They’ve been rewarded with an 11% rise in the share price post-results. But it has been a hard slog for investors in respiratory specialist Vectura Group PLC (LON:VEC), who have seen the stock drift by around a quarter over the last year.
The reason for the decline? Well, according to analysts, there has been a degree of uncertainty around the £441mln takeover of Skyeparma, completed this summer.
Earlier Vectura told the market the merger benefits would be higher than first anticipated.
What followed was a relief rally; in other words, the markets concerns weren’t crystalised.
So where to now for the stock?
Well, according the broker Peel Hunt, the recent weakness of the share price provides an opportunity.
Analyst Amy Walker says the company’s pipeline and technology platform is worth around 100p (or just over two-thirds of Vectura’s current valuation).
That provides almost a “free option” on VR315, a generic version of Advair, the “mega blockbuster” asthma product developed by GlaxoSmithKline (LON:GSK).
While Advair came off patent in 2010, it has remained uncontested until now because the delivery method retained patent protection. That final defence against the copy-cat producers has been eroded.
In the first half Advair generated sales of £1.7bn for Europe’s largest pharma company.
So there is a huge opportunity for the likes Vectura and is partner Hikma Pharmaceuticals (LON:HIK).
Peel Hunt’s Walker reckons Vectura is worth around 200p per share, compared to a current market price of around 145p. The consensus valuation is 206p, based on NPVs provided four other brokers and the highest of those estimates is 231p.
“Vectura has suffered a significant de-rating post the Skyepharma merger and recent disappointing news flow,” said
“Our detailed analysis of the assumptions baked into the share price and consensus forecasts…suggest the stock now offers a free option on VR315 (generic Advair) on both a net present value and mid-term multiples basis.”