Vectura reports 'strong' operational performance in 2020

Inhaled medicines-focussed pharmaceutical company Vectura Group updated the market on its trading on Tuesday, saying it expected revenue and adjusted EBITDA for 2020 to be ahead of board expectations, following the fourth quarter approval of VR315 (US), or generic ‘Advair’, alongside Hikma.

The FTSE 250 company reported “strong” operational performance in 2020, underpinned by a “resilient” base business, with closing cash and cash equivalents of approximately £79m; following capital returns of about £16.4m made during the year.

It said there had been no disruption to its product supply chain, despite the Covid-19 pandemic.

Vectura said it was executing on its strategy to become “the industry-leading” inhalation contract development and manufacturing organisation (CDMO), having established a new business development team with a presence on the east and west coasts of the United States (US), Europe and the UK.

It signed a total of 18 new CDMO deals during the year, delivering against a range of client needs across indications, with revenue of approximately £3m revenue recognised in the second half of 2020.

Vectura also reported progress across its co-development pipeline, with the December approval of VR315 (US) triggering milestones of $11m, while the approval of ‘Enerzair Breezhaler’ in Japan and Europe triggered milestones of $6.25m.

The board also noted that an appeal during the year upheld the damages and ongoing royalties awarded to Vectura totalling $200m, following a US jury verdict in patent litigation against GlaxoSmithKline.

Looking ahead, Vectura said that building on its positive momentum in 2020, it was expecting to see continued progression against its strategy, with CDMO revenues in 2021 expected to “more than triple” over 2020.

It said ‘flutiform’ product supply revenues had benefited from partner stock builds in both 2019 and 2020, driven by moves towards more conservative stock holding policies given supply chain uncertainties, including Brexit, and in the case of Japan a move from air to sea freight.

Those stock builds were not expected to recur in 2021, however, with partner demand forecasts indicating Vectura product supply revenue in the range of £75m to £80m.

From 2022 onwards, Vectura said its product supply volumes were expected to align more closely with underlying forecast growth in-market sales.

Following a strategic review of its operating footprint, the firm said a “phased reduction of activities” at the Muttenz site in Switzerland would begin in 2021.

That was expected to deliver a “modest benefit” to the operational cost base in 2021, with a £5m to £7m reduction in annual operating cost expected by the end of 2022.

Activities previously performed in Switzerland would be transitioned to the UK, with new CDMO contracts being delivered from there.

Reflecting the Group's transition towards a development services model and restructuring of its operational footprint, the group said it was expecting to incur exceptional cash costs in the low-single-digit millions of pounds in 2021.

“I am pleased to report that the business has performed well during 2020, trading ahead of board expectations following FDA approval in December of our generic Advair® programme, partnered with Hikma,” said chief executive officer Will Downie.

“The business has also proven resilient in the face of wider challenges posed by the coronavirus outbreak.

“We have continued to execute on our inhalation CDMO strategy, signing 18 deals during 2020, with revenue from this new business being recognised in the second half of the year.”

At 0854 GMT, shares in Vectura Group were down 0.19% at 123.57p.2 -