Final Results

Vectura Group plc - Preliminary Results

- Strong financial performance with multiple catalysts ahead -

Chippenham, UK - 26 April 2012: Vectura Group plc (LSE: VEC) ("Vectura") which specialises in developing inhaled therapies, principally for the treatment of respiratory diseases, today announces its preliminary results for the year ended 31 March 2012.

Financial highlights

·; Revenues ahead of expectations at £33m (2010/11: £42.9m)

·; Loss before tax in line with previous year at £13.2m (2010/11 £13.3m)

·; Loss after tax reduced by 50% to £4.4m (2010/11: £8.8m)

·; Cash and cash equivalents increased by £1.1m with cash of £75.5m at 31 March 2012

Operational Highlights

·; NVA237 (COPD) first launch anticipated in 2012

o European Marketing Authorisation Application (MAA) filed in September 2011, triggering a $5m milestone receipt from Novartis

o EU decision on NVA237 expected from mid-2012

o New Drug Application (NDA) for Japan filed in November 2011

o Phase III data presented in September 2011 at the European Respiratory Symposium (ERS) demonstrated improvements compared with placebo

§ Additional Phase III data expected in H1 2012

o US NDA filing expected early in 2014

·; QVA149 (COPD) on track for European filing in 2012 and launch in 2013

o Novartis reported headline Phase III data from the first four studies in April 2012 which showed that QVA149 met all primary endpoints:

§ ILLUMINATE - superior lung function (measured by FEV1 AUC0-12h with a p value ® (fluticasone 500mcg / salmeterol 50mcg) in patients with moderate to severe COPD

§ SHINE - superiority in trough FEV1 (p. In addition, QVA149 showed superiority in trough FEV1 (p

§ BRIGHT - patients experienced significantly better exercise endurance versus placebo (p=0.006)

§ ENLIGHTEN - QVA149 was well tolerated with a safety and tolerability profile similar to placebo

o Additional Phase III data to be published at a conference in H2 2012

o US NDA filing is expected at the end of 2014

·; VR315 (asthma/COPD) - Progress continues in all territories with two new partnerships secured

o Agreement signed with Sandoz in August 2011 for Rest of World (RoW) development; €2.5m received

o Development progresses in both EU and RoW with Sandoz

o Agreement signed with the US division of an international pharmaceutical company for development and commercialisation in the US; $10m generated in August 2011

o A further $2m received in March 2012 from our US partner relating to development progress

·; VR632 (asthma/COPD) - Development progresses in Europe with Sandoz

o €0.4m milestone received in March 2012

Dr Chris Blackwell, Chief Executive of Vectura:

"Vectura has delivered another set of robust results, preserving a strong balance sheet through a combination of existing royalty streams and disciplined investment in R&D. During the year we delivered two new deals around VR315; securing a new US partner and extending our existing relationship with Sandoz (our European partner) to cover Rest of World territories. We also announced positive Phase III data from the combination product, QVA149 in April of this year and anticipate a number of major catalysts in 2012, including the EU filing of this product as well as the expected launch of NVA237 in Europe. As these programmes mature, we anticipate the resultant milestones and royalties will transform our revenue streams, making Vectura a self-sustainable, cash-generative Company, setting the stage for the next chapter in the Company's growth."

- Ends -

Chris Blackwell, Chief Executive and Anne Hyland, Chief Financial Officer, will host an analyst/investor briefing today at 9.30 a.m. BST at the offices of FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB.  For further details please contact Victoria Foster-Mitchell on +44(0)20 3077 0486.

Enquiries

Notes for editors

About Vectura

Vectura Group plc develops inhaled therapies principally for the treatment of respiratory diseases. Vectura's main products target diseases such as asthma and chronic obstructive pulmonary disease (COPD), a growing market that is currently estimated to be worth in excess of $25bn.

Vectura has six products marketed by its partners and a portfolio of drugs in clinical and pre-clinical development, a number of which have been licensed to major pharmaceutical companies. Vectura has development collaborations and licence agreements with several pharmaceutical companies, including Novartis, Sandoz (the generics arm of Novartis), Baxter and GlaxoSmithKline (GSK).

