Vernalis Announces Sale of ApokynŽ and US Commercial Operations, Share Subscription and Extraordinary General Meeting
05 June 2008
Not for release, publication or distribution, in whole or in part, in, into or from the United States, Canada, Australia or Japan or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction
Vernalis plc (LSE: VER) today announces that it has agreed terms for the sale of Apokyn® and its US Commercial Operations to Ipsen S.A. (Euronext: IPN) for up to US$17.5 million (£9.0 million), comprising an initial cash consideration of US$6.5 million (subject to adjustment for working capital at Completion) and further milestone consideration of up to US$6.0 million. As part of the Sale arrangements, Ipsen has also agreed to take a US$5.0 million equity stake in Vernalis, at a subscription price per Ordinary Share of 7.26 pence, representing a 20 per cent premium to the average Closing Price of an Ordinary Share on the previous three trading days. The Sale and the Subscription are conditional on the approval of Shareholders and are expected to complete on 1 July 2008.
A conference call will be held today at 09.30 BST. The webcast can be accessed via Vernalis' website at www.vernalis.com and the call by dialling +44 (0)1452 561 263 and using the participant PIN code Vernalis#. A recording will also be available afterwards on the Vernalis website.
Summary of Sale terms
Up to US$17.5 million is payable by Ipsen in connection with the sale of Apokyn® and the US Commercial Operations as follows:
- US$11.5 million upfront on Completion, comprising:
- US$6.5 million cash consideration
- US$5.0 million share subscription at 20% premium to average Closing Price over previous three trading days
- Up to US$6.0 million of deferred milestone consideration,
comprising
- Up to US$1.5 million at the end of 2008 dependent on 2008 Apokyn® net sales
- US$2.5 million payable at the end of first year that combined Apokyn® and Dysport net sales exceed US$50 million
- Up to US$1.0 million in 12 months subject to staff retention
- Additional US$1.0 million payable if Vernalis does not proceed with a potential CNS collaboration with Ipsen
In addition to the above, US$4.0 million of shut-down costs are avoided by the Sale.
Peter Fellner, Executive Chairman of Vernalis, commented:
"Following the FDA's issuance of a non-approvable letter for the prophylactic use of Frovatriptan for short-term prevention of menstrual migraine, we have taken rapid and decisive action to reorientate Vernalis' business strategy. Today's announcement of the successful sale of Apokyn® and our US Commercial Operations substantially completes the restructuring of the Company. Following this transaction Vernalis' cash resources will, under the current investment plan, fund the Company for the next two years, which puts Vernalis in a strong position compared with other UK listed biotech companies."Vernalis has six promising products in clinical development and collaborations with Novartis, Biogen Idec and Servier among others. We look forward to rebuilding significant shareholder value in the mid-term through progression of our promising R&D pipeline."
Background to and reasons for the Sale
Vernalis is currently implementing a major change in its business strategy, following receipt by Endo of the FDA’s non-approvable action letter for the supplemental New Drug Application seeking approval for frovatriptan for the short-term prevention of menstrual migraine. The Company will now focus on building value by progressing its innovative development pipeline and discovery programmes up to and including proof of concept clinical studies and then undertake partnerships for later-phase clinical development and commercialisation. The action letter was issued in September 2007 and the Sale forms part of an extensive restructuring of the business to implement the new strategy. Elements of this restructuring have already been implemented, including:
- early settlement in February 2008 of the loan due to Endo. The outstanding balance of approximately US$56 million, which was originally due for repayment in September 2009, was discharged in full in return for an initial payment by Vernalis of US$7 million and Vernalis foregoing future royalties on US sales of frovatriptan until they exceed US$85 million per annum;
- reduction of the total headcount from 210, including the US Commercial Operations, to approximately 90, of which 75 are in R&D. The remaining employees will all be based in the UK and the changes will be fully implemented by the end of Q3 2008;
- a financing agreement with Paul Capital Healthcare agreed in April 2008 relating to frovatriptan. Paul Capital Healthcare acquired an interest in 90 per cent of the Group’s revenues under its collaboration with Menarini for the commercialisation of frovatriptan in Europe and certain other territories in return for a payment to the Group of €18.4 million. The remaining 10 per cent retained by the Group will be used to meet the costs of supplying active pharmaceutical ingredient to Menarini.
