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

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.

Not good news in today's RNS guys:
"Based on the adequacy of the study itself, together with today's clinical
results, the Company considers that the efficacy shown is not sufficient to
justify further development of renzapride by Alizyme. As a result, the Company
is discontinuing clinical development of renzapride..."

Should have sold when I was in profit...

There's an analyst briefing today at 11:00 with webcast. Full details on link below:

Renzapride Phase III results

But at least we can still hope for a deal on Cetilistat one of these days...

there was indeed a whiff but, not the right type on this occasion sp31.5p

Nicely put Gus - more like the whiff that's been blowing over the south-east (from the Continent) by all accounts. Decided to sit tight for now as there's a chance it might bounce a bit higher, given time

If anyone is planning to listen to the webcast it would be good if you could post any comment re Cetilistat - bound to be pressurised by analysts given this disappointment. Many thanks. Eric

Will keep you posted.

Recent developments have made me a little bit sceptical. The Board certainly got the timing right in raising a further 10m @ 50p per share not long ago ahead of this announcement. Institutions will not be happy with this especially the the Pru imho with their large stake. Of course if/when a Cetilstat deal occurs, all may well be forgiven but, in the mean time, pressure will now mount and I do not think this management will be given alot more time without some positive development. I will continue to hold for now. sp30.5p

These things happen - yet on reflection if there is no significant benefit (to the Patient) - you have to ask why this wasn't spotted a while ago. (Shades of British Biotech, when investors' money finally gave "Merimostat" cancer-patients about two extra weeks - if they were lucky!)) - and BB had wormed its way into the FTSE!
- Regulators, don't you love 'em?

Sure the early trials determine the drug isn't a killer, yet at some point the drug was said to cure xxx . . . . . and I presume that was because they'd tried it on someone suffering from xxxx . . . . . . . or was it - they cured a mouse that had a poorly foot . . . . and somehow thought it would cure madness in Politicians?

[[Anyone close to the Co can suggest what is likley (ie now), as this means their focus and cash will be on the other products.]]

This stock was 1.20 about a year ago - and some of the fall is due to "Market woes" - I read there was a funding at 50p - well, just as well . . . looking a bit of a joke this Management. . . . Oh deary. . . . something good will be needed to stop a further slide as Management tries to explain themselves!

Whilst hangon's comments are understandable, there is an alternative viewpoint. Phase III frequently brings about the death-knell of drugs that have passed previous tests: the statistical demands to pass are more stringent with a much larger population. Interesting that, whilst 60% reported benefits from Renzapride, 55% did so for placebo! In other words a lot of the benefit is psychological!

I have not followed Renzapride nearly as closely as cetilistat. I believe the Phase III risk is much less becuase previous tests have demonstrated better results than the established drug, Xenical, without the negative side effects. The FDA have also recommended a separate project for diabetes treatment, irrespective of the obesity effects. We thus, in effect, have two drugs so that news in the last six months could be seen as replacing one potential blockbuster, Renzapride, with another, Cetilistat for diabetes.

At 31p we have a cap of about 70m which is below figures between 100m and 120m for the nearest competitors with AZM having the advantage, typically, of being more advanced in the development process. So it should be worthwhile staying in board. Nevertheless, I am disappointed and hurting in the pocket - could do with a bit of obesity there!

Eric