Final Results

21st May 2013

Vectura Group plc - Preliminary Results

Strong financial performance underpinned by branded product progress

Chippenham, UK - 21 May 2013:Vectura Group plc (LSE: VEC) ("Vectura"), which specialises in developing inhaled therapies, principally for the treatment of airway diseases, announces today its preliminary results for the year ended 31 March 2013.

Financial Highlights

·; Revenues slightly ahead of expectations at £30.5m (2011/12: £33m)

·; EBITDA loss improves to £3.4m (2011/12: £4.2m)

·; Loss before tax decreased by 21% to £10.4m (2011/12: £13.2m)

·; Balance sheet strength maintained with cash and cash equivalents of £70.1m (£75.5m at 31 March 2012)

Operational Highlights

Significant regulatory and clinical progress made throughout the year

Seebri® Breezhaler® (glycopyrronium bromide/NVA237 (COPD))

Product now launched in some European countries and Japan

·; Novartis' Seebri® Breezhaler® approved in the EU for maintenance treatment of COPD by the European Commission

·; Approval for once-daily Seebri® Inhalation Capsules as maintenance COPD treatment in Japan

·; EU and Japanese approvals triggered two milestone payments from Novartis of $10m (£6.2m) and $2.5m (£1.5m) respectively 

·; Seebri® Breezhaler® has been launched by Novartis in UK and Ireland, Germany and other countries, and Seebri® Inhalation Capsules in Japan

·; US NDA filing for NVA237 expected in early 2014

QVA149 (COPD)

European and Japanese filings completed

·; QVA149 is being investigated by Novartis for the maintenance treatment of COPD in the Phase III IGNITE clinical trial programme

·; IGNITE is one of the largest international clinical trial programs in COPD comprising 10 studies in total (ILLUMINATE, SHINE, BRIGHT, ENLIGHTEN, SPARK, BLAZE, ARISE, BEACON, RADIATE, LANTERN) with more than 7,000 patients across 42 countries

·; Phase III data presented by Novartis at the European Respiratory Society (ERS) Annual Congress in September 2012

·; Novartis filed QVA149 for marketing authorisation in Europe in October 2012, and a separate filing in Japan in November 2012

·; The EU filing triggered a $5m (£3.1m) milestone payment to Vectura

·; US NDA filing expected at the end of 2014

VR315 (asthma/COPD), VR632 (asthma/COPD) and VR506 (asthma)

·; Development programme continue to progress

·; First development milestone of $3m (£1.9m) earned from new US partner on VR315

·; Eligible to receive up to a further $32m upon achievement of future pre-determined development milestones

·; VR506 development on-going with two multi-centre, international clinical trials currently in progress; one expected to report in Q4, 2013 and the second in Q1, 2014

Post-period events

·; Chinese JV, Kinnovata, formed to develop and commercialise products in fast-growing Asian markets

·; US approval of GSK's BREOTM ELLIPTATM signals new additional royalty stream

·; As is the subject of a separate announcement, Anne Hyland will be stepping down as Chief Financial Officer and Board Director on 30 June 2013. Paul Oliver, currently Financial Controller, will be appointed as her successor, with effect from 1 July 2013.

Dr Chris Blackwell, Chief Executive of Vectura:

"The past year has been very significant for Vectura, driven by the tremendous progress made by our partners and we continue to preserve our balance sheet strength through a combination of existing royalty streams and disciplined investment in R&D. As Novartis continues its roll out of Seebri® Breezhaler®, we will build on our royalty income and should also benefit from additional near-term development milestones from products in our pipeline. These additional income streams will provide a platform from which we can generate the next phase of Vectura's growth. To achieve this, we will actively seek and evaluate suitable late-stage development and commercial opportunities, whilst carefully prioritising development and exercising tight control over expenses to manage our cash resources prudently. We are also delighted with the announcement post-period of the establishment of our joint venture in China, Kinnovata. This marks our first step into emerging markets and is an example of how we strive to leverage our assets in a cash efficient manner".

- 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 is a product development company that focuses on the development of pharmaceutical therapies for the treatment of airway diseases. This growing market includes asthma and chronic obstructive pulmonary disease (COPD) and is estimated to be worth in excess of $30 billion worldwide.

