Inhaled airways disease business Vectura (VEC) has impressed the market by delivering higher than expected recurring revenue in the nine months to 31 December. The £1bn-plus company reported a rough 75% jump in headline revenue from £72m to £126.5m, beating broker expectations.
But investors appear particularly impressed that the recurring element of that figure has soared from 59.6%, for the 12 months to 31 March 2016, to 80.1%. The company has changed its year end from March to December, explaining the timeframe discrepancy.
The share price has rallied 4% 163.7p, with confidence also bolstered by seven recently launched inhaled products.
'STRONG TOP LINE GROWTH'
N+1 Singer analyst Dr Jens Lindqvist anticipates continued strong top line growth. This will largely come from the US launches of specific chronic obstructive pulmonary disease drugs, including Seebri and Utibron. Both have stemmed from a collaboration agreement with Novartis, a collaboration deal renewed last year.
Dr Lindqvist is also hopeful over prospects for VR315, the generic asthma treatment that is based on the now off-patent drug Advair owned by GlaxoSmithKline (GSK). Vectura's VR315 is being developed alongside Hikma Pharmaceuticals (HIK).
FDA approval in the US for VR315 could come in May.
Stefan Hamill, an analyst at broker Numis, is also optimistic about Vectura and its shares. He highlights the ‘transformative effect’ of the company's £441m all-share merger with peer SkyePharma announced in March 2016.
‘SkyePharma provides near-term cash generation to fund the strategic evolution of the business and Vectura the pipeline to drive the next legs of growth,’ he says. Hamill currently has a 225p share price target on the stock, implying around 37% upside.
