RBC cautious about Vectura's success with asthma drug

The broker said that although upcoming events could push its target price to 150p - with sentiment potentially to 180p - its is cautious on success for Vectura and thinks that consensus forecast expectations have already priced in much of the upside.

Since the company’s merger with Skye, “Vectura has enhanced its capabilities as a development partner to peers but it has also provided the financial muscle to progress its own expansion as a specialist commercial player in the respiratory field”.

With this strategy still in its formative years, RBC sees investment in capabilities, commercialisation and research and development remaining high and likely to consume much of the free cash. It forecasts the business to generate from its key pipeline assets.

From the 10 May roll out of generic Advair (VR315) in the US, the broker expects it to add between £30-£50m per year in revenue for Vectura with a 50% chance of success. But when RBC modelled the outcome of this event, it found it difficult due to the multiple potential outcomes and lack of visibility on key data points.

Vectura is targeting three to five new generic deals and said theses deals “should each be additive to the investment case”.

The risks to the investment remains on potential delays or failure to the US roll-out of generic Advair from the price of competitor products and the number of other competitor launches.

Vectura could be the first to launch the drug after rival Mylan suffered a setback when it recently received a complete response letter from the US Food & Drug Administration for its generic version of GlaxoSmithKline's Advair Diskus, but believes that a “delay is more likely” from Vectura.

Shares in Vectura Group were down 3.02% to 138.30p at 0854 BST.