Vernalis — Update 28 April 2016

Vernalis — Update 28 April 2016

Vernalis

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Vernalis

Securing cash to sustainability

Proposed fund-raising

Pharma & biotech

28 April 2016

Price

49.75p

Market cap

£221m

Net cash (£m) at 31 December 2015

54.0

Shares in issue

445.1m

Free float

64%

Code

VER

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

Business description

Vernalis is a UK speciality pharma company with an FDA-approved, prescription-only cough cold treatment, Tuzistra XR; an FDA-approved amoxicillin, Moxatag; and a late-stage US cough cold pipeline of four products. Vernalis also has an early- to mid-stage R&D pipeline of CNS and cancer projects. Its primary focus is on commercialising Tuzistra XR in the US.

Analyst

Lala Gregorek

+44 (0)20 3681 2527

Vernalis is a research client of Edison Investment Research Limited

Vernalis intends to raise £40m (gross) through the issue of 80m new shares at 50p per share. This equity raise will remove any uncertainty over whether Vernalis’s cash position is sufficient to take it through to sustainable profitability in FY18 (on our current forecasts). New funds will be used to boost existing working capital required for a conservative Tuzistra XR roll-out, upcoming Moxatag re-launch and future launches of the remaining four US cough cold programmes in development with Tris. The share placing is on a non pre-emptive basis and is conditional on being passed at the General Meeting scheduled on 12 May 2016.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

14.1

(4.7)

(0.8)

0.0

N/A

N/A

06/15**

19.9

(6.9)

(1.0)

0.0

N/A

N/A

06/16e

11.9

(28.0)

(6.0)

0.0

N/A

N/A

06/17e

30.6

(15.4)

(3.3)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments. **18-month reporting period, 12 months thereafter.

Net proceeds, coupled with existing cash resources of £54m (at end-December 2015), will cover ‘a conservative risk-adjusted roll-out plan’ for Tuzistra XR, upcoming Moxatag re-launch and the planned roll-out of the four other products in the cough cold franchise (two of which remain on track for NDA filing by end-2016). It will also facilitate increased promotional activity, if appropriate.

New funds ensure that Vernalis can focus on executing its operational plan as it has sufficient resources to invest in establishing the cough cold platform for future sales growth. With operating costs of c £40m pa (and limited room to make savings), these additional funds provide an ample cash cushion, based on our Tuzistra XR sales estimates in FY17 and FY18 and the timing of success-based milestone payments to Tris ($46m in aggregate), to take Vernalis through to sustainable profitability.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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