Vectura has seven products marketed by its partners and a portfolio of drugs in 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, GlaxoSmithKline (GSK) and Tianjin King York Group Company Limited (KingYork).

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 product development company that focuses on the development of pharmaceutical therapies for the treatment of diseases that affect or can be treated with drugs that act on the airways (Airways Diseases). This segment of the pharmaceutical market includes large indications such as asthma and chronic obstructive pulmonary disease (COPD) and is estimated to be worth in excess of $30 billion in sales worldwide. This segment of the market also covers a wide range of other indications including viral and fungal infections, allergies, cough and fibrotic diseases of the lung.

Vectura's development and formulation expertise is evidenced by numerous accomplishments including seven marketed therapies. The Group's in-house and partnered pipeline assets span both branded treatments and high value generics. These programmes, if successful, will compete in multi-billion dollar markets.

Value realisation from product progress

Blue-chip partners including Novartis, Sandoz, Baxter and GSK have invested in, and validated, Vectura's technology and approach to drug development.

Our value will stem from pipeline products such as:

Seebri® Breezhaler® (NVA237; glycopyronnium bromide), a long-acting muscarinic antagonist (LAMA), approved by the European Commission for use in Europe as a once-daily, inhaled, maintenance bronchodilator treatment to relieve symptoms in adult patients with chronic obstructive pulmonary disease (COPD). Seebri® Inhalation Capsules 50 mcg have been approved in Japan as maintenance COPD treatment.

QVA149, the investigational fixed-dose combination of glycopyronnium bromide with the once-daily, long-acting beta-agonist (LABA), indacaterol maleate, developed and marketed by Novartis as Onbrez® Breezhaler®.

VR315, VR632 and VR506, generic versions of drugs for COPD and/or asthma.

Seebri® Breezhaler® (NVA237; glycopyronnium bromide)

During 2012, Novartis, the worldwide licensee for NVA237, received approval of Seebri® Breezhaler® in the European Union and Seebri® Inhalation Capsules in Japan and in nine other countries including Canada and Australia. Subsequently, the product has been launched in several countries.

The EU approval triggered a $10 million (£6.2m) milestone to Vectura and the Japanese approval a $2.5 million (£1.5m) milestone, along with subsequent royalty streams. The approval of this drug was a landmark and value-enhancing event for Vectura, providing further validation of Vectura's business model to date.

Seebri® Breezhaler® is an innovative, once-daily therapy that has been shown to reduce breathlessness and exacerbations, improve lung function and help improve overall quality of life when compared to placebo. Its approval in the European Union is therefore an important development and provides a new treatment option for patients with COPD, the world's fourth biggest cause of death.

Japanese approval for once-daily Seebri® Inhalation Capsules as maintenance COPD treatment was received by Novartis in September 2012. Seebri® Inhalation Capsules provide doctors and patients with a once-daily treatment option for COPD, a condition that is increasing in prevalence in Japan.

In the US, Novartis is undertaking Phase III studies of NVA237 and expects to file the product early in 2014.

QVA149, the investigational fixed-dose combination of glycopyronnium bromide and indacaterol maleate

This year also saw a number of important milestones in the development of QVA149. In April 2012, Novartis reported headline Phase III data from the first four studies of the IGNITE Phase III clinical trial programme. The studies, ILLUMINATE, SHINE, BRIGHT and ENLIGHTEN, all met their respective primary endpoints. These results were supplemented by additional positive Phase III data from SPARK, reported by Novartis in August 2012. Three presentations of clinical data from the IGNITE programme were made at the ERS Annual Congress in September 2012.

QVA149 was filed for marketing authorisation with the EMA in October 2012, triggering a $5m (£3.1m) milestone and in November 2012, QVA149 was filed in Japan. US New Drug Application ("NDA") filing is expected at the end of 2014.

The dual activities of LAMA/LABA combination products offer the potential for rapid and potent bronchodilation, providing an opportunity to address a large and unmet medical need for COPD sufferers. This growing, multi-billion dollar market makes QVA149 a significant value prospect for Vectura should the product reach the market.

