Although the share price plunge by Vectura PLC (LON:VEC) today can be pinned on news of a sharply wider pre-tax loss, Mike van Dulken, head of research at Accendo Markets thinks there may also be another reason buried in the inhaled medical products firm’s first half results statement.
In early afternoon trading, Vectura shares were 9%, or 10.2p lower at 98.90p, just holding off the session low of 93.55p.
READ: Vectura posts bigger first half loss on increased R&D costs, higher amortisation levels, tighter margins
In a note, van Dulken said the share price reaction “may in fact be due to a downgraded Risk & Uncertainties statement, buried half way through the report before the financial statements.”
The analysts noted that back in May, Vectura’s partner Hikma Pharmaceuticals PLC (LON:HIK) received a Complete Response Letter from the US Food and Drug Administration regarding its new drug application for a generic version of GlaxoSmithKline plc’s (LON:GSK) Advair Diskus treatment for asthma in the US.
That major setback saw shares in both Vectura and Hikma shares fall by around 10%.
Last month, in its own half-year results statement, van Dulken noted that Hikma said the pair had had “constructive discussions with the FDA and have been able to clarify and resolve a number of the questions raised.”
Hikma added: “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."
READ: Hikma sounds the earnings alarm sending shares crashing
Prior to that, the analyst said, Vectura had only highlighted the risks attached to the drug as "Disruption to the launch of VR315 (US)".
In today’s results, however, van Dulken pointed out, Vectura formally downgraded this 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 the group said both it and Hikma 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”.
Van Dulken concluded that “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, he noted, Hikma shares were only down 0.1%, or 1p at 1,189p today.