where diet and exercise and/or behavioural measures alone have failed.

"On current evidence, we do not believe that rimonabant represents a significant advance for patients with obesity," they said.

http://www.acompliareport.com/News/news-053007.htm

Copied from ADVFN's site:

QAZWSX123 - 6 Jun'07 - 10:21 - 6918 of 6922 edit

A report from the Scottish Medicines Consortium (January 2007) Page 6, gives an important price comparison for obesity drugs, as follows:

1) Sanofi's Acomplia (Rimonabant) costs 720 pa.
2) Abbot's Sibutramine (Meridia) costs 592-647 pa (depending on the dose).
3) Roche's Xenical (Orlistat) costs 515 pa.

i.e. Sanofi's Acomplia (Rimonobant) is 39.8% more expensive than Xenical (and Xenical is also cheaper than Sibutramine) !!!

Obviously AZM's Cetilistat should (as a lipase inhibitor like Xenical) be closer in price to Xenical, than to Acomplia (Rimonobant) or Sibutramine.

In view of Acomplia's disadvantages of safety (depression, etc), high costs, and questionable benefits, it is reasonable to expect that Roche's Xenical and subsequently AZM's Cetilistat, will remain the obesity drugs of first choice with state healthcare providers imo.

http://www.scottishmedicines.org.uk/smc/files/rimonabant%20_Acomplia_%20%20_341-07_.pdf

All good info Ludlow thanks, it realy is just down to Xenical and Cetilistat, and as we know so far in trials Cetilistat is superior.

Another post copied from ADVFN, this time about Alizyme's Renzapride:

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QAZWSX123 - 10 Jun'07 - 16:20 - 6997 of 6999 edit

Birdie4 (Post 6995) let's not overlook AZM's Renzapride for c-IBS (35% of IBS sufferers) and m-IBS (40% of IBS sufferers) which could be huge.

Sales of Novartis's Zelnorm in just c-IBS (it did not address m-IBS) reached a substantial $561m pa in the US (it was not on sale in Europe) and were rising steadily (predicted to exceed $1 billion pa) before being suspended. AZM's Renapride addresses both c-IBS and m-IBS, appears to be more efficaceous and safer than Zelnorm (Renzapride and Zelnorm are not members of the same chemical class and Renzapride has undergone an additional safety trial) and could get approval in the US and EU. Hence, sales of AZM's Renzapride for c-IBS and m-IBS in the US (SPA granted and currently in PIII for c-IBS) and EU could potentially surpass $2.5 billion pa. AZM's Renzapride is potentially a mega blockbuster!

P.S.
Renzapride sales royalties to AZM @ 15% of $2.5 billion pa = $375m pa (190m pa) = approx 95p Earnings Per Share (currently 200m shares) and if then trade on even a modest PE of 12 = a future share price based on just Renzapride when at peak sales = 11.40. (Need to discount this back, to give a Discounted Present Value; but it does illustrate the potential for future explosive growth).

From the ADVFN site:

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QAZWSX123 - 11 Jun'07 - 20:39 - 7006 of 7006 edit

Just checked the Acomplia Report site again. More ugly safety data has been released for Sanofi's Rimonobant/Acomplia and it looks like its all going pear-shaped. Two further suicide attempts by patients taking Acomplia (Rimonobant) have been reported, plus 74 possible and/or definite cases of suicidality outnumbering placebo 3 to 1, 11 likely or possible cases of "seizures", 4 confirmed cases of multiple sclerosis, 15 reports of thoughts of or planning for suicide, 4 reports of delusional symptoms, 6 reports of psychotic behavior (including a man who attempted to strangle his daughter) and 5 reports of aggression (including a man who beat his wife).

I cannot see Acomplia getting US prescription approval now, or ever getting OTC approval in the US.

I would not be surprised to see the European regulators now withdrawing Acomplia

Excellent indirect implications for the competitive positioning and value of AZM's Cetilistat imo.

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FDA DELAY ON DIET PILL ACOMPLIA (RIMONABANT) TIED TO SUICIDE, SEIZURES
11th June 2007

http://www.acompliareport.com/News/news-061107.htm

The long delay in FDA action on diet drug rimonabant (Acomplia / Zimulti) is the result of concern over "increased frequencies of psychiatric adverse effects" including suicide and seizures, the agency's staff disclosed on June 11th.

The confirmation of long-rumored FDA worries over the neuropsychiatric side-effects of this novel diet drug -- which works by blocking the CB1 receptors in the brain -- came in a briefing paper prepared for the June 13th airing of issues surrounding rimonabant by an FDA panel of outside medical experts.

The staff report suggests that rimonabant's developer, Sanofi-Aventis, is in for a rough day Wednesday, and that without a favorable recommendation by the advisory panel, the FDA may well decide in July to defer approval of sale of rimonabant in the United States until it has more data -- perhaps until 2010.

"Among the most significant adverse events throughout the Phase 3 (clinical trial) program were those in the primary System Organ Class (SOC) Psychiatric Disorders, specifically depressive events, anxiety, psychomotor agitation, and sleep disorders," the FDA staff said.

While the FDA reported only two completed suicides during the trials by participants on Acomplia, the "possible and/or definite cases of suicidality" during the trials identified by a Columbia University team that advises the FDA totalled 74 with those on rimonabant outnumbering those on a placebo by almost three to one.

The staff also pointed out that an unusually high percentage of participants withdrew early from the clinical trials, the staff reported, "with more rimonabant subjects doing so due to depression, anxiety, mood alteration with depressive symptoms, and the need for antidepressant medication.

"Given the lack of systematic follow-up of these subjects and rimonabants long half-life (the time it continues acting after a person stops taking it), the results of the above analyses should be viewed as incomplete at best and at worse as an underestimate of rimonabants risk for suicidality," the staff said.

The FDA said that subsequent to Sanofi's submission of a safety update on Acomplia trials that are still continuing in March 2007, it has received 2 additional reports of suicide attempts - one by a 60-year-old female and the other by a 56-year-old male taking rimonabant in the CRESCENDO trial.

The staff said the FDA also has been maintaining a log of all adverse event reports reported by patients taking Acomplia in countries where it has been approved for sale.

The agency said that in addition to 15 reports of thoughts of or planning for suicide, it had received " 4 reports of delusional symptoms, 6 reports of psychotic behavior (including a man who attempted to strangle his daughter), and 5 reports of aggression (including a man who beat his wife.)"

The FDA said data from countries where Acomplia is being marketed also "reveal that reports of nervous system disorders are frequent (15% of adverse events reported) and are driven predominantly by dizziness."

The staff also reported that experts had identified 11 likely or possible cases of "seizures" among participants in the clinical trials, as well as four confirmed cases of multiple sclerosis among trial participants taking rimonabant.

During the trials, the staff reported that dizziness and vertigo occurred with greater frequency in the rimonabant 20 mg group...motor impairment occurred with greater frequency (driven predominantly by tremor and balance disorder)... .and cognitive disorders occurred with greater frequency ... driven predominantly by mental impairment, somnolence, and disturbance in thinking/perception.

"These neurological adverse events may well have contributed to the disproportionate number of subjects who sustained injuries (contusions, concussions, falls, road traffic accidents, whiplash, and injuries) during the RIO trials in the rimonabant 20 mg group," the staff added.