Generic programmes

Development work continues on Vectura's generic programmes: VR315 (asthma/COPD), VR632 (asthma/COPD) and VR506 (asthma). In March 2012, Vectura announced receipt of a €0.4m development milestone from Sandoz relating to VR632, and in August 2012, Vectura received its first development milestone of $3m (£1.9m) from our US partner related to VR315, indicating further development progress during the period. Two multi-centre, international clinical trials are underway on VR506, which should complete in late 2013 and early 2014.

Technology development

It is essential that the Group's product focus is underpinned by our intellectual property. Vectura commits significant effort to ensure competitiveness in this area is maintained through innovation. Vectura's technologies will therefore continue to drive value by enabling, improving and adding value to the products we develop.

Outlook

2012/13 was a landmark year for Vectura, evidenced by the significant progress made by licensees of Vectura products and technologies.

We look forward to a number of significant catalysts in this coming year from our programmes. Looking ahead, we will be in a position to build on royalty income from sales of Seebri® Breezhaler® through additional near-term development milestones from this and other products in our pipeline.

These additional income streams provided by our commercial and late-stage products will further strengthen our robust financial position and provide a platform from which to accelerate the next phase of Vectura's growth. As part of this growth, we will continue to seek and carefully evaluate suitable opportunities in established and emerging markets.

We continue to believe that the low risk development model we adhere to, together with tight cost control and focused development criteria, will continue to result in value enhancement.

Post-period developments

Kinnovata

Vectura announced on 13 May 2013 that it had established Tianjin Kinnovata Pharmaceutical Company Limited ("Kinnovata") in China with two partners; Tianjin KingYork Group Company Limited ("KingYork") and Zendex Bio Strategy Inc. ("Zendex"). Completion of the Kinnovata transaction is subject to final Government clearances in China which are expected mid-to-late 2013. 

Kinnovata will develop, manufacture and commercialise respiratory products for the rapidly growing domestic Chinese and other regional markets in Asia. This new company will initially exploit Vectura's Clickhaler® and Duohaler® dry powder inhaler (DPI) technology platforms to address current unmet needs in the growing Asian respiratory markets, notably the asthma and chronic obstructive pulmonary disease (COPD) therapeutic areas.

Kinnovata will be an independent company with its own development and manufacturing operations located in Tianjin. Vectura is also providing training and other expertise to Kinnovata as the Company prepares to undertake its first Clickhaler® clinical studies in Chinese patients. An application for the import of Asmasal® Clickhaler® (salbutamol) has been filed with the Chinese State Food and Drug Administration (SFDA).

In addition, a separate R&D Cooperation Agreement has been established between Kinnovata and the Shanghai Institute of Pharmaceutical Industry to undertake the development of a number of DPI products on behalf of Kinnovata.

GSK

On the 10 May 2013, the United States Food and Drug Administration (FDA) approved a NDA for BREO™ ELLIPTA™ (fluticasone furoate/vilanterol 100/25 mcg) submitted by GSK. In August 2010, GSK entered into a license and option to license agreement for certain of Vectura's dry powder formulation patents. Vectura is entitled to a low single digit royalty on net sales of products using these patents, capped at a maximum amount of £13m per annum. BREO™ ELLIPTA™ will be the first product to be launched by GSK that will use patents covered by the agreement. GSK has stated that it expects the product to be available in the United States during the third quarter of 2013. BREO™ ELLIPTA™ was filed for approval in Europe and Japan in 2012.

A second GSK combination product covered by the agreement has also been filed for approval in the United States, Europe and Japan. 

Financial review

Summary

The Group ended the year with £70.1m of cash (2012: £75.5m). Revenues of £30.5m (2011/12: £33.0m) were lower (8%) than in the previous year as a result of lower pharmaceutical development service revenues and device sales this year, but were ahead of expectations. These reductions have been partially offset by an increase in one-off milestone revenues recognised and received during the year following European and Japanese approval of NVA237 and filing of QVA149 with the European Medicines Agency (EMA).

The EBITDA loss has improved to £3.4m (2011/12: £4.2m); this improvement is mainly due to a 5% increase in gross margin and a 6% reduction in research and development expenditure to £30.9m (2011/12: £32.8m) in the period.

