Vectura 2017 Interim Results

Published: Sep 06, 2017

Vectura reports strong growth of recurring revenues, substantially enhancing revenue mix and underlying profitability

Chippenham, UK – 6 September 2017: Vectura Group plc (LSE: VEC) (“Vectura” or “the Group”), an industry-leading device and formulation business for inhaled airways products, today announces its unaudited interim results for the six months ended 30 June 2017.

Financial Highlights

Comparison of the reported results to the reported prior period is impacted by significant prior period milestones and other non-recurring revenue[1]. Accordingly, additional financial information based on recurring revenue[1] is provided to support assessment of underlying performance.

 

6 months ended

30 June 2017

6 months  ended

30 September 2016[1]

Change

Revenue

£78.8m

£73.9m

6.6%

Recurring revenue[1]

£71.0m

£56.3m

26.1%

Recurring revenue[1]% of total revenue

90.1%

76.2%

+13.9 ppts

 

 

 

 

Operating loss

(£41.3m)

(£24.1m)

(71.4%)

Adjusted EBITDA[1]

£18.9m

£21.5m

(12.1%)

Adjusted EBITDA based on recurring revenue[1]

£11.1m

£3.9m

184.6%

 

 

 

 

Basic EPS

(5.6p)

(3.2p)

(75.0%)

Basic adjusted EBITDA per share[1]

2.8p

3.7p

(24.3%)

  • Revenue up 6.6% to £78.8 million (six months ended 30 September 2016: £73.9 million)
    • Driven by continued momentum of in-market sales of marketed products, resulting in recurring revenue[1]  up 26.1%  to £71.0 million (six months ended 30 September 2016: £56.3 million)
      • In-market net sales of the eight key inhaled products for the rolling twelve months ended 30 June 2017 grew by 54.1% to over $2.3 billion[2]
    • Non-recurring revenue[1] of £7.8 million down from £17.6 million in the prior period due to lower milestones
    • Revenue mix substantially improved with 90.1% coming from recurring sources, an increase of 13.9 percentage points (six months ended 30 September 2016: 76.2%)
  • Adjusted EBITDA based on recurring revenue[1], which measures underlying profitability excluding the impact of milestones and other non-recurring revenue, grew 184.6% to £11.1 million (six months to 30 September 2016: £3.9 million)
  • Cash of £90.5 million at 30 June 2017 (31 December 2016: £92.5 million) reflects £4.9 million outflows for prior year tax (nine months ended 31 December 2016: £2.6 million outflows). Full year cash will benefit from the receipt post-period of £4.1 million of royalties and the $5.0 million signing payment from Sandoz
  • The Board continues to expect higher overall like-for-like recurring revenue[1] compared to the 2016 full year proforma[1] level.  Within total recurring revenue, product supply and device sales are likely to be in line with the 2016 full year proforma, due to an element of customer destocking in the flutiform® supply chain. A detailed review of priorities for R&D programmes in 2017 has been undertaken and expenditure for the full year is now expected to be lower, at £60 million - £70 million, compared to the previous guidance range of £65 million - £75 million. The impact of these changes is expected to be broadly neutral at an earnings level.

Operational highlights

Significant growth across eight key in-market inhaled products

  • Further expansion of demand for flutiform® with growth of product supply volumes in the period, a key capacity expansion initiative going live, continued roll-out in Asia Pacific and Latin America, and commencement of Phase III asthma study recruitment in China
  • Continued growth from Ultibro® Breezhaler® with net sales reported by Novartis up 10% in the period on a constant currency basis, fuelled by the positive FLAME study results and the recent changes to GOLD guidelines

Progress across our novel partnered pipeline

  • Validation of Vectura’s FOX® handheld smart nebuliser device with first commercial launches of BreelibTM in the EU by Vectura’s partner Bayer (VR876)
  • Continued progress of Ablynx’s Phase IIb study for RSV programme ALX-0171 (VR465) in hospitalised infants. Top line results are expected in H2 2018
  • Post-period in August, Vectura announced an exclusive global agreement was signed with Dynavax for the clinical application of Vectura’s proprietary smart nebuliser technology to deliver Dynavax’s investigational immunotherapeutic agent to lung cancer patients (VR347)