Vectura seeks to develop certain programmes itself where this will optimise value. Vectura's formulation and inhalation technologies are available to other pharmaceutical companies on an out-licensing basis where this complements Vectura's business strategy. For further information, please visit Vectura's website at www.vectura.com

Forward-looking statements

This press release contains forward-looking statements, including statements about the discovery, development and commercialisation of products. Various risks may cause Vectura's actual results to differ materially from those expressed or implied by the forward-looking statements, including: adverse results in clinical development programmes; failure to obtain patent protection for inventions; commercial limitations imposed by patents owned or controlled by third parties; dependence upon strategic alliance partners to develop and commercialise products and services; difficulties or delays in obtaining regulatory approvals to market products and services resulting from development efforts; the requirement for substantial funding to conduct research and development and to expand commercialisation activities; and product initiatives by competitors. As a result of these factors, prospective investors are cautioned not to rely on any forward-looking statements. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CHAIRMAN AND CHIEF EXECUTIVE'S REVIEW

OVERVIEW

Vectura is a developer of inhaled pharmaceuticals with a range of proprietary lung delivery technologies, including formulation and device capabilities. Our focus is principally on developing treatments for respiratory diseases. We have a broad and largely late-stage pipeline of products spanning both the branded and generics space. The collaborations and licence agreements we have struck around these products with major players in the $25bn asthma/chronic obstructive pulmonary disease (COPD) market are testament to the strength of our respiratory franchise.

Our most advanced pipeline products are:

·; NVA237, a long-acting muscarinic antagonist (LAMA), which is being developed for the treatment of COPD both as a monotherapy and as part of a novel, fixed-dose combination with the once-daily, long acting beta-agonist (LABA) Indacaterol (QVA149)

·; QVA149, the fixed-dose combination of NVA237 with the once-daily, long acting beta-agonist (LABA), Onbrez® Breezhaler® (indacaterol maleate) developed and marketed by Novartis. Onbrez® Breezhaler® is now approved in more than 80 countries, including the US, where it is approved under the name Arcapta™ Neohaler™, and Japan under the name Onbrez® Inhalation Capsules

·; VR315, a generic version of an established blockbuster for asthma and COPD

Novartis, the worldwide licensee for NVA237, has made progress this year in commercialising its COPD products in a number of territories. The publication of positive pivotal Phase III data for NVA237 in August 2011 coincided with the European regulatory filing for the drug. Marketing Authorisation is being sought with the European Medicines Agency (EMA) for NVA237, under the brand name Seebri® Breezhaler®. For this, Vectura received a $5m milestone. An EU decision on NVA237 is expected mid-year with the first launch expected later in 2012. In the US, Novartis has agreed Phase III for NVA237 with the FDA and expect to file the product at the beginning of 2014.

We believe that QVA149 could be the first once-daily LABA/LAMA combination therapy to market for COPD. With the dual activity of a beta-adrenergic agonist and a muscarinic antagonist offering the potential for potent bronchodilation, it has an opportunity to address a large and unmet medical need for COPD sufferers. This year should see a number of important milestones for QVA149. We recently announced positive pivotal Phase III data and expect Novartis to present additional data in H2 2012, which should support initial regulatory submissions in Europe and other countries, including Japan, later this year.

Our licensing deal with Novartis for NVA237 and QVA149 is a good example of our disciplined approach to R&D; it also demonstrates the high return possible on our drug discovery platform. To date, we have made a four times return on our investment in NVA237, with the prospect of transformational royalties and milestones pointing towards further significant near-term upside.

Our key generic programme, VR315, also continues to progress worldwide. During the financial year, we secured two prestigious partners. In the US, our new partner is the US division of a leading international pharmaceutical company, while we have extended our existing relationship with Sandoz, our licensee for Europe, to cover RoW (ex-US). In March 2012 we received $2m from our new US partner indicating further development progress during the year.

