19th May 2009 07:00
Vectura Group plc - Preliminary Results
-Strong rise in revenues with robust cash position-
-Good progress with portfolio and material clinical development ahead-
Chippenham, UK - 19 May 2009: Vectura Group plc (LSE: VEC) ("Vectura"), the inhaled product development company, today announces its preliminary results for the year ended 31 March 2009.
Financial Highlights
Operational and Product Highlights
Highlights after Year End
Dr Chris Blackwell, Chief Executive of Vectura, comments:
"It has been another strong year for Vectura from both a financial and product perspective. In the five years since Vectura listed on the Stock Exchange, we have seen a seven-fold increase in our revenues to £31.2m, which has contributed towards our healthy cash balance of £74m at 31 March 2009.
"Over the course of the next twelve months we expect to see significant pipeline progress as our key programmes advance into registration trials. With our strong cash position, credible partners developing several products, and a diversified product development strategy, we remain confident of Vectura's ability to generate long-term shareholder value."
- Ends -
Chris Blackwell and Chief Financial Officer Anne Hyland will host an analyst/investor presentation and conference call today at 11.00 a.m. BST for an explanation and discussion of the Company's annual results. For further details please contact Juliet Edwards at Financial Dynamics on +44(0)20 7269 7125.
Enquiries
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Vectura Group plc |
+44 (0)1249 667700 |
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Chris Blackwell, Chief Executive |
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Anne Hyland, Chief Financial Officer |
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Julia Wilson, Director of Investor Relations |
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Financial Dynamics |
+44 (0)20 7831 3113 |
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Ben Atwell |
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Susan Quigley |
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Notes for editors
About Vectura
Vectura Group plc is a product-focused Group that 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 $20 billion. Vectura also develops products for other lung pathologies and non-respiratory diseases.
Vectura has eight products marketed by its partners and a portfolio of drugs in clinical and pre-clinical development, some of which have been licensed to major pharmaceutical companies. 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.
Vectura has development collaborations with several pharmaceutical companies, including Boehringer Ingelheim, Novartis, Sandoz (the generics arm of Novartis), Baxter, GlaxoSmithKline (GSK), Mylan, UCB and Otsuka. Vectura has been included in the FTSE 250 index since 23 March 2009. 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
In the current economic conditions, it is vital to maintain a strong financial position which we believe we have as we ended the financial year with £74m of cash and cash equivalents. Revenues increased by 24% to £31.2m (2007/08: £25.2m), gross profit increased 31% to £27.3m (2007/08: £20.8m) and, with a research and development investment of £32.3m (2007/08: £29.7m) we recorded a net cash outflow of £4.8m.
Vectura's strength lies in its specialism; the knowledge, experience and technical capabilities to develop inhaled pharmaceutical products. We have refined our focus to concentrate our efforts on developing our own range of inhaled products to treat lung diseases. Our late-stage pipeline is focused on the respiratory market, particularly the asthma and COPD segments, with an increasing emphasis on combination products. These markets are large, and growing, allowing several major products to generate very significant revenues.
Our late-stage projects have continued to progress over the course of the year with NVA237 due to enter a Phase III trial in COPD patients in the second quarter of 2009. We believe that NVA237 will be the second once-daily long-acting muscarinic antagonist (LAMA) on the market, and that QVA149 will be the first once-daily LAMA/LABA (long-acting beta-agonist) combination available to patients. Simplicity and ease-of-use improves compliance, which enhances the benefits patients get from their medicines.
Novartis plans to present data from QVA149 during 2009 and expects to start the Phase III trial in the fourth quarter of 2009. NDA submissions for both NVA237 and QVA149 are expected to be filed by Novartis in 2011.
Our generic combination asthma/COPD products VR315 and VR632 are also progressing well. In April 2009, we received a €2.5m (£2.2m) European milestone payment from Sandoz, the generics division of Novartis, in relation to VR315. Increasing pressure on the regulatory authorities, particularly in the US, to approve cheaper generic drugs means that both programmes have significant revenue potential for Vectura. This is particularly true of VR315, for which Vectura has a profit-share agreement in the US market. Sandoz has made a significant investment in these programmes and has invested over $50m in manufacturing facilities for VR315 and VR632.
The €7.5m (£6.2m) milestone receipt from Boehringer Ingelheim in November 2008 endorses the strength of our technological capabilities, as Boehringer Ingelheim progresses development of its own proprietary products in the Vectura dry powder inhaler (DPI) device. Boehringer Ingelheim is one of the world's leading companies developing therapies to treat asthma and COPD, for which the majority of treatments are delivered by inhalation, with Spiriva® being the most prescribed COPD medicine worldwide. Milestones and equity payments received from Boehringer Ingelheim since April 2006 now total €37.5m (£31.2m) and additional milestones will be payable to Vectura for each product developed in the inhaler, as well as royalties on global sales.
In addition to the asthma/COPD market, there are a significant number of other areas where we expect local delivery of drug to the lung to be of benefit. Vectura has an active development group looking at new opportunities. We initiated a Phase II proof-of-concept study with VR496 in CF during the year and expect to be able to report the results of this trial in early 2010. We aim to advance this programme through clinical development towards commercialisation, allowing us the opportunity to retain a greater proportion of the value; something we increasingly seek to achieve in all of our licensing agreements and collaborations. It is our belief that the mucolytic and anti-inflammatory properties we expect to see with VR496 will also provide benefit to patients with airway diseases such as asthma and COPD. If the current study demonstrates these properties, we will look to partner VR496 for these significant markets while developing the CF indication ourselves.
