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Vectura upgrades on pause

Analysts are questioning whether the drug developer can sustain recent upgrade momentum in 2019
March 27, 2019

Vectura (VEC) shares were marked down on the release of these results after City analysts warned that despite a "solid" performance in 2018, there is only a limited chance of continued earnings upgrades this year. Last year, better-than-expected cash profits of £39m were the result of a disciplined approach to research and development (R&D) expenditure. Costs landed at the bottom of the £55m-£65m guided range, leading to higher gross margins. Meanwhile, a strong year-end cash position followed a 31 per cent surge in cash generated from operations.

IC TIP: Hold at 69.7p

But management has conceded that continued growth this year from its 'core' product portfolio – which includes respiratory products Flutiform and Ultibro – could be offset by a fall in sales of Exparel, as exclusivity patents expire on the pain relief product. That said, in November Vectura signed a new partnership with generics giant Hikma (HIK) to develop cheaper versions of GSK’s (GSK) Ellipta drug portfolio, which could include up to five different inhalers.

Broker Panmure Gordon is considering changing its forecasts, but previously expected pre-tax profits of £91.2m in 2019, giving EPS of 4.7p, moving up to £95.9m and 6.6p in 2020.

VECTURA (VEC)   
ORD PRICE:69.7pMARKET VALUE:£464m
TOUCH:69.5-70p12-MONTH HIGH:108pLOW: 66p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:74p*NET CASH:£108m
Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016**72.0-1.91.2nil
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2016^127-40.1-5.3nil
2017148-102-12.6nil
2018161-105-13.2nil
% change+8---
Ex-div:na   
Payment:na   
*Includes intangible assets of £383m, or 58p a share                                                                **Pre-merger Vectura numbers ^Nine-month figures