As detailed below, we continue to see progress on our other programmes including VR632, a second combination product for asthma and COPD, where we received a €0.4m milestone from Sandoz in relation to European development progress.

Summary and outlook

Vectura has made significant progress this year on both its branded and generic programmes as they move closer to market. At the same time, the Company has maintained its financial discipline in preserving a strong balance sheet whilst investing in future growth. The low risk development model we have adopted, together with strict development criteria, optimises the likely returns we have seen and will continue to see from our R&D investment.

We look forward to a number of significant catalysts in this coming year from our programmes while we continue to look to exploit other significant opportunities within the markets in which we operate.

Partnered proprietary products and technologies

In the asthma and COPD markets, we offer licensing opportunities for our products and also offer technologies to other pharmaceutical companies, where our expertise enables a more effective delivery of products.

NVA237 and QVA149 for chronic obstructive pulmonary disease (COPD)

NVA237 is a dry powder formulation for inhalation of glycopyrronium bromide, a LAMA with a rapid onset of activity at first dose, being investigated for the treatment of COPD.

NVA237 was licensed to Novartis in April 2005 by Vectura and our co-development partner, Sosei Group Corporation. It is anticipated that Novartis will launch NVA237 in certain territories as a once-daily monotherapy for COPD in 2012 and as a combination (QVA149) with its once-daily LABA, indacaterol, in some territories in 2013.

In September 2011, Novartis filed NVA237 for marketing authorisation with the EMA under the brand name Seebri® Breezhaler®, triggering a $5m milestone payment to Vectura.

That same month, Novartis presented new NVA237 Phase III data at the ERS congress. The GLOW1 and GLOW3 studies in COPD patients showed that NVA237 significantly increased patients' lung function compared with placebo, with a fast onset of action at first dose, as well as improving exercise endurance.

The GLOW1 study met its primary endpoint by showing that NVA237 50 mcg once-daily produced a significant improvement of 108 mL in trough FEV1 (forced expiratory volume of breath in one second) after 12 weeks in patients with moderate-to-severe COPD compared with placebo (p1 compared with placebo at five minutes after the first dose (p

NVA237 significantly prolonged the time to first moderate/severe COPD exacerbation compared with placebo, and reduced the percentage of hospitalizations. Significant improvement in breathlessness was seen at 26 weeks compared with placebo, accompanied by a significant improvement in health-related quality of life and reduction in the use of rescue medication.

The GLOW3 study investigated the effects of NVA237 50 mcg once-daily on exercise endurance in moderate-to-severe COPD patients. The study met its primary endpoint by showing a significant 21% improvement in exercise endurance relative to placebo at the end of the study (i.e. day 21), with a significant 10% increase from day one (both p

Both studies showed that NVA237 was well-tolerated, with a similar incidence of adverse events for patients treated with NVA237 and placebo. Novartis expect to announce additional Phase III data from the GLOW2 study in H1 2012.

After discussions with the Food and Drug Administration (FDA), in April 2012 Novartis announced that in the US, they have agreed on Phase III for NVA237 and they expect to file the product at the beginning of 2014.

The FDA's requirement for additional clinical data for NVA237 has also impacted the timing of the NDA submission for QVA149 in the US which is now expected at the end of 2014. We believe that QVA149 could be the first once-daily LABA/LAMA combination therapy on the market for COPD. The dual activity of a beta-adrenergic agonist (beta2-agonist) and a muscarinic antagonist could result in a potent bronchodilator that would address a large and unmet need for COPD sufferers.

Novartis commenced Phase III studies with QVA149 in May 2010, triggering a $7.5m milestone payment to Vectura. In April 2012, Novartis announced headline data from four of these studies. The studies ILLUMINATE, SHINE, BRIGHT and ENLIGHTEN, have all met their respective primary endpoints and demonstrate the potential of QVA149 in the treatment of COPD.