Licensing activities for Vectura's non-respiratory assets continue. While still planning to out-license our Parkinson's disease programme, VR040, we have initiated a Phase IIb "at-home" study which we expect to report early in 2010.
Our facilities
Vectura's headquarters and development operations are in Chippenham, Wiltshire, with further laboratories in Nottingham and a device development facility in Cambridge. At a time when other companies are closing down facilities, we were honoured in April to have the Economic and Business Minister responsible for bioscience and pharmaceuticals, Ian Pearson MP, and Dr Clive Dix, Chairman of the BioIndustry Association, officially open our new 13,000 sq ft, state-of-the art facility in Chippenham. It is one of only a handful of facilities globally that has been specifically designed to manufacture inhaled products, enabling us to accelerate development projects. The facility will provide Vectura with additional space and the ability to produce later-stage clinical trial supplies, which will result in a more efficient business.
Our people
Our employees remain crucial to the success of Vectura and it is their skill and expertise that have enabled us to achieve our progress to date. We are committed to the development of a motivated and professional workforce in order to build a business that is constantly looking to innovate and evolve. On behalf of the Board, we thank all our staff for their hard work and continued support and commitment.
Outlook
Vectura has a broad and innovative development portfolio which combines mid and late-stage pharmaceutical products with earlier-stage opportunities addressing fast-growing market sectors.
Vectura benefits from a steady stream of revenues from products marketed by Baxter and a flexible development model. We are focused on our financial goal of becoming a sustainably cash-generative business following the receipt of the substantial milestone and royalty revenues from our partnered late-stage respiratory programmes. In the short-term we will continue with careful cash management and increase investment in our own proprietary development activities using both current revenue streams and our cash resources.
It is an important time in Vectura's development with Novartis advancing both NVA237 and QVA149 into Phase III development in the coming months and further good progress with our generic asthma/COPD programmes partnered with Sandoz expected.
In March 2009 we joined the FTSE 250 index of the London Stock Exchange, which we believe has helped to raise our profile within the investment community as well as increase our share trading volumes. We have a healthy pipeline of products in development and a number of innovative opportunities for future development and plan to continue to drive these forward diligently in order to grow shareholder value as we move towards becoming a specialty pharmaceutical company.
PRODUCT PIPELINE
Respiratory
NVA237 and QVA149 for chronic obstructive pulmonary disease (COPD)
NVA237 is a dry powder formulation for oral inhalation of glycopyrronium bromide, a long-acting muscarinic antagonist (LAMA) with a rapid onset of activity.
NVA237 was licensed to Novartis in April 2005 by Vectura and its co-development partner, Sosei Group Corporation (Sosei). Novartis intends to launch NVA237 as a once-daily monotherapy for COPD and as a combination with Novartis's once-daily, long-acting beta-agonist (LABA), indacaterol, which was filed for approval with the regulatory authorities as a monotherapy treatment for COPD at the end of 2008. The combination of NVA237 and indacaterol is known as QVA149.
COPD is a chronic obstruction of the airways which affects 210 million people worldwide and is projected to be the third leading cause of death by 2030. It is a progressive lung disease with symptoms including chronic bronchitis and/or emphysema, which slowly progresses and eventually leads to a largely irreversible loss of lung function. While there is no cure, bronchodilators such as LAMAs make breathing easier by enlarging the patient's airways, and are recognised in international guidelines as an integral part of the treatment for COPD.
To date, Vectura has received $15m and, under the terms of the agreement with Novartis, could receive up to $172.5m for achieving clinical, regulatory and commercialisation targets for both the monotherapy and combination product. In addition, royalties on product sales will be received for both products. If additional combination products are developed by Novartis using NVA237, then further milestones and royalties will be receivable.
QVA149 is one of the most advanced once-daily LAMA/LABA combinations in development and Vectura believes that it could be the first such combination to come to market for COPD. The dual activity of a muscarinic antagonist and a beta-adrenergic agonist promises to be a potent bronchodilator and, with convenient once-daily dosing, has the potential to improve compliance and address a large and unmet need for COPD sufferers.
Novartis has made substantial progress in the development of NVA237 and QVA149, with both due to start Phase III clinical trials in 2009. We also expect Novartis to present the Phase II QVA149 data during 2009.
Data from the Phase II NVA237 trial was presented at the annual congress of the European Respiratory Society (ERS) in Berlin in October 2008. The data demonstrate that NVA237 provides sustained 24-hour bronchodilation in patients with moderate-to-severe COPD and showed similar efficacy and duration of action to Spiriva® with the potential for a more rapid onset of action. In addition, studies lasting up to 28 days showed that NVA237 was safe and well-tolerated, with no clinically relevant adverse events.
Another important outcome from the ERS meeting in October 2008 was the publication of the tiotropium (Spiriva®) safety database from approximately 20,000 patients. This meta-analysis, which included the prospectively designed UPLIFT study (Understanding Potential Long-term Impacts on Function with Tiotropium), demonstrated the cardiovascular safety of tiotropium and, in our view, allays any cardiovascular safety concerns over this class of drug.
NDA submissions are expected to be filed for both NVA237 and QVA149 in 2011.