Revenue

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

Overall, royalties were down on the previous year at £13.0m (2011/12: £13.5m) primarily due to the exceptional royalties received for Extraneal® last year. ADVATE® royalties of £11.1m (2011/12: £10.6m) are higher than last year due to an exceptional amount of £0.6m relating to prior year sales. Underlying ADVATE® sales have remained constant at $1.9bn in 2012 (2011: $1.9bn). Vectura receives a net royalty of under 1% at these high levels of cumulative annual sales. Extraneal® royalties were £0.8m (2011/12: £1.7m), this being an expected decrease, as last year included exceptional royalties of £1.1m relating to sales in prior years. The majority of the remaining royalties were generated from Adept®, £0.6m (2011/12: £0.9m). In addition, Vectura received its first royalties in the year from Novartis for sales of Seebri® Breezhaler®.

Product licensing revenues in the period were £12.8m (2011/12: £12.1m), which includes milestone payments from Novartis of $10.0m (£6.2m) and $2.5m (£1.5m) relating to the European and Japanese approval for NVA237 respectively. A further milestone of $5.0m (£3.1m), relating to QVA149 from Novartis, was earned in October 2012, relating to the filing of a marketing authorisation with the EMA. Product licensing revenues also include a $3.0m (£1.9m) development milestone relating to VR315 US. Of this amount, $2.0m was released from deferred income and a further $1.0m was received in the year.

Technology licensing revenues of £3.7m (2011/12: £2.3m) are higher than the previous year. £3.5m of the total revenue stream relates to milestones due under a non-exclusive licence agreement signed with GSK in August 2010. Under the terms of the agreement, Vectura received a £10m upfront payment in 2010/11 and is due to receive a further £10m by the time the products are launched. £6.0m of this total had been received by 31 March 2013.

Pharmaceutical development services (PDS) revenues decreased to £0.6m (2011/12: £2.8m) 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 do not expect any significant change to these revenues in the next financial year.

Device sales of £0.4m were lower than the prior period (2011/12: £2.3m) as our trading partners now hold stock at the required level.

Gross profit

The gross profit in the year to 31 March 2013 was £29.8m (2011/12: £30.8m). Gross profit represents 98% of revenue (2011/12: 93%) and this increase is due to the higher proportion of royalty and licensing revenues received as a proportion of total revenues.

Research and development expenses

Total investment in research and development was £30.9m, a 6% decrease on the previous year (2011/12: £32.8m). Of the £30.9m, 28% of this expenditure related to clinical trials (2011/12: 24%).

Taxation

The tax credit for the year was £4.5m (2011/12: £8.8m). Research and development tax credits of £4.4m were received in cash during the year (2011/12: £4.6m), of which £4.0m was included in other receivables as at 31 March 2012, resulting in current year tax income of £0.4m. An estimated research and development tax credit of £3.8m relating to the 2012/13 financial year has been recorded and this is expected to be received during 2013/14. As the Group's losses reduce, research and development tax receipts will decline significantly. A release of £0.3m from a deferred tax liability has also been credited to the statement of comprehensive income for the 2012/13 financial year due to the utilisation of tax losses carried forward.

Intangible assets

Intangible assets of £17.1m (2012: £23.4m) have been amortised by £6.3m (2012: £7.5m) 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 from Extraneal® in certain territories, and all Extraneal® royalty streams are expected to cease by Q1 2014. The £17.1m of intangible assets will be amortised over the next three years.

Property, plant and equipment

Property, plant and equipment increased by £3.0m (2012: increase of £3.1m) 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. £3.4m of deferred income was released during the year, mainly relating to GSK and VR315 US milestones. Of the £1.4m on the balance sheet at 31 March 2013 (2012: £4.8m), £0.1m will be recognised as revenue in 2013/14 and £1.3m, relating to the VR315 RoW deal with Sandoz, will be recognised as revenue in later periods.

Cash flow

Cash decreased by £5.4m in the period (2011/12: increase of £1.1m). The net cash flows from operating activities are negative at £2.8m (2011/12: positive £2.1m). At 31 March 2013, Vectura had cash and cash equivalents of £70.1m (2012: £75.5m), which was equivalent to 21p per share in issue.

