Vectura’s (VEC) annual results provide plenty of ammunition for both bulls and bears. On the plus side, underlying revenues – after adjusting for the 2016 merger with peer Skyepharma – rose 4 per cent to £131m, but throw in non-recurring milestone payments for partnered drug programmes, and the group’s pro-forma revenue dropped to £184m. Meanwhile, a non-cash impairment of £110m widened Vectura’s operating loss position. But strip that (and the non-recurring revenues) out and adjusted cash profit rose to £10m thanks to significant cost savings from merger synergies.
There is also plenty to like (and perhaps to despair) in the outlook. Vectura is unique in its ability to develop respiratory medicine devices in-house and has a strong portfolio of projects which it is looking to partner with generic drugs makers. The US market for cheaper, unbranded asthma medicines is relatively underserved. And yet, Vectura’s quest for generic domination means it must take on respiratory giants – no easy task. The group is already embroiled in a patent dispute with GlaxoSmithKline (GSK), while the delay in the approval of the drug it has developed with Hikma (HIK) demonstrates the difficulty in launching a generic respiratory product.
Prior to these results, broker Numis forecast adjusted cash profit of £27.7m and EPS of 2.5p in 2018, growing to £39.4m and 4p the following year.
| VECTURA (VEC) | ||||
| ORD PRICE: | 68.4p | MARKET VALUE: | £454m | |
| TOUCH: | 68.4-69.7p | 12-MONTH HIGH: | 167p | LOW: 68.4p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 87p* | NET CASH: | £104m | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015** | 58 | -6.2 | 4.0 | nil |
| 2016** | 72 | -1.9 | 1.2 | nil |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016ˆ | 127 | -40.1 | -5.3 | nil |
| 2017 | 148 | -102 | -12.6 | nil |
| % change | +17 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £497m, or 75p a share | ||||
| **Pre-merger Vectura numbers ˆNine-month figures | ||||