VR315 for asthma/COPD
Combination therapy for asthma is the biggest and fastest-growing sector of the asthma market, with annual sales of approximately $10bn.
VR315 is an inhaled combination therapy for asthma and COPD that is being jointly developed with Sandoz, the generics division of Novartis, using Vectura's GyroHaler® Dry Powder Inhaler ("DPI") device. Vectura licensed the European rights for VR315 to Sandoz in March 2006, in a deal worth up to €22.5m in milestones and development funding together with royalties on all products sold. Rights in the US were licensed to Sandoz in December 2006 in a profit-sharing agreement which includes the payment of up to $63m in milestones to Vectura. Sandoz has since stated that it has invested over $50m in manufacturing facilities for VR315 and VR632.
With more key respiratory drugs coming off patent over the coming years and with increasing pressure on the regulatory authorities to approve lower cost drugs, both programmes have significant financial upside for Vectura. Vectura received a €2.5m (£2.2m) milestone payment from Sandoz in April 2009 and expects to receive a further €7.5m in milestones from its EU collaboration, and up to $30m from its US collaboration prior to the launch of VR315 in these regions. Revenues will also be earned on all product sales in the EU and from a profit share in the US. Vectura will also earn a margin on the commercial manufacture and supply of GyroHaler® and retains rights for un-licensed territories.
VR632 for asthma/COPD
VR632 is a second inhaled combination therapy for asthma and COPD that is being jointly developed with Sandoz, and is delivered using GyroHaler®. Vectura licensed the European rights for VR632 to Sandoz in December 2007 in a deal worth up to €15.5m in milestones and development funding together with royalties on all products sold. Vectura will also earn a margin on the commercial manufacture and supply of GyroHaler® devices. Vectura retains rights for the US and other un-licensed territories.
Boehringer Ingelheim collaboration on respiratory medicines
Most treatments for asthma and COPD are delivered by inhalation. DPIs are increasingly the preferred choice for patients with these conditions and it is expected that DPIs will be used to deliver the majority of the drugs sold in these markets by 2011. Vectura believes that its device and formulation technologies are well placed to capture a significant market share.
In April 2006, Vectura agreed a non-exclusive, worldwide collaboration, development and licence agreement with Boehringer Ingelheim to develop a fully integrated, multi-dose DPI. The device will be available to Boehringer Ingelheim for the development and marketing of its proprietary respiratory medicines for the treatment of respiratory diseases such as asthma and COPD.
Boehringer Ingelheim is one of the world's leading companies developing therapies to treat asthma and COPD. Its COPD therapy Spiriva® is the most prescribed COPD medicine worldwide, with sales in excess of $3bn in 2008.
Vectura has received a total of €37.5m (£31.2m) in equity investment and milestone payments from Boehringer Ingelheim to date, the latest receipt being €7.5m (£6.2m) in November 2008. Boehringer Ingelheim will be responsible for further development, manufacturing and clinical trial use of the DPI with its proprietary compounds, as well as the commercialisation of these products. Vectura will receive development milestones and royalties on sales of each product marketed in the device. Our collaboration with Boehringer Ingelheim has added significantly to our intellectual property portfolio and provided Vectura with an excellent DPI platform to deliver further value from its inhaled therapy technologies through other collaborations.
VR496 for cystic fibrosis (CF) (with potential for asthma and/or COPD)
VR496 is being developed as an inhaled, locally acting treatment for CF, and has the potential to be developed as a therapy for patients with other airway diseases such as asthma and COPD. The active component of VR496 is heparin, a drug that has been approved worldwide as an injected or infused treatment for other indications.
Vectura has initiated a Phase II clinical study with VR496 in CF patients. If the data prove to be positive in CF, Vectura intends to progress the product for this indication. A significant literature database describes the multi-modal and complementary pharmacological properties of inhaled heparin that are relevant to the treatment of CF, asthma and COPD, with mucolytic, anti-inflammatory, bronchodilatory and anti-infective activity being particularly relevant. Vectura will look to find a partner for the larger asthma and COPD indications.
The European Medicines Evaluation Agency (EMEA) and US Food and Drug Administration (FDA) have granted VR496 orphan drug status.
Duohaler® for asthma/COPD
An undisclosed pharmaceutical company which had an exclusive agreement for the development, marketing and distribution in Europe of two Duohaler® products, has reviewed its portfolio of products following a recent acquisition. As a result of this review, the company is working to find a new partner for these projects and will continue to assist in the funding of the lead programme so that the development can proceed on schedule. The second Duohaler® project is currently on hold and will be reinitiated if interest is received from new partners.
£2.3m of milestone income generated from both of these projects, which was potentially repayable under certain circumstances, is no longer repayable and thus has been released from deferred income to revenue in the year.
The Duohaler® device provides advantages over some multi-dose DPIs. It has two separate drug reservoirs that feed two individual drug formulations to two separate metering chambers from which the drugs are delivered to the user in a single inhalation, avoiding co-formulation issues.
We believe that the Duohaler® lead product in development has the ability to capture an attractive share of the European and other generic markets and we look forward to the licensing discussions progressing.
Budesonide Clickhaler® for asthma in Japan
An undisclosed Japanese pharmaceutical company that had an exclusive licence to the Clickhaler® for use with budesonide in Japan has decided to no longer sell products in the respiratory market and has therefore returned all rights to Vectura, including access to the Phase III data generated to date. This product is now available for licensing to other third parties.
