Final Results

RNS Number : 4400O

Allergy Therapeutics PLC

19 September 2011

Allergy Therapeutics plc

("Allergy Therapeutics" or "the Company")

Preliminary Results for the year ended 30 June 2011

Allergy Therapeutics plc (AIM: AGY), the fully integrated specialty pharmaceutical company specialising in allergy vaccines announces preliminary results for the year ended 30 June 2011.

Highlights

· FDA to lift clinical hold on INDs for MATA-MPL© productssubject to submission of agreed protocols

o Partnering process initiated to exploit significant US market opportunity

· 10 Marketing Authorisation Applications filed in Germany

o Pollinex Quattro grass filed in Switzerland

· Teomed AG acquisition in Switzerland fully integrated and beginning to deliver

· Netherlands subsidiary established and operating successfully

· Full-year revenue up 2% to £42 million (2010: £41 million); revenue up 5% at constant currency to £43 million

o Pollinex Quattro revenue up 2% at constant currency to £22 million (2010: £21 million)

· Number of in-licensing deals signed leveraging sales infrastructure

· PQ grass dossier report received from Germany's PEI, response to be submitted November 2011

· EBITDA £1.8 million (2010: £2.9 million); adjusted EBITDA pre FX hedge fair valuation impact £2.6 million (2010: £2.9 million)

· Cost reduction plan executed and headcount reduced by 10%

Post reporting period events

· Initial roll-out of Emerging Market strategy with supplies to Latin America (August 2011)

· Anapen® distribution agreement extended to include UK and Ireland (September 2011)

Manuel Llobet, Chief Executive of Allergy Therapeutics, added:

"Allergy Therapeutics has made significant progress towards its goal to become one of the top 3 immunotherapy companies in the world and a leader in the subcutaneous segment of the market.

"During the year, we achieved important regulatory milestones including discussions with the FDA to resume US development of Pollinex Quattro and feedback from the PEI, the German regulatory body, for the registration of Pollinex Quattro Complete. Pollinex Quattro could be the first registered subcutaneous vaccine available to allergy sufferers in the US, and could also become the first injectable vaccine registered under the new European regulatory requirements.

"We remained profitable at an EBITDA level, despite a difficult environment in Germany, currently our largest market. This reflects a number of measures implemented to improve efficiency and reduce costs, which we expect will also benefit our performance in the current year.

"We have made good progress with our Emerging Markets strategy, introducing our own products in Latin America and licensing in products to improve our portfolio. We have established a subsidiary in Argentina and plans are already in place for additional distribution agreements in other key countries.

"By leveraging our established infrastructure in Europe and extending our presence into new markets, we are confident of improving profitability going forward and creating a sustainably profitable company."

For further information

Allergy Therapeutics	+44 (0) 1903 845 820
Manuel Llobet, Chief Executive Officer
Ian Postlethwaite, Finance Director
www.allergytherapeutics.com

Nomura Code Securities	+44 (0) 207 776 1200
Juliet Thompson/ Clare Terlouw

Financial Dynamics	+44 (0) 207 831 3113
Ben Brewerton/ Susan Quigley

Chairman's Statement

I am delighted to have this opportunity to write to you for the first time as Chairman. In particular, I would like to thank Ignace Goethals, from whom I took over the role on the 1 January this year, for a smooth and helpful transition and I welcome Ignace's continued presence on the Board as a non-executive director.

I am pleased to report that, despite being impacted by a weak German market and a weaker Euro against Sterling on average over the year, the Group again reported an operating profit; albeit smaller than the previous year due in part to fair valuation of the foreign exchange hedges. This has been achieved by the acquisition of Teomed AG in Switzerland and other initiatives to improve revenue outside Germany whilst reducing costs in other areas, including reducing headcount by approximately 10%. The lower operating profit and higher finance charges resulted in a £2.7m loss after tax (2010: £0.6m profit). The financial review describes the results in detail.

We achieved the key regulatory goals we set for the year. Firstly in Germany, we submitted 10 MAAs to the Paul Erlich Institute (PEI), beginning to focus the portfolio on 'registered finished products'. Secondly, in the United States, the Company met with the Food & Drug Administration (FDA) and they stated their intention to lift the clinical hold on all three programmes (Grass, Ragweed & Tree) and we are now preparing detailed protocols for discussion with the FDA to lift the hold officially. Finally we received the PEI report on the Pollinex Quattro Grass Complete 0.5ml MAA. We are reviewing the report and believe that the issues raised can be satisfactorily addressed and expect to submit a response by the end of November.

Earlier in the year the European commercial infrastructure was strengthened by the acquisition of Teomed AG, a Swiss speciality distribution company. Teomed is the first acquisition following the increased emphasis in the Group's strategy towards strengthening its European market position. Our new operation in the Netherlands further reinforces our European base. Both operations are now fully integrated and delivering value.

Following our decision to reduce the size of the Board, Keith Carter retired as a non executive director on 31 December 2010 and both Tom Holdich and Christian Gratz left the Board on 30 September 2010. On behalf of my fellow directors I wish to thank them all for their contributions to the Group's development.

