Skyepharma Share Discussion Threads

[soundbuy] 08/4/2016 08:17

Good news for them, good news for us :)

[sikhthetech] 08/4/2016 08:16

The Vec news ANDA and milestone payment is good news for them...the share price has moved up sharply...

[soundbuy] 06/4/2016 08:41

'Hopefully, this would have led to the share price rising well above £5'

Only takes a VEC rise to 180p (ish) to achieve the £5 mark - fair mkt conditions and bit of a tailwind over the next couple of months....

Wonder what certain funds which have dual holdings in SKP and VEC will do?
Greater weighting in the FTSE250 could be interesting too...

[alexchry] 05/4/2016 14:15

GBCol, thanks for your views. I forgot to say that I, too, had been hoping for a cash bid later this year to take the selling decision out of my hands. I also increased my holding quite substantially at around 70p and, although not the low point, has given me a big profit to partially offset my losses. I will probably wait until the merger goes ahead and the dust settles before selling unless something significant happens in the meantime.

[gbcol] 05/4/2016 14:04

Alex I've been in this for around 15 years, was close to cutting my losses many times but held my nerve (or was it just inertia or blind optimism?). Topped up quite heavily when share price was at/near lows and took full advantage of the rights offer a couple of years back. So sitting on a decent profit atm albeit I am a bit nervous as SKP makes up a large percentage of my portfolio.

I would have liked a nice cash offer to take the decision out of my hands as I never seem to get it right. However that doesn't look likely now. Personally I have reduced by about 25% since the announcement and assuming the offer goes through, will take the 15% cash on offer to reduce my exposure further. That will still leave me with a fair investment in the merged enterprise which I expect I will let all or most of run for a year or two more and see what pans out - unless I need the funds elsewhere.

[alexchry] 05/4/2016 11:56

I have had my SKP shares for well over ten years and lost a considerable amount of money primarily because Flutiform didn't get USA approval which not only had a major impact on Flutiform but on other SKP developments. Had Flutiform been approved, I'm sure that I would have made a big profit. Earlier this year I was looking forward to some solid results and SKP announcing the success of the COPD trial and the confirmation of the new contract with Mundipharma. Hopefully, this would have led to the share price rising well above £5 at which time I would have cashed in most of my holding. I would still have lost some money but nothing too disastrous and a far cry from when SKP sunk to around 25p. The proposed merger between VEC and SKP has now muddied the waters. I have listened to the audio and read opinions in the press and it does seem that the merger makes sense. However, it seems a bit like groundhog day as VEC's great white hope is being put forward for approval in the USA, result due in about a year assuming that their application is approved. I'm not sure whether to cash in now before the verdict or wait in the hope of a major boost to the share price and hopefully a break even on my original investment. Any thoughts or advice welcome.

[fhmktg] 29/3/2016 10:49

Good share price movement for both SKP and VEC- either the logic for the deal has prompted interest or I wonder if there could be a third party who might fancy
taking both over?

[soundbuy] 24/3/2016 12:09

H/T FT AV

Numis

The union of Vectura and Skyepharma is one of the most complementary mergers
in the UK healthcare sector. It will create a £1bn+ FTSE250 UK respiratory champion
with strong, globally competitive technologies and capabilities across the entire
spectrum of dry powder, smart nebuliser and now metered dose inhalers, making
it the partner of choice in targeting the airways and allowing it to address 60%
more of the $35bn global respiratory market than Vectura did on its own. We see
the merger as a strategically and financially logical step-up for Vectura, with the
combined company offering critical mass and attractive growth at a good price. We
re-introduce our Buy recommendation with a 12-month target of 264p.


● In this 30-page note, we look at Skyepharma in some detail, focusing on Flutiform in
particular. We see the prospect of it becoming a c.$500m drug as realistic, offering
Vectura shareholders a growing, lower risk cash flow to diversify its higher risk
prospects (VR315 and wholly owned FAVOLIR / SCIPE assets).



