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.
Net Tuzistra XR H117 sales of £0.8m indicate that sales growth is materialising as barriers to prescribing are being addressed. Near-term investment in improving physician awareness, pharmacy stocking and patient access have provided momentum (at the expense of a modest decrease to net $/Rx). After the disruption caused by expansion/realignment of the salesforce in the autumn, the focus for H217 is on improving their effectiveness; Tuzistra XR is highly detail sensitive.
The season-end management update should enable a more accurate assessment of Tuzistra XR’s potential and Vernalis’s commercial capabilities. The latter will be leveraged by potential launches of CCP-07 and CCP-08 (April and August PDUFA dates respectively) into the 2017/18 cough cold season. CCP-05 and CCP-06 aim to achieve proof of concept in calendar 2017 (widening of earlier guidance).
We update FY17 forecasts with lower Tuzistra XR net $/Rx and net revenue offset by delivery of an extra Frova API batch and milestone receipts ($3m from Corvus; €2m from Servier). H217 opex will be in line with H1 assuming constant FX. Lower FY17 and FY18 cough cold revenue delays our expectation of sustainable profitability by one year to FY20. With £74.2m of cash and equivalents, Vernalis has sufficient runway to fund ongoing S&M investment and future launches of the remaining four US cough cold programmes ($43m in potential milestones to Tris).
Our valuation of £427m or 81p/share (from £377m, 72p/share) results from our new financial forecasts (see above), rolling forward our model and updating FX. 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. Upside could come from portfolio progress, launches and sales upgrades.