From earnings season to allergy season

May 30, 2024

Shelves of medicines in a pharmacy.

It’s springtime and, although most Global Alpha employees are close to putting Q1 earnings season behind them, some of us are getting ready to start dealing with allergy season. Trying to make the most of our situation, we tried to see if we could profit from this annual annoyance.

What’s the problem with allergies?

For most people who suffer from allergies, this only implies a runny nose and watery eyes, but it also impacts millions of people more significantly through sleepless nights, shortness of breath and asthma. A recent European survey found that 80% of respondents suffering from allergies mentioned the condition affecting their daily activities considerably. Additionally, untreated or poorly treated allergies can lead to serious health complications.

The ramifications of allergies are amplified by the fact that it affects children disproportionately, impacting sleep schedules and consequently school performance. Multiple studies have found that children who are allergic to pollen can see their grades drop an entire level if their condition strikes during exams. There is also a clear, although not properly explained, positive correlation between higher GDP per capita and the proportion of population with some form of allergy. This suggests that its effects on society are likely to get worse over time if nothing is done to address it.

Allergies as an investment opportunity

Given all this, it makes sense why allergy treatment is getting more attention and resources from pharmaceutical companies. The global allergy treatment market was $20.8 billion in 2022, with expectations to reach $38.9 billion in 2032. The Asia-Pacific region is expected to experience the fastest growth given its quickly growing middle class and increasing awareness of treatment options.

According to the WHO, allergies are now the fourth-largest pathological condition after cancer, AIDS and cardiovascular diseases. Over 500 million people globally have some form of allergy, with the majority self-treating with over-the-counter medicine without seeing a medical professional. This has driven massive investments in allergy treatments among virtually every major pharma company.

Curing allergies with a simple tablet?

In comes one of our holdings: ALK-Abello (ALKB DC). It is the world’s largest provider of allergy immunotherapy solutions with more than 35% market share. It provides its products in three different formats: injections, sublingual drops and tablets (the latest addition to the product line and largest opportunity). Most of its revenue is from Europe, with the rest coming more or less evenly from North America and APAC. Its market share in Japan is 97%, but adoption has yet to catchup to Europe standards.

Immunotherapy is one of the most exciting treatment methods for allergies, as it attempts to rebalance the immune system to avoid triggering the undesired reaction and thus provides a more permanent solution than alternatives. ALK’s products treat the five most common respiratory allergies (dust mites, grass, trees, ragweed, Japanese cedar), which together account for close to 80% of allergy cases in the world. The company differentiates itself from peers with its unique clinical data sets that not only assist in developing new products, but also help increase penetration by providing evidence-based insights to prospects and customers.

Where will the growth come from?

  • Obtaining full approvals for its tablet portfolio for young patients, especially the pediatric segment.
  • An ongoing trial for peanut allergy treatment opens the opportunity for a new business segment.
  • Increasing awareness of treatments for allergies in various geographies.
  • New partnerships for distribution.
Global Alpha Capital Management Ltd.
May 30th, 2024