Shares in pharmaceutical firm Vectura Group (VEC) jump 15% to 81p as it announces that earnings for the full year will be ‘materially ahead’ of market expectations.
Today's news has been particularly well received after the company suffered a number of setbacks in recent months.
AJ Bell investment director Russ Mould says the company has delivered the improvement by altering its business model instead of focusing solely on sales.
‘Improved margin performance, a larger contribution from higher-return parts of the group and productivity improvements have all helped to enhance earnings, reflecting well on management,’ comments Mould.
NEW STRATEGY PAYS OFF
Vectura, which develops formulations for dry powder inhalers, changed tack this time last year by focusing on less complex molecule development to boost its chances of creating a successful product.
By choosing an arguably safer strategy Vectura has managed to keep R&D investment tightly controlled at around the bottom of its £55m to £65m guidance.
One of the occupational hazards for any pharmaceutical company is the success of clinical trials to prove their treatment is effective.
Vectura recently experienced a setback after failing to prove its VR745 treatment was effective in helping sufferers of extreme asthma, wiping off a forecast £40m in pre-tax profit.
With other asthma products currently in clinical trials, further setbacks or success could be on the horizon depending on the results.
PARTNERSHIP HIGHS AND LOWS
Partner Hikma (HIK) is also tied to Vectura’s fortunes. In March 2018, Hikma was forced to undergo a further clinical study into its generic version of GlaxoSmithKline’s (GSK) Advair asthma treatment.
Vectura has also sealed a deal with Hikma to develop and commercialise generic versions of GlaxoSmithKline’s Ellipta portfolio, generating $15m in an upfront milestone payment.
