Vectura & Sandoz Revise VR315 Agreement

Vectura & Sandoz Revise VR315 Agreement

Vectura to receive $9.5m payment and up to $25m loan facility

Chippenham, UK - 18 March 2010: Vectura Group plc (LSE: VEC) ("Vectura"), the specialty pharmaceutical company, announces today that it has agreed with Sandoz AG to take full control of the US development and commercialisation of VR315, its combination product for asthma/COPD. Good progress continues to be made with the development of VR315. In Europe, there is no change to the agreement signed in April 2006, and Sandoz will continue to be fully responsible for the development, manufacture and commercialisation of the product.

Under the revised agreement, Vectura regains full rights and responsibilities for the development and commercialisation of VR315 in the US and is released from its profit share obligations. The reacquisition of full control of this important product in the US is part of Vectura's strategy to become a cash-generative specialty pharmaceutical company, and VR315 will form the cornerstone of Vectura's nascent US operations.

Vectura will receive an additional payment of $9.5m from Sandoz in Q2 2010. This follows a $6m milestone received in August 2009 and $2m received in 2006. Potential further payments to Vectura may be generated under the revised agreement. Additionally, Sandoz will put in place a loan facility of up to $25m to facilitate Vectura's development and commercialisation of VR315 in the US.

Branded combination dry powder inhaler (DPI) therapy is the biggest sector of the respiratory market, with annual sales in excess of $10bn, and these products have the potential to provide a large value opportunity as generics or branded generics. There is increasing pressure to provide innovative medicines that are effective and affordable to more patients. Developing DPI products requires the integrated development of both formulation and device, which is Vectura's area of expertise.

Dr Chris Blackwell, Chief Executive of Vectura, commented:

"Vectura's strategy is to develop and commercialise products in the US. Together with Sandoz's partnership in Europe, VR315 has the potential to be a significant new product in the DPI market. Regaining complete ownership of the VR315 US programme is in line with this strategy and offers Vectura significant financial advantages. We are confident that we have the high level of expertise required to develop and successfully commercialise inhaled products, and with a robust balance sheet, we believe we have the ability to gain an enlarged share of a major market opportunity."

Chris Blackwell and Chief Financial Officer, Anne Hyland, will host an analyst/investor conference call today at 7.45 a.m. GMT. For further details please contact Juliet Edwards at Financial Dynamics on +44 (0)20 7269 7125 or via email on [email protected]

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About Vectura

Vectura Group plc is a company 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 Novartis, Sandoz (the generics arm of Novartis), Baxter, GlaxoSmithKline (GSK), Mylan and Otsuka. For further information, please visit Vectura's website at www.vectura.com

About VR315 and the European collaboration

VR315 is an inhaled combination therapy for asthma and COPD that is being jointly developed in Europe 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. Sandoz has invested over $50m in the VR315 manufacturing facilities.

Under the EU collaboration Vectura received a €2.5m (£2.2m) milestone payment from Sandoz in April 2009 and expects to receive a further €7.5m in milestones prior to the launch of VR315. Revenues will also be earned on all product sales in the EU. In addition, Vectura earns a margin on the commercial manufacture and supply of GyroHaler® and retains rights for all un-licensed territories.

About VR632

VR632 is a second inhaled combination therapy for asthma and COPD that is being jointly developed with Sandoz in Europe, 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.

About GyroHaler® - "Passive" DPI device

GyroHaler® is a novel, cost-effective, multi-unit dose DPI device designed to deliver locally acting drugs to the lung. It is compact and easy to use with a small number of moulded parts, facilitating short device development times and competitive manufacturing costs. The device contains up to 60 doses and is disposable after use. It is designed to have competitive aerosolisation characteristics and to provide excellent drug protection from moisture and light using sealed foil blisters. GyroHaler® has the potential to deliver respiratory products in an efficient and patient-friendly manner.

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.