We are at an exciting stage in the development of our business. During the period we have achieved a number of regulatory milestones, strengthened our financial position and established a presence in the lucrative Emerging Markets (starting with some important Latin American markets) to improve future growth prospects outside Europe. We will look for a partner to develop our Pollinex Quattro assets for the US market and we will seek to registerPollinex Quattro Grass Complete 0.5ml in Germany and beyond through the European mutual recognition process. With a clear strategy for expanding our business we are well positioned to deliver growth for our shareholders.

Peter Jensen

Chairman

16 September 2011

CEO's Review

Now in my second year as CEO, I am pleased that the Group is progressing well despite challenging market conditions and is delivering in line with its strategy. One of our key ambitions for this year was for the Group to maintain operating profitability and I am very pleased to report that this has been achieved. Operating profit for the year is £0.1m (2010: £1.5m), which included a non-cash charge of £0.8m (2010: £nil) at the balance sheet date for the fair valuation of outstanding foreign exchange contracts.

Operationally, the results for the period were impacted by a weaker German market, with gross sales (before German statutory sales rebates) marginally higher at £43.0m (2010: £42.0m). On a constant currency basis however, revenue increased by 5%. Gross sales of Pollinex Quattro grew by 2% on a constant currency basis.

The market in Germany has declined for the first time in the Group's history as a result of various factors changing in the market place, including a new regulatory environment - the Therapeutic Allergen Regulation (TAV) - which has led to the withdrawal of certain minor product ranges and pressures from German health insurance companies on doctors to reduce spending.

The Group has initiated a number of measures to offset the impact of weaker sales in Germany including strengthening our sales teams in other major markets outside of Germany, all of which have been showing good growth.

The Group has also recently set up its own operation in the Netherlands where sales have progressed well and we have taken advantage of the infrastructure to in-license complementary products to those already in our portfolio. On the first day of the financial year, the Company acquired Teomed AG of Switzerland for a consideration of CHF1.2m (£0.7m).Teomed specialises in the field of allergy and was the distributor for the Group's products and other companies' products in the Swiss market. Following this transaction Allergy Therapeutics has a direct sales and marketing presence in seven countries: Germany, Italy, Spain, UK, Austria, The Netherlands and Switzerland. The allergy vaccine market in Switzerland is sophisticated and well established, and is worth around £10 million per annum. The Pollinex Quattro Grass Complete 0.5ml dossier was submitted to the Swiss regulators in April 2011.These two new operations are a great opportunity to improve earnings and provides us with an established infrastructure from which to launch Pollinex Quattro in the future.

A key strategic goal is to expand the revenue base outside Europe, and the Group therefore intends to pursue opportunities in the Emerging Markets. Initially the Group will focus on Argentina, Columbia, Venezuela and Chile before moving into other Latin American markets. Allergy Therapeutics has established the necessary infrastructure to begin building a presence in these markets, including creating a subsidiary in Argentina and putting distribution agreements in place to support its sales representatives. Allergic Rhinitis ("AR") is a common chronic condition in Latin America, with a recently reported prevalence rate of 7% (approximately 40 million people) in a population-based study. We want to maximize this opportunity for our products and anticipate that Emerging Markets will account for a significant proportion of the Group's revenues in 5 years time.

At a meeting with the U.S. FDA in March this year, the Group was informed that the FDA intends to lift the clinical hold in order to allow the development of MATA-MPL^© products to move forward. We are now preparing detailed protocols for discussion with the FDA to lift the hold officially and these will be submitted by December 2011. This is a significant step forward for the Group. It is estimated that some 60 million people suffer from allergy in North America, an estimated 25 million of whom have been diagnosed as suffering from moderate to severe allergy. In many cases the disease and allergy symptoms are not well-controlled, and thus there is a significant unmet need for better treatment. It has recently been estimated that up to 3 million Americans are being treated with a vaccine prepared by the treating physicians themselves, who buy the base products in bulk from manufacturing companies. No registered products for allergy immunotherapy are currently available in North America.

Over the past 6 years the Group has invested around £66 million across three development programs for grass, tree and ragweed in Pollinex Quattro and in proving the benefit of MPL in an oral vaccine. We have started the process to identify the right partner to help finish this development program, seek registrations in markets outside Europe and subsequently to commercialise the products.

At the end of November 2010 the Group submitted 10 Marketing Authorisation Applications (MAA's) to the Paul Ehrlich Institute (PEI), the Regulatory Authority for biological products in Germany. This achievement has been in response to the introduction of the TAV, which has changed the regulatory landscape in Germany. To date many products have been available in Germany on a 'named patient' basis. However, as a result of the TAV, all immunotherapy products containing common allergens (grass, trees, house dust mites and insect venoms) will need Marketing Authorisations by 2017. Since 2008, Allergy Therapeutics has reviewed its product portfolio and has submitted MAA's for its top 10 products in the Pollinex Quattro, Tyrosin TU t.o.p. and Oralvac Compact ranges. This has been a major project that has required significant investment over the past two years and will result in the Group continuing to offer an attractive portfolio of products. These regulatory changes should favour the Group as the market will become focused on evidence-based, approved, value-added immunotherapy products and Allergy Therapeutics is well-placed to deliver a range of such products.

