Trading update shows momentum maintained
Skyepharma’s Q215 trading update shows progress is continuing as expected. flutiform is growing in-market sales as forecast, with further roll-outs into new, albeit smaller, markets. Royalties from the other key drivers are also on track, with rising contributions from the GSK Ellipta inhaled products, as well as solid Solaraze sales in the US. Pacira’s Exparel is still expected to trigger the $8m sales milestone this year. Our valuation, currently still based on a DCF model, is £354m or 338p a share.
Q215 update shows business remains on track
The trading update highlights how the operating business continues to perform as expected, with the momentum build-up seen in FY14 being maintained. Revenues for flutiform continue to grow, with rising royalty contributions from the new GSK Ellipta inhaled products and Solaraze sales in the US. The performance of Exparel means that, despite some uncertainty following the US judicial enquiry (announced in April 2015), and, based on Pacira analyst consensus, the $8m sales milestone (when Exparel annual sales exceed $250m) should be triggered in FY15.
flutiform, Exparel and Solaraze are key drivers
The flutiform roll-out is continuing, with the launches in four additional countries meaning it is now available in 30 markets. Approvals are under review in a further 14 countries. Importantly, flutiform in-market sales continue to track as expected. Mundipharma has completed recruitment for its 1,700 patient trial to support flutiform’s use in COPD. Although the efficacy is not in doubt, the expected positive outcome will support reimbursement in this important market segment. Pacira is due to start additional US Phase III studies (before end-15) to broaden Exparel’s indications into upper and lower extremity nerve blocks. This supplemental approval would allow Exparel to be indicated for use in the majority of nerve blocks used to provide post-surgical analgesia. Solaraze in the US is also still performing well.
Valuation: DCF model shows £354m, or 338p a share
Over the last 18 months there has been a progressive and material reduction in Skyepharma’s risk profile, which arguably is yet to be fully reflected in the share price. Although the strong operating performance means earnings-based measures are increasingly meaningful and useful as valuation tools, we currently use a DCF model as our main valuation method. The DCF model, based on forecasts of revenue projections through to 2027, model shows £354m or 338p a share.
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