Investec resumes coverage on Vectura at 'buy'

Investec resumed coverage on Vectura at ‘buy’ with a 200p price target following completion of the SkyePharma deal.

“In our view, the benefits from a broader royalty base, improved cash flows, as well as an enhanced competency set, are yet to be fully reflected in the share price,” it said.

The brokerage said the enlarged group, less dependent on progression of pipeline assets but still with exposure to product catalysts, can materially accrete value.

It argued there was a clear logic behind the combination of Vectura and Skye.

“With access to Skye’s assets (most notably Flutiform), Vectura’s near-term group earnings and cash flow are significantly improved. Broader device competencies, spanning the range of mass-market, inhaled device technologies, accompany royalty streams with greater diversity and strengthened customer lists.”

Investec said the capital markets day in December was likely to give improved visibility on management’s strategy for the combined group.

“We expect management to address strategic priorities for the enlarged group, with a discussion on the level of future Research & Development spend, the intent for non-respiratory assets, as well as plans related to in-house commercialisation of specific assets.”

Vectura and Skyepharma announced back in March that they had reached an agreement on the terms of an all-share merger which values Skyepharma at around £441m.

"Bringing together the two groups will create a stronger scaled business which has the ability to accelerate the delivery of both companies' strategic objectives and deliver greater revenues, providing broad access to the global inhaled respiratory market, which was worth $35bn in 2015," the companies said at the time.

At 1450 BST, Vectura shares were down 0.6% to 142.70p.