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.
During FY16/17 Vernalis made significant moves to improve the effectiveness of its US commercial platform, dynamically managing sales rep effectiveness, pharmacy stocking and patient access (formulary coverage, patient coupons). We have lowered our near-term cough/cold net sales forecasts to reflect slower rampup in Tuzistra XR and delays to CCP-07 and CCP-08. We note that management expects a threefold increase in Rx in the year. In addition, full promotion of Moxatag has started in the US which should further leverage the salesforce.
The CRLs raised outstanding questions that must be resolved prior to NDA resubmission and an FDA approval decision. We conservatively assume a oneyear delay to approval and launch for both.
We update FY18 forecasts with lower Tuzistra XR revenue plus a delay of our CCP-07 and CCP-08 launch date by a year to FY19. Lower FY18 and FY19 cough cold revenue delays our expectation of sustainable profitability by one year to FY21. Net cash of £61.3m provides sufficient runway into FY19. We estimate a funding gap in 2019 and include an illustrative £30m financing, nominally attributed to debt, in our FY19 forecasts.
Our revised valuation of £358.5m or 68p/share (from £399m) results from our new financial forecasts (see above), rolling forward our model, updating FX ($1.32/£) and a lower net cash position at June 2017 (£61.3m). Our valuation consists of US cough cold and NCE pipeline rNPV, explicit cost modelling and inclusion of cash; we assume zero NPV for the research business. Clarity on CCP-07/08 NDA resubmission, portfolio progress, launches and sales upgrades would unlock upside.