Vectura Group Plc – Offering Tailored Inhalation Services

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

The Company will release interim results on 15 September 2020.

Recent News

On 7 July 2020,Vectura Group announced the approval of Enerzair^® Breezhaler^® (QVM149), which used Vectura's formulation IP. The regulatory approval in Europe triggered $5 million, and Japanese approval triggered $1.25 million payment to Vectura from Novartis.

Update on Trading Performance (27 May 2020)

The Company made a decent start to the financial year 2020 with development of services activities and product supply as per schedule. VEC pleased by a recent positive opinion by CHMP (Committee for Medicinal Products for Human Use) for Enerzair® Breezhaler® (QVM149). The Group remained focused on maintaining the health and safety of employees and carried supply chain and product development activities as planned with strict hygiene protocols and social distancing. The demand for the products was maintained at expected levels, and the Company was working closely with suppliers to monitor interruptions in the supply chain. Despite the imposed travel restrictions, the Group showedmomentum in the deal pipeline.  The Company has a robust balance sheet with RCF of £50 million and minimal debt to tackle the impact of covid-19.

Share Price Performance


Daily Chart as of August 10, 2020, before the market close (Source: Refinitiv,Thomson Reuters)
 

Vectura Group Plc shares were trading at GBX 111.60 at the time of writing before the market close (at 9:45 AM GMT+1) on 10 August 2020 and up by 0.36% versus the previous day closing price. Stock 52 week High and Low were GBX 115.00 and GBX 59.10, respectively.

From the technical standpoint, 14-day RSI is currently in an overbought zone, which means the stock price could decline in the short term.

Key Risks

The Group has to comply per regulations with multiple regulatory authorities, failure to do so will result in regulatory, legal and accounting risks. Any delay in delivery of new medicines and pipeline; failure to meet ethical requirements or regulatory for medicine approval or development, could result in medicine pipeline risks.

Valuation Methodology



Conclusion

The Group made a decent start to the financial year 2020, with decent product supply and development services. Due to imposed travel restriction, the operational and financial performance impacted for the short-term period. With the increased number of covid-19 cases, the Group has put a hold or suspended major growth projects. Moreover, the Company’s share price is trading near its 52-week high, which raises doubt over its upside potential. The Company’s Price/Cash flow and EV/EBITDA multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Based on the risks associated and support from valuation done using the above method, we have given a “Sell” recommendation at the current price of GBX 115.00 (as on 10 August 2020, before the market close at 1:48 PM GMT+1) based on 19.20x Price/NTM Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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