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Shares in Vectura are down 11% this morning after publication of interim results. Whilst the share price reaction could be pinned on news of a sharply wider pre-tax loss it may in fact be due to a downgraded Risk & Uncertainties statement, buried half way through the report before the financial statements.
Back in May, partner Hikma Pharmaceuticals (HIK) received a Complete Response Letter (CLR), classified as ‘major’, from the US Food and Drug Administration (FDA). This was regarding its new drug application (NDA) for a generic version of GSK’s Advair Diskus treatment for asthma in the US. A major setback that saw both VEC and HIK shares fall by around 10%.
Only last month (17 Aug) HIK said the pair have had “constructive discussions with the FDA and have been able to clarify and resolve a number of the questions raised. The discussions with the FDA have confirmed the initial assessment that there are no material issues regarding the substitutability of the proposed device. We are in ongoing discussions with the FDA to address the remaining questions and will provide a more detailed update to the market as soon as we are able to do so.”
Prior to that, VEC had only highlighted the risks attached to the drug as “Disruption to the launch of VR315 (US)“.
Today’s results, however, have seen this formally downgraded to “Issues raised by the US FDA in their Complete Response Letter for VR315 (US) are not resolved. Failure to resolve these issues at all or in a timely manner will result in a loss of potential future revenues for the Group as well as additional funds for investment.”
While its says that both it and partner Hikma Pharmaceuticals are “confident the issues raised in the CRL will be addressed and the product approved as an AB rated substitutable product. We expect to be able to confirm the regulatory timetable before the end of the year” pipeline uncertainty is never good. Especially for smaller companies for whom success and/or failure can hinge on a select few drugs compared to more diverse revenue streams at bigger Pharma counterparts.
Interestingly, HIK shares are barely down by 1%.
Mike van Dulken, Head of Research, 6 Sept 2017
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