Vernalis Settles $56m Endo Loan and Undertakes Major Business Restructuring
20 February 2008
Vernalis plc (LSE:VER) today announces that it has agreed to the early settlement of the amount due to Endo Pharmaceuticals Inc (Endo) under the loan agreement between the two companies. The outstanding balance on the Loan, which was originally due for repayment in August 2009, was approximately $56m. This loan has been discharged under the terms reported below.
In addition, Vernalis is implementing a major restructuring of the Company and its operations, which will substantially extend the cash runway of the business. The early loan settlement and the restructuring were both triggered by the FDAâ€™s recent non-approval of the Companyâ€™s supplementary NDA submission for its product Frova for the treatment of menstrual migraine.
The key terms of the loan settlement are as follows:
-Immediate cancellation of the loan
-Vernalis will pay Endo $7m (approximately Â£3. 6m) in cash
-Vernalis will forego future royalties on US sales of FrovaÂ®, until annual US net sales exceed a threshold of $85m. For sales in excess of $85m and for all other terms, the licence agreement remains unchanged. FrovaÂ®'s US sales for the first nine months of 2007 amounted to $38 million.
-The co-promotion of FrovaÂ® in the US by Vernalis is terminated effective from 19 February 2008
The Vernalis revenues arising from sales of frovatriptan in Europe and elsewhere are unaffected by this settlement. European sales of frovatriptan in 2007 amounted to â‚¬22m.
The strategic restructuring will enable the Company to focus upon its innovative discovery programmes and progress its development programmes to the point at which they can be partnered. The headcount reductions in the restructuring will be larger in the various corporate and other areas than in R&D, where it is planned to retain a critical mass that will ensure that Vernalisâ€™ ongoing programmes are effectively pursued and remain fully competitive. The discovery programmes will be pursued up to and including proof of concept clinical studies and 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 of whom will be based in the UK. Following the restructuring, staff in R&D will number approximately 75.
-Revision of the senior management structure (see accompanying announcement).
-Concentration of Research on one site, at the Company's Cambridge facility, together with a small group of corporate and new product development staff who will continue to be based in Winnersh.
-Divestment of ApokynÂ® (currently marketed by Vernalis in the US for Parkinson's disease) and the Company's US commercial operations. Detailed discussions are currently ongoing with interested parties on these divestments.
-Vernalis has announced the closure its clinical development operations based 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 is estimated to be less than Â£10 million per annum. The Companyâ€™s unaudited cash resources at 31st December 2007 amounted to Â£20.5m.
Vernalis will continue to exploit its proven innovative research capabilities utilising its suite of structure-based drug discovery technologies which are employed in accelerating Vernalisâ€™ internal drug discovery programmes and for third party collaboration programmes in the CNS and oncology fields.
Vernalisâ€™ clinical development portfolio comprises six product candidates, two of which are being developed under collaborative arrangements. The status of the four product candidates in which Vernalis is investing its own funds is as follows:
-V1512 (Parkinson's disease). Results are expected shortly from a pharmacokinetic-pharmacodynamic study to evaluate the plasma profiles of repeated doses of the drug compared with Carbidopa/L-Dopa prior to the evaluation of the drug in a Phase III programme.
-V10153 (Ischemic stroke). V10153 is currently being evaluated in a Phase IIa study in patients who have recently suffered a stroke. Results from the study are expected at the end of 2008.
-V3381 (Neuropathic pain). This product has successfully completed a Phase IIa trial which demonstrated that V3381 was generally well tolerated with good preliminary indications of efficacy.
-V24343 (Obesity). V24343 has successfully completed a Phase I study which showed that V24343 produced significant weight loss in overweight and mildly obese volunteers.
Vernalisâ€™ R&D collaborations are not affected by the strategic restructuring. These comprise:
-The collaboration with Biogen Idec to develop V2006 (currently in a Phase II programme), an A2A antagonist to treat Parkinson's disease.
-The collaboration with Novartis to identify Hsp90 inhibitors to treat various cancers. AUY922, the lead compound from this collaboration, is currently being evaluated in a Phase I programme.
-The three-year oncology drug discovery collaboration with Servier.
Response to the FDA on FrovaÂ®
In parallel with the loan settlement and restructuring, Vernalis and Endo are currently preparing their responses to the points that were raised by the FDA in its 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 the extensive restructuring of the business, will create a platform that will enable us to rebuild significant shareholder value in the mid-term".
â€“ ends â€“
Vernalis plc +44 (0) 118 977 3133
Peter Fellner, Executive ChairmanÂ Â
Tony Weir, Chief Financial OfficerÂ Â
Â Â Â
Brunswick Group +44 (0) 20 7404 5959
Jon ColesÂ Â
Justine McIlroyÂ Â
Alex TweedÂ Â
Notes to Editors
Vernalis is a speciality bio-pharmaceutical company focused on products marketed to specialist neurologists. The company has two marketed products, FrovaÂ® and ApokynÂ®, and a development pipeline focused on neurology and central nervous system disorders. The company has six products in clinical development and collaborations with leading, global pharmaceutical companies including Novartis, Biogen Idec, Endo, Menarini and Chiesi:
For further information about Vernalis, please visit www. vernalis. com.
This news release may contain forward-looking statements that reflect the Company's current expectations regarding future events including the clinical development and regulatory clearance of the Company's products, the Company's ability to find partners for the development and commercialisation of its products, as well as the Company's future capital raising activities. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors including the success of the Company's research strategies, the applicability of the discoveries made therein, the successful and timely completion of clinical studies, the uncertainties related to the regulatory process, the ability of the Company to identify and agree beneficial terms with suitable partners for the commercialisation and/or development of its products, as well as the achievement of expected synergies from such transactions, the acceptance of FrovaÂ® and ApokynÂ® and other products by consumers and medical professionals, the successful integration of completed mergers and acquisitions and achievement of expected synergies from such transactions, and the ability of the Company to identify and consummate suitable strategic and business combination transactions.