● The ongoing roll-out of Flutiform is set to transform the P&L with revenues and
underlying EBITDA set to approximately double and then grow at 14% and 20% CAGR
respectively to end FY2021. EPS CAGR is higher, at 33%.
● We see EPS accretion of 24% in year 1 (FY2017, 7% ROI), growing to c.60% over
years 2-3 (FY2018-2019, double digit ROI), then falling to single digits as VR315
royalties come through and are spread over a higher share count.
● The deal washes its face on our risk-adjusted SOTP analysis (£470m vs £460m
consideration and estimated costs).
● Our risk adjusted SOTP value is 14% diluted from our previous 271p target. The
potential for platform synergies are not captured in this approach, which to date has
attributed no terminal value to the assets.
● Skyepharma will bring in significant near-term cash-flows to give management a
multitude of options to make the leap to self-commercialisation and build lasting
sustainable enterprise value. The time feels right to switch to a multiple-based
valuation.



● We see the increased size, liquidity and FTSE250 listing increasing awareness of
Vectura's steep forecast trajectory. A rating relative to BTG feels appropriate. Applying
a P/E in line with BTG of 24.7x (vs 29% risked EPS CAGR) our risked FY2020 EPS of
16.8p (fully taxed) and discounting back, we see a multiples based valuation of 294p.
We blend this with our SOTP of 234p to derive our target price of 264p, reflecting the
need to complete the transition to self commercialisation.
● On our initial projected consolidated EPS forecasts, Vectura's P/E drops to single digits
by year 3 (FY2019), now driven mostly by Flutiform: a strong buy signal in our view.



RBC Cap Mkts.


Strategic rationale: Strategically, we see the deal enhancing Vectura’s capabilities (oral, pMDI and commercial manufacturing) but think the financial rationale is the main motive for the combination. Vectura has a larger pipeline but its partnered assets have only recently launched and its financial profile still less developed than SKP’s, which has a smaller pipeline but with key assets launched and delivering profit growth (FY15A EBITDA margin of 37.5%). Combined, we see the two offering a healthy pipeline of opportunities with a strong financial profile.

Turbo charged financials: We choose not to update our forecasts (or valuation) until completion of the deal and instead provide a view on the combination below and within the note. The New Co will have an implied Mcap of £1.1bn and offer a revenue, EBITDA and EPS 3-year CAGR (FY17E-20E) of 31.7%, 41.3% and 32.1% respectively with a FCF yield of c10%. More importantly, the Group will become attactive on conventional multiple metrics, PE of 12.6x FY18E EPS (March YE) given the earnings ramp delivered by SKP.

Valuation mixed: We think Vectura have paid a fair but full price for SKP which, when executed alongside recent share price weakness has magnified the potential dilution. That said, we acknowledge that acquisition targets that fit well rarely coincide with perfect market conditions. Our conventional valuation for Vectura (SoTP; DCF and rNPV) suggests fair value of New Co at c190p (down from 206p) once the deal completes. However, we think investors should focus on the New Co financial profile which shows the shares trading on an implied EV/EBITDA of sub 10x by FY18E and 12.6x FY18E EPS. Considering upcoming newsflow (VR315 in particular) alongside growth and cash generation metrics we believe a re-rating likely from these low levels given the growth on offer.



Valuation:

Given the risk associated with assets not yet approved by regulators or still in their launch phase we utilise a SoTP model; for partnered launched assets we utilise NPV analysis with a WACC rate of 7% (Vectura is net cash) and no terminal value beyond Vectura’s patent protection. For partnered pipeline assets we use risk-adjusted NPVs with a discount rate of 10%, standard industry associated risk adjustments and no terminal value beyond Vectura’s patent protection on the products. For wholly owned pipeline assets we also use a rNPV (again a discount rate of 10% and standard risk adjustments) but apply a terminal with a growth rate of -2.5%. This provides our price target of 205p and our Outperform rating, although near term newsflow on VR315 in the US and on both Utibron & Seebri assets (also US) may drive our valuation towards 230p. We have not updated our forecasts or valuation for the SKP merger, but provide sensitivity analysis to our forecasts and valuation within.

