Hikma Pharmaceuticals (HIK), and partner Vectura (VEC), are on the wrong end of the US Food and Drug Administration (FDA) this morning as their bid to challenge GlaxoSmithKline’s asthma combatant hegemony hits another hurdle. The second pushback from the FDA, less than nine months after the US agency found an issue in the clinical endpoint study, sees both companies’ shares trade lower, although Vectura has been hit harder than its larger counterparty, reflecting the importance of developing an alternative to GSK’s Advair on the business. Hikma’s size and pipeline, however, provides some insulation from today’s announcement which sees their shares hold just offside.

The relatively inconspicuous move lower for Hikma, in the grand scheme of things, may be surprising given the longevity of the new proposal – with no fresh clinical data submission expected until 2019 – although it seems management were pre-empting such a proposal from the FDA given the new clinical study has already been comprehensively prepared for (with patient enrolment in the study expected in the next few weeks). Instead, investors may be waiting for Wednesday’s announcement of full-year results to evaluate just how much of a financial impact this will end up having over the coming year.

For Vectura, on the other hand, a fresh setback in their bid to bloody the nose of larger rivals has seen previously loyal shareholders jump ship. Having already seen shares fall as much as 42% from their 2018 highs, waiting a further 12 months to receive any further news on the development of the Advair alternative – let alone whether that news is positive or negative – is too much of an endeavour for many to undertake. Whether the Wiltshire-based company can maintain its partnership with Hikma will also be of key concern to both parties.

Henry Croft, Research Analyst, 12 March 2018