Developments across our generics pipeline

  • In May, the US Food and Drug Administration (“FDA”) issued a complete response letter (“CRL”) in relation to Vectura’s partner, Hikma’s, abbreviated new drug application (“ANDA”) for a generic version of GlaxoSmithKline's Advair Diskus® (fluticasone propionate and salmeterol inhalation powder) (VR315 US). Since the CRL, Vectura has supported Hikma in a constructive dialogue with the FDA and a number of the questions raised have now been clarified and resolved. Vectura expects to be able to confirm the regulatory timetable before the end of 2017
    • Partnering of the first of our new generic programmes, extending our established relationship with Sandoz through an exclusive license and development agreement for a generic of a major inhaled combination therapy for asthma and chronic obstructive pulmonary disease (“COPD”) in the US (VR2081) utilising a pressurised metered dose inhaler ("pMDI")
    • Post-period, Vectura today announced a major new tiotropium bromide dry powder inhaler (“DPI”) development programme (VR410) for COPD, accelerated through the licensing of technology from Pulmatrix.  Following the announcement of VR2081 with Sandoz, this is the second partnering deal from the new generics programmes that were announced post-merger  

Continued development of our wholly-owned pipeline

  • Phase III study for VR475 EU (nebulised budesonide for treatment of severe uncontrolled asthma in adults) is progressing well and, post-period in August, patient recruitment was completed earlier than previously expected. This study is expected to complete in H2 2018
  • Phase I study in adults of VR647 US (nebulised budesonide for treatment of paediatric asthma) has been successfully completed with Phase II study in children planned to start in Q4 2017

Synergy realisation making excellent progress

  • Substantial progress has been made with the merger integration. The new organisation structure is in place and all priority integration initiatives have completed. In line with the Board’s expectations, the Group remains on track to deliver the original £10 million target annual cost synergies by 2018 with the majority of this being realised in 2017
  • Further annual non-headcount cost synergy opportunities of £1 million - £2 million from 2018 have been identified and realisation initiatives are in progress

James Ward-Lilley, Chief Executive Officer of Vectura:

This is a robust set of results in line with Board expectations for the full year reflecting the increasing contribution from our recurring revenues alongside effective cost and synergy management. We continue to make significant headway with both our pipeline and business development. There is a productive dialogue and progress being made with the FDA following receipt of the major CRL for our VR315 Advair generic in the US, concluding a number of open questions. Along with our partner Hikma, we remain confident of the approvability of the product.

“The Group continues to be uniquely positioned as a leading respiratory airways device and formulation specialist with a proven track record reflected in our broad offering of growing in-market revenues and multiple pipeline and further partnering opportunities. This provides the basis for a strong outlook for the remainder of the year and beyond with multiple opportunities to create substantial shareholder value.” 

Analyst briefing

James Ward-Lilley, Chief Executive Officer, and Andrew Derodra, Chief Financial Officer, will present the Interim Results for analysts at 9.30am to 10.30am BST on 6 September 2017. The presentation will be held at the offices of Numis Securities Ltd., 10 Paternoster Square, London, EC4M 7LT. There will be a simultaneous live conference call. Dial-in details are:

Participant local dial-in: 

+44(0)20 3427 1906

Participant free phone dial-in: 

0800 279 4992

Participant code:

5798305

 

A live webcast of the meeting, with the presentation slides including proforma financial information, will be available on Vectura’s website: http://www.vectura.com/investors/presentations-webcasts/  

- Ends -

Enquiries

Vectura Group plc

+44 (0)1249 667 700

Andrew Derodra – Chief Financial Officer

Fleur Wood –  Director Communications

Elizabeth Knowles – Director Investor Relations and Analysis

 

 

 

 

 

Consilium Strategic Communications

+44 (0)20 3709 5700

Mary-Jane Elliott / Sue Stuart / Jessica Hodgson

 vectura@consilium-comms.com

     

About Vectura

Vectura, a FTSE250 company listed on the London Stock Exchange (LSE: VEC), is an industry-leading device and formulation business for inhaled airways products offering a uniquely integrated inhaled drug delivery platform.  With our extensive range of device and formulation technologies, integrated capabilities and collaborations, we are a leader in the development of inhalation products, increasing our ability to help patients suffering from respiratory diseases. 

Vectura has eight inhaled, four non-inhaled and ten oral products marketed by partners with growing global royalty streams.  The group has a diverse portfolio of drugs in clinical development, including a number of novel and generic programmes which are partnered with several global pharmaceutical and biotechnology companies including Hikma, Novartis, Sandoz, Mundipharma, Kyorin, Baxter, GSK, UCB, Ablynx, Grifols, Bayer, Chiesi, Almirall, Janssen, Dynavax and Tianjin KingYork along with two wholly owned nebulised development programmes.

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