The Group has a broad product portfolio that addresses the needs of the market: injectable (both short and longer course), oral and diagnostics. The flagship product is Pollinex Quattro, an injectable short course vaccine which requires only four injections over a period of three weeks. Pollinex Quattro is currently sold across a number of European countries on a named patient basis. Completion of the regulatory process outlined below will open up new markets to Pollinex Quattro and enable Allergy Therapeutics to improve market share in those countries where only named patient sales are currently possible.

During the year we have added to our portfolio through a number of agreements.

The Anapen auto-injector adrenaline (epinephrine) pen has been licensed in from Lincoln Medical Ltd. in certain markets. Anapen is a device to administer adrenaline and treats anaphylactic shock. This can be caused by an allergic reaction to foods such as nuts and shell fish, or to a wasp or bee sting, as well as contact with materials such as natural latex. Auto-injector pens are commonly carried by people at risk of anaphylactic shock as the adrenaline can be self-administered and is very fast acting. Adrenaline also features in emergency drug kits frequently held by GP surgeries and dental practices to treat patients prior to the emergency services arriving on scene. It is estimated that up to 4 million people in Europe and the USA carry an adrenaline auto-injector.

DAP, a diagnostic product for people who are allergic to penicillin, has been licensed from Diater Laboratorios, S.A., for certain markets. Millions of patients believe they are allergic to penicillin. However, it is estimated that only approximately one in ten of these patients is actually allergic. If not diagnosed properly, patients who believe they are allergic to penicillin will be treated with broad spectrum antibiotics. Improved diagnosis can limit the use of broad spectrum antibiotics, thereby lowering treatment costs and the risk of developing multi drug resistant bacteria.

Avamys nasal spray is co-promoted in Germany on behalf of GSK. People who suffer from nasal allergies (allergic rhinitis) can experience a variety of symptoms as a result of their allergy, including a runny, itchy or blocked nose, sneezing and sinus discomfort. These symptoms are a result of inflammation in the nasal passages. Avamys contains the active ingredient fluticasone furoate, which is a corticosteroid. Corticosteroids are hormones produced naturally by the adrenal glands that have many important functions, including control of inflammatory responses. Fluticasone is a synthetic corticosteroid and is administered by nasal spray to decrease inflammation in the nasal passages.

Outlook

As a result of new regulations in Europe, a new global market of registered allergy vaccine products will be created. Immunotherapy is receiving more attention and is the only segment of the Allergic Rhinitis market that is expected to show significant growth in the next few years, according to a recent Datamonitor report. We are preparing the Group to take advantage of this opportunity.

Key objectives have been achieved to make the Group profitable and to strengthen our European business. During the year we have consolidated our position in Europe and remained profitable at the EBITDA level. We anticipate building on our profitability in the coming years as we focus on the Emerging Markets and on the continued expansion of our portfolio of products through in-licensing. The work we have already undertaken to reduce and carefully control our costs means we are now well placed to maximise the long-term potential of our business by moving into new territories and adding new products for our sales force to sell. Work will also continue to find a partner to help develop and commercialise our products in North America.

The current challenging economic climate may affect certain markets, with reimbursed markets seeing increased pressure on payors to lower the cost of medicines and greater pressure on discretionary spending in markets where products are not fully reimbursed. Variations in the Euro/Sterling exchange rate will also continue to affect performance in the second half. We will also continue to move forward with regulatory activities in Germany and the US.

There are many opportunities that will enable us to create a bright future for Allergy Therapeutics. With operating profits delivered for the second year running giving the Group a strong financial base and excellent market potential, I believe we will build on this year's performance and create significant long-term value for shareholders and stakeholders, as well as making a real difference to patients.

Manuel Llobet

Chief Executive Officer

16 September 2011

Financial Review

Overview of the business model

We are a specialist fully integrated pharmaceutical company that is focused on the allergy vaccine sector. We concentrate on specialist products used by allergists, dermatologists, paediatricians and Ear Nose and Throat (ENT) doctors who treat people for Allergic Rhinitis.

The results for the twelve months to 30 June 2011 have seen the Group posting another operating profit, following its maiden operating profit in the prior year, of £0.1m (2010: £1.5m). The relative reduction in performance in 2011 reflects weaker German revenue and the lower average Euro versus Sterling exchange rate.

Revenues

We market and sell allergy vaccines mainly in Europe, South Korea and Canada and since the year end have started marketing in Latin America. Germany is our most important market, accounting for 66% of our revenue, a reduction from the prior year (74%). Our revenues derive principally from sales of our own products, generally through our own sales forces but also through distributors. The key product is Pollinex Quattro, accounting for approximately 50% of sales.

Gross sales for the period, before the statutory sales rebate in Germany of £1.4m (2010: £1.3m), were £43.0m (2010: £42.0m). This represents an increase of 5% over the previous year at a constant currency. However, given that most of the Group's sales are in Euros, the weaker average Euro rate to Sterling during the year of 1.17 compared to the average rate in the prior year of 1.14 has had a negative impact on sales limiting the growth rate to 2% and the increase in sales to £1m. This growth is driven primarily by sales in the new markets of Switzerland and the Netherlands, mitigating the weaker effect of the lower sales in Germany. From a product perspective, sales of new licensed in products have contributed most to the growth. After the German statutory rebate, Group revenue increased by 2% to £41.6m (2010: £40.8m).

