Vectura Share Discussion Threads

[pooroldboy55] 25/11/2017 09:09

Yes the end of a very bad week can see this going only one way. And that's not up even with share buy back, in fact it may be the buy back pushing price down. Some one playing a game here did you see all the trades in sixties lots at 64 /67.

[dp1umb] 24/11/2017 17:18

Very poor finish this afternoon.

[polaris] 24/11/2017 12:14

No buyback so far this week. Just a matter of waiting for the FY figures and the outlook. i.e. steady as she goes with little likelihood of big moves for the next few months.

[diesel] 22/11/2017 17:13

It will be interesting to see if Numis were in the market this afternoon, something halted the slide at 15:15..

[dp1umb] 20/11/2017 17:18

HIK was oversold?

[popper joe] 20/11/2017 17:10

I'm sure if we were to hear some good news in that direction, then the shares would surge at least 3p!

[fhmktg] 20/11/2017 15:29

I hope so!

[cityfarmer] 20/11/2017 14:18

Interesting that HIK has taken off the last two trading days no news but wonder if there has been a leaking bucket on FDA resolution?

[cityfarmer] 20/11/2017 14:18

Interesting that HIK has taken off the last two trading days no news but wonder if there has been a leaking bucket on FDA resolution?

[polaris] 19/11/2017 12:45

Hi Diesel,

The following was the original announcement for the sale of the injectables division:


In that, it states that the royalties will continue as long as their is patent protection for the technology in the country of sale. For some reason, i had it in my mind it was 2019 for any milestone payments.

The original patent filing is here:


That shows the filing data in 1998 and the publication in 2000. However, a quick read shows that patent protection is typically 20 years from the filing date. The US information states this:

In the United States, for utility patents filed on or after June 8, 1995, the term of the patent is 20 years from the earliest filing date of the application on which the patent was granted and any prior U.S. or Patent Cooperation Treaty (PCT) applications from which the patent claims priority.

That suggests that patent protection for the depofoam technology is approaching end of protected life.

That does not mean that patent ends but it does mean that someone can look to develop a generic with the same technology, at least IMO.

Sales in the US seem to have stalled around the $280-300M level, although Pacira is working on several sNDAs, which have the potential to increase total sales.

I do not know the full details of the agreements when the injectables division was sold, but it is one to watch going forward. At sales of $300M p.a. then it is worth about $9M to VEC in recurring revenues, i.e. not a huge impact assuming continued growth of other products (5% of projected annual revenues for CY2017).

regards,

Paul

[diesel] 17/11/2017 23:01

Polaris, good post, re Exparel, as far as I'm aware the final milestone re sales of $500m is not time barred, not certain, but if so then this is a given albeit some years away.

[ianood] 17/11/2017 17:22

polaris - as ever many thanks for your thoughts they are much appreciated. It looks to me that this is going to take some time to turn. In the interim a hot bath and open a vein may be preferable! :)

[polaris] 17/11/2017 14:02

Hi all,

OK - now feel i am reasonably up to speed after reading the last two reports.

Major drivers in current products are the Breezhaler ($260m H1 2017 around 4% royalty), the Ellipta series (SKP agreement 716M GBP H1 2017 at about 1% royalty, capped at 9M GBP), Flutiform supply chain and royalty (hard to put exact numbers on the margin and royalty but they are healthy) and the around 3% royalty from Exparel. The good thing is that recurring revenues account for 90% of total revenues and so reasonably clarity going forward. Of course, there are other products out there but total contribution to revenues no more than 10%.

R&D seems pretty clear and there are a number of pipeline products and technologies that could be earnings drivers in the future. The FOX nebuliser could be one such driver and so the approval and launch of the Breelib device, which is a validation of the technology in a small market area, is actually quite important to leverage the technology elsewhere. One to watch.

In the pipeline my attention was drawn to VR2081 with Sandoz. The chemical entities are not disclosed but it is described as a generic of a well known combination therapy for asthma. Assuming this does not go the way of Hikma with VR315 then it is promising, although not likely to reach market for another 4-6 years so not a value driver for now. There are several other development projects that look to leverage the delivery technology. VEC needs more of that!

I would like to see Exparel submitted and approved for Europe and RoW. The final milestone is probably not going to be reached (annual net sales $500m) unless this happens quickly.