Other development products
VR040 for Parkinson's disease (PD)
VR040 is an inhaled, systemically acting product for the treatment of "off" episodes associated with advanced PD. The active ingredient in VR040, apomorphine hydrochloride, has been approved previously as an injectable formulation in Europe, and more recently in the US, for treating "off" episodes. VR040 is Vectura's formulation of apomorphine, delivered by inhalation using Vectura's proprietary DPI technology.
The EMEA has granted VR040 orphan drug status. Vectura is using the EMEA Scientific Advice procedure to progress the development of the product.
The successful results of a Phase IIa proof-of-concept clinical study for VR040 were reported in August 2006. In October 2007, Vectura announced successful completion of a second Phase II clinical study of VR040 in patients with PD. The study demonstrated that VR040 is safe and well-tolerated. Following treatment with VR040, patients successfully and rapidly recover from an induced "off" episode; this effect was also durable. Vectura believes that delivery of apomorphine by inhalation will allow patients to experience benefits beyond those offered by current products.
Vectura initiated a Phase II "at-home" study at the end of 2008 and intends to out-license VR040 before the start of Phase III trials.
VR147 for migraine
VR147 is an orally inhaled DPI formulation of a triptan that offers the potential to provide a rapid onset of action, and so provide early symptomatic relief for migraine sufferers. In April 2008, Vectura announced the successful completion of an early proof-of-concept study. The data demonstrated that VR147 is safe and well tolerated. Vectura is exploring out-licensing opportunities for VR147.
VR004 for erectile dysfunction (ED) and VR776 for premature ejaculation (PE)
Vectura is seeking licensing partners for these products. There is no expenditure in relation to these projects in the year to 31 March 2009 and no future expenditure will be incurred.
MARKETED PRODUCTS
ADVATE® for Haemophilia A
In 2000, Baxter was granted worldwide rights to use Vectura's stabilisation patents and has utilised the technology in its serum-free recombinant Factor VIII, ADVATE®. ADVATE® is indicated for the treatment of haemophilia A and is marketed worldwide by Baxter. Vectura receives royalties on sales of ADVATE®. Baxter sales of ADVATE® have increased to over US$1.5bn in 2008, compared to US$1.2bn in 2007.
There is strong demand for ADVATE®, and Baxter continues to differentiate the product with various dosage forms, making it easier for patients to administer higher doses from fewer vials and to reduce the total infusion time. Growth of ADVATE® sales has continued to exceed our expectations as patients switch from plasma-based and other competing products in Europe and the US. Baxter recently announced that it has established the leadership position in Japan for recombinant Factor VIII. We expect to see further growth from increased compliance, establishing prophylaxis as the standard of care and the global penetration of the therapy.
Extraneal® for peritoneal dialysis
Extraneal® is a peritoneal dialysis solution containing icodextrin, licensed to Baxter in 1996 and marketed by Baxter worldwide. The product has been launched in over 45 countries including, in 2003, the US and Japanese markets. Vectura receives royalties on the sales of Extraneal® in the US, Japan and the rest of the world.
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 following gynaecological and other abdominal surgery. It has been used for this purpose in Europe since 2000 and in the US since October 2006. Vectura signed a global licence deal with Baxter in December 2005 for the manufacture and distribution of Adept®.
Asmasal® and Asmabec® for asthma
Asmasal® and Asmabec® are Clickhaler® based products. Asmasal® contains salbutamol, a short-acting beta-2 agonist for the quick relief of asthma symptoms. Asmabec® contains beclomethasone, an inhaled steroid used as standard preventative therapy for asthma. Asmasal® and Asmabec® are marketed by UCB SA in the UK, France and Ireland. Clickhaler® is Vectura's proprietary reservoir DPI device.
Budesonide Clickhaler® and Formoterol Clickhaler® for asthma
These are Clickhaler® based products containing budesonide and formoterol respectively. Budesonide is a steroid used as standard preventative therapy for asthma. Formoterol is a long-acting beta-2 agonist with a fast onset of action and longer duration than salbutamol, benefiting sufferers with more severe symptoms. Mylan Inc, our licensing partner for these products, has received regulatory approvals for budesonide in Germany, The Netherlands and New Zealand; with regulatory approvals for formoterol received in Denmark, The Netherlands, South Africa and New Zealand. No further approvals are expected for these products in the near future. £0.9m of milestone revenue was released from deferred income in relation to these products during 2008/09.
Meptin Clickhaler® for asthma
Otsuka Pharmaceuticals, in Japan, has licensed the Clickhaler® technology from Vectura. The device is used to deliver its short-acting beta-2 agonist Meptin® (procaterol) for the quick relief of mild, intermittent asthma symptoms.
Other Clickhaler® opportunities
Vectura continues to explore licensing opportunities for Clickhaler® products in other countries. Vectura supplies the Clickhaler® devices to licensees and earns a margin on these device sales.
FINANCIAL REVIEW
Summary of results
The results for the year ended 31 March 2009 show total revenue of £31.2m (2007/08: £25.2m), a 24% increase on the previous year. The operating loss for the year was £20.9m (2007/08: £25.1m) after deduction of £12.1m (2007/08: £12.9m) of non cash amortisation and share option costs. The loss before tax was £19.6m (2007/08: £21.4m) and the loss after tax £16.7m (2007/08: £19.2m).