The ILLUMINATE study in more than 500 patients demonstrated that superior lung function (measured by FEV1 AUC0-12h with a p value ® (fluticasone 500mcg / salmeterol 50mcg) in patients with moderate to severe COPD.

The results of SHINE, with an enrolment of more than 2,100 patients, met the primary endpoint, demonstrating the superiority in trough FEV1 (p1 (p

The results of BRIGHT showed that patients experienced significantly better exercise endurance versus placebo (p=0.006). ENLIGHTEN demonstrated that QVA149 was well tolerated with a safety and tolerability profile similar to placebo.

Novartis expects to present additional Phase III data at a conference in H2 2012 and to file the product in Europe and other countries, including Japan, in 2012. The first product launch is expected in 2013.

To date, Vectura has received $35m from Novartis and, under the terms of the licence, could receive up to an additional $152.5m for achievement of regulatory and commercialisation targets for both the monotherapy and combination product. Vectura has no cost obligations for these products and royalties will be received on product sales following successful product launches. The COPD market is forecast to grow to $24bn in 2019 and these products are expected to play an important role in this market.

Generic/branded generic products

Branded, combination, dry powder inhaler (DPI) therapy constitutes the largest sector of the respiratory market, with annual sales of over $11bn. With an ever-growing need for effective and affordable medicines, these products have excellent potential to generate value as generics or branded generics. With extensive formulation and device expertise, both of which are needed to create DPI products, we are ideally placed to take advantage of this opportunity.

VR315 for asthma/COPD

VR315 is an inhaled combination therapy for asthma and COPD, delivered with Vectura's GyroHaler® DPI device in Europe, where it is licensed to Sandoz AG for development and commercialisation. The deal is worth up to €22.5m in milestones and development funding, plus royalties on all products sold. Vectura has received all development funding with €7.5m in milestones to be received.

Vectura signed a US licence agreement with a division of a leading international pharmaceutical company in August 2011. Under the terms of this agreement, Vectura's partner will be responsible for the commercialisation and manufacture of the product together with clinical development. Vectura is providing support for the US development of VR315 and received an initial payment of $10m with a further $2m payment received in March 2012. Vectura is eligible to receive a further $33m upon achievement of pre-determined development milestones and, in addition, will receive a royalty from all VR315 US sales.

Also in August, we extended our collaboration with Sandoz for RoW rights to VR315. Sandoz is responsible for any development work required and for obtaining marketing authorisations throughout the RoW territory, which includes Japan, Canada, South America and Australia. Under the terms of the agreement, Vectura will receive a royalty on net sales and a margin on the commercial manufacture and supply of the GyroHaler® device used to deliver VR315, and is also eligible for milestones and advance pre-launch royalties worth up to €8m.

VR632 for asthma/COPD

VR632 is our second inhaled combination therapy for asthma and COPD, which also uses our GyroHaler® technology. The European rights for VR632 were licensed to Sandoz in December 2007 in a deal worth up to €15.5m in milestones and development funding plus royalties on all products sold. We retain the rights for the US and other territories. Development progress continues on the product and we received €0.4m from Sandoz in March 2012.

VR506 for asthma

VR506 is an inhaled corticosteroid (ICS) for the treatment of asthma that entered clinical development in early 2011. ICS's are the mainstay of prophylactic therapy for asthma. As one of the recommended "preventer" drugs for adults and children, they are often prescribed alongside beta2-agonist bronchodilators.

MARKETED PRODUCTS

Six products are currently being marketed and generating revenue for Vectura, with ADVATE® being the main value driver.

ADVATE® for haemophilia A

In 2000, we granted worldwide rights to Baxter to use our stabilisation patents in its serum-free recombinant Factor VIII, ADVATE®. This is indicated for the treatment of haemophilia A and is marketed worldwide by Baxter, from which Vectura earns royalties from sales.

Extraneal® for peritoneal dialysis

Extraneal® is a peritoneal dialysis solution containing icodextrin, licensed to Baxter in 1996 and marketed by Baxter worldwide. Vectura receives royalties on sales in the US and certain other territories.

