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

So the purchaser in the large sales last wek was UBS acquiring 10.02% of the equity. Any thoughts about logic. No indication (yet) of reduced institutional holdings - the major transfer was at 25p so it looks as if UBS mopped up demoralised holdings.

EW, who was providing you the CFDs. May be interested if price drops to about 15p.

Which I doubt.

UBS have already disposed, presumably, of 2.4mill on 25th, day after share acquisition. Mostly acquired at 25p and sold at around 29p. Looks as if acquisition to be traded only so bound to overhand market for a while. It will be worth looking out for the notice that takes holding below 3%.

sorry guys ive bailed out at a massive loss, i said all or nothing but lost my bottle. I think kenmare resources is a better prospect over the shorter to medium term. i will keep an eye on azm though and will be back in like a shot when/if we have some positive news. Good luck to you holders.

may see some perkiness today as Express says some big deal(s) may be announced shortly ..... note the subjunctive!

Still interested in AZM despite the let down, somewhat costly for me and, no doubt, others. The finger is pointing at Tim McCarthy, the Chief Exec, who must have lost all face with the institutions having raised 10m only two months ago at 50p. OK, problems do arise at Phase III but it suggests that the Phase II studies have not been sufficiently thorough. The strange thing to my mind was that the efficacy appeared to be good with the problem being that the placebo performed almost as well; the effect in the latter case was clearly psychological but you start to wonder about the design of the test.

And why was the Interim Management Statement issued at all? It was for the period 1st Jan to 19th May, odd in itself, and it didn't appear to say anything new. Mc Carthy comments: We continue with a number of ongoing discussions with potential partners for our late stage products. We anticipate that these activities,together with results fromour Phase III study for COLAL-PRED, will provide for significant news flow through 2008.

The sp continues to fade which is not surprising. But I will come back in when I have some funds available - if they can't negotiate decent deals then someone will take them over; the institutions would be happy to get the 50p price back no doubt

Eric

21p seems to be lowest its ever gone from looking at the chart..... is there anyone out there looking to buy at these levels ???

I think Nar1 it has become an issue of credibilty for the management. They have lost alot of trust imho.

Looks set to fall further today. I wouldn't get back in until there's some strong upward momentum - even if that does mean missing the rock-bottom sp.

Lets wait and see

Its simple to me, we need some positive, factual news. If, buts and maybe's are no good anymore.

flat today was up 0.75 could this be the bottom ?

It may well be but I'm still steering clear until I see some real impetus - there's so much happening elsewhere that I'm happy to hang back for now.

Suggested 15p as a buy. But still can't find a CFD provider for them!

Fred: go to IGmarkets.com

Or Etrade.

I think this will be the bottom ladies and gentlemen does anyone concur from looking at the 10 yr chart this is the lowest azm has gone

Toya & Neil, Thank you! Will consider it.

Silence on this thread on the PhIII failure to meet end-points.

And Colal-Pred looks like a good idea - has anyone worked-out what was wrong with the end-points?
Some bounce today, but the Questions remain...what's the Cash position, this level of sp doesn't look good....oh dear.

Cash.
5.8m cash at 31st December 2007, and raised a further 10m via a Placing in March



Shocking really, the way this share has just disintergrated, Colal Pred, In many P,Is view was a given, now , if it isnt dropped like a stone, then maintenance of remission at best. Cetilistat needs to be a decent deal, all eyes on Takeda, It really is all or nothing.
Personally, im annoyed with myself, I broke my own trading rules and have paid for it.
Never fall in love with a company and set your stops and stick to them, had I done this I would have stopped out with a trailing stop at a small profit. What a dummy! still you cant win them all. I have done very well with the likes of PHC, BGC, and AFR. So it was about time I had a reality check. We live and we learn.
Neil