Revenue
In the 12 months to 31 March 2009, total revenue increased compared to the prior year by 24% to £31.2m. Revenue includes fee income from royalties, product licensing, technology licensing, development fees and device sales.
Royalties increased by 37% to £12.5m (2007/08: £9.1m) - 21% of this increase was due to increased product sales and the balance of 16% was due to favourable exchange movements. ADVATE® contributed 65% (£8.1m; 2007/08: £5.8m) of the royalties generated in the year. ADVATE® sales are continuing to grow and with current sales levels of approximately $1.5bn, Vectura is receiving a net royalty of just under 1% at these high levels of cumulative annual sales. Extraneal® contributed 27% or £3.4m; (2007/08: £2.5m) of royalties in the year and benefited from £0.4m of one-off revenues in the period. The majority of the remaining royalties were generated from Adept® with products delivered in Clickhaler® also contributing.
Product licensing revenues in the period were £4.2m (2007/08: £2.8m), all of which was released from deferred income, with £1m generated from VR315, £2.3m from Duohaler® and £0.9m from Clickhaler®. A further £0.9m is expected to be released from deferred income in relation to VR315 in 2009/10. 2009/10 revenues will also benefit from the €2.5m (£2.2m) milestone receipt on VR315 EU. We also believe that two additional milestone payments of $7.5m each could be generated on the initiation of the NVA237 and QVA149 Phase III studies.
Technology licensing revenues of £6.1m (2007/08: £2.9m) comprises £1.1m generated from a 2003 licence on Innovata technology and £5m released from deferred income in relation to the Boehringer Ingelheim milestones of €10m (£7.2m) received in December 2007 and €7.5m (£6.2m) milestone received in November 2008. A further £5.5m is expected to be released from deferred income in relation to these milestones in 2009/10, with the final £1.8m expected to be released in the year ending 31 March 2011.
Pharmaceutical Development Services (PDS) revenues were £6.6m, a 26% reduction from the £8.9m received in 2007/08. These revenues principally represent contractual development fees charged to licensing partners for work carried out during the period on Vectura's generic programmes. As previously reported, we expect these revenues to continue to decline as we complete our work on these generic programmes. The level of PDS revenues in the future will depend on new licensing deals. The development of inhalation products is a very specialist area. When a partner licenses one of our products, they frequently require Vectura's involvement in the continuing development of that product and Vectura continues to charge for these services as part of the licensing agreement.
Device sales revenue of £1.8m (2007/08: £1.5m) was derived from the sale of devices to licensees.
Gross profit
The gross profit in the period to 31 March 2009 was £27.3m, a £6.5m improvement on the prior year (£20.8m). Gross margin in the year to 31 March 2009 represents 88% of revenue (2007/08: 83%) with the improvement arising from the increased proportion of royalties and milestones earned during the year.
Research and development expenses
Total investment in research and development was £32.3m, a 9% increase on the prior year (£29.7m). Research and development costs include primarily clinical trial costs, salary costs for scientists and scientific support staff, intellectual property costs, laboratory running costs and depreciation. We expect our investment in this area to increase significantly as some of our key products and devices move to late-stage development, with 2009/10 investment likely to be approximately 25% in excess of the current year.
Other administrative expenses
Other administrative expenses for the period were £3.2m, in line with the previous year.
Investment income
Investment income of £3.6m (2007/08: £4.5m) for the period is expected to reduce significantly in 2009/10 due to the fall in interest rates. The Board operates an investment policy, under which the primary objective is to invest in a diverse portfolio of low risk cash or cash equivalent investments to safeguard the principal. These investments do not offer above-market rates of interest.
Loss after taxation and loss per share
The loss for the period after taxation was £16.7m (2007/08: £19.2m) giving a loss per ordinary share of 5.2p (2007/08: 6.1p).
Non-current assets
Non-current assets were £106.1m, compared with £117m on 31 March 2008, including goodwill (£49.6m), intangible assets (£52.2m), and property, plant and equipment (£3.5m).
Financial liability
Financial liabilities total £6.6m ($9.4m), which represents a liability to Royalty Securitization Trust in respect of a loan secured against US dollar denominated royalty streams. $9m was paid to Royalty Securitization Trust during the year ended 31 March 2009. The exchange loss recorded in the year on this liability is due to the depreciation of sterling against the US dollar. Vectura's exchange loss on this US dollar liability is naturally offset by royalty streams being received in US dollars. This loss is offset by the gains made on these income streams, the majority of which flow directly into the revenue line.
Deferred income
Deferred income relates to milestones received in cash but not yet recognised as revenue. The £10.4m to be recognised as part of revenue in later periods includes £0.9m for VR315, £7.3m relating to Boehringer Ingelheim and £2.2m relating to other licensing deals.
Cash flow
The net cash outflow from operating activities in the year was £0.7m compared to a net cash outflow of £1.5m in 2007/08. After investing and financing activities, the net cash outflow was £4.8m compared to a net inflow of £1.3m in 2007/08. At 31 March 2009, Vectura had cash and cash equivalents of £74m (31 March 2008: £78.8m).
Capital expenditure
Capital expenditure in the period was £1.6m (2007/08: £0.7m) and includes the expansion of our manufacturing facilities at Chippenham. These new facilities were completed on time and below the £2m originally budgeted as no contingencies were required.
