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

That looks a good buy, Joe - better than a goodbye! I agree the right view is an investment for the long haul - also agree that it has probably bottomed out even if the new shares at 100p will be bound to overhang the market for a while.

Eric

Starting to rally well...100p getting close now.

anybody bought this at 90p?

Had these for a few years. Bought more this week at 86p instead of subscribing to the open offer. Always difficult to value a stock like this, but they have been up at 2.00, and could get there again with a licensing deal imho. Agree that they could hang around at this price a while for the overhang to clear and more news flow,but they now have the funds to wait for the right deals.

Well done. I wish I had had your courage. Chewed it over and ducked. One of the problem was the NMS and being overweight in them already. But perhaps next time.

Good to have AZM holders posting. I came out around 130p as my goals have turned short-term and felt I couldn't wait for AZM to get their licensing deals together. Then we have this placing of an amount of stock which seemed hard to justify. Certainly the price looked impossible as was quickly proven. However, a million bought per day will soon put the overhang behind us. Well done on the buy canary; not completely sure we might not go back there. To me, the mystery remains - why so many shares? One plausibe answer is that they have a buy out of a company with skills in later stage development and marketing to complement their own research, product and clinical management skills. Other views?

Eric

Hello People
This is less technical than the advfn thread and doesn't have it resident Troll (I hope).
I shorted from 120 down as hedge for my holding and got stopped out at 94 on the reverse and put my profits from the short in to a long targetting 111.
Idea is to leave the profits as more "free" shares
Well, we shall see

In case anyone wonders I hold a diverse portfolio of stocks and bonds in US and UK...I am not an "all or nothing" biotech punter but I did buy in when the stock was at 80p, averaged down (I was inexperienced), at 40p ..took up the rights (very inexperienced) and.........rode back up to 150 with a 50% topslice so...I now have a free holding.I like AZM and will stick as long as the news flow remains clear. If they get foggy/tricky with words...I will bail out - always the first sign of wailing and gnashing of teeth

My guess is that for a period 2-4weeks sp drop to 92-94 before gradually climbing back about 125 over 6-8 week period. Nice if it doesn't drop!

daly: helpful to have your background. I bought in at the bottom of the amrket at around 30p, around the time they raised funds at that level. Topped up in 70s, mroe funds raised, and then followed ride up to around 180p. Took most of profits; had one or two sallies around 130p when it seemed that a licensing deal was on the cards but got out before the latest fall when it became clear that they were playing things long.

There is little doubt in my mind that this will come good and will become a billion company but that is voer a 3 to 4 year period. For those preapred to take that term view then its a very sound investment for a protfolio. But when will there be a significant rise in the sp? Management are very happy to play it long, I suspect particularly on the obesity drug. It could be, however, that the institutional holders may want some action more quickly and persuade them to licence a drug earlier, say in the next 12 months. Its worth keeping a close watch.

Just taken a look at the Hemscott 'detailed broker forecasts'. Panmure Gordon and Merrill Lynch both give pre-tax profits of around 6.5m and eps of 4.47 and 3.74 respectively in 2006. 5 brokers state BUY, 2 HOLD and 1 ADD. That's a pretty positive picture. Could be that presentations have led to a more positive picture than that we observe. Mat tuck away a CFD as they are unlikely to drop lower.

Eric

Eric
Have a care with interchanging value and price. We may all agree that the share in undervalued for the long term but that doesn't control the share price in the short term.
Value Stanelco and tell me something with a 1.3M turnover and embroiled in patent infringement cases is worth 250M ........price can be anything and is sentiment driven...value isn't. The further the price diverges from a fair value, the greater the buying opportunity and the likely price spike when good news hits. The longer time passes, the greater the degree of uncertainty removed from the pipeline, the higher the potential value of any deals

IMHO the lasck of news will allow price drift and cause a spike when something good is announced. Te problem is that without any sign of news...I can find better places for my money than leaving it to sit in a no-yield drug development company giving risk but no income.

I hold AZM but will take CFD positions to either hedge my holding or go overweight without tying up significant additional capital. At the moment I am long targetting 111p but...I think I may have called this wrongly...I ran a short from 122 to 94. I have no idea where this is going next LOL

M

will this ever come good. they say 'the trend is your friend', well it aint being friendly to me. someone give me some hope!!!! bought near the top!

AZM will come good. R+D is good, but you may have to hold for quite a while. AGM 17/6/05 and Interims 27/9/05. Either will be informative. I think the brave may try and trade it, but I think it will be dangerous to go short unless it is for the next few days or so.

