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).
Tuzistra XR net sales of £1.1m for the first 10 months of launch reflect a moderate and late cough cold season and newly established commercial platform. Increased near-term investment in improving physician awareness, pharmacy stocking and patient access (formulary coverage, couponing) will underpin future sales growth, but decrease Tuzistra Rx’s net price in the near term.
Two licensees have raised significant new funds for development of lead assets: RPL554 (Verona Pharma) and CPI-444 (V81444, Corvus). Sale of RedoxTherapies to Juno Therapeutics may add impetus to V2006 development in immuno-oncology.
Net cash of £84m continues to provide sufficient runway to sustainable profitability in FY19 on our current forecasts. This includes the impact of increased operating costs due to investment in commercial infrastructure/salesforce expansion and Tuzistra XR sales and marketing initiatives, as well as the relaunch of Moxatag and future launches of the remaining four US cough cold programmes.
Our updated valuation (from £393m or 75p/share) reflects increased sales and marketing costs coupled with lower short-term Tuzistra XR net sales as Vernalis invests in the operational platform for future sales growth. This is largely offset by weaker sterling vs US$ and a higher CCP-07 probability of success post-NDA acceptance. We use an rNPV approach for the US cough cold and NCE pipelines, explicitly model costs and include cash; we assume an NPV of zero for the research business. Upside would come from portfolio progress, launches and sales upgrades.