Foreign exchange rates
The following foreign exchange rates were used on 31 March 2009:
£/$1.43 (31 March 2008: £/$1.99)
The following foreign exchange rates were the average for the year ended 31 March 2009:
£/$1.72 (31 March 2008: £/$2.01)
Consolidated income statement
for the year ended 31 March 2009
|
|
Note |
2009 £m |
2008 £m |
|
|
|
|
|
|
Revenue |
3 |
31.2 |
25.2 |
|
|
|
|
|
|
Cost of sales |
(3.9) |
(4.4) |
|
|
|
|
----------- |
----------- |
|
Gross profit |
|
27.3 |
20.8 |
|
|
|
|
|
|
Research and development expenses |
|
(32.3) |
(29.7) |
|
|
|
|
|
|
Other administrative expenses |
|
(3.2) |
(3.0) |
|
Amortisation |
|
(10.2) |
(10.2) |
|
Share-based compensation |
|
(1.9) |
(2.7) |
|
|
|
----------- |
----------- |
|
Total administrative expenses |
|
(15.3) |
(15.9) |
|
Share of loss of associate |
|
(0.6) |
(0.3) |
|
|
|
----------- |
----------- |
|
Operating loss |
|
(20.9) |
(25.1) |
|
|
|
|
|
|
Investment income |
4 |
3.6 |
4.5 |
|
Finance costs |
4 |
(2.3) |
(0.8) |
|
|
|
----------- |
----------- |
|
Loss before taxation |
|
(19.6) |
(21.4) |
|
|
|
|
|
|
Taxation |
|
2.9 |
2.2 |
|
|
|
----------- |
----------- |
|
Loss after taxation attributable to equity holders of the Company |
|
(16.7) |
(19.2) |
|
|
|
---------- |
---------- |
|
Loss per ordinary share basic and diluted |
5 |
(5.2p) |
(6.1p) |
|
|
|
---------- |
---------- |
All results are derived from continuing activities.
Consolidated balance sheet
at 31 March 2009
|
|
Note |
2009 £m |
2008 £m |
|
|
|
|
|
|
Assets |
|
|
|
|
Goodwill |
|
49.6 |
49.6 |
|
Intangible assets |
|
52.2 |
62.4 |
|
Property, plant and equipment |
|
3.5 |
3.4 |
|
Investments in associates and joint ventures |
6 |
- |
0.9 |
|
Trade investments |
6 |
0.4 |
0.3 |
|
Other receivables |
|
0.4 |
0.4 |
|
|
|
----------- |
----------- |
|
Non-current assets |
|
106.1 |
117.0 |
|
|
|
----------- |
----------- |
|
Inventories |
|
0.1 |
0.2 |
|
Trade and other receivables |
7 |
6.4 |
6.0 |
|
Cash and cash equivalents |
|
74.0 |
78.8 |
|
|
|
----------- |
----------- |
|
Current assets |
|
80.5 |
85.0 |
|
|
|
----------- |
----------- |
|
Total assets |
|
186.6 |
202.0 |
|
|
|
----------- |
----------- |
|
Liabilities |
|
|
|
|
Trade and other payables |
8 |
(14.7) |
(10.0) |
|
Deferred income |
9 |
(8.6) |
(5.5) |
|
Financial liabilities |
10 |
(1.2) |
(0.9) |
|
|
|
----------- |
----------- |
|
Current liabilities |
|
(24.5) |
(16.4) |
|
|
|
----------- |
----------- |
|
Deferred income |
9 |
(1.8) |
(8.2) |
|
Financial liabilities |
10 |
(5.4) |
(7.9) |
|
|
|
----------- |
----------- |
|
Non-current liabilities |
|
(7.2) |
(16.1) |
|
|
|
----------- |
----------- |
|
Total liabilities |
|
(31.7) |
(32.5) |
|
|
|
----------- |
----------- |
|
Net assets |
|
154.9 |
169.5 |
|
|
|
---------- |
---------- |
|
Equity |
|
|
|
|
Share capital |
11 |
0.1 |
0.1 |
|
Share premium |
|
77.2 |
77.0 |
|
Special reserve |
|
8.2 |
8.2 |
|
Other reserve |
|
124.9 |
124.9 |
|
Share-based compensation reserve |
|
7.6 |
5.7 |
|
Retained loss |
|
(63.1) |
(46.4) |
|
|
|
----------- |
----------- |
|
Total equity |
|
154.9 |
169.5 |
|
|
|
---------- |
---------- |
The financial statements for the year ended 31 March 2009 were approved and authorised for issue by the Board of Directors on 18 May 2009 and were signed on its behalf by:
|
Dr C P Blackwell Director |
A P Hyland Director |
Consolidated cash flow statement
for the year ended 31 March 2009
|
|
|
2009 £m |
2008 £m |
|
|
|
|
|
|
Operating loss |
|
(20.9) |
(25.1) |
|
Depreciation |
|
1.6 |
1.6 |
|
Amortisation |
|
10.2 |
10.2 |
|
Share-based compensation |
|
1.9 |
2.7 |
|
Decrease in inventories |
|
0.1 |
- |
|
(Increase)/decrease in receivables |
|
(0.2) |
2.2 |
|
Increase in payables |
|
4.6 |
1.9 |
|
(Decrease)/increase in deferred income |
|
(3.3) |
2.4 |
|
Exchange movements |
|
1.8 |
- |
|
Other non-cash movements |
|
0.6 |
0.4 |
|
|
|
----------- |
----------- |
|
Net cash outflow from operations |
|
(3.6) |
(3.7) |
|
Taxation paid |
|
(0.4) |
(0.1) |
|
Research and development tax credits |
|
3.3 |
2.3 |
|
|
|
----------- |
----------- |
|
Net cash outflow from operating activities |
|
(0.7) |
(1.5) |
|
|
|
----------- |
----------- |
|
Cash flows from investing activities |
|
|
|
|
Interest received |
|
3.6 |
4.5 |
|
Purchase of property, plant and equipment |
|
(1.6) |
(0.7) |
|
Receipts from sale of property, plant and equipment |
|
- |
1.3 |
|
|
|
----------- |
----------- |
|
Net cash inflow from investing activities |
|
2.0 |
5.1 |
|
|
|
----------- |
----------- |
|
Net cash inflow before financing activities |
|
1.3 |
3.6 |
|
|
|
----------- |
----------- |
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issue of ordinary shares |
|
0.2 |
4.1 |
|
Payment of financial liabilities |
|
(5.9) |
(5.2) |
|
Payment of finance lease liabilities |
|
- |
(0.4) |
|
Interest paid on financial liabilities |
