28 August 2008

Announcement of Interim results for the six months ended 30 June 2008

Winnersh, UK, 28 August 2008, Vernalis plc (LSE: VER) today announces its preliminary results for the six months ended 30 June 2008.

In the first half of 2008, Vernalis implemented a major change in its business strategy and is now focused on pursuing its R&D programmes up to and including proof of concept clinical studies whilst seeking partnerships for later-phase clinical development and commercialisation. Vernalis has completed a major restructuring to provide a stable financial platform for this R&D based strategy.  Vernalis also today announces the successful completion of a Phase IIa study with V10153, a potential treatment for ischaemic stroke. 

Highlights

• Proforma cash resources at 30 June 2008 of £22.9 million (including £6.2 million proceeds from sale of Apokyn® and US operations to Ipsen). Cash resources at 30 June 2008 of £16.7 million (31 Dec 2007: £20.5 million)

• Early settlement of $56 million loan from Endo

• €18.4 million financing from European frovatriptan revenues 

• Divestment of Apokyn & US operations to Ipsen (completed 1 July 2008)

• $5 million share subscription by Ipsen at 20 per cent premium (1 July 2008)

• V10153 Phase IIa study in ischaemic stroke successfully completed.  5 mg/kg dose to be evaluated in efficacy studies

• V1512 - positive data from Phase II pharmacokinetic study (Parkinson's disease)

Peter Fellner, Executive Chairman, Vernalis commented, "In the first half of 2008, we have completed the restructuring of Vernalis, as planned and on schedule. The divestment of Apokyn® and the US operations together with utilisation of frovatriptan revenues to raise cash and cancel debt has strengthened the balance sheet and provided the financial platform to invest in our product pipeline and discovery programmes. I am also very pleased to announce today that we have successfully completed our Phase IIa ischaemic stroke study with V10153, and have identified a safe dose to take through to  efficacy studies next year in this very underserved market. "

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Notes to Editors

About Vernalis

Vernalis is a pharmaceutical company with one marketed product, Frova®, and 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.

Forward-Looking Statement

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 Frova® 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.

Strategic and Operational Review

Strategic Framework

Vernalis has undertaken a major change in its business strategy following the decision of the US FDA, in September 2007, not to approve the Company's Supplemental New Drug Application (sNDA) for Frova® for the short-term prevention of menstrual migraine.

The revised strategy will refocus the Company on building value by effectively and rapidly progressing its innovative development pipeline and discovery programmes up to and including proof-of-concept clinical studies, prior to establishing partnerships for later-phase clinical development and subsequent commercialisation.  The development pipeline includes a series of novel product candidates addressing potentially large market opportunities. Several are retained in entirety by Vernalis, and two are being developed in collaboration with major partners, Novartis and Biogen Idec.

Vernalis will continue to exploit its proven, highly competitive structure-based discovery technologies and capabilities to drive a series of key programmes, with the initial goal of generating attractive development candidates from one to two of these programmes within the next 12 months.

As a consequence of this strategic shift, Vernalis has implemented a major restructuring of its business, in order to provide a stable financial platform for the repositioned Company.  Current estimates are that Vernalis should have sufficient funds until mid 2010 based on its current out-licensing and investment plans for its R&D programmes.

The key elements of the restructuring are as follows:

• Early settlement of the loan due to Endo Pharmaceuticals Inc. This was successfully concluded and announced in February 2008. The outstanding balance of approximately $56million, which was originally due for repayment in August 2009, was discharged in full in return for an initial payment of $7million and Vernalis foregoing Frova® royalties from US sales until they exceed $85million per annum.

•  A financing agreement with Paul Capital Healthcare whereby Paul Capital Healthcare acquired an interest in 90 per cent of Vernalis' net revenues from frovatriptan under its collaboration with Menarini in return for a payment to Vernalis of €18.4 million. The remaining 10 per cent retained by Vernalis will be used to meet the costs of supplying active pharmaceutical ingredient to Menarini.

• Divestment of Apokyn®, currently marketed in the US for Parkinson's disease, together with the Company's US sales and marketing operations to Ipsen on 1 July 2008 for an initial cash consideration of $6.5 million.  Further milestone consideration of up to $6.0 million may become payable by Ipsen to Vernalis and, in addition, Ipsen subscribed $5.0 million for new shares in Vernalis at a 20 per cent premium.  

• Reduction of the total headcount from 210, including US commercial operations, to approximately 90.  The remaining employees are all based in the UK, with around 75 in R&D. The discovery programmes are being concentrated at the Cambridge research facility, with a small group of development and corporate staff continuing to be based in Winnersh.

All elements of the restructuring are expected to be completed in the third quarter of 2008.

Marketed Products

Apokyn® - Advanced Parkinson's Disease

Apokyn® was divested to Ipsen effective from 1 July 2008.  Gross sales for Apokyn for the six months ended 30 June 2008 were $2.1 million (2007: $3.1 million).  These results are shown as a discontinued operation in the income statement.

Frova® - Acute Migraine

Frova®, a selective 5-HT1B/1D receptor agonist, is approved as an acute oral treatment for migraine headache and its associated symptoms. Vernalis licensed North American rights for Frova® to Endo, who reported net sales in the six months ended 30 June 2008 of $26.9 million (2007: $24.9 million).  In return for the early settlement of the loan due to Endo Vernalis does not receive royalties on US sales of frovatriptan until sales exceed $85 million per annum.  