Adept® for prevention of surgical adhesions

Adept® is a 4% icodextrin solution used during surgery to reduce post-surgical adhesions, a frequent and major complication after gynaecological and other abdominal surgery. It has been used in Europe since 2000 and since 2006 in the US. In December 2005, we signed a licence deal with Baxter for the manufacture and distribution of Adept®.

Products delivered in Clickhaler® for asthma

Five products have gained regulatory approvals for the treatment of asthma that are delivered using Clickhaler®, our proprietary reservoir DPI device.

Asmasal® and Asmabec® are marketed by Recipharm in the UK, France and Ireland. Asmasal® contains salbutamol, a short-acting beta2-agonist for the rapid relief of asthma symptoms. Asmabec® contains beclometasone, an inhaled steroid used as standard preventative therapy for asthma. Meptin® (procaterol) is a short-acting beta2-agonist for the rapid relief of mild, intermittent asthma symptoms, marketed by Otsuka Pharmaceutical in Japan.

Regulatory approvals have also been received for Clickhaler® budesonide in Germany, the Netherlands and New Zealand, with approvals for Clickhaler® formoterol received in Denmark, the Netherlands, South Africa and New Zealand. Neither of these products is marketed at present; we are actively exploring new territories for marketing them as well as other Clickhaler® products. One of the countries we are considering is China, where an estimated 5% of the population suffers from asthma or COPD.

ENABLING TECHNOLOGY PLATFORMS

We have a wide range of important drug delivery technology platforms that are patent-protected, which we use to support our own product development. We also offer technologies for licence to other pharmaceutical companies, a strategy that has already generated significant revenue for Vectura.

Vectura has a state-of-the-art Good Manufacturing Practice (GMP) facility that has been designed specifically to manufacture inhaled products to support clinical trials through to regulatory filing.

The development of drugs for inhalation is more complex than for oral delivery and different approaches are required depending on the characteristics of the drug being delivered. Companies across the world are keen to harness our expertise and technology for their own inhalation programmes and we expect that this will lead to future collaborations and licensing deals.

Formulation technologies - including PowderHale®

Our formulation technologies include PowderHale®, a patented DPI formulation technology designed to allow aerosolised drug particles to achieve high lung deposition with low-dose variability. This is achieved by incorporating an additional pharmacologically inactive excipient known as a Force Control Agent (FCA). We also possess expertise in micronisation, blending and spray drying, all of which are used in the development of our own and third-party products.

An example of the type of formulation technology licensing deal possible is the non-exclusive licensing agreement signed in August 2010 with GSK which enables them to use some of our dry powder drug formulation patents for two late-stage development compounds in their respiratory product pipeline. Under the agreement, Vectura will receive £20m by the time the compounds are launched, as well as earning royalties on sales of these products, generating up to £13m per year.

Multi-unit dose DPI devices

Our cost-effective, multi-unit dose DPI technologies, designed to deliver locally-acting drugs to the lungs, include devices such as GyroHaler® and OmniHaler®. Compact and easy to use, our devices consist of just a few moulded parts, which reduces manufacturing costs. Each device delivers up to 60 doses and is disposable after use. They have aerosolisation characteristics that are competitive in the marketplace and provide excellent drug protection from moisture and light using sealed, foil blisters. GyroHaler® is used to deliver some of our generic products and is scaled up for commercial launch. Other devices are in late-stage development.

We continue to invest in our device platform and have tailored our device technologies for the US respiratory generics market and have received recent validation from both partners and other external parties. All our multi-unit dose DPI technologies are available for licensing where such a partnership would add value to our business.

Duohaler® device and combination products for asthma/COPD

In addition to our multi-unit dose devices we also have the two reservoir DPIs Clickhaler® and Duohaler®. Duohaler® provides advantages over a number of other multi-dose DPIs. Two separate drug reservoirs feed two individual drug formulations into two separate metering chambers, and the drugs are then delivered to the user in the same inhalation. This process obviates the need to co-formulate combination drugs and provides a means of delivering simultaneously a combination formulation from one reservoir and an individual drug from the second. Both Clickhaler® and Duohaler® are available for licensing.

