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Operational initiatives in place, execution is key

Outlook | Pharmaceuticals & healthcare | 22 Nov 2017

Tuzistra XR prescriptions (Rx) grew threefold to ~35k in FY16/17 (2nd year on the market) vs ~12k in FY15/16. Investment into addressing the barriers to higher Tuzistra XR prescribing is translating into higher Rx rates, although this has not been matched by revenue growth due to higher inventory stocking in the same period last year. In H217 FDA issued partner Tris with two complete response letters to Vernalis’s CCP-07 and CCP-08 NDAs and we now model launch during the 2018/19 cough cold season. Our updated forecasts reflect this and lower Tuzistra XR revenues due to a slower than anticipated sales trajectory in the near term.


Cash cushion for cough cold growth

Update | Pharmaceuticals & healthcare | 25 May 2016

The issue of 80m new shares at 50p/share has raised £40m (gross), which enables Vernalis to focus on executing its operational plan and removes uncertainty over whether it is sufficiently funded through to sustainable profitability in FY19 (on our new forecasts). Near-term investment into the commercial cough cold platform will underpin future sales growth. Ongoing initiatives to improve physician awareness, stocking and formulary coverage should increase Tuzistra's XR market share in the longer term.


Termination of coverage

Termination | Pharmaceuticals & healthcare | 21 Jun 2018

Edison Investment Research is terminating coverage on Vernalis (VER). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.


Tuzistra XR downgrade prompts strategic rethink

Flash note | Pharmaceuticals & healthcare | 28 Feb 2018

Vernalis has provided a trading and operational update to its guidance for Tuzistra XR prescriptions for financial year-end 2018. Despite dynamic management of commercial initiatives, Tuzistra XR prescription growth is not accelerating fast enough to meet Vernalis’s guidance of 105-115k prescriptions (given at the FY17 results). Following a disappointing uptake in the current cough cold season (~65% of the season is complete), Vernalis is downgrading guidance on prescription numbers and, in light of slow progress in the US cough and flu business, is seeking alternative strategies for the US business and the group. As such, we place our financial forecasts and valuation under review until we receive clarity on strategic next steps and the potential impact on cash burn, given a cash balance of GBP 44m (unaudited at 31 January 2018).


Tuzistra XR steady growth in Rx run rate

Update | Pharmaceuticals & healthcare | 19 Jul 2017

Vernalis has provided a year-end trading and operational update ahead of its FY17 results due to be announced on 12 September. Total revenues are expected to be ahead of current market expectations, largely due to higher than anticipated R&D-related milestones. This and tighter cost control means that operating loss for the full year is expected to be lower than consensus estimates. In terms of prescription (Rx) growth, Tuzistra XR continued its steady growth in volumes y-o-y; reported net revenue will depend on the impact of rebates and vouchers on gross revenues for the year. Our valuation remains unchanged at GBP 399m (76p per share).


FDA issues CCP-07 complete response letter

Update | Pharmaceuticals & healthcare | 24 Apr 2017

FDA has issued a complete response letter (CRL) to Vernalis' CCP-07 NDA following its 20 April PDUFA date, outlining questions that need to be addressed in an NDA resubmission for potential FDA approval. Given limited disclosure regarding possible timelines for dealing with these questions and the probable class of resubmission, we conservatively push back our CCP-07 approval assumption by one year, delaying launch into the 2018/19 cough cold season. However, we acknowledge that there are scenarios under which CCP-07 could still be launched into the 2017/18 season, albeit later than previously anticipated. Separately, Vernalis has received a $2m milestone relating to an existing research collaboration.


Positive Tuzistra trends

Update | Pharmaceuticals & healthcare | 15 Mar 2017

Investment into addressing barriers to higher Tuzistra XR prescribing is starting to translate into higher prescription (Rx) rates. Mid-way through the second season post launch, both Rx and sales are showing positive trends and gathering momentum, although we lower our near-term Tuzistra XR net sales forecasts. Ongoing focus on improved salesforce effectiveness, which will provide a solid foundation for CCP-07 and CCP-08 launches, means the post-season update should better inform the future potential of Vernalis's extended release Rx-only cough cold franchise.


Advancing towards a commercial portfolio

Update | Pharmaceuticals & healthcare | 05 Jan 2017

FDA acceptance of the CCP-08 NDA (setting a 4 August 2017 PDUFA date) advances Vernalis towards its goal of building a speciality US franchise of extended release (ER) prescription-only (Rx) cough cold products. Potential 2017 approval of CCP-08 and CCP-07 (PDUFA date 20 April 2017) would enable launch into the 2017/18 cough cold season. Last reported cash of £78.6m (unaudited at end October) supports ongoing investment in operational initiatives to enhance Tuzistra XR sales growth this season and beyond. Successful execution will lay important foundations for the launches of CCP-07 and CCP-08.


Investing in the commercial platform

Outlook | Pharmaceuticals & healthcare | 21 Oct 2016

Vernalis marked its transition into a commercial-stage speciality pharma company with the September 2015 US launch of Tuzistra XR, the first product from its extended release (ER) prescription only (Rx) cough cold pipeline. First year (FY16) Tuzistra XR net sales were £1.1m. The £38.9m (net) raised in May provides sufficient funds to invest in operational initiatives (pharmacy stocking, patient access) to support stronger sales growth into the 2016/17 cough cold season and beyond. Successful execution will lay important foundations for the launch of CCP-07 in the following season (PDUFA date: 20 April 2017), and potentially CCP-08 soon after (NDA filing by year-end 2016). This increased investment in FY17, offset by weaker sterling, decreases our valuation to £376m (72p/share).


Securing cash to sustainability

Flash note | Pharmaceuticals & healthcare | 28 Apr 2016

Vernalis intends to raise £40m (gross) through the issue of 80m new shares at 50p per share. This equity raise will remove any uncertainty over whether Vernalis's cash position is sufficient to take it through to sustainable profitability in FY18 (on our current forecasts). New funds will be used to boost existing working capital required for a conservative Tuzistra XR roll-out, upcoming Moxatag re-launch and future launches of the remaining four US cough cold programmes in development with Tris. The share placing is on a non pre-emptive basis and is conditional on being passed at the General Meeting scheduled on 12 May 2016.


Establishing a firm foundation

Update | Pharmaceuticals & healthcare | 06 Apr 2016

Vernalis reported a modest £0.6m in Tuzistra XR sales over the first four months post-launch due to the mild cough cold season. The US launch of this prescription-only (Rx), extended release (ER) cough cold medicine is the first step in Vernalis's transition into a commercial-stage speciality pharma company, targeting a $3.5bn market opportunity. The emphasis for year one of Tuzistra XR commercialisation is operational: establishing the platform for future sales growth. However, financial performance, in particular, during its second year on the market, will be an important determinant of whether Vernalis will need to raise new funds near term.


A player in the US prescription cough cold market

Outlook | Pharmaceuticals & healthcare | 12 Nov 2015

Vernalis is poised to complete the transition towards becoming a self-sustaining speciality pharma company, based on its five extended release cough cold products targeted at high-value prescribers. First out of the blocks is Tuzistra XR, launched in September. We forecast £5.8m cough cold sales in FY16 rising to £27.3m in FY17. Our DCF valuation is £439m.