|
(0.4) |
(0.8) |
|
|
|
----------- |
----------- |
|
Net cash outflow from financing activities |
|
(6.1) |
(2.3) |
|
|
|
----------- |
----------- |
|
(Decrease)/increase in cash and cash equivalents |
|
(4.8) |
1.3 |
|
Cash and cash equivalents at beginning of period |
|
78.8 |
77.5 |
|
|
|
----------- |
----------- |
|
Cash and cash equivalents at end of period |
|
74.0 |
78.8 |
|
|
|
---------- |
---------- |
Consolidated statement of changes in equity
for the year ended 31 March 2009
|
|
Share capital |
Share premium |
Special reserve |
Other reserve |
Share- based compen- sation reserve |
Retained loss |
Total equity |
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
At 1 April 2007 |
0.1 |
72.9 |
8.2 |
124.9 |
3.0 |
(27.2) |
181.9 |
|
Loss for the year |
- |
- |
- |
- |
- |
(19.2) |
(19.2) |
|
Share-based compensation |
- |
- |
- |
- |
2.7 |
- |
2.7 |
|
Exercise of share options |
- |
0.6 |
- |
- |
- |
- |
0.6 |
|
Shares issued |
- |
3.5 |
- |
- |
- |
- |
3.5 |
|
|
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
|
At 31 March 2008 |
0.1 |
77.0 |
8.2 |
124.9 |
5.7 |
(46.4) |
169.5 |
|
Loss for the year |
- |
- |
- |
- |
- |
(16.7) |
(16.7) |
|
Share-based compensation |
- |
- |
- |
- |
1.9 |
- |
1.9 |
|
Exercise of share options |
- |
0.2 |
- |
- |
- |
- |
0.2 |
|
|
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
----------- |
|
At 31 March 2009 |
0.1 |
77.2 |
8.2 |
124.9 |
7.6 |
(63.1) |
154.9 |
|
|
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
---------- |
Notes to the financial information
1. Basis of preparation
The financial information included in this statement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information has been extracted without material adjustment from the consolidated financial statements of Vectura Group plc for the year ended 31 March 2009, which have been audited. The auditors have made reports under section 235 of the Companies Act 1985 in respect of the statutory consolidated accounts for the years ended 31 March 2009 and 31 March 2008. Their reports were unqualified within the meaning of section 262(1) of the Companies Act 1985 and did not contain a statement under section 237 (2) or (3) of that Act.
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 2008 have been delivered to the Registrar of Companies pursuant to section 242 of the Act, whereas those for the year ended 31 March 2009 will be delivered following the Annual General Meeting.
The Group's Annual Report and Accounts will be sent to shareholders in June 2009 and will be available on our website www.vectura.com.
Risks and uncertainties
The key business risks facing Vectura on a stand-alone basis remain consistent with those set out in the Annual Report & Accounts for the year ended 31 March 2008, 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, competition and intellectual property risk, economic risk and financial risk (cash flow, credit and exchange rates). 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 and Vectura has a $10m US dollar financial liability as at 31 March 2009. 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 £74m of cash and cash equivalents as at 31 March 2009. 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 May 2009.
After making enquiries, 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. The policies have been consistently applied to all periods presented. Full details of the Group's accounting policies can be found in the 2007/08 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 which fall within the Group's sole ordinary activity, the development of pharmaceutical products.
|
Revenue by category: |
2009 £m |
2008 £m |
|
|
|
|
|
Royalties |
12.5 |
9.1 |
|
Product licensing |
4.2 |
2.8 |
|
Technology licensing |
6.1 |
2.9 |
|
Pharmaceutical development services |
6.6 |
8.9 |
|
Device sales |
1.8 |
1.5 |
|
|
----------- |
----------- |
|
|
31.2 |
25.2 |
|
|
---------- |
---------- |
4. Investment income and finance costs
|
2009 £m |
2008 £m |
|
|
Interest income: |
|
|
|
Interest receivable on bank deposits and similar income |
3.6 |
4.5 |
|
|
|
|
|
Finance costs: |
|
|
|
Imputed interest charge on financial liabilities |
(0.4) |
(0.8) |
|
Exchange rate loss on financial liability |
(3.7) |
- |
|
Foreign exchange gains |
1.8 |
- |
|
|
----------- |
----------- |
|
|
(2.3) |
(0.8) |
|
|
---------- |
---------- |
5. Loss per ordinary share
The calculation of loss per share is based on the following losses and number of shares:
|
|
2009
|
2008
|
|
|
|
|
|
Loss for the year (£m) |
(16.7) |
(19.2) |
|
Weighted average number of ordinary shares (No. millions) |
320.6 |
315.8 |
|
Loss per ordinary share |
(5.2p) |
(6.1p) |
|
|
---------- |
---------- |
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 and warrants would have the effect of reducing the loss per ordinary share, and is therefore not dilutive.