What is bad?
The GSK litigation wrt legacy VEC patents. That will cost about 13-14M GBP (based on current sales - might be more going forward but i don't know the details of the original agreement) in revenues p.a. until resolution, assuming it is in VEC favour. The trial date is set for mid December 2018!! Legal costs in H1 2017 were listed as $0.5M. For me, this is just the tier I pharma keeping its legal division with something to do. The costs (if they lose) are minor for a company of this type. However, fighting a battle with small pharma, even if you know you are going to lose, sharpens the minds of the legal team assigned (who you are paying anyway) ready for future litigation that may be worth $10s-100sM to GSK. You need to keep your best minds and the best way to keep them interested is to be fighting cases, keeping up to date with developments and looking for ways to subvert or get around patents. This is big business!

Ellipta series agreement - yes i am a broken record there. Likely to cost anything up to 10M GBP p.a. depending on total sales peak of the Ellipta series. Might also have a knock on effect on the lost earnings from the legacy VEC patents for the same series.

VR315 with Hikma. This is now unlikely to get approval before 2020 (best case scenario) and the benefit will reduce with time if other generics come to market. Pricing pressure and entry date will mean a lower return, despite the reasonable mid teens royalties that VEC could expect. The recent analyst reports reducing the carried value of this agreement seem fair to me.

Unknowns
What does anyone know about the Chinese Kinnovata JV? There is not much on the internet and the H1 report just lists another payment of 1.4M GBP but that the JV is assigned no value on the balance sheet going forward. Seems a little odd to me.

Overall
VEC need to leverage the delivery technology faster than they have to date. They have good technology but, as i mentioned yesterday, this is always a moving field and you cannot afford to get caught offside. The next several years are clear in terms of royalty drivers and so basic EBITDA will continue to grow, although not as fast as i would like. The writeoffs of goodwill and the amortisation of intangibles will mean big headline losses for several years. However, these do not affect the bottom line of the actual business, just distort the carried value on the balance sheet and assets.

With the VEC patents and Hikma approval, things would have looked very different as those two would have been worth at least 3-4p EPS at EBITDA level, probably more going forward.

I hope the enlarged entity can negotiate better deals with tier I pharma on licensing the technologies. It is well known that tier I pharmas are poor at developing their own delivery technologies for inhalation. Some of the early generation stuff is awful - most of this i know from ex AZN people who i encountered in Sweden, where a lot of the in-house was done. All those sites are closed now and they look to partner outside for future therapies.

regards,

Paul

[polaris] 17/11/2017 12:02

I agree with Diesel here. The company will only buy up what is available in the market without pushing the share price up. Yesterday that happened to be only 5k shares. They have 6 months to use the 15M GBP and this equates to 16-17M shares at current price. There is normally a clause in any buyback that it cannot be used to artificially control the share price By that they mean make it go up as, clearly, the buyback will have a bearing on share price falls, mopping up quite a lot of any shares that come to market. There are many examples where a buyback is in place and the share price falls at the end of the period as the buying pressure created by the buyback is released and the share price reacts to find the new buy/sell equilibrium level, which is lower.

As i have not been in here for some time i spent the morning catching up on the report 2016. I still need to read the 6 month report for 2017. That will get me reasonably back up to speed as a lot of the legacy SKP products i still have the knowledge tucked away in my head. Reading the 2016 report brought a lot of it back - e.g. the manufacturing plant in Lyon. I need to get more details on the VEC technology in currently sold and under development products.

The balance sheet is a mess with the intangibles and goodwill. That means a likely large loss will be reported again in 2017 due to amortisation, but i am only really interested in EBITDA to get an idea of operations.

More later.

regards,

Paul

[dp1umb] 17/11/2017 11:41

Diesel perversely at the moment it’s in the companies favour if the share price keeps falling.

[diesel] 17/11/2017 08:56

anyone understand the level of trading activity here?
Huge number of relatively small trades, most 'AT', is this the normal quick in out robot trading be it shorts or longs or a mixture. If so is this what Numismatic are tasked to disrupt, otherwise they would buy all the shares in one or two big tranches.
Might explain 5053 yesterday, no need to intervene more as the price went up.

[a0148009] 17/11/2017 08:09

Purchase of 5053 shares is that correct?? Ridiculous.

[a0148009] 16/11/2017 19:27

Paul - thanks for all that most helpful.

[popper joe] 16/11/2017 17:43

Thanks for your views Paul. Nice to know you are back in, if only for a short time.

[polaris] 16/11/2017 16:59

Hi All,

Been a while here. I bought a few around the 90p mark looking for some kind of short term bounce. The share buyback will probably help to set a bottom in the SP, at least while the selling pressure is soaked up by the buyback. I am willing to take that chance for a 10% return on share price (100% on margin).

