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

Just been looking again at the Investec comments and the quote that AZM are about to conclude a deal which ends a 5-year search for a major development partner. I'm not sure that they will want a single partner as they could become vulnerable to a takeover which is clearly the last thing the directors want. So the forthcoming announcement could be very significant. A bit surprised that Investec's price targey is only 59p which gives a cap of about 130M. That is round about the level of the other players in this sector, but AZM are much nearer the market with three drugs in Phase III, two seen as blockbusters. A very significant part to the Cetilstat statement a month ago was that they had encouraged them to open another 12 month phase III exercise aimed at Diabetes alone apart from obesity considerations. That effectively adds a third blockbuster.

I am really looking for the announcement to generate a bit more steam and for the share to at least get to 70p before pausing. So don't take your profits too soon, Toya and Cynic. Tomorrow could be the day!

Eric

to be decided .... as i have often said, no one ever went broke banking a profit

TRue, but (a) you can leave much on the table (b) I prefer the saying: cut your losses, run your profits.

I was taught to leave a bit for the next man but, not too much. lol

How about leaving something for the next woman Gusc?

I'll wait and see how much steam can be generated, and what the prospects are for more, before I decide whether to hold or sell. I do agree Eric: AZM is certainly a company with a lot of potential but it's all about timing.

Oh ok then Toya, if you insist. Certainly concur about timing, this is a tricky one for the trader. I am in for the major move, hopefully. I think the recent institutional funds raised at 50p per share is interesting and points to better times to come. These funds were raised during a difficult backdrop for the sector.

Gus Your point about the major move is a good one. Look five years ahead with three blockbusters live (including Cetistat for diabetes) then we are talking about licence income of certainly $1billion, a fair bit going to the bottom line. Certainly in the FTSE 350. I suspect there will be a couple of major moves, perhaps 3, the first based on deals made and the up-front payments, the second based on confoence in the license flow. The expected deal for cetilistat is unlikely to be a mojor mover, unless, pause, the forward earnings flow is very explicit. The other prerequisite is probably a change in the general market and with it the attitude to the sector. If you take my argument then play the market of course but also tuck some away for the long term.

Eric

Disappointing not to see the Cetilistat licensing deal this week after the press comment and the Investec report. These were clearly based on a note by the house broker so either they were misinformed or there is a slip between cup and lip. More difficult when you are trying to hold on to a CFD investment but I accept that it is a price you pay for the extra gearing. Lets have it Monday, please!

Eric

Is this the week then? how do you reckon the odds? Reasonably sure it will be April (as I said back in Jan.) - 90%. Next week? 40%. week of 14th? 25% leaving 25% for the last two weeks. Any other bids?

Nop no bids - just hope they get the finger/RNS out soon. Yep I've got this one as well!!!!!!!!!!!! All fingers crossed, handy cos it keeps me from pressing the buy button.

I'm thinking of writing a book! Its called "waiting for Alizyme" Will i ever finish it though, thats the thing. :o)

ive said many times in past posts, i could be dead before we hear what we want to hear. In my forties by the way lol (and intend to live into my eighties, if the stress of waiting for some positive news doesnt get me first).

One thing, though, about Alizyme is that every news you get is 'good news'! They are always making positive progress. The problem, I agree, is that the progress reported can be somewhat snail-like, or even tortoise like. They will get to the finishing post we know. I think they have been working on these proudcts for some 15 years so what is an odd year here or there? Last year was going to be the year of transformation - well we did have the COLAL deal. There will undoubtedly news of product progress this year. Will there be a licensing deal for Cetilistat. I have funds that says there will be. The reason is that we do know that they cannot start the planned Phase III effort without funds from a partner.

The real problem is that UK investors are an impatient lot. There is also a quirk of the market that is illustrated today. A trader drives the price down 1p by a series of sales totalling some 100K shares. It then takes 200K of buys to recover the 1p, presumably including that trader closing his bets (definitely a man as a woman wouldn't do such a thing). We know that the share is worth 50p because institutional investors have said so to the tune of 10m. But this trader(s) continues to get away with making life a misery for we well-meaning and still optimistic, really pleasant and constructive, and eternall patient, investors.

Eric

He is a brave man to be doing that in case he is caught short, so to speak, if a bullish statement is announced. Unless, dare I say, he is closer to things than we are.

Gus Trading within a day is a relatively safe exercise. Any announcement is going to come out at 7 a.m.; so day trading is comparatively low risk. I am still hopeful for an announcement in April - where did the Investec statement, and the press comment a couple of weeks back that an announcement was due that week, come from. We have had the smoke, lets have the fire

probably from a relative of the person who rumoured that a Bradford & Bingley rights issue was imminent Eric. lol

Only seven days left for my April prediction re deal announcement. Please!

Alizyme plc also announces that its Annual General Meeting ('AGM') will be held
on Tuesday, 24 June 2008. The meeting will be held at the offices of Buchanan
Communications, 45 Moorfields, London, EC2Y 9AE, commencing at 11.00 a.m.

Good volume! maybe something in the wind?

Have a whiff myself. Good buying volume. The 100K sell is a buy delayed by one hour. My 'prayer' last night is being answered I reckon.