* FY revenue jumps 20 pct to 36.5 mln stg
* Royalty revenue rises 25 pct to 16.3 mln stg
* Shares rise as much as 3.5 pct (Adds CEO and analyst comments; updates share movement)
May 21 (Reuters) - Drug developer Vectura Group Plc reported a 20 percent rise in full-year revenue, ahead ofanalysts' expectations, helped by higher royalty payments and anincrease in licensing revenue.
The company, which develops and markets drugs forrespiratory illnesses such as asthma and chronic obstructivepulmonary disease, said revenue rose to 36.5 million pounds inthe year ended March 31 from 30.5 million pounds a year earlier.
Pretax loss narrowed to 4.8 million pounds ($8.1 million)from 10.4 million pounds a year earlier.
Nearly half of Vectura's revenue came in from royalties frompartners including Switzerland's Novartis, Sandoz, andGlaxoSmithKline Plc.
Shares in the company rose as much as 3.5 percent in morningtrade on the London Stock Exchange.
"We see the shares performing well over the next 12 monthsas the market gains increasing confidence in the revenue growth,with Novartis quarterly sales updates likely to be keycatalysts," Peel Hunt analyst Stefan Hamill said in a note toclients.
Royalty revenue rose 25 percent to 16.3 million pounds,mainly from Novartis relating to sales of the Seebri Breezhaler.
The company also earned milestone revenue of 7.8 millionpounds following the approval of Ultibro Breezhaler in Europeand Japan, and 3.7 million pounds following the approval ofAirFluSal Forspiro in Germany, Romania and Belgium.
"The key products have started to roll out on thecommercialization front, and are now starting to bring in goodroyalties for us. That will build and that will very muchunderpin our business moving forward," Chief Executive ChrisBlackwell told Reuters.
AirFluSal Forspiro is being marketed by Sandoz, the genericsdivision of Novartis. The drug is widely believed to be ageneric version of GSK's best-selling lung drug Advair.
Vectura has eight products marketed by partners and aportfolio of drugs in clinical development, some of which havebeen licensed to major pharmaceutical companies.
The company, which acquired Activaero GmbH - a privateGerman firm - for 108 million pounds in March, said it saw greatopportunity in Activaero's pipeline of products.
"There are several programmes (in Activaero) that arealready partnered. Therefore our investment in terms of cash andresources is extremely limited, and we will see returns in theshorter term in the form of milestones and ultimatelyroyalties," Blackwell said.
Activaero develops therapies targeting severe respiratorydiseases utilising a drug-device approach including theproprietary smart nebuliser-based technology, FAVORITE, thatallows inhaled drugs to be targetted into preselected areas ofthe lung.
Shares in Chippenham-based Vectura were up 2.6 percent at130.75 pence at 0840 GMT on the London Stock Exchange. ($1 = 0.5935 British Pounds) (Reporting by Roshni Menon; Editing by Gopakumar Warrier)