Financial review

Summary

This was another cash generative year for Vectura with a £1.1m increase in cash to £75.5m (2011: £74.4m). Revenues of £33.0m (2010/11: £42.9m) were ahead of expectations, although £9.9m lower than the previous year; due to a higher level of one-off milestone receipts in the previous year. However, Vectura managed this decrease in revenue through active reduction in expenses resulting in £0.1m reduction in the loss before tax to £13.2m (2010/11: £13.3m).

Revenue

Revenue includes fee income from royalties, product licensing, technology licensing, development fees and device sales.

Royalties were in line with the previous year at £13.5m (2010/11: £13.6m). ADVATE® royalties increased by 4% in the period to £10.6m (2010/11: £10.2m) and contributed 79% of the royalties generated in the year. ADVATE® sales are continuing to grow, approaching $1.9bn in 2011, compared with sales of $1.8bn in 2010. Underlying ADVATE® royalties increased by 6% in the period with the effect of foreign exchange rates reducing the net increase to 4%. Vectura receives a net royalty of under 1% at these high levels of cumulative annual sales. Extraneal® royalties were £1.7m (2010/11: £2.4m) which included exceptional royalties of £1.1m relating to prior year sales. Extraneal® royalties are expected to be approximately £0.6m in the next financial year as Vectura patents relating to this product expire. The majority of the remaining royalties were generated from Adept® £0.9m (2010/11: £0.8m).

Product licensing revenues in the period were £12.1m (2010/11: £10.6m), which includes the final £2.4m of the £5.1m ($7.5m) QVA149 Phase III clinical trial milestone received from Novartis in 2010 and the final £1.4m of the £6.2m ($9.5m) milestone received from Sandoz for VR315 US. We announced two new licensing deals in August 2011, both relating to VR315, of which £3.9m ($6.3m) relates to the upfront milestone received for the licence of VR315 to an undisclosed partner in the US and £0.9m relates to the upfront milestone received for the licence of VR315 to Sandoz for the RoW territories. A further £3.2m ($5m) relates to the NVA237 EU filing milestone received from Novartis in September 2011 and £0.3m relating to a development milestone from Sandoz for VR632 received in March 2012.

Technology licensing revenues of £2.3m (2010/11: £12.9m) are lower than the previous year. In 2010/11 we received a £10m upfront payment from GSK under a non-exclusive licence agreement. In addition to the upfront payment we are due to receive a further £10m by the time the products are launched. £4m of which was received by 31 March 2012.

Pharmaceutical development services (PDS) revenues decreased to £2.8m (2010/11: £4.2m) as work on some of our partnered programmes has been successfully completed. Future PDS revenues will depend on the extent and nature of feasibility studies and new licensing deals as the development of inhalation products is a very specialist area, with partners frequently requiring Vectura's involvement in the continuing development of a product. We expect these revenues to decrease further in the next financial year.

The significant increase in device sales to £2.3m (2010/11: £1.6m) was mainly due to sales of the GyroHaler® device.

Gross profit

The gross profit in the year to 31 March 2012 was £30.8m (2011: £40.2m). Gross profit represents 93% of revenue (2010/11: 94%).

Research and development expenses

Total investment in research and development was £32.8m, a 13% decrease on the previous year (2010/11: £37.7m). Research and development expenditure in 2010/11 includes £2.5m that relates to the costs of restructuring our development operations, encompassing closure of the Nottingham facility and a reduction in the number of research and development employees.

Taxation

The tax credit for the year was £8.8m (2010/11: £4.5m). Research and development tax credits of £4.6m were received in cash during the year (2010/11: £8.2m) of which £2.5m was included in other receivables as at 31 March 2011, resulting in current year tax income of £2.1m. An estimated research and development tax credit of £4.0m relating to the 2011/12 financial year has been recorded and this is expected to be received during 2012/13. A release of £2.8m from a deferred tax liability has also been credited to the income statement for the 2011/12 financial year due to the utilisation of tax losses carried forward. As the Group's losses reduce, research and development tax receipts will decline significantly.

