Vectura Group, the company that specialises in the treatment of respiratory diseases, is reducing its research and development (R&D) expenditure by around £1m during the final quarter of 2012.
The firm now expects R&D costs for the full year to 31 March 2012 to be around £33m, while full year revenue will be in line with market expectations.
In a statement the firm said: "We continue to pay close attention to R&D expenditure to ensure appropriate investment is placed behind key assets. Based on our current plans, further reductions in R&D expenditure for 2013 are also expected."
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Peel Hunt, which rates the stock as "buy", responded by upgrading its earnings estimates for fiscal 2012 (FY2012) and fiscal 2013.
"This is a sensible step that maintains Vectura's momentum towards reaching cash sustainability, with FY2013 now forecast to be nearer to break-even at the earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flow level," the broker's Dr. Stefan Hamil said.
"We see the shares as cheap, attributing little value to the pipeline, which contains four of the key late-stage respiratory assets globally, each of which has important catalysts (data/approvals) in the next 12 months," Dr.Hamil added.
finnCap, which also rates the shares a "buy", focused on the announcement that further clinical data for the NVA237 drug, the development of which is being funded by pharmaceutical giant Novartis, is now required in support of the drug's eventual submission for clearance by the US Food and Drug Administration (FDA).
"We hypothesised in November 2011 ... that additional clinical data had been requested by FDA to support the NVA237 submission, and this is confirmed in the IMS [interim management statement]. The fact that Vectura specifically states this is to be funded by Novartis indicates that this will entail further studies, it is not a re-hash of existing data on file. The progress of QVA149 in the US is, as we surmised, dependent on the outcome of the NVA237 submission," finnCap analyst Keith Redpath said.
The broker played down the significance of the cash-saving measure of reducing R&D spend.
"With a forecast cash position of £66m by year end, we do not see this as particularly relevant - Vectura has sufficient resources for several years of operation and cash conservation seems a low priority. The key near-term goal should be monetising its late-stage assets: NVA237, QVA149, VR315 and VR632," the broker claimed.
The share price fell 0.45% to 54.75p by 13:06.
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