New product launches, clinical trial results, a direct sales strategy in the US and a forecast return to profit sets respiratory drug specialist Vectura (VEC) up for a potentially-strong 2016. Stockbroker Numis reckons the share price could ‘realistically’ double over the next two years.

The Wiltshire-based company formulates drugs and develops the inhalers to deliver treatments for bronchial illnesses, such as asthma and chronic obstructive pulmonary disease (COPD), a condition mainly caused by smoking that leads to coughing and shortage of breath.

The £701 million cap is now firmly established as a commercial-phase pharmaceutical with eight royalty-generating products on the market licenced to larger pharmaceuticals, including Novartis (NOVN:SIX) and GlaxoSmithKline (GSK).

Near-term catalysts include launching two COPD products in the US during the first quarter of 2016 as well as publishing phase I clinical trial data for two of its pipeline candidates by the end of June.

Long-term growth catalysts include the launch of VR315 which completed a clinical study in January 2016. This is a generic version of GSK’s asthma treatment Advair.

Vectura has sufficiently matured as a drug company to alter its strategy towards selling products directly in the US rather than just in Europe without the need of a third party.

This could play a part in Vectura turning a profit in the financial year to 31 March 2016 after a £6.1 million loss a year earlier. Analysts expect £14.6 million pre-tax profit thanks to an almost 25% jump in sales, rising to £19 million pre-tax profit in the year to 31 March 2017.

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The company’s prospects proved strong enough to lure new chief executive James Ward-Lilley away from FTSE 100 giant AstraZeneca’s (AZN) respiratory team in September 2015.

It does not appear that Ward-Lilley is ready to recommend a dividend any time soon as he is focused on bringing more candidates out of Vectura’s pipeline and concentrate on building a direct sales infrastructure in the US.

Based on Numis’ 6.1p earnings per share (EPS) forecast for Vectura’s current financial year the stock can be bought on 28 times earnings, while trading at 170.8p a share. That is arguably not too demanding for what is expected to be a rapid growth story for years ahead.

Vectura is targeting a $44 billion global market that is forecast to grow by more than 20% between 2015 and 2021. Investment drivers in its area of expertise remain strong with longevity, smoking and pollution behind rising diagnosis of conditions such as asthma and COPD.

Vectura is firmly established as a commercial-phase drug company and the growth catalysts expected in 2016 underpin our bullish stance. Buy at 170.8p.

SWOT ANALYSIS

STRENGTHS

• Revenue generating products

• Strong management

• Rich pipeline

WEAKNESSES

• Development risk

• Some investors may be put off by high equity rating

OPPORTUNITIES

• Rise in asthma/COPD diagnosis

• Direct sales

• New launches

THREATS

• Regulation

• Rival drugs