Vectura Group Plc

Vectura Group Plc (LON: VEC) is a research and development company related to the inhaled formulation, development capabilities and devices.

Financial Highlights – Financial Year 2019 (31^st December 2020, £, million)

(Source: Annual Report, Company Website)
 
For the financial year ending 31^st December 2019, driven by an increase in the revenue from product supply by 34.3 per cent for the period, the company’s revenue surged by 11.1 per cent to GBP 178.3 million as against GBP 160.5 million in FY2018. Due to the higher cost of sales for the period, the gross profit declined by 3.6 per cent from GBP 98.9 million in FY2018 to GBP 95.3 million in the financial year 2019. In the financial year 2019, the adjusted EBITDA increased by 11.3 per cent to GBP 43.4 million from an adjusted EBITDA of GBP 39 million in FY2018. The adjusted EBITDA margin remained flat at 24.3 per cent for the period. The company reported an operating loss of GBP 27 million in the financial year 2019 versus an operating loss of GBP 105.4 million in FY2018. The basic loss per share stood at 3.4 pence in the financial year 2019 versus a basic loss per share of 13.2 pence in FY2018. The group’s cash balance stood at GBP 74.1 million in FY2019 versus GBP 108.2 million in FY2018.
 
Share Price Performance

Daily Chart as of March 20^th, 2020, before the market close (Source: Thomson Reuters)

Vectura Group Plc shares were trading at GBX 68.569 at the time of writing before the market close (at 1:45 PM GMT) on 20^th March 2020 and up by 1.89% versus the previous day closing price. Stock's 52 weeks High is GBX 102.24 and Low is GBX 59.10.

Valuation Methodology

*Peers: Dechra Pharmaceuticals Plc, ECO Animal Health Group Plc, ConvaTec Group Plc and UDG Healthcare Plc.

Conclusion
The company had shown good top-line performance in the financial year 2019. The company expects growth to continue from flutiform partner in-market sales in the financial year 2020. As the company moves towards a development services model, the revenues from development services expected to rise. Due to high barriers in entry and exit, the company faces less competition and is able to capture large market portion. The company remained a cash generative in the current financial period due to focused investment prioritisation, and tight financial management approach opted by the company. In FY2019, the company’s adjusted EBITDA improved, mainly driven by increased revenue, high supply margin and low expenditure on R&D. The group doesn’t see any impact on the supplies, due to COVID-19 outbreak.

Based on decent prospects and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 66.58 (as on 20^th March 2020, before the market close at 11:05 AM GMT) with lower double-digit upside potential based on 13.20x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.). 

Amryt Pharma Holdings Ltd

Amryt Pharma Holdings Ltd (LON: AMYT) is a biopharmaceutical company focused on delivering and developing new treatments to enhance the lives of orphan and rare diseases patients.

Trading Update (9 months period ending 30^th September 2019)
Amryt Pharma Holdings released a trading update for the nine-months period ended 30 September 2019. From the completion of acquisition with Aegerion Pharmaceuticals, Inc, the company now has two commercial-stage assets, namely, Myalept® / Myalepta® (metreleptin) and Juxtapid® / Lojuxta® (lomitapide) and infrastructure in place through which the group is commercialising these assets in EMEA, LATAM, and North America. On a proforma basis, the combined company’s revenue for the nine-month period to 30 September 2019 increased by 19.7% to $113.1 million as compared with the corresponding period of the last year. In Juxtapid®/ Lojuxta® (lomitapide), the company has generated revenue of $51.1 million in 9M FY2019, an increase of 6.5% from the $48 million in 9M FY18. For the nine-month period to 30 September 2019, the revenue was $61.7 million from Myalept® / Myalepta® (metreleptin), an increase of 34.7% against the same period last year. In metreleptin, the significant growth indicated the rollout of Myalepta® in Europe following the consent of the product by the European Medicines Agency (EMA) in the third quarter of 2018. On 31st October 2019, the company had cash in hand of around US$61.2 million (unaudited).

Share Price Performance

Daily Chart as of March 20^th, 2020, before the market close (Source: Thomson Reuters)

Amryt Pharma Holdings Ltd shares were trading at GBX 99.95 at the time of writing before the market close (at 1:52 PM GMT) on 20^th March 2020 and up by 5.21% versus the previous day closing price. Stock's 52 weeks High is GBX 143.00 and Low is GBX 69.90.

Valuation Methodology


*Peers: Corline Biomedical AB, N4 Pharma Plc, Shield Therapeutics Plc and Marinomed Biotech AG.
*Currency exchange rate taken for 1 EUR = 0.90878 GBP.

Conclusion
 
The company has shown decent business performance in the first nine months of the financial year 2019. The top-line performance has improved for the period. The company has evolved with a single asset in EMEA (through the acquisition of Aegerion), to become an international biopharmaceutical group with a commercial infrastructure across North America, EMEA and LATAM. On a proforma basis, the combined revenues were increased from the same period in 2018. The company will continue to deliver decent business performance in the near term. The company is on track to implement the strategy of becoming an international leader in the orphan and rare disease space. In 2020, the company anticipates good progress in financial performance.
 
Based on the decent fundamental prospects and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation at the closing price of GBX 95 (as on 19^th March 2020) with single-digit upside potential based on 13.57x NTM EV/Sales (approx.) on FY20E sales (approx.).
 
*The “Speculative Buy” recommendation is valid for the current price as covered in the report (as on 20^th March 2020).
*All forecasted figures and Peer information have been taken from Thomson Reuters.

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