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New-look Vectura impresses the market

Vectura announces its first annual results since completing its SkyePharma merger
March 21, 2017

Full-year results from respiratory specialist Vectura (VEC) aren't easy to digest. Not only did the group complete a significant merger with SkyePharma in 2016, it also changed its financial year-end. But like-for-like numbers suggest the picture is largely positive. Total group revenue in the nine months to December 2016 rose 9 per cent to £142m, although extra research and development costs relating to the original Vectura business sent group adjusted cash profits down 13 per cent to £43.4m.

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Vectura and SkyePharma both develop inhaled respiratory products for large pharma partners and make money from royalty and milestone payments when those products are sold. Combined, the group has a portfolio of seven products, which together made over $2bn of in-market sales in 2016 and generated 62 per cent of Vectura's total revenue in the reported period.

The remaining revenues are milestone payments from the drugs and devices being developed with partners. For example, clinical approval of an unbranded version of asthma drug Advair earned Vectura a $10m fee from its partner Hikma (HIK) in April.

Broker Numis expects double-digit cash profit growth from 2017 to 2020 as the full benefits and £10m annual savings from the merger come through. But FY2017 adjusted EPS is only expected to rise by 0.1p to 5.8p as exceptional costs remain.

VECTURA (VEC)

ORD PRICE:164.9pMARKET VALUE:£1.12bn
TOUCH:164.8-164.9p12-MONTH HIGH / LOW:179p123p
DIVIDEND YIELD:NilPE RATIO:na
NET ASSET VALUE:100p*NET CASH:£92.5m

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2014**36.5-4.81.5nil
2015**58.0-6.24.0nil
2016**72.0-1.91.2nil
9 months to DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016127-40.1-5.3nil
% change+76---

Ex-div: na

Payment: na

*Includes intangible assets of £620m, 91p a share

**Pre-merger Vectura numbers