NVA237 is a dry powder formulation for inhalation of glycopyrronium bromide, a long-acting muscarinic antagonist (LAMA) with a rapid onset of activity.

NVA237 was licensed to Novartis in April 2005 by Vectura and its co-development partner, Sosei Group Corporation (Sosei). Novartis intends to launch NVA237 as a once-daily monotherapy for COPD and as a combination with its once-daily, long-acting beta-agonist (LABA), indacaterol, known as QVA149.

COPD is a chronic obstruction of the airways that affects 210 million people worldwide and is projected to be the third leading cause of death by 2030. It is a progressive lung disease with symptoms including chronic bronchitis and/or emphysema, which slowly progress and eventually lead to an irreversible loss of lung function. Although there is no cure, bronchodilators make breathing easier by enlarging the patient's airways and are recognised in international guidelines as an integral part of the treatment for COPD.

Vectura believes that QVA149 could be the first once-daily LAMA/LABA combination to come to market for COPD. The dual activity of a muscarinic antagonist and a beta-adrenergic agonist promises to be a potent bronchodilator and, with convenient once-daily dosing as a co-formulation, has the potential to improve compliance and address a large and unmet need for COPD sufferers.

Novartis continues to make good progress in the clinical development of NVA237 and QVA149, with NVA237 entering Phase III trials in June 2009 followed by QVA149 in April 2010, triggering a total of $15m in milestone receipts to Vectura. Novartis has initiated a number of trials over the period and plans to submit for regulatory approvals in 2011 and 2012 respectively.

To date, Vectura has received $30m from Novartis and, under the terms of the licence, could receive up to an additional $157.5m for achievement of regulatory and commercialisation targets for both the monotherapy and the combination product. In addition, royalties on product sales will be received in the event of successful product launches.

There is a growing consensus among key opinion leaders that a LAMA/LABA combination is likely to be the future "gold standard" for COPD patients and Novartis presented promising Phase II safety and efficacy data on QVA149 at the European Respiratory Society meeting in Vienna in September 2009. The data showed that at a dose of 50µg/300µg QVA149 was well tolerated, with overall adverse event rates similar to placebo. QVA149 produced clinically relevant mean improvements in trough FEV1 (forced expiratory volume in one second) of 226mL when compared with placebo after 7 days of once-daily dosing, and 123mL and 117mL when compared with indacaterol alone at doses of 300µg and 600µg respectively. These substantial improvements were maintained throughout a 24-hour period on Day 1 and Day 7.

Data presented at the ERS meeting in October 2008 demonstrated that NVA237 provides sustained 24-hour bronchodilation in patients with moderate-to-severe COPD and, in an open study arm, showed similar efficacy and duration of action to the market leader tiotropium (Spiriva^®), with the potential for a more rapid onset of action. In addition, studies lasting up to 28 days showed a good overall safety and tolerability profile. This was corroborated by additional post-hoc analysis presented at the recent American Thoracic Society (ATS) international conference in May 2010.

The LABA component of the combination, Novartis' indacaterol, received European regulatory approval in November 2009 (Onbrez^® Breezhaler^® – indacaterol maleate). Novartis launched the product in Germany in December 2009 and in Ireland and Denmark in March 2010. Novartis has confirmed it is on track to file additional data to FDA in the US during the second half of 2010.

VR315 is an inhaled combination therapy for asthma and COPD in development with Sandoz (the generic division of Novartis) in Europe using Vectura's GyroHaler^® DPI device. Vectura licensed the European rights for VR315 to Sandoz in March 2006, in a deal worth up to €22.5m in milestones and development funding together with royalties on all products sold. The product is in late-stage development for the European market.

In December 2006, a cost/profit-sharing agreement was signed with Sandoz for development of VR315 in the US. In March 2010, Vectura received full development and commercialisation rights back from Sandoz for VR315 in the US. Under the revised agreement, Vectura received $9.5m from Sandoz in May 2010. This follows a $6m milestone received in August 2009 and $2m received in 2006. Additionally, Sandoz has put in place a loan facility of up to $25m to facilitate Vectura's development of VR315 in the US. Vectura is continuing development of VR315 for the US market, but does so cautiously, while continuing dialogue with FDA and assessing third-party interest in licensing rights to VR315.

Vectura also retains the rights to the product in territories outside the US and Europe. These territories account for over 15% of the branded product's sales and therefore provide an important licensing opportunity.

VR632 is the second inhaled combination therapy for asthma and COPD being jointly developed with Sandoz in Europe, also using the GyroHaler^® technology. Vectura licensed the European rights for VR632 to Sandoz in December 2007 in a deal worth up to €15.5m in milestones and development funding, together with royalties on all products sold. Vectura will also earn a margin on the commercial manufacture and supply of GyroHaler^® devices and retains rights for the US and other territories.

Sandoz has made a significant investment in manufacturing facilities for both VR315 and VR632.

VR506 is an inhaled corticosteroid (ICS) treatment for asthma that Vectura has been developing since early 2009. Steroids are the mainstay of prophylactic therapy for asthma, the recommended "preventer" drugs for adults and children, and are often prescribed alongside beta-agonist bronchodilators. VR506 is expected to enter the clinic in 2010.

The Duohaler^® device provides advantages over a number of multi-dose DPIs. It has two separate drug reservoirs that feed two individual drug formulations to two separate metering chambers from which the drugs are delivered to the user in the same inhalation, avoiding potential co-formulation issues. Vectura is currently in discussions with potential licensing partners for the Duohaler^® lead product in development.