The acquisition of the Group's Swiss distributor, Teomed AG, has progressed well and this has helped support the results in the period by adding £2.1m in revenue. Growth in the remainder of the Group's markets, excluding Germany, was good with a constant currency increase of 15%. These performances helped mitigate the weaker German allergy vaccine market where units sold during the period declined in the 12 month period to June by 6% and gross sales in Germany declined by 5% at constant currency rates. The market in Germany has declined for the first time in the Group's history as a result of various factors changing in the market place, including the introduction of a new regulatory environment, the Therapeutic Allergen Regulation (TAV), which has led to the withdrawal of certain minor product ranges and also pressures from the German health insurance companies on the prescribing doctors to reduce their spending. Moreover, the pollen count last year was lower than normal in most areas of Germany.

The Group's strategy, to exploit its sales force infrastructure through complementary products sales, was launched during the year. A number of commercial initiatives have started, including in-licensing Anapen, (an adrenaline injector), DAP, (a penicillin allergy diagnostic) and co-promoting Avamys from GSK in Germany. Whilst revenues from these initiatives are small in the current year, growth is expected in the future.

Gross profit

As a consequence of lower than expected sales in Germany, where the Group benefits from its highest selling prices and a weaker Euro to Sterling exchange rate, gross profit decreased by 4% to £28.3m (2010: £29.6m), representing a gross margin of 68% (2010: 73%) of revenue. This impact was compounded by an increase in cost of goods to £13.2m (2010: £11.2m). This was generally a result of the prior year cost of goods charge benefiting from some one-off events and higher manufacturing compliance costs.

To combat the impact on the gross margin, as soon as the Group became aware of the weakness in the German market, a decision was made to reduce the headcount by approximately 10%. The majority of those affected were based in the manufacturing and support departments. Although this is regrettable for those people affected it was essential to take such measures to protect the Group's profitability to ensure its long term financial health. As a consequence, the cost savings from this exercise should benefit margins for the future.

Operating expenses

Despite the reduction in total headcount, investment and headcount in sales and marketing, the major component of distribution costs has not been adversely impacted. This is due to the strategy of improving our marketing capabilities in all of our key markets. Total distribution costs increased to £17.5m (2010: £16.1m), an increase of 9% over the previous year. Administration costs of £9.2m (2010: £10.2m) were lower by £1.0m than in the previous year due primarily to various cost saving initiatives taking effect and despite taking on further overheads in our new markets.

Research and development costs decreased again during the year to £1.7m (2010: £2.2m) as the development activity for the MPL based vaccine range has now completed its current programme. Other income represents the gain on bargain purchase released as a consequence of the purchase of the Swiss distributor being at a price below the fair value of the net assets acquired. In the prior year, other income came from funds received from a partner to build in-house specific manufacturing plant.

The operating profit for the period was £0.1m (2010: £1.5m), lower than the previous year due principally to the impact of foreign exchange with a £0.8m charge (2010: £nil) for the fair valuation of the foreign exchange forward contracts outstanding at the balance sheet date creating a charge in administration expenses.

Finance expenses are significantly higher than the prior year at £2.4m (2010: £1.6m) primarily due to a higher revaluation loss of £1.3m (2010: £0.1m) on the Euro denominated loan as a consequence of the year-end Euro: Sterling exchange rate strengthening against the rate used at the prior year end from 1.23 to 1.11.

During the previous year a £0.8m research and development tax credit was received which related to spend in the prior financial year, offset by a small tax charge in Germany. In the current year the small tax charge relates to the German and Italian subsidiaries.

The loss after tax for the year was £2.7m (2010: profit £0.6m) reflecting the lower operating profit and higher finance charges.

Spending on capital items was broadly in line with the charges for depreciation and amortisation in the year. Intangible assets however have increased by £1.1m, to £4.4m due mainly to the acquisition of the Swiss subsidiary.

Net current assets excluding cash and cash equivalents are £2.7m (2010: £0.3m). This increase of £2.4m is principally due to higher debtors in Germany and additional trade debtors in the new markets of £0.5m offset by a higher foreign exchange derivative fair valuation creditor of £0.8m. Although net current assets excluding cash are higher, due to an increase in net debt, net assets have decreased by £1.7m to £2.1m during the year.

Net cash generated by operations for the year was an outflow of £1.7m (2010: inflow £1.1m) and was impacted by the £2.4m increase in net current assets excluding cash and cash equivalents.

Financing

The weakening of the average rate of the Euro against Sterling during the year has been detrimental to the Group's performance. Over 85% of our sales are denominated in Euros whereas roughly 50% of costs are incurred in the United Kingdom and denominated in Sterling. Although the Euro weakened against Sterling on average over the year, it actually closed stronger at the balance sheet date against the prior year closing rate and this generated two further negative effects on the Income statement: forward foreign exchange contracts maturing after the balance sheet date when fair valued at the balance sheet date generated a charge of £0.8m and similarly the Euro denominated loan was revalued up at the balance sheet date charging the Income Statement with £1.3m.