Intangible assets

Intangible assets of £23.4m (2011: £30.9m) have been amortised by £7.5m (2010/11: £10.7m) during the year. These intangible assets relate to the Innovata acquisition and they will continue to be amortised over their expected useful life. The reduction in the amortisation charge is in line with the reduction in royalty streams as Extraneal® comes off patent in certain territories.

Property, plant and equipment

Property, plant and equipment increased by £3.1m (2011: decline of £0.1m) in the year as a result of the Group's investment in its inhaled product manufacturing capabilities.

Deferred income

Deferred income relates to milestones received in cash but not yet recognised as revenue. Of the £4.8m on the balance sheet at 31 March 2012 (2010: £5.5m), £3.5m will be recognised as revenue in 2012/13; £0.6m relates to ADVATE® royalties, £1.6m to technology licensing and £1.3m relates to the VR315US $2m receipt. £1.3m will be recognised as revenue in later periods relating to the VR315 RoW deal with Sandoz.

Equity

A shareholder resolution was approved at the Company's AGM, held on 22 July 2011, to reduce the Company's share premium account by £78.6m. An application to reduce the Company's share premium account was subsequently made to the High Court of Justice and approval was received on 25 January 2012. In the balance sheet, the share premium account has been reduced by £78.6m and the retained loss of the Company has been reduced from £25.9m to £nil. The remaining balance of £52.7m has created a retained profit in the Company balance sheet and which will enable the Company to pay dividends in future periods. The Board does not currently intend to pay dividends.

The Company balance sheet is not included in these preliminary results.

Cash flow

Cash increased by £1.1m in the period (2010/11: £10.3m). The net cash flows from operating activities are once again positive at £2.1m (2010/11: £10.8m). At 31 March 2012, Vectura had cash and cash equivalents of £75.5m (2011: £74.4m), which was equivalent to 23p per share in issue.

Foreign exchange rates

The following foreign exchange rates were used during the year:

Consolidated statement of comprehensive incomefor the year ended 31 March 2012

All results are derived from continuing activities.

Consolidated balance sheet

at 31 March 2012

Consolidated cash flow statementfor the year ended 31 March 2012

Consolidated statement of changes in equityfor the year ended 31 March 2012

Notes to the financial statements

1. Basis of preparation

The financial information included in this statement does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information has been extracted without material adjustment from the consolidated financial statements of Vectura Group plc for the year ended 31 March 2012, which have been audited. The auditor has made reports in respect of the statutory consolidated accounts for the years ended 31 March 2012 and 31 March 2011. Their reports were (i) unqualified, (ii) did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under sections 237(2) or 237(3) of the Companies Act 1985 and sections 498(2) or 498(3) of the Companies Act 2006.

Whilst the information included in this preliminary announcement has been computed in accordance with International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.

Statutory accounts for the financial year ended 31 March 2011 have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2012 will be delivered following the Annual General Meeting.

The Group's Annual Report and Accounts will be sent to shareholders in June 2012 and will be available on our website www.vectura.com.

Risks and uncertainties

The key business risks facing Vectura on a stand-alone basis are consistent with those set out in the Annual Report and Accounts for the year ended 31 March 2011 and those to be included in the Annual Report and Accounts for the year ended 31 March 2012. The recent global credit problems and turmoil in the financial markets bring additional uncertainties to Vectura, as to all other businesses. There are a number of potential risks and uncertainties that could have a material impact on the Group's performance over the forthcoming financial year and could cause actual results to differ materially from expected and historical results. Particular risks include industry risk, clinical and regulatory risk, counterparty risk, competition and intellectual property risk, economic risk and financial risk (cash flow, credit, liquidity and price risks). The global credit problems could result in the failure of banks where funds are deposited, the failure of customers or the failure of insurers. The fluctuating US dollar in currency markets has and could continue to impact results. The majority of royalties received are denominated in US dollars. The Board has policies in place to mitigate these risks and uncertainties.