Principal terms of the Sale
Under the terms of the Sale Agreements, Vernalis has agreed to sell Apokyn® and its US Commercial Operations to Ipsen for an initial cash consideration of US$6.5 million, subject to adjustment for working capital at Completion. Further milestone consideration of up to US$6.0 million is payable to Vernalis under the Sale Agreements as follows:
- up to US$1.5 million dependent on the level of net sales of Apokyn® for 2008;
- US$2.5 million payable at the end of the first financial year that combined Apokyn® and Dysport net sales exceed US$50 million;
- up to US$1 million payable 12 months from Completion dependent on success of the retention and incentive plan for Vernalis Inc. employees to be put in place by Ipsen at Completion; and
- an additional payment of US$1 million payable if Vernalis does not proceed with a potential CNS collaboration with Ipsen.
As part of the Sale arrangements, Ipsen has also agreed to make the Subscription, which amounts to US$5.0 million.
The Sale is conditional, amongst other things, on the Subscription and the approval of Shareholders and is expected to complete on 1 July 2008.
Details of the Subscription and its effect
Pursuant to the Subscription, Ipsen (through SCRAS) will subscribe at Completion for 35,253,134 New Ordinary Shares. The Subscription Price for the New Ordinary Shares is 7.26 pence per New Ordinary Share, which represents a premium of 20 per cent to the average of the Closing Prices of an Ordinary Share on the three trading days prior to the announcement of the Sale. Upon Completion the 35,253,134 New Ordinary Shares will represent approximately 9.7 per cent of the Company’s enlarged issued ordinary share capital and the Existing Ordinary Shares will represent approximately 90.3 per cent of the Company’s enlarged issued ordinary share capital. Following the issue of all the New Ordinary Shares to be allotted to Ipsen pursuant to the Subscription, Shareholders will suffer an immediate dilution of approximately 9.7 per cent in their interests in the Company.
The Subscription is conditional upon, amongst other things, the Sale, the passing of the Resolutions at the Extraordinary General Meeting and Admission becoming effective. It is expected that Admission will become effective and dealings in the New Ordinary Shares will commence at 8.00 a.m. on 1 July 2008. The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with, and carry the same voting rights as, the Existing Ordinary Shares.
Use of Proceeds
The aggregate net proceeds of the Sale received at Completion and the Subscription will amount to approximately £4.8 million.
The Directors currently expect that the Group’s existing cash resources of approximately £11.7 million as at 31 March 2008, together with the net proceeds from the financing arrangement with Paul Capital Healthcare of £14.7 million (€18.4 million) and the net proceeds from the Sale received at Completion and the Subscription of approximately £4.8 million, will be applied as follows:
- approximately 60 per cent to invest in Vernalis’ clinical development and discovery research programmes; and
- approximately 40 per cent for working capital and other corporate purposes.
Extraordinary General Meeting
An extraordinary general meeting to, among other things, approve the Resolutions to enable the Directors to complete the Sale and the Subscription and to issue the New Ordinary Shares will be held at the offices of Allen & Overy LLP at One Bishops Square, London, E1 4AD at 10.00 a.m. on 30 June 2008. A document comprising a combined circular and prospectus containing further details of the proposed Sale and Subscription, including notice of Extraordinary General Meeting, will be posted to Shareholders on or before 6 June 2008.
This summary should be read in conjunction with the full announcement which is contained in the following pages.
-- ends --
Enquiries:
Vernalis plc +44 (0) 118 977 3133 Peter Fellner, Executive Chairman Tony Weir, Chief Financial Officer 
Piper Jaffray +44 (0) 20 3142 8700 Neil Mackison
Rupert Winckler
Thomas Rider Brunswick Group +44 (0) 20 7404 5959 Jon Coles Justine McIlroy
View the Vernalis Announces Sale of Apokyn® and US Commercial Operations, Share Subscription and Extraordinary General Meeting (PDF - 114 KB).
This page includes links to documents in Portable Document File (PDF) format. To read PDF documents you may need to download the free Adobe Acrobat Reader. For PDF accessibility help, visit Access Adobe. These links will open in a new browser window.