I have quite a large holding of these, bought a number of times but luckily average price is quite low as I didn't buy at its height. (Luck(:-)

W/W with TLC

AGM will see a positive outlook and overhang cleared. Sure to spike up by end of week. Bargain basement at 84p surely?

I have grouped together the feedback from the AGM off the BB's at:

http://www.ukbiotechs.com/phpbb/viewtopic.php?t=135

Seems to be a generally good event, although slightly tense. Also RP apparently displayed a presentation of the possible news flow over the next two years. It would interesting to see that if they eventually display it on their website.

ADAM

Thanks for that. Do we not have any info on the discussion of potential newsflow over the next two years?

The major issue is that the Directors objectives of 'increasing long-term shareholder value' has little relationship to the price in the market now. I have little doubt that this company will be worth 1 billion plus in four years time - a figure that could be justified by the obesity drug alone. However, the market is not going to move the sp ahead significantly until it sees real numbers being earned or at elast contracted for. Moreover, there must be a heavy Nomura overhang on the market which will remain for some time.

Thus the importance of news flow. If someone is happy to lock their money away for 4 years and multiply its value five times, then AZM is a low risk bet. In suggesting a CFD, I am not assuming a short-term kill. I actually see a CFD as a way of borrowing money at 2% over LIBOR without security other than your 20% stake. 25% cost for a 25-fold increase is not a bad bet. Having said that, I have places for that basic stake which are more pressing and am sitting on the sidelines at present (having banked some good profits). Thus the importance of info. on the news timetable. AZM has a number of analysts following it and I expect the information will be forthcoming before too long.

Eric

AZM up 8.9 % to-day with sizeable buys and overall good volumes. No news to-day. Looking at the chart could be a break out. I am in need of one.

Eric,

Sorry didn't see your reply,

You can get the presentation from the AGM plus all the other info at:

http://www.ukbiotechs.com/phpbb/index.php?f=31

Alizyme PLC
07 July 2005


For Immediate Release 7 July 2005


ALIZYME REACHES AGREEMENT WITH FDA

FOR RENZAPRIDE PHASE III CLINICAL TRIAL


Cambridge UK, 7 July 2005: Alizyme plc (LSE:AZM) announces that it has reached
agreement with the US Food and Drug Administration (FDA) under the Special
Protocol Assessment (SPA) procedure for the design of a pivotal Phase III
clinical trial for renzapride in constipation-predominant irritable bowel
syndrome (c-IBS) in the US.

The trial will be a multi-centre, randomised, double-blind, placebo-controlled,
parallel group, pivotal, efficacy study. The trial will involve up to 1,700
women with c-IBS being treated over a 12-week period. Patients' response will be
determined by each patient, via weekly self-assessments of their IBS symptoms.
The primary endpoint will be to evaluate whether daily doses of renzapride,
taken either as 4 mg once daily or 2 mg twice daily, are clinically and
statistically significantly more effective than placebo in providing overall
symptomatic relief of c-IBS in women between 18 and 65 years of age. Secondary
endpoints include adequate relief of abdominal pain/discomfort and of bowel
problems.

It is expected that patient recruitment will commence in Q4 2005 and, assuming
anticipated recruitment timelines are met, Alizyme would expect results to be
available in the first half of 2007.

Commenting, Dr Richard Palmer, Chief Executive Officer, said:

'We are extremely pleased to have reached agreement with the FDA, following
extensive discussions, for this pivotal Phase III clinical trial of renzapride
in the US. This is a major achievement for both renzapride and the Company as it
takes a second product from our portfolio into Phase III clinical development.'

This has been off the screen for quite a while, which has been a buying oportunity for many with courage and belief in the concepts employed.

I think the company is getting act to-gether and if the next stage of the trials are as good as these then it should be a flyer.

"UK smallcap opening - Alizyme up after positive cetilistat trial completion
AFX


LONDON (AFX) - Buyers pursued Alizyme, 10-1/2 pence better at 111-1/2, as the company disclosed it has successfully completed its phase I clinical trial of cetilistat in obese volunteers under its Investigational New Drug (IND) application in the US.

It said the high levels of tolerability in American obese subjects were similar to those in European clinical trials, and it considers the completion 'an important step forward' for cetilistat in its development for the 'commercially significant' US market.

fjb/jsa

"

But is still not for orphans.