Vectura – IP Growth Portfolio

Posted 15th Sept 2020

Vectura (LON:VEC) hit a new low at 60p on the 17th Mar 2020. (lowest buy price 70p) - (I hold a long position)

Company History

I first became aware of Vectura (LON:VEC) Vectura when it agreed to buy rival SkyePharma £SKP for £441 million pounds in March 2016. The tie-up was intended to create a leading lung disease group with expertise across different inhaler technologies and a combined market value of more than 1 billion pounds. Vectura (LON:VEC) had an extensive IP portfolio but limited cashflow and by contrast, SkypePharma had a limited developing IP but it Flutiform product has started generating significant free cash flow with growing sales.

The combination of SkyePharma with its cashflow and Vectura (LON:VEC) with extensive developing IP looked like a world-beater. (At the time I thought Vectura (LON:VEC) had has been very shrewd have acquired SkyePharma with a growing free cash flow to fund its IP development).

The Company to Today

The company has started to generate significant free cash flow as it has refocused on CMDO (contract manufacturing and development organisation) and reduced R & D costs on its stand-alone IP. (IP without and Biotech/Pharma partner).

Near Term Catalysts for a re-rating

• EXPAREL® – injectable analgesic for post-operative pain relief, sales at $500M will trigger $32M milestone payment (2021)
• GSK Ellipta Vectura (LON:VEC) IP infringement case conclusion would require compensation to the tune of $200M (2021)
• Partnering with Hikma the VR315 Phase III approval for a Advair generic leading to milestone payments and teens % royalties (2H 2020)

A growth development IP portfolio

A growing IP portfolio with a credible partner at various phases of development. Additional 12 agreements signed in 1H 2020.

• Novartis QVM149(Asthma (EU, RoW) (LAMA/LABA/ICS)
• Grifois VR179 (Cystic Fibrosis, Global)
• Ventaleon VR739 (Severe Influenza, global)
• Janssen VR096 (Anti-inflammatory Asthma/COPD, Global)
• Mundipharma VR2076 (Asthma, Global)
• UCB VR942 (Uncontrolled Asthma, Inhaled Biologic Global)
• Ablynx VR465 (FOX device, RSV infection, Global)
• Aerami T. VR325 (FOX device)

Sales estimate FY2020 - 2025

Note : Revenue forecast determined by way of risk-adjusted weight average across all future revenues hence is inherently less stable.

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