6. Trade investments
The Group holds two investments with a value of £0.4m (2007/08: £0.3m). An investment in an unquoted company and a shareholding in Orexo AB, a Swedish listed company. The Orexo AB investment is as a result of the disposal of Vectura's shareholding in PharmaKodex Limited in February 2009. PharmaKodex Limited was equity accounted as an associate for the period to February 2009 and Vectura's share of the losses for that period was £0.6m. The carrying value of PharmaKodex Limited was £0.9m at 31 March 2008 and after consolidation of the losses for the period to February 2009 was reduced to £0.3m. Vectura is also entitled to deferred and contingent consideration from Orexo AB based on the future financial performance of PharmaKodex Limited.
7. Trade and other receivables
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Trade receivables |
1.4 |
2.9 |
|
Other receivables |
0.3 |
- |
|
Prepayments and accrued income |
4.0 |
2.8 |
|
VAT recoverable |
0.7 |
0.3 |
|
|
----------- |
----------- |
|
|
6.4 |
6.0 |
|
|
----------- |
----------- |
8. Trade and other payables
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Trade payables |
3.2 |
1.9 |
|
Other taxes and social security costs |
- |
0.4 |
|
Other payables |
1.6 |
0.4 |
|
Accruals |
9.9 |
7.3 |
|
|
----------- |
----------- |
|
|
14.7 |
10.0 |
|
|
----------- |
----------- |
9. Deferred income
Deferred income relates to amounts received under product licensing agreements.
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Amounts due within one year |
8.6 |
5.5 |
|
Amounts due in more than one year |
1.8 |
8.2 |
|
|
----------- |
----------- |
|
|
10.4 |
13.7 |
|
|
----------- |
----------- |
10. Financial liabilities
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
At 1 April |
8.8 |
14.0 |
|
Utilised |
(5.9) |
(5.2) |
|
Exchange rate adjustment |
3.7 |
- |
|
|
----------- |
----------- |
|
At 31 March |
6.6 |
8.8 |
|
|
---------- |
---------- |
|
|
2009 £m |
2009 £m |
|
|
|
|
|
Amounts due within one year |
1.2 |
0.9 |
|
Amounts due in more than one year |
5.4 |
7.9 |
|
|
----------- |
----------- |
|
At 31 March |
6.6 |
8.8 |
|
|
---------- |
---------- |
The financial liability relates to $10m due to Royalty Securitization Trust I which is secured against certain royalty streams, the majority of which are received in US dollars.
The provision as at 31 March 2009 of £6.6m ($9.4m) is based on the total future discounted minimum payments due excluding an imputed interest charge of £0.4m ($0.6m).
The exchange rate used at 31 March 2009 was £/$1.43 (31 March 2008: £/$1.99).
11. Share capital
|
|
2009 |
|
2008 |
|
|
|
£m |
No.'000 |
£m |
No.'000 |
|
Authorised: |
|
|
|
|
|
Ordinary shares of 0.025p each |
0.1 |
441,200 |
0.1 |
441,200 |
|
Redeemable preference shares of £1 each |
- |
34 |
- |
34 |
|
|
----------- |
----------- |
----------- |
---------- |
|
Allotted, called up and fully paid: |
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of 0.025p each: |
|
|
|
|
|
At 1 April |
0.1 |
319,511 |
0.1 |
314,518 |
|
Issued to investors |
- |
- |
- |
3,628 |
|
Issued to Share Investment Plan |
- |
919 |
- |
123 |
|
Issued on exercise of share options |
- |
600 |
- |
1,242 |
|
|
----------- |
----------- |
----------- |
----------- |
|
At 31 March |
0.1 |
321,030 |
0.1 |
319,511 |
|
|
----------- |
----------- |
----------- |
----------- |
|
Redeemable preference shares of £1 each: |
|
|
|
|
|
At 1 April and 31 March |
- |
34 |
- |
34 |
|
|
----------- |
----------- |
----------- |
----------- |
Between 1 April 2008 and 31 March 2009 the Company issued 599,796 (2008: 1,241,972) ordinary shares of 0.025p each on the exercise of employee share options at an average exercise price of 35.8 pence per share (2008: 49.4 pence).
12. Related party transactions
Remuneration of key management personnel
|
|
2009 |
2008 |
|
|
£m |
£m |
|
|
|
|
|
Short-term employee benefits |
1.1 |
1.0 |
|
Post-employment benefits |
0.1 |
0.1 |
|
Share-based payments |
0.5 |
0.7 |
|
|
----------- |
---------- |
|
|
1.7 |
1.8 |
|
|
----------- |
----------- |
There are no other related party transactions.
Directors' responsibility statement
We confirm to the best of our knowledge:
1. 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
2. the management report, which is incorporated into the Directors' report, 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 they face.
Related Shares:
VEC.L