Global development programme with Mundipharma

Vectura Group plc

Global development programme with Mundipharma for pMDI inhaled triple therapy (VR2076) for asthma and COPD

Chippenham, UK - 23 December 2016: Vectura Group plc (LSE: VEC) ("the Group"), an industry-leading device and formulation business for inhaled airways disease, today announces that it has signed a development and licence agreement with Mundipharma International Corporation Limited and a US independent associated company  as the global development and commercialisation partner for the VR2076 (previously coded SKP-2076) pressurised Metered Dose Inhaler ("pMDI") ICS/LABA/LAMA triple programme.

In December 2015, the companies entered into a feasibility and option agreement and following successful completion of the feasibility work, which Vectura was responsible for, Mundipharma and the US associated independent company have now confirmed they will exercise the option to develop and commercialise VR2076 initially in asthma. The exercise of this option triggers a payment to Vectura of €1.5 million. The Group's R&D investment guidance for 2016 and 2017, provided recently in its interim results statement in November, remains unchanged.

Further total potential milestone payments up to €46.5 million are receivable linked to development, regulatory and launch progress of the programme as well as royalties on any future net sales of the product. The royalty rate on this novel product development programme, where Vectura has been responsible for the formulation development, is initially around a mid-single digit percentage but could increase depending on sales.

This agreement also includes the potential for further development of the triple combination treatment for chronic obstructive pulmonary disease ("COPD"). If Mundipharma decides to develop the programme in COPD, Vectura is eligible for further potential milestones linked to the regulatory progress of the programme up to €20.0 million as well as royalties on any future net sales of the product. The royalty rate on net sales for the COPD indication product would be the same as the asthma indication product.

In addition, Vectura will also receive one-off undisclosed sales milestones should net sales of both the asthma and COPD products achieve certain predetermined levels.

The first regulatory filings of VR2076 are planned in the EU for late 2022/early 2023.

The respiratory market, worth over $40 billion[1] in 2015, is expected to continue to grow, with current estimates up to 2025[2] predicting low single digit percentage growth. Within this, the dynamics of the classesof products are forecast to change significantly with further generic penetration of core classes such as ICS/LABA and LAMA and newer classes such as LAMA/LABA (dual bronchodilators), triple therapies and biologics expected to gain momentum. The first COPD triple (LABA/LAMA/ICS) is expected to launch in 2017[3] with the first asthma triple products expected to launch in 2019/20. Free triple therapies (ICS/LABA & LAMA or LAMA/LABA & ICS) are already used to a large extent for severe COPD and asthma patients today and oncethe fixed-dose triple combination is available, it is expected to grow into a class with a market size of $3-5bn by 2025[4].

VR2076 (LABA/LAMA/ICS)

VR2076 is a natural extension of the flutiform product and is a fixed dose daily combination long-acting beta2-adrenergic agonist (LABA), long-acting muscarinic antagonist (LAMA) and an inhaled corticosteroid (ICS) in a pMDI.

James Ward-Lilley, Chief Executive of Vectura, commented:

"This agreement extends our relationship with Mundipharma by building on the existing flutiform collaboration and, along with the Novartis QVM149 DPI programme, increases the Group's exposure to the important emerging triple combination class. Fixed combination triple therapy treatment is expected to develop strongly and is likely to take significant share from both existing use of multiple "free combination" treatments as well as from the large volume of ICS/LABA combination treatment currently used. The recent changes to the GOLD guidelines in November highlight the importance of a triple therapy in asthma given the likelihood of reduced future usage of ICS in COPD patients."

This announcement includes inside information

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About Vectura

Vectura, a FTSE250 company listed on the London Stock Exchange (LSE: VEC), is an industry-leading inhaled airways disease focused business with proprietary formulation and devices across DPI, pMDI and smart nebulisation platforms. With our extensive range of technologies, capabilities and collaborations, we believe we can become a leader in the development of inhalation products, increasing our ability to help patients suffering from respiratory diseases. In June 2016 Vectura completed a merger with Skyepharma PLC.

Vectura has seven inhaled, four non-inhaled and ten oral products marketed by partners with growing global royalty streams, and a portfolio of drugs in clinical development, a number of which have licence agreements with several global pharmaceutical and biotechnology companies including Hikma, Novartis, Sandoz, Mundipharma, Kyorin, Baxter, GSK, UCB, Ablynx, Grifols, Chiesi, Almirall, Janssen, and Tianjin KingYork.

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.