Furthermore, there have been changes in the reimbursement regime in Germany, our key market. Notably, there has been a price freeze on reimbursed products from the prices in the market on 1 August 2009 and the rebate paid to sick-funds increased from August 2010 from the previous level of 6% to 16%, although the Company has received an exemption from this rebate rise until the end of the calendar year.

The Group meets its ongoing financing obligations through a combination of a term loan facility of €8.1m (2010: €11.0m), a revolving credit facility of €15.5m (2010: €15.5m) and a small bank overdraft. At the balance sheet date a net amount of £15.2m was drawn on these facilities (2010: £11.7m). The Directors believe that the Company and the Group will have access to adequate facilities for the foreseeable future and accordingly, they continue to adopt the going concern basis in preparing the full year results.

Ian Postlethwaite

Finance Director

16 September 2011

ALLERGY THERAPEUTICS PLC

Consolidated income statement for the year ended 30 June 2011
		Year to 30 June	Year to 30 June	Year to 30 June	Year to 30 June
		2011	2011	2010	2010
		£'000	£'000	£'000	£'000
	Note

Revenue	2		41,552		40,750

Cost of sales			(13,221)		(11,164)
Gross profit			28,331		29,586

Distribution costs			(17,524)		(16,141)

Administration expenses - other		(9,232)		(10,235)
Research and development costs		(1,670)		(2,210)
Administration expenses			(10,902)		(12,445)

Other income			210		456
Operating profit			115		1,456

Finance income			2		9
Finance expense	4		(2,430)		(1,581)
Loss before tax			(2,313)		(116)
Income tax			(349)		702

(Loss) / Profit for the period			(2,662)		586



(Loss) / Earnings per share	5
Basic (pence per share)			(0.86p)		0.20p
Diluted (pence per share)			(0.86p)		0.19p

Consolidated statement of comprehensive income for the year ended 30 June 2011
		Year to 30 June	Year to 30 June
		2011	2010
		£'000	£'000
	Note

(Loss) / Profit for the period		(2,662)	586
Actuarial gain / (loss) on defined benefit pension scheme		235	(612)
Exchange differences on translation of foreign operations		586	(79)
Revaluation (losses) / gains		(54)	1,265
Income tax relating to components of other comprehensive income		-	(31)

Total comprehensive income		(1,895)	1,129

ALLERGY THERAPEUTICS PLC

Consolidated balance sheet
		30 June	30 June
		2011	2010
		£'000	£'000
	Note
Assets
Non-current assets
Property, plant and equipment		8,809	8,938
Intangible assets - Goodwill		2,624	2,496
Intangible assets - Other		1,781	860
Investments - Retirement benefit asset		2,493	2,017
Total non-current assets		15,707	14,311

Current assets
Trade and other receivables		6,779	3,390
Inventories		7,087	6,894
Cash and cash equivalents		1,048	4,520

Total current assets		14,914	14,804

Total assets		30,621	29,115

Liabilities
Current liabilities
Trade and other payables		(7,549)	(8,875)
Current borrowings	6	(2,793)	(1,109)
Derivative financial instruments		(805)	-

Total current liabilities		(11,147)	(9,984)

Net current assets		3,767	4,820

Non current liabilities
Retirement benefit obligation		(4,114)	(3,573)
Non current borrowings	6	(12,361)	(10,596)
Derivative financial instruments		(376)	(830)
Deferred taxation		(201)	-
Non current provisions		(283)	(246)

Total non current liabilities		(17,335)	(15,245)

Total liabilities		(28,482)	(25,229)

Net assets		2,139	3,886

Equity
Capital and reserves
Issued capital		321	321
Share premium		58,705	58,704
Merger reserve - shares issued by subsidiary		40,128	40,128
Reserve - shares held by EBT		67	67
Reserve - share based payments		1,398	1,323
Revaluation reserve		1,287	1,381
Foreign exchange reserve		524	(62)
Retained earnings		(100,291)	(97,976)

Total equity		2,139	3,886

Registered number: 05141592

ALLERGY THERAPEUTICS PLC

Consolidated statement of changes in equity

	Issued Capital	Share premium	Merger reserve - shares issued by subsidiary	Reserve - shares held in EBT	Reserve - share based payments	Revaluation reserve	Foreign exchange reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

At 30 June 2009	92	33,193	40,128	67	1,291	189	(1,113)	(97,023)	(23,176)
Exchange differences on translation of foreign operations							(79)		(79)
Actuarial losses								(612)	(612)
Valuation gains taken to equity						1,265			1,265
Income tax relating to components of other comprehensive income						(31)			(31)
Other comprehensive income	-	-	-	-	-	1,234	(79)	(612)	543
Profit for the period after tax								586	586
Total comprehensive income	-	-	-	-	-	1,234	(79)	(26)	1,129
Share based payments					193				193
Shares issued	229	25,511							25,740
Transfer of depreciation on revalued property						(42)		42	-
Correction of prior period immaterial errors							1,130	(1,130)	-
Transfer of lapsed options to retained earnings					(161)			161	-
At 30 June 2010	321	58,704	40,128	67	1,323	1,381	(62)	(97,976)	3,886