Price target impediments:

We see two key impediments to our price target and rating:

1. VR315 – The launch of VR315 in the US is arguably the most important launch from Vectura’s pipeline over the coming months. A generic of Advair (aka Seretide) we anticipate the product being directly substitutable and, with only one competitor (Mylan) in the short term we have modelled only partial price erosion. If this launch is delayed then this would erode an estimated c7p for each 6 month delay and we see downside risk as capped at c.50p to our valuation if the product fails to launch altogether.
2. Utibron & Seebri – Whilst we believe Novartis is unlikely to shelve these assets in the US, it could find a commercial partner given the cost of launching and as the market becomes more competitive. We see downside risk of c.20p to our valuation if the assets are not launched in the US.

[soundbuy] 24/3/2016 11:46

H/T Rivaldo VEC BB



Numis Securities gave shares of Vectura Group PLC a price target of 264p indicating a potential increase of 64.08% from Vectura Group PLC’s current price of 160.90p.

[rogerrail] 24/3/2016 11:43

Mundipharma have been very silent on the merger, unless anyone can enlighten us, I'm sure that they cant be too happy about the tie-up with a major competitor to flutiform.

[sikhthetech] 24/3/2016 10:10

After all this time, I'm still holding and hoping for all cash counter offer...
SKP have now reached a firm footing and can do well on it's own... Looking at Vec, I can see rationale in the merger, especially from VEC side...
They both have 'blockbuster' asthma drugs...
After the merger, will they still have the two???

[soundbuy] 24/3/2016 07:59

H/T rivaldo VEC BB



"Small cap biotech Skyepharma was up 5.2 per cent or 22.25p to 445.75p after analysts at RBC Capital Markets reacted favourably to its proposed merger with fellow respiratory specialist group Vectura.

'Strategically, we see the deal enhancing Vectura’s capabilities but think financial rationale is the main motive for the combination,’ said RBC’s Nick Keher. Vectura’s most promising treatment is a generic version of GlaxoSmithkline’s blockbuster asthma drug Advair, which may be approved next year."

[wad collector] 23/3/2016 21:08

Having averaged about £33 I cannot get very excited about the recent rise ; a salutary lesson in not doing enough research and believing some equally ill-informed optimists.
I think the peak price was about £150 ( equivalent) so some have lost more. Well done more recent buyers , though it could have gone down with all hands.

[gbcol] 23/3/2016 16:38

Well my morning sale at 4.28 didn't look so good after the afternoon action but still got 3/4 of my holding left so hopefully a nice little counter offer sometime soon. Then I can leave the many years of ups and downs with skp on a high note.

[soundbuy] 23/3/2016 15:50

Well, arb opt gone for now....

[polaris] 23/3/2016 15:48

starts at 2pm - i wonder if we have a US based counter offer being prepared that just leaked?

[aceuk] 23/3/2016 15:47

Yes, but why today?

[soundbuy] 23/3/2016 15:46

Trading above the offer....just

[soundbuy] 23/3/2016 14:33

....and about where I reckon we'd have been on results sans 'merger' news....

[soundbuy] 23/3/2016 14:26

Discount disappearing.........

[gbcol] 18/3/2016 16:58

Took a few off the table post results/RNS as my average price is about £2 and skp makes up a large chunk of my portfolio but still got 80% of holding left. Was hoping they would get taken out for a lot more but will probably let rest of holding ride for a while and see what happens.

When the results were delayed on wed I was a bit worried so good to take a bit of profit, never been very good at that bit of investing! Fairly good week overall though I suppose.

[dasw] 18/3/2016 16:23

seems plenty of time for other suitors to appear

[alexchry] 18/3/2016 16:16

Scheme arrangement in third quarter.

[pooroldboy55] 18/3/2016 16:06

Was thinking the same

[robleetoon] 18/3/2016 15:41

Excuse my ignorance but is this a done deal and if so what sort of timescale are we looking at as there is no mention of this in the RNS.