Vectura's solid interims turn focus further forward

Vectura kept guidance for the full year unchanged as the inhaled medicines specialist reported robust revenue and said it has identified pipeline projects with potential annual sales of over $250m.

For the six months ended 30 June, the company generated revenues of £79.8m, up 1.4% on the same period a year ago. Sales from inhaled products rose 7% to £64.7m, with flutiform up 3% despite a competitive market, mostly from supply chain activities compared to royalties.

For the full year the outlook was reiterated, with Vectura stating that it looks forward to “strong reported performance in H2 2018” and that it maintains both its 2018 revenue growth expectations and guidance for 2018 R&D costs of £55-65m.

A step up in phasing of R&D costs in the second half is anticipated, principally related to VR475 and VR647. VR647, a nebulised budesonide for paediatric asthma, is ready to move into Phase III trials with headline results expected in the fourth quarter.

On the joint plan with Hikma Pharmaceuticals to develop a generic version of Advair, Vectura confirmed that its partner plans to submit data to the US regulator next year and anticipates a launch in 2020.

Looking further forward, management has identified and "is progressing" a number of new pipeline products targeting niche or orphan disease segments, with individual peak year sales potential said to be ">$250m" that "could" come to market within eight years and have potential for partnering within a three to five year period.

These projects are targeting the inhaled management of a cardiopulmonary vascular disease, cystic fibrosis and infection in post-transplant immunocompromised patients.

Vectura said it was "creating headroom within its existing R&D budget to cover the initial development of these therapies and the board anticipates these new programmes will not impact current guidance for annual R&D expenditure".

Vectura received £8.5m from Novartis’ Ultibro and Seebri sales, which were flat due to previously reported de-stocking, but Novartis has noted acceleration in sales in the second quarter. There was another £8.8m of royalties from GSK’s Ellipta portfolio, almost reaching the £9m annual cap.

Royalties from GSK are protected by granted patents with the earliest expiry for one of the patents in a major market being in November 2019. Vectura's US legal proceedings against GSK over the FTSE 100 group's decision to not extend the terms of a legacy agreement are scheduled for a jury trial in December, with the equivalent UK outcome after GSK challenged Vectura’s UK patents expected in the first quarter of next year.

Gross profits increased 4.4% to £52.6m and after R&D expenditure was cut 19% to £25.3m operating losses decreased 27% to £30.2m.