Exchange differences on translation of foreign operations							586		586
Actuarial gains								235	235
Valuation losses taken to equity						(54)			(54)
Other comprehensive income	-	-	-	-	-	(54)	586	235	767
Loss for the period after tax								(2,662)	(2,662)
Total comprehensive income	-	-	-	-	-	(54)	586	(2,427)	(1,895)
Share based payments					147				147
Shares issued		1							1
Transfer of depreciation on revalued property						(40)		40	-
Transfer of lapsed options to retained earnings					(72)			72	-
At 30 June 2011	321	58,705	40,128	67	1,398	1,287	524	(100,291)	2,139

ALLERGY THERAPEUTICS PLC

Consolidated cash flow statement
		Year to 30 June	Year to 30 June
		2011	2010

		£'000	£'000
	Note

Cash flows from operating activities

Loss before tax		(2,313)	(116)

Adjustments for:
Finance income		(2)	(9)
Finance expense	4	1,085	1,499
Revaluation loss on loan	4	1,345	82
Non cash movements on defined benefit pension plan		181	155
Depreciation and amortisation		1,698	1,427
Gain on bargain purchase	7	(186)	-
Charge for share based payments		147	193
Financial derivative instruments		805	(1,172)
Disposal of property, plant and equipment		8	-
(Increase) in trade and other receivables		(2,728)	(112)
Decrease / (increase) in inventories		73	(911)
(Decrease) / increase in trade and other payables		(1,788)	14

Net cash (used in) / generated by operations		(1,675)	1,050

Interest paid		(3)	(15)
Income tax (paid) / refunded		(349)	667

Net cash (used in) / generated by operating activities		(2,027)	1,702

Cash flows from investing activities
Interest received		3	9
Investments		(313)	(319)
Acquisitions	7	(740)	-
Payments for intangible assets		(87)	(56)
Payments for property plant and equipment		(1,150)	(1,642)

Net cash used in investing activities		(2,287)	(2,008)

Cash flows from financing activities
Proceeds from issue of equity shares		1	25,740
Repayment of borrowings		(7,016)	(41,040)
Proceeds from borrowings		9,024	22,442
Bank loan fees and interest paid		(1,245)	(2,248)

Net cash generated by financing activities		764	4,894

Net (decrease) / increase in cash and cash equivalents		(3,550)	4,588
Effects of exchange rates on cash and cash equivalents		78	(42)
Cash and cash equivalents at the start of the period		4,520	(26)

Cash and cash equivalents at the end of the period		1,048	4,520

ALLERGY THERAPEUTICS PLC

NOTES TO THE FINANCIAL STATEMENTS

1. BASIS OF PREPARATION

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006.

The consolidated balance sheet at 30 June 2011 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's 2011 statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498(2) or (3) of the Companies Act 2006.

Those financial statements have not yet been delivered to the registrar of companies.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) in issue as adopted by the European Union ('EU').

Allergy Therapeutics Plc is the Group's ultimate parent company. The Company is a limited liability company incorporated and domiciled in England. The address of Allergy Therapeutics Plc's registered office and its principal place of business is Dominion Way, Worthing, West Sussex and its shares are listed on the Alternative Investment Market (AIM).

The consolidated financial statements for the year ended 30 June 2011 (including comparatives) have been prepared under the historical cost convention except for land and buildings and derivative financial instruments which have been measured at fair value. They were approved and authorised for issue by the Board of Directors on 16 September 2011.

Except as described below, in preparing the condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30^th June 2010.

New standards adopted

The Group has adopted the following new interpretations, revisions and amendments to IFRS issued by the International Accounting Standards Board which are relevant to and effective for the Group's financial statements for the year beginning 1 July 2010.

IFRS 3 Business Combinations (revised 2008)

During 2011 the Group adopted IFRS 3 revised. In anticipation of this, £120,000 of transactions costs were recognised through the Group's consolidated income statement in 2010 which related to the acquisition of Teomed AG as detailed in note 7.

Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group in the 30 June 2011 financial statements

At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective. The Group has not adopted any of these pronouncements early. The new standards, amendments and interpretations that are expected to be relevant to the Group's financial statements are as follows:

IFRS 9 Financial Instruments (effective 1 January 2013)

This IFRS replaced IAS39 and addresses the usefulness for users of financial statements by simplifying the classification and measurement requirements for financial instruments. Management are currently assessing the detailed impact on the Group's financial statements.

IFRS 10 Consolidated Financial Statements (effective 1 January 2013)

This IFRS establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities

IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2013)

This IFRS looks at the disclosure of information that enables users of financial statements to evaluate the nature of, and risks associated with, its interests in other entities, and the effects of those interests on its financial position, financial performance and cash flows

IFRS 13 Fair Value Measurement (effective 1 January 2013)

IFRS 13 seeks to increase consistency and comparability in fair value measurements and related disclosures through a 'fair value hierarchy'.

