* 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 of analysts' expectations, helped by higher royalty payments and an increase in licensing revenue.
The company, which develops and markets drugs for respiratory illnesses such as asthma and chronic obstructive pulmonary disease, said revenue rose to 36.5 million pounds in the 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 from partners including Switzerland's Novartis, Sandoz, and GlaxoSmithKline Plc.
Shares in the company rose as much as 3.5 percent in morning trade on the London Stock Exchange.
"We see the shares performing well over the next 12 months as the market gains increasing confidence in the revenue growth, with Novartis quarterly sales updates likely to be key catalysts," Peel Hunt analyst Stefan Hamill said in a note to clients.
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 million pounds following the approval of Ultibro Breezhaler in Europe and Japan, and 3.7 million pounds following the approval of AirFluSal Forspiro in Germany, Romania and Belgium.
"The key products have started to roll out on the commercialization front, and are now starting to bring in good royalties for us. That will build and that will very much underpin our business moving forward," Chief Executive Chris Blackwell told Reuters.
AirFluSal Forspiro is being marketed by Sandoz, the generics division of Novartis. The drug is widely believed to be a generic version of GSK's best-selling lung drug Advair.
Vectura has eight products marketed by partners and a portfolio of drugs in clinical development, some of which have been licensed to major pharmaceutical companies.
The company, which acquired Activaero GmbH - a private German firm - for 108 million pounds in March, said it saw great opportunity in Activaero's pipeline of products.
"There are several programmes (in Activaero) that are already partnered. Therefore our investment in terms of cash and resources is extremely limited, and we will see returns in the shorter term in the form of milestones and ultimately royalties," Blackwell said.
Activaero develops therapies targeting severe respiratory diseases utilising a drug-device approach including the proprietary smart nebuliser-based technology, FAVORITE, that allows inhaled drugs to be targetted into preselected areas of the lung.
Shares in Chippenham-based Vectura were up 2.6 percent at 130.75 pence at 0840 GMT on the London Stock Exchange. ($1 = 0.5935 British Pounds) (Reporting by Roshni Menon; Editing by Gopakumar Warrier)