Going Concern

Although the current economic conditions may place pressures on customers and suppliers which may face liquidity issues, the Group's product diversity and customer and supplier base substantially mitigate these risks. In addition, the Group operates in the relatively defensive pharmaceutical industry which we expect to be less affected compared to other industries.

The Group has £75.5m of cash and cash equivalents as at 31 March 2012. The Board operates an investment policy under which the primary objective is to invest in low-risk cash or cash equivalent investments to safeguard the principal. The Group's forecasts, taking into account likely revenue streams, show that the Group has sufficient funds to operate for the foreseeable future, being at least twelve months from April 2012.

After reviewing the Group's forecasts, the Directors believe that the Group is adequately placed to manage its business and financing risks successfully despite the current uncertain economic outlook. Accordingly they continue to adopt the going-concern basis in preparing the annual report and accounts.

2. Accounting policies

The financial information has been prepared in accordance with the accounting policies as set out in the previous financial statements and those signed today for the year ended 31 March 2012. The policies have been consistently applied to all periods presented. Full details of the Group's accounting policies can be found in the 2010/11 Annual Report, which is available on our website www.vectura.com.

3. Revenue

Revenue represents amounts invoiced to third parties, derived from the provision of licences and services that fall within the Group's sole principal activity, the development of pharmaceutical products.

4. Research and development expenses

Included in research and development expenses for 2010/11 was a £2.5m restructuring charge relating to the restructuring of development operations, with the closure of the Nottingham facility and a reduction in the number of R&D employees. This action was taken in order to reduce the ongoing cost base. There has been no impairment of the intangible assets or goodwill following this restructuring.

5. Investment income and finance costs

6. Taxation

7. Loss per ordinary share

The calculation of loss per share is based on the following losses and number of shares:

The loss per share is based on the weighted average number of shares in issue during the period. IAS 33 - Earnings per Share, requires presentation of diluted earnings per share when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. No adjustment has been made to the basic loss per share, as the exercise of share options would have the effect of reducing the loss per ordinary share, and is therefore not dilutive.

8. Trade and other receivables

(1) Includes research and development tax credits of £4.0m (2011: £2.5m)

9. Trade and other payables

10. Deferred income

Deferred income relates to amounts received under product licensing agreements. Vectura continues to provide services to these licensing partners over a period of time. Milestone payments under these licensing agreements are therefore spread, and income is deferred as follows:

11. Share capital

Between 1 April 2011 and 31 March 2012 the Company issued no ordinary shares to the Vectura Group plc Employee Benefit Trust (in the year ended 31 March 2011 1,500,000 ordinary shares of 0.025p each were issued to the Vectura Group plc Employee Benefit Trust in satisfaction of the issue of matching and free shares due to employees in accordance with the rules of the Vectura Group plc Share Incentive Plan (SIP)).

Between 1 April 2011 and 31 March 2012 the Company issued 3,475,463 (2011: 789,175) ordinary shares of 0.025p each on the exercise of employee share options at a weighted average exercise price of 57.04p per share (2011: 31.45p).

Between 1 April 2011 and 31 March 2012 the Company issued 1,465,608 (2011: nil) ordinary shares of 0.025p each on the exercise of Sharesave options at a weighted average exercise price of 36.14p per share.

Between 1 April 2011 and 31 March 2012 the Company issued 86,209 (2011: 421,153) ordinary shares of 0.025p each on the exercise of LTIP nil-cost options.

12. Related party transactions

Remuneration of key management personnel

There are no other related party transactions.

Directors' responsibility statement

The Directors' responsibility statement below has been prepared in connection with the Company's full Annual Report for the year ended 31 March 2012. Certain parts thereof are not included within this announcement.

We confirm to the best of our knowledge:

·; the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·; the management report, which is incorporated into the Chairman and Chief Executive's review, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

By order of the Board,

Anne Hyland

Director

25 April 2012