Consort Medical PLC (LON:CRST) saw its shares go up in smoke today after it said British American Tobacco plc (LON:BATS) plans to terminate a supply agreement for the Voke nicotine inhaler.
Consort said its Bespak Europe Ltd unit has been served termination notices for all supply agreements by BAT subsidiary, Nicovations Ltd.
The pharmaceutical services group said Nivocations is terminating the supply agreements with immediate effect on the basis of a lack of commercial launch of Voke before December 31.
In early trading on the LSE’s main market, Consort shares were down 7%, or 75p at 985p.
Consort said its Bespak remains in "constructive dialogue" with Kind Consumer, which designed the inhaler, and Nivocations, which was licenses the inhaler, over the future of the Voke programme.
The nicotine inhaler is one of 16 programmes in Bespak's development pipeline.
Consort said it "does not believe" the termination of the deal "materially impacts" its expectations for underlying trading performance for its current financial year to end April 30.
Jonathan Glenn, Consort’s chief executive officer, said : “Our recent interim financial results highlighted the underlying strength in Bespak and Aesica and the momentum emanating from the growing and diverse pipeline portfolio of significant development programmes.
"Therefore, while we are naturally disappointed in the loss of the Supply Agreements for Voke to Nicovations, we continue our dialogue with Kind Consumer and with Nicovations on the future of the programme and we remain highly confident in the robustness of the remainder of our business and our prospects for the future.”
Analysts still positive ...
In a note to clients this morning, analysts at Shore Capital said: “Whilst clearly disappointing for Consort we note that at current levels (1,060p) there is little in the valuation for Voke. Hence we would expect a modest underperformance today.”
Repeating a ‘buy’ rating on the stock, they added: “We see Consort as having encouraging long-term prospects, particularly with access to the large (c.$50bn) and growing (c.7.5% CAGR) global contract manufacturing market and the opportunity to take advantage of the growth of biologics with its auto-injector technology.”
Panmure Gordon analysts also reiterated a ‘buy’ rating on Consort, saying in a note to clients: “We expect the shares to be weak on today's news, however, would see this as a buying opportunity as the underlying business remains strong.”
BAT did not provide any update on the deals this morning.