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

We are BLUE - anyone here got Level 2

cynic We clearly disagree on fundamentals. Your emphasis is on the markets and I suspect your conclusion is drawn on trading principles. That's fair enough up to a point. But my basic premise is that there is an underlying value to a stock: in many cases you are buying earnings, or yied, or growth; here you are buying the intrinsic value of the drugs in later stage development. The share is now valued at levels not seen for the last four years, yet they have had four years of positive development since then! The trading pattern has turned the other way today, not necessarily permanently: it could even be the same trader(s) who have traded it down who are trading it back up and why not? At least it is an indication that we are at about the bottom of the share pattern.

Nel: don't currently have Level 2 but there has been a good volume of buying, better than recent days when the price has been falling. Still a prevalemnce of Automatic Trades: i.e. they are essentially 'trades' rather than investment buying.

Eric

pharmas are notorious for their products failing either in final trial or ultimately in the market ..... take a good look at Shire for the classic example

i shall continue to watch casually though purely out of interest rather than intent

Ive took an even bigger gamble and bought some more. Time will tell!!

I suppose they could sell the research team. Might slow down their cash burn.

Well done, Kivver. That's the spirit. Good to see Shares comment today:

Results from Phase III studies for its IBS drug Renzapride and ulcerative-colitis products are due in the first half of the year. Looks cheap, and positive news and potential licensing deals could elad to a recovery in shares.

Will attempt to update the header of this thread in the next few days. A pity that there is no news of a Shares competition to earn a bit of extra lolly.

Eric

I didn't think Shares went into ramping. The chart tells it all.

this stock needs more than ramping ..... it needs a wheelchair and 24 hour nursing!

or perhaps just patients ! not one for widows and orphans though.

perhaps rechristen as "the widowmaker" for giving aged holders heart attacks

Looking at the NMX4570 chart, its easy to see why AZM is where it is.
And add to the mix that a deal for Cetilistat or Renzapride has yet to materialise.
Although the SP has changed, the products remain the same, Cetilistat is better
tolerated than approved product Xenical . Renzapride on track with
results due in April , SPA approvals for both and more anticipated.
Also lets not forget the two transactions for Colal-Pred in North America and Japan
and the prospect of more territorial transactions, the news flow could be thick and fast.
Still plenty of risk though , and definitely not for bed wetters.
But whats life without a bit of risk.

Risk = discomfort

Encouraging trading for a second day on reasonable buying volumes. Could be establishing a baseline (hopefully!). Agree with you Neil. I suspect the deal in US for Colel-Pred will be replicated in the next couple of months; perhaps 5 times the numbers which would make the market much happier; price should then retrace to the original support level of 70p.

Eric

For some excitement, who wants a boring life, and it's all the more sweet if it takes off.

Pigs might fly.

Not a fan Of AZM then.

I did hold them at one time. Lucky to have made a profit on them Sold 8/3/06 at 180p having bought at about 106p. Restropectivley bad judgement buying and b.. lucky selling.

I think the product, which has not got to market yet and the competition around will be that much of a winner.

I could be wrong. but I think it was being ramped when I held it and see some of the old faces doing the same again before they jump boat.

Next prelims are 19/2/08. Just watcg the sells increase before the date.

From the charts looks oversold, but that is what I think it should be!

Yes oversold and MACD has crossed over !!! So heading north IMO

We need AZM to do a CEN. CEN (there has been a share consoladation a shaort while ago)) have been in the doldrums for a long while but shot up 64% today, not sure why.