In Europe, frovatriptan is marketed by Menarini, and they reported sales in the six months ended 30 June 2008 of €13.2 million (2007: €9.9 million). Under its collaboration with Menarini, Vernalis earns a return which approximates to 25 per cent of net sales through the supply of product to Menarini.  In April 2008, Vernalis entered a financing agreement with Paul Capital Healthcare relating to the revenues under the collaboration with Menarini. Vernalis continues to receive the full revenues from Menarini but 90 per cent of these are paid to Paul Capital Healthcare under the financing arrangement.

In the six months ended 30 June 2008, frovatriptan was launched in Portugal.

Frova® - Prevention of Menstrual Migraine (MM)

On 30 September 2007, Vernalis announced that the FDA had issued a non-approvable letter in respect of the sNDA for Frova® for the short-term prevention of menstrual migraine. Vernalis' partner, Endo, has subsequently withdrawn the sNDA and Vernalis and Endo are continuing to evaluate options for further development in this and other indications.

Vernalis' European partner, Menarini, is considering submitting an application throughout Europe, under the mutual recognition procedure, to extend the current acute indication to include prevention of menstrual migraine. 

Product development pipeline 

Unpartnered products

V1512 - Parkinson's Disease

V1512 combines Levodopa (L-dopa) methylester, a form of L-dopa with significantly enhanced solubility, with Carbidopa. It is fully soluble in water and is presented in a patented effervescent formulation as a potential novel treatment for Parkinson's disease. It is expected that this product could provide a valuable clinical advantage in patients with advanced disease, many of whom suffer from reduced gastrointestinal motility.  Data from a recently completed pharmacokinetic study have confirmed the improved reproducibility and reliability of L-dopa absorption from V1512 compared with standard L-dopa therapy.

We plan to evaluate V1512 in a pivotal Phase III programme, which has been agreed with the FDA under the Special Protocol Assessment (SPA) process. Discussions are currently ongoing with potential partners, to enable this Phase III programme to be completed, and to undertake the commercialisation of this novel product.

V10153 - Ischaemic Stroke

V10153 is a novel thrombolytic protein which is being developed for the treatment of acute ischaemic stroke. Current therapeutic options for stroke sufferers are limited since the only approved drug therapy, the thrombolytic recombinant tissue plasminogen activator (rt-PA), must be administered within three hours of a stroke occurring.

V10153 has been evaluated in a Phase IIa study in which patients who had recently suffered a stroke are treated within three to nine hours.  This trial was designed primarily to collect safety data, but patients have also been assessed by CT angiography to ascertain whether reperfusion or recanalisation events occurred.

Four dose levels (1 mg/kg; 2.5 mg/kg; 5 mg/kg and 7.5 mg/kg) have been completed and a total of 49 patients have been treated. Ten patients received each of the first two dose levels of 1 mg/kg and 2.5 mg/kg and 20 patients received the third dose level of 5 mg/kg. Nine patients received the top dose level of 7.5 mg/kg of which three experienced a clinically significant bleed. Although such bleeds occur relatively frequently in ischaemic stroke patients, the possibility that the bleeds were treatment-related cannot be ruled out. It has been agreed, in consultation with the Study Steering Committee and Data Safety Monitoring Board, that the study has met its objectives and consequently enrolment in the study has been closed.  

The Data Safety Monitoring Board has confirmed that the 5mg/kg dose is safe and well tolerated. Several patients at this dose level have demonstrated positive clinical outcomes with those patients who entered the trial with better prognostic characteristics, such as those that were treated earlier and/or those with smaller clots, responded particularly well to V10153.

The Phase IIa trial has, therefore, met its objective of determining a safe dose (5 mg/kg) of V10153 for evaluation in further clinical studies. Consultants with specialised expertise in neurological imaging have been engaged to further assess the data from the trial. These analyses will be available later this year, following which the next steps in the development of V10153 will be formulated. These plans could include a study to assess V10153 within the initial three hour period following a stroke, since this product has potential clinical advantages over rt-PA. These advantages include a prolonged plasma half-life, with a possibility of a reduced reocclusion rate, as well as the potential to administer the product by bolus injection rather than infusion. An academic collaboration is also being planned with Dr Michael Hill, Calgary, Canada, on a study to evaluate the safety and efficacy of V10153 in patients who awake with a stroke. Many of these patients are currently ineligible for thrombolytic therapy. 

V3381 - Neuropathic pain

V3381 has a dual mechanism of action, as an NMDA antagonist and MAO-A inhibitor, that gives it the potential to moderate pain at both central and peripheral sites, and is being developed for the treatment of neuropathic pain. V3381 has successfully completed a Phase IIa trial in patients suffering neuropathic pain from long-standing diabetes. Data from the trial indicate that V3381 was generally well tolerated with good preliminary indications of efficacy.

V24343 - Obesity & Diabetes

V24343 is a cannabinoid type 1 receptor (CB1) antagonist which is a potential treatment for obesity, diabetes and related disorders. V24343 has successfully completed a series of