IAS 19 (Revised June 2011) Employee Benefits (effective 1 January 2013)

IAS 19 reviews the treatment of employee benefits with a view to recognising the cost in the period in which the benefit is earned by the employee, rather than when it is paid or payable.

IAS 27 (Revised) Separate Financial Statements (effective 1 January 2013)

IAS 27 is concerned with the preparation and presentation of consolidated financial statements for a group of entities under the control of a parent, and in accounting for investments in subsidiaries, jointly controlled entities and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements.

Amendments to IFRS 7 Disclosures on Transfers of Financial Assets (effective 1 July 2011)

IFRS 7 addresses the need for additional disclosures on financial instruments regarding the significance, nature and risk arising from their use.

Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets (effective 1 January 2012)

This IAS prescribes the treatment for income taxes

Amendments to IAS 1 Presentation of Other Comprehensive Income (effective 1 July 2012)

This IAS amendment revises the way the statement of other comprehensive income should be presented requiring separate subtotals for those elements which may be 'recycled' (e.g. cash-flow hedging, foreign currency translation), and those elements that will not.

Management anticipate that the above pronouncements will be adopted in the Group's financial statements in line with the effective dates stated above. Management are currently assessing their detailed impact on the Group's financial statements.

Other new standards and Interpretations have been issued but are not expected to have a material impact on the Group's financial statements.

Going concern

For the year ended 2011 and for the second year in succession, the Group has reported an operating profit, however the Group reported a loss after tax of £2.7m (2010: £0.6m profit) and an operating cash outflow of £2.0m (2010: £1.7m inflow), and these have been funded by the debt facilities.

The Group has prepared detailed budgets, including cash flow projections, for the periods ending 30 June 2012 and 30 June 2013. These projections include assumptions on the trading performance of the operating business and the continued availability of the existing debt facilities. After making appropriate enquiries, which included a review of the annual budget, by considering the cash flow requirements for the foreseeable future and the effects of sales and other sensitivities on the Company's funding plans, the Directors continue to believe that the Group will have adequate resources to continue in operational existence for the foreseeable future and accordingly have applied the going concern principle in drawing up the financial statements. In reaching this view, the Directors have considered and prioritised the actions that could be taken to offset the impact of any shortfall in operating performance.

2. REVENUE

An analysis of revenue by category is set out in the table below:

	2011	2010
	£'000	£'000

Sale of goods	40,445	38,735
Royalties	1,107	2,015

	41,552	40,750

There were no milestone payments in either the current or previous year.

3. SEGMENTAL REPORTING

The Group's operating segments are being reported based on the financial information provided to the Board of Directors, which is the Chief Operating Decision-Maker (CODM), to enable it to allocate resources and make strategic decisions.

The CODM reviews information based on geographical market sectors and assesses performance at an EBITDA (operating profit before interest, tax, depreciation and amortisation) and operating profit level. Management have identified that the operating segments are Central Europe (Germany, Austria and the new markets in Switzerland and the Netherlands), Southern Europe (Italy and Spain), the UK and Other.

Revenue by segment

	Revenue from External Customers	Inter Segment Revenue	Total Segment Revenue	Revenue from External Customers	Inter Segment Revenue	Total Segment Revenue
	2011	2011	2011	2010	2010	2010
	£'000	£'000	£'000	£'000	£'000	£'000

Central Europe
Germany	27,390		27,390	29,973		29,973
Other	4,816		4,816	933		933
	32,206		32,206	30,906		30,906
Southern Europe	5,931		5,931	5,562		5,562
UK	700	34,925	35,625	490	35,024	35,514
Other	2,715		2,715	3,792		3,792

	41,552	34,925	76,477	40,750	35,024	75,774

Revenues from external customers in all segments are derived from the sale of a range of pharmaceutical products designed for the immunological treatment of the allergic condition.

Other revenues include licensee and distributor sales and royalties through several world-wide markets including Czech and Slovak Republics, Canada and South Korea.

Inter-segment revenues represent sales of product from the UK to the operating subsidiaries. The price is set on an arms-length basis which is eliminated on consolidation

The CODM also reviews revenue by segment on a constant currency basis to provide relevant year on year comparisons.

The following revenue table is based on a constant currency rate of € 1.20: £1.00 which was the rate used in the 2011 budget.

