20 Feb 2008 07:00
Vernalis PLC20 February 2008 20 February 2008 Vernalis Settles $56m Endo Loan and Undertakes Major Business Restructuring Vernalis plc (LSE:VER) today announces that it has agreed to the earlysettlement of the amount due to Endo Pharmaceuticals Inc (Endo) under the loanagreement between the two companies. The outstanding balance on the Loan, whichwas originally due for repayment in August 2009, was approximately $56m. Thisloan has been discharged under the terms reported below. In addition, Vernalis is implementing a major restructuring of the Company andits operations, which will substantially extend the cash runway of the business.The early loan settlement and the restructuring were both triggered by the FDA'srecent non-approval of the Company's supplementary NDA submission for itsproduct Frova for the treatment of menstrual migraine. Loan Settlement The key terms of the loan settlement are as follows: • Immediate cancellation of the loan • Vernalis will pay Endo $7m (approximately £3.6m) in cash • Vernalis will forego future royalties on US sales of Frova(R), untilannual US net sales exceed a threshold of $85m. For sales in excess of $85m andfor all other terms, the licence agreement remains unchanged. Frova(R)'s USsales for the first nine months of 2007 amounted to $38 million. • The co-promotion of Frova(R) in the US by Vernalis is terminatedeffective from 19 February 2008 The Vernalis revenues arising from sales of frovatriptan in Europe and elsewhereare unaffected by this settlement. European sales of frovatriptan in 2007amounted to €22m. Restructuring The strategic restructuring will enable the Company to focus upon its innovativediscovery programmes and progress its development programmes to the point atwhich they can be partnered. The headcount reductions in the restructuring willbe larger in the various corporate and other areas than in R&D, where it isplanned to retain a critical mass that will ensure that Vernalis' ongoingprogrammes are effectively pursued and remain fully competitive. The discoveryprogrammes will be pursued up to and including proof of concept clinical studiesand then partnered for later phase clinical development and commercialisation.Existing partnerships will not be affected by the restructuring. The key elements of the restructuring include: • Reduction of the total headcount from 210 to approximately 90, all ofwhom will be based in the UK. Following the restructuring, staff in R&D willnumber approximately 75. • Revision of the senior management structure (see accompanyingannouncement). • Concentration of Research on one site, at the Company's Cambridgefacility, together with a small group of corporate and new product developmentstaff who will continue to be based in Winnersh. • Divestment of Apokyn(R) (currently marketed by Vernalis in the US forParkinson's disease) and the Company's US commercial operations. Detaileddiscussions are currently ongoing with interested parties on these divestments. • Vernalis has announced the closure its clinical development operationsbased in Canada and transferred all activities to the UK. The restructuring is expected to be completed during the second quarter of 2008.The steady-state annualised cash utilisation following the restructuring isestimated to be less than £10 million per annum. The Company's unaudited cashresources at 31st December 2007 amounted to £20.5m. Revised Focus Vernalis will continue to exploit its proven innovative research capabilitiesutilising its suite of structure-based drug discovery technologies which areemployed in accelerating Vernalis' internal drug discovery programmes and forthird party collaboration programmes in the CNS and oncology fields. Vernalis' clinical development portfolio comprises six product candidates, twoof which are being developed under collaborative arrangements. The status of thefour product candidates in which Vernalis is investing its own funds is asfollows: • V1512 (Parkinson's disease). Results are expected shortly from apharmacokinetic-pharmacodynamic study to evaluate the plasma profiles ofrepeated doses of the drug compared with Carbidopa/L-Dopa prior to theevaluation of the drug in a Phase III programme. • V10153 (Ischemic stroke). V10153 is currently being evaluated in aPhase IIa study in patients who have recently suffered a stroke. Results fromthe study are expected at the end of 2008. • V3381 (Neuropathic pain). This product has successfully completed aPhase IIa trial which demonstrated that V3381 was generally well tolerated withgood preliminary indications of efficacy. • V24343 (Obesity). V24343 has successfully completed a Phase I studywhich showed that V24343 produced significant weight loss in overweight andmildly obese volunteers. Vernalis' R&D collaborations are not affected by the strategic restructuring.These comprise: • The collaboration with Biogen Idec to develop V2006 (currently in aPhase II programme), an A2A antagonist to treat Parkinson's disease. • The collaboration with Novartis to identify Hsp90 inhibitors to treatvarious cancers. AUY922, the lead compound from this collaboration, is currentlybeing evaluated in a Phase I programme. • The three-year oncology drug discovery collaboration with Servier. Response to the FDA on Frova(R) In parallel with the loan settlement and restructuring, Vernalis and Endo arecurrently preparing their responses to the points that were raised by the FDA inits non-approvable action letter for the Supplemental New Drug Application(sNDA) for Frova for the treatment of menstrual migraine. Peter Fellner, Executive Chairman, comments: "I believe that the settlement of the outstanding loan, together with theextensive restructuring of the business, will create a platform that will enableus to rebuild significant shareholder value in the mid-term". -- ends -- Enquiries: Vernalis plc +44 (0) 118 977 3133Peter Fellner, Executive ChairmanTony Weir, Chief Financial Officer Brunswick Group +44 (0) 20 7404 5959Jon ColesJustine McIlroyAlex Tweed Notes to Editors About Vernalis Vernalis is a speciality bio-pharmaceutical company focused on products marketedto specialist neurologists. The company has two marketed products, Frova(R) andApokyn(R), and a development pipeline focused on neurology and central nervoussystem disorders. The company has six products in clinical development andcollaborations with leading, global pharmaceutical companies including Novartis,Biogen Idec, Endo, Menarini and Chiesi: Product Indication Phase I Phase Phase Market Marketing Rights II IIIApokyn(R) Parkinson's X North America DiseaseFrova(R) Migraine X Menarini (EU-royalties)Frova(R) Menstrual X Menarini Migraine (EU-royalties) PreventionV1512 Parkinson's X World Wide (excl. Disease Italy)V10153 Thrombotic X World Wide DisordersV3381 Neuropathic X World Wide PainV2006 Parkinson's X US Co-promotion Disease Biogen IdecV24343 Obesity X World WideAUY922 Cancer X None - royalty (Novartis)For further information about Vernalis, please visit www.vernalis.com. Forward-Looking Statement This news release may contain forward-looking statements that reflect theCompany's current expectations regarding future events including the clinicaldevelopment and regulatory clearance of the Company's products, the Company'sability to find partners for the development and commercialisation of itsproducts, as well as the Company's future capital raising activities.Forward-looking statements involve risks and uncertainties. Actual events coulddiffer materially from those projected herein and depend on a number of factorsincluding the success of the Company's research strategies, the applicability ofthe discoveries made therein, the successful and timely completion of clinicalstudies, the uncertainties related to the regulatory process, the ability of theCompany to identify and agree beneficial terms with suitable partners for thecommercialisation and/or development of its products, as well as the achievementof expected synergies from such transactions, the acceptance of Frova(R) andApokyn(R) and other products by consumers and medical professionals, thesuccessful integration of completed mergers and acquisitions and achievement ofexpected synergies from such transactions, and the ability of the Company toidentify and consummate suitable strategic and business combinationtransactions. This information is provided by RNS The company news service from the London Stock Exchange