Brokers' Views: Charles Stanley

Pharmaceuticals sector specialist Franc Gregori highlights the merits of two Full List drug developers, namely Antisoma and Vectura.

Interim results from Antisoma – currently 33.75p with a £211 million market price tag – confirmed clinical progress for lung cancer drug ASA404, ‘the key determinant of Antisoma’s future prospects’ and one with blockbuster potential.

Though half-year losses to December widened to £18.3 million (2008: £5 million), management is ‘controlling the business as expected’, with cash burn under control. The cash pile as of December stood at £49.6 million, not too far reduced from the previous year’s £52.7 million.

Mindful of the risks inherent in the sector, Gregori acknowledges that Antisoma ‘may be viewed as a binary bet on the prospects for ASA404’, yet he believes ‘the likelihood of a positive outcome is favourable’ and continues to rate the shares a buy.

Vectura drugs on track
Gregori also urges investors to pick up shares in inhaled pharmaceuticals specialist Vectura, whose NVA237 and QVA149 drug candidates, both partnered with Novartis to treat chronic obstructive pulmonary disease, ‘remain on track for regulatory filings in 2011 and 2012 respectively’ and its VR315 and VR632 asthma treatments are ‘progressing well’. He is reassured by the group’s financial strength, with Vectura’s net cash pile ‘expected to exceed £64 million at March 2010’.

Vectura shares, now 63p, valuing the group at £203.7 million, have recently underperformed, but Charles Stanley considers the fundamentals to be ‘as attractive as ever’ and views ‘current share price weakness as a buying opportunity’, reiterating its buy advice and setting a 96p target price.