Foreign exchange rates

The following foreign exchange rates were used during the year:

Anne Hyland

Chief Financial Officer

20 May 2013

Consolidated statement of comprehensive incomefor the year ended 31 March 2013

All results are derived from continuing activities.

Consolidated Balance sheetat 31 March 2013

Consolidated Cash flow statementfor the year ended 31 March 2013

Consolidated Statement of changes in equityfor the year ended 31 March 2013

Notes to the financial statements for the year ended 31 March 2013

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 2013, which have been audited. The auditor has made reports in respect of the statutory consolidated accounts for the years ended 31 March 2013 and 31 March 2012. 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 2012 have been delivered to the Registrar of Companies, whereas those for the year ended 31 March 2013 will be delivered following the Annual General Meeting.

The Group's Annual Report and Accounts will be sent to shareholders in July 2013 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 2012 and those to be included in the Annual Report and Accounts for the year ended 31 March 2013. 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 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

The accounts have been prepared on the going concern basis. 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 made a loss of £5.9m for the financial year ended 31 March 2013 (2012: £4.4m) but had £70.1m of cash and cash equivalents as at 31 March 2013 (2012: £75.5m). 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.

After reviewing the Group's forecasts and assessing the uncertain nature of some of the Group's forecast revenues, 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, from which this announcement has been extracted.

2. Accounting policies

The financial information has been prepared in accordance with accounting policies as set out in the previous financial statements and those signed today for the year ended 31 March 2013. The policies have been consistently applied to all periods presented. Full details of the Group's accounting policies can be found in the 2011/12 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. Investment income and finance gains

5. Taxation

The major components of the income tax credit for the years ended 31 March 2013 and 31 March 2012 were as follows:

6. 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.

7. Trade and other receivables

 (1) Includes research and development tax credits of £3.8m (2012: £4.0m).

The average credit period taken by customers is 30 days (2012: 30 days). The Directors consider that the carrying value of trade and other receivables approximates to their fair value.

8. Trade and other payables

Trade payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken by the Group for trade purchases is 31 days (2012: 32 days).

9. 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 over future periods, and income is deferred as follows:

10. Equity

Share capital

Between 1 April 2012 and 31 March 2013 the Company issued 1,000,000 ordinary shares to the Vectura Group plc Employee Benefit Trust (in the year ended 31 March 2012: none ).

Between 1 April 2012 and 31 March 2013 the Company issued 1,061,980 (in the year ended 31 March 2012: 3,475,463) ordinary shares of 0.025p each on the exercise of employee share options at a weighted average exercise price of 48.52p per share (2012: 57.04p).

Between 1 April 2012 and 31 March 2013 the Company issued 225,634 (in the year ended 31 March 2012: 1,465,608) ordinary shares of 0.025p each on the exercise of Sharesave options at a weighted average exercise price of 48.18p (2012: 36.14p) per share.

Between 1 April 2012 and 31 March 2013 the Company issued 482,121 (in the year ended 31 March 2012: 86,209) ordinary shares of 0.025p each on the exercise of LTIP nil-cost options.

11. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation. There has been no material change in the type of related party transactions described in the last Annual Report and Accounts

12. Post balance sheet event 

Vectura announced on 13 May 2013 that it had established Tianjin Kinnovata Pharmaceutical Company Limited ("Kinnovata") in China with two partners; Tianjin KingYork Group Company Limited ("KingYork") and Zendex Bio Strategy Inc ("Zendex").

Completion of the Kinnovata transaction is subject to final Government clearances in China which are expected mid-to-late 2013. Vectura expects to record an exceptional non-cash gain of approximately £13.5m in relation to the acquisition of the 35% shareholding in Kinnovata. This gain will be recognised in the 2013/14 financial year. Kinnovata will be accounted for as an associate, with Vectura recording 35% of the profits or losses of Kinnovata on its statement of comprehensive income as a non-cash item. Kinnovata is expected to be loss-making for at least 24 months following establishment. Vectura's share of Kinnovata's losses in the next two financial years is not expected to exceed the initial non-cash exceptional gain recognised in the 2013/14 financial year.

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 2013. 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

20 May 2013

This information is provided by RNS

The company news service from the London Stock Exchange

END