Reassuringly positive operating performance
Skyepharma (L:SKP) continues to maintain strong progress across the business. Revenue growth is driven by the products launched since 2012, with encouraging contributions from flutiform and Exparel. The improving operational leverage in the flutiform supply chain suggests continuing margin expansion though to 2018. We have reviewed our model, raising our forecasts for FY16 and beyond, and consequently our valuation increases by 11.5% from £354m or 338p a share to £395m or 377p a share.
The balance sheet transformation is complete
2014 was truly a transformational year for Skyepharma as the roll-out of flutiform across Europe and Japan provided the platform for the successful £112m (gross) equity raise, which in turn allowed the early repayment of the bonds. The strong cash flows allowed the repayment of other expensive legacy debts. The result has shifted investor attention from scrutinising cash flows and debt service burdens to assessing the strength of the underlying business and the longer-term growth prospects.
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