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 £44m (unaudited at 31 January 2018).
Tuzistra XR is failing to accelerate prescription (Rx) growth to an adequate run rate to meet FY17-18 guidance of 105-115k prescriptions. While prescriptions have grown steadily (+74% for the first 33 weeks of 2017/18), with 65% of the cough cold season complete, a lack of acceleration over the last few months translates to a downgrade to below 105-115k. Coupled with a lack of any significant updates from partner Tris on the regulatory status of pipeline assets CCP-07 and CCP-08 (Complete Response Letters issued last year raised outstanding questions that must be resolved prior to NDA resubmission and an FDA approval decision) or achieving proof of concept for CCP-06, Vernalis is rethinking its US business strategy and a more detailed update will ensue in the coming weeks. Vernalis has signalled that these plans will reduce the cash burn of the business. We highlight that success of the US cough cold business has been dependent both on Tuzistra XR uptake, but additionally on launching follow-up compounds to maximise operational leverage in the US business.