Drug maker leaps as lung treatment gets green light
DRUG maker Vectura jumped up the FTSE 250 leaderboard after revising profits estimates upwards for the year following stellar sales of its flutiform asthma treatment in the first half.
Max Herrmann, of broker Stifel, who has a ‘buy’ recommendation on the stock and forecasts revenues of £175m this year, said the recent share price weakness has been overdone.
Vectura’s shares plunged last week after flutiform failed a late stage trial for chronic obstructive pulmonary disease, limiting its potential sales in Europe.
Even so, flutiform can be used ‘offlabel’ for the late-stage lung disease, which means it can be sold if prescribed by a doctor, but it can’t be marketed by the company, analysts say.
The Wiltshire-based group, which makes treatments for asthma, listed on the Alternative Investment Market in 2004 and signed its first big Pharma collaboration with Novartis the following year.
Vectura recently merged with fellow UK biotech SkyePharma and announced it has dropped development of an experimental treatment called SKP-2075 following a review of its research and development pipeline. Instead, it plans to focus on the market for generic medicines, traditionally cheaper and more widely prescribed, which it intends to fund with the help of partners.
David Cox of Panmure Gordon pointed to a good performance from Solaraze, a pre- cancerous skin cream, and Advate for haemophilia, during the first half, but added these are due to short-term factors.
The shares closed 12.84pc higher, or 16.3p at 143.2p. Morgan Stanley is the group’s largest shareholder with a 10.6pc stake, while Invesco has a 9.7pc stake and Baillie Gifford just over 4pc.
Elsewhere in the sector, small cap biotech Consort Medical was also well bid, advancing by over 5.3pc, or 55p to 1093p after signing a supply deal with pharma heavyweight AstraZeneca. The group, which makes drug delivery devices and provides ingredients to the pharmaceutical industry from its facilities in Italy, Germany and the UK, said it doesn’t expect any fundamental changes to its business as a result of Brexit.
Any exposure to the euro will be limited to this year due to its hedging policy and current trading is inline, Consort said.
‘More interesting is the new contract with AstraZeneca,’ said Julie Simmonds of Panmure Gordon. The deal, which could herald the start of an expanded relationship with AZ, offers room for upgrades later in the year, according to Simmonds.
The Footsie edged into positive territory, up 0.3pc, or 20.53 to 6846.58, as heavyweight oil, metal and mining stocks were lifted by gains in the price of crude oil. The receding likelihood of a September rate hike in the US strengthened base and precious metals alike. The dollar slipped following weak US economic data, while gold and copper rose, bringing Antofagasta 1.9pc, or 9.5p higher to 512.5p. Randgold was up 1.64pc, or 125p at 7735p bolstered by a Numis upgrade to ‘buy’,
Anglo American gained 1.6pc, or 13.4p to 840.2p and commodity powerhouse Glencore advanced by 1.66pc, or 3.05p to 186.3p.
Aviva was in demand after UBS raised it to a ‘ buy’ and hiked the share price to 505p from 395p.
‘Sustainable dividends dictate share price performance for UK life,’ said analyst Colm Kelly. He reckons the insurance group will post double-digit growth, a consensus-busting 7pc yield in 2018 – and offers less risk than its peers under the new Solvency II rules.
‘Our caution on Aviva to date has proved merited, but the findings of our work combined with lower expectations following the investor day provide scope for upside from current levels,’ he said. The shares were 1.66pc higher, or 7.2p at 441.9p.
Among FTSE 250 stocks, Just Eat was subjected to a sell- off after Amazon announced plans to enter the food delivery market in London, offering a free service to its Prime customers using ‘ Amazon Restaurants’ and spending more than £15. The shares slipped 5.44pc, or 31p to 538.5p.