VR496 is in development as an inhaled locally acting treatment for CF. The active component of VR496 is heparin, a drug that has been approved worldwide as an injected or infused treatment for other indications. Vectura is conducting a Phase II clinical study with VR496 in CF patients, with data expected in early 2011.

A significant literature database describes the multi-modal and complementary pharmacological properties of inhaled heparin that are also relevant to the treatment of asthma and COPD, with mucolytic, anti-inflammatory, bronchodilatory and anti-infective activity being particularly relevant. Vectura will seek a partner for all indications following a positive outcome of the proof-of-concept study.

The European Medicines Agency (EMA) and US Food and Drug Administration (FDA) designated VR496 an orphan drug.

VR040 is an inhaled, systemically acting treatment for "off" episodes associated with advanced PD. The active ingredient in VR040, apomorphine hydrochloride, is marketed as an injectable product in Europe and the US. VR040 is Vectura's formulation of apomorphine, delivered by inhalation using Vectura's proprietary DPI technology.

The EMA designated VR040 an orphan drug. Vectura is using the EMA scientific advice procedure to progress the development of the product. Recruitment into the ongoing Phase II "at-home" study is complete and results are expected later in 2010. Vectura intends to out-license VR040 before the start of Phase III and continues dialogue with interested third parties.

VR461 is an inhaled anti-fungal in development for the treatment of lung diseases in patients with fungal sensitisation. Fungal spores are commonly found in ambient air and are generally of little or no consequence. However, in certain conditions, fungi can be associated with increased morbidity in a number of disease states. The anti-fungal agents currently administered by mouth or by injection are associated with a number of unpleasant side effects and can have variable efficacy. Based on discussions with key opinion leaders, Vectura believes that an inhaled anti-fungal with proven efficacy would be of clinical and commercial value. Vectura is developing VR461 as a well-characterised drug, which could compete well against the current oral and injectable anti-fungal treatments. VR461 is in pre-clinical development.

VR909 for the prevention of chronic rejection following lung transplant

VR909 is in development as an adjunctive, chronic immunosuppression therapy for delivery post-lung transplant, to delay onset of chronic rejection and increase survival. Lung transplantation is the final therapeutic option for a variety of end-stage pulmonary diseases including emphysema, cystic fibrosis and idiopathic pulmonary fibrosis. Despite aggressive care, only 45% to 55% of lung transplant recipients will survive 5 years following the transplant procedure. In contrast, 70% to 90% of heart, kidney, and liver transplant patients will be alive after 5 years, and over 50% of recipients will survive 10 or more years following the transplant procedure. Approximately 2,500 lung transplants are conducted worldwide each year. VR909 is in pre-clinical development.

There was no expenditure in relation to these products in the year to 31 March 2010 (2008/09: nil) and no further expenditure will be incurred. These products are available for licensing.

In 2000, Baxter was granted worldwide rights to use Vectura's stabilisation patents and has utilised Vectura's technology in its serum-free recombinant Factor VIII, ADVATE^®. ADVATE^® is indicated for the treatment of haemophilia A and is marketed worldwide by Baxter. Vectura receives royalties on sales of ADVATE^®. Baxter sales of ADVATE^® have increased to over US$1.7bn in 2009, compared to US$1.5bn in 2008.

There is strong demand for ADVATE^® and Baxter has confirmed that the outlook for its recombinant franchise remains strong; they are guiding to mid-single digit growth for the next two years. Baxter continues to differentiate the product with various dosage forms, making it easier for patients to administer higher doses from fewer vials and to reduce the total infusion time. Growth of ADVATE^® sales has continued to exceed our expectations as patients switch from plasma-based and other competing products in Europe and the US. We expect to see further growth from increased compliance, establishing prophylaxis as the standard of care and the global penetration of the therapy, as well as new launches in Brazil, Russia and China.

Extraneal^® is a peritoneal dialysis solution containing icodextrin, licensed to Baxter in 1996 and marketed by Baxter worldwide. The product has been launched in over 45 countries including, in 2003, the US and Japanese markets. Vectura receives royalties on the sales of Extraneal^® in the US, Japan and the rest of the world.

Adept^® is a 4% icodextrin solution used during surgery to reduce post-surgical adhesions, a frequent and major complication following gynaecological and other abdominal surgery. It has been used for this purpose in Europe since 2000 and in the US since October 2006. Vectura signed a global licence deal with Baxter in December 2005 for the manufacture and distribution of Adept^®.

Asmasal^® and Asmabec^® are Clickhaler^®-based products. Asmasal^® contains salbutamol, a short-acting beta-2 agonist for the quick relief of asthma symptoms. Asmabec^® contains beclometasone, an inhaled steroid used as standard preventative therapy for asthma. Asmasal^® and Asmabec^® are marketed by Recipharm in the UK, France and Ireland. Clickhaler^® is Vectura's proprietary reservoir DPI device.

Otsuka Pharmaceutical, in Japan, has licensed the Clickhaler^® technology from Vectura. The device is used to deliver its shortacting beta-2 agonist Meptin (procaterol) for the quick relief of mild, intermittent asthma symptoms.

Vectura continues to explore licensing opportunities for Clickhaler^® products in other countries. The products available include budesonide and formoterol. Regulatory approvals for Clickhaler^® budesonide have been received in Germany, the Netherlands and New Zealand; whilst regulatory approvals for Clickhaler^® formoterol were received in Denmark, the Netherlands, South Africa and New Zealand. These products are currently not marketed. Vectura supplies the Clickhaler^® devices to licensees and earns a margin on these device sales.