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.
Vernalis launched Tuzistra XR, an extended release (ER) or 12-hourly dosed cough cold treatment in September. The ER formulation offers greater convenience than immediate release products; there is only one other FDA-approved liquid ER prescription product owing to formulation complexities. Vernalis has attained tier 3 unrestricted formulary coverage for Tuzistra XR for over 120 million lives, which is to be a key driver of its ability to gain market share. Vernalis has a dedicated US salesforce in place ahead of the 2015/16 cough cold season.
After initially launching Tuzistra, Vernalis plans to leverage the expanding sales force with companion product, extended-release antibiotic Moxatag, and through successive product launches from the remaining four ER products. The US prescription-only branded cough-cold market offers significant commercial prospects with c 35m prescriptions per year across the narcotic and non-narcotic segments of the market, and given the estimated $100 net brand pricing per scrip.
We forecast FY16 group sales of £15.9m and £36.6m in FY17. This includes cough cold revenue of £5.8m, rising to £27.3m in FY17 as traction builds. Sales and marketing costs at £26.8m in FY16 and £27.1m in FY17 form the bulk of expenses as the company switches to commercial phase. Our forecasts suggest a cash reach to self-sustainability based on end of June 2015 cash of £61.3m.
We have increased our DCF valuation to £439m from £406m, or 99p per share, using a 12.5% WACC across the development pipeline and our standard 10% commercial-stage WACC for Tuzistra XR. We have made no fundamental changes to our valuation but include some revisions to our near-term forecasts. The aggregate commercial potential across the portfolio is unchanged vs our previous report and our peak sales estimate for the cough cold portfolio is c $500m by 2024.