Reasons why i am not staying longterm for now:

The litigation with partners isn't ideal. I always thought the Ellipta series deal was a poor one by SKP and that the potential value was far in excess of the 9M GBP capped sum for the chemical entities. I was certainly proved right on this. I even remember the day SKP was trashed due to GSK allegedly reporting slow initial sales of the ellipta series (SKP lost something like 20% of share price over the course of a few weeks). It was total garbage as i said at the time, an excuse to hammer the share price

Generic Advair for me is a red herring as, by the time anything is approved, the tier I pharmas will have moved many sufferers on to other treatments that are non-exchangeable. They are very good at protecting their space on these products.

GSK seem to be going forward in the inhalation arena with the partnership with Innoviva and that is not good for VEC. The triple therapy for COPD is one to watch as i expect similar products to appear in the asthma arena in the next 12-18 months.

I know a few people developing next generation inhalers (privately) and VEC may well be on the outside looking in if they are not careful. There are some very nice developments out there. Sadly, the developments i am aware of are small set-ups that are not listed, as they are looking to get patent protection first. That means you will find nothing on the internet. Getting patent protection is the first step in bringing these things to marketable status and the testing requirements (or should i say mishandling requirements to prove efficacy and safety of the device) are tough.

VEC still has Flutiform that has growing market share, where it is sold. The US still seems a closed market and the cost to get it approved is not worth it after all the historical issues SKP had with the FDA.

Outside of the inhalation arena then Exparel was always the driver for SKP revenues. I am not sure where that now stands in terms of patent protection. The Pacira assets were all SKP once upn a time as part of the injectibles division.

The combined VEC/SKP was meant to become a leader in devices for inhalation. So far i am not convinced.

The business is certainly worth more than the 600-odd million GBP but long term earnings visibility is an issue when multi-billion tier I pharma decides to play hardball on license agreements or decide not to launch developed products fully. SKP fell foul of that a long time ago with Paxil CR...also developed with GSK!

That is the game you play as a developer of technologies that must be licensed to big pharma.

regards,

Paul

[a1ord53] 16/11/2017 12:35

On 8 November JPMorgan Cazanove wrote :
US Generic Advair accounts for only 6% of our Vectura NPV, 11p per share. Arguably the Vectura share- price prior to today’s announcement included very little value for this project since the CRL earlier this year. That said, we expect significant share price underperformance today, with the market disappointed that the optionality around this asset has been pushed further out. On our forecasts the stock is now (89p) trading at almost 20% discount to our base business NPV (109p), with more than 70p of pipeline optionality coming for free.

Vectura
Updating for US generic Advair update, launch moved to early 2020, NPV derived PT trimmed 3% to 175p
June-18 PT lowered 3%/5p to 175p (180p), reflecting further US generic Advair delays, US Advair now only 4% of our NPV. Yesterday saw Vectura’s partner Hikma provide a disappointing update on US generic Advair, as described below. The negative update makes only a very modest impact on our Vectura NPV, though it does drive significant EPS downgrades in 2019-21e, and removes what could have been a positive catalyst that could have helped close some of the company’s very large NPV discount. At the current share-price (96p), the stock trades at an 11% discount to our base business valuation (108p) and a c.45% discount to our c.175p NPV derived PT, which includes risk-adjusted pipeline. Though we believe patience will be required for much of the valuation gap to close, we continue to see current levels representing an attractive entry point for longer-term investors, buying into the diversified set of on-market and pipeline respiratory cashflows.

[fhmktg] 16/11/2017 11:51

I presume that today's approval of Treligy Ellipta by GSK has no impact on VEC.Is the Ellipta inhaler a GSK delivery device?

[pooroldboy55] 16/11/2017 09:27

Wish I could help but like you completely in the dark. cheers POB

[a1ord53] 16/11/2017 09:06

I am being asking on this board about valuations of Numis,Peel Hunt and JPMorgan Cazanove and nobody answers. What’s happened with valuation with SKP and Vectura profit generating products ?
Suddenly 2 companies combined lost all what they had - Advair generic market value looks like 1 £ per share ? Its absolutely nonsence .
Thanks all who can share this information, views and opinions.

[fhmktg] 16/11/2017 08:42

Sorry, got my calendar wrong.Still believe it will be boring financial data which will determine share price until one or more of the outstanding regulatory and legal issues are resolved.