	Revenue from External Customers	Revenue from External Customers
	2011	2010
	£'000	£'000

Central Europe
Germany	26,783	28,409
Other	4,855	1,816
	31,638	30,225
Southern Europe	5,689	5,172
UK	700	490
Other	2,638	2,965

	40,665	38,852

Depreciation and amortisation by segment

	2011	2010
	£'000	£'000

Central Europe	74	58
Southern Europe	93	99
UK	1,531	1,270

	1,698	1,427

EBITDA by segment

	2011	2010
Allocated EBITDA	£'000	£'000

Central Europe	363	521
Southern Europe	(189)	313
UK	1,639	2,049
Allocated EBITDA	1,813	2,883
Depreciation and amortisation	(1,698)	(1,427)
Operating profit	115	1,456
Finance income	2	9
Finance expense	(2,430)	(1,581)

Loss before tax	(2,313)	(116)

Total assets by segment

	2011	2010
	£'000	£'000

Central Europe	9,849	6,538
Southern Europe	3,823	3,255
UK	33,436	34,810
	47,108	44,603
Inter-Segment Assets	(1,835)	(1,620)
Inter-Segment Investments	(14,652)	(13,868)

Total Assets per Balance Sheet	30,621	29,115

Total liabilities by segment

	2011	2010
	£'000	£'000

Central Europe	(7,836)	(5,633)
Southern Europe	(1,646)	(1,289)
UK	(20,835)	(19,927)
	(30,317)	(26,849)
Inter-Segment Liabilities	1,835	1,620

Total Liabilities per Balance Sheet	(28,482)	(25,229)

4. FINANCE EXPENSE

	2011	2010
	£'000	£'000

Interest on borrowing facility	1,342	1,580
Change in fair value of financial derivative instrument	(454)	(289)
Bank interest	-	6
Employee defined benefit scheme interest expense	196	193
Other interest and charges	1	9
	1,085	1,499
Retranslation loss on Euro denominated borrowing facilities	1,345	82

	2,430	1,581

The revaluation loss represents the translation difference on the Group's Euro based borrowing facility caused by the movement of the Euro against Sterling throughout the year.

5. (LOSS) / EARNINGS PER SHARE

	2011	2010
	£'000	£'000

(Loss) / profit after tax attributable to equity shareholders	(2,662)	586

	Shares	Shares
	'000	'000

Issued ordinary shares at start of the period	310,757	82,367
Ordinary shares issued in the period	15	228,390
Issued ordinary shares at end of the period	310,772	310,757

Weighted average number of shares in issue for the period	310,759	293,143
Weighted average number of shares for diluted earnings per share	323,354	305,581

Basic (loss) / earnings per share (pence)	(0.86p)	0.20p
Diluted (loss) / earnings per share (pence)	(0.86p)	0.19p

The diluted loss per share in the current year does not differ from the basic loss per share as the exercise of share options would have the effect of reducing the loss per share and is therefore not dilutive under the terms of IAS 33.

6. BORROWINGS

	2011	2010
	£'000	£'000
Due within one year
Facility borrowing	2,793	891
Short term loans	-	218
	2,793	1,109

Due after more than one year
Facility borrowing	12,361	10,596

The facility borrowing is denominated in Euros and provided by Royal Bank of Scotland plc. The interest on the loan is a floating rate of Euribor plus a variable margin. The loan is secured in favour of The Royal Bank of Scotland plc by means of debentures granted by the Company and it's principal subsidiaries, an Intellectual Property Rights Agreement with Bencard Allergie GmbH and share pledge agreements with Bencard Allergie GmbH, Allergy Therapeutics Italia s.r.l. and Allergy Therapeutics Iberica S.L.

7. ACQUISITIONS

As part of it's strategy to strengthen its sales base outside Germany, on 1 July 2010, Allergy Therapeutics plc acquired 100% of the issued share capital of Teomed AG. Teomed was established in 1989 and specialises in the field of allergy and is the distributor for the Company's products and other company's products in the Swiss market.

The total consideration was CHF1,200,000 (£740,000) and comprised an initial cash payment of CHF800,000 (£494,000) on signing, and a deferred payment of CHF400,000 (£246,000), which was paid into an escrow account and paid out twelve months after the date of completion. The deferred consideration was contingent on the basis that existing distributor agreements continued for a period of at least one year from the acquisition date.

The allocation of the purchase price to the assets and liabilities of Teomed AG at the acquisition date was as follows:

	Pre- acquisition carrying amount £'000	Adjustment to fair value £'000	Recognised at acquisition date £'000
Property, plant and equipment	15	-	15
Intangible assets	-	884	884
Total non-current assets	15	884	899
Trade and other receivables	217	(10)	207
Inventories	133	-	133
Cash and cash equivalents	3	-	3
Total Assets	368	874	1,242
Trade and other payables	(139)	-	(139)
Deferred taxation liability	-	(177)	(177)
Net identifiable assets and liabilities	229	697	926
Gain on bargain purchase			(186)
Cost of acquisition			740

Acquisition costs incurred amounted to £120,000 and were expensed in the year ended 30 June 2010. These were shown under administration costs within the consolidated income statement in that year.

The adjustment to fair value on trade and other receivables related to trade debtors which existed at the acquisition date.

The acquisition gave rise to a gain on bargain purchase primarily due to the fair valuation of the existing distribution agreements exceeding the consideration paid. These intangible assets represent the present value of the future cashflows expected to arise from the agreements. They were not recognised on the balance sheet of the acquired company. The gain has been included in Other Income in the Group's consolidated income statement in the year ending 30 June 2011.

The pre-existing distributor agreement between the Group and Teomed AG had expired prior to the acquisition taking place.

The acquisition of Teomed AG took place on 1 July 2010 and as a consequence traded for the full year as a member of the Group. It contributed £2.1m in revenue and £0.1m of the Group's operating profit.