Vernalis Announces Results Announcement for the 12 Months Ended 30 June 2016

Significant investment in Tuzistra^® XR US launch as transition to a commercial specialty pharmaceutical company continues
Vernalis plc (LSE: VER) today announces its audited results for the 12 month period ended 30 June 2016.

			(Audited) 12 months ended 30 June 2016 £000		(Unaudited) 12 months ended 30 June 2015 £000		(Audited) 18 months ended 30 June 2015* £000
Revenue			12,034		13,712		19,882
Sales and marketing expenditure			(20,428)		–		–
Research and development expenditure			(10,932)		(15,687)		(22,563)
General and administrative expenditure (before exceptional items)			(5,289)		(6,019)		(8,635)
Operating loss
	Before exceptional items		(26,223)		(8,224)		(12,078)
	After exceptional items		(23,572)		(7,981)		(11,835)
Net finance income			8,273		4,252		2,576
Loss before tax
	Before exceptional items		(17,950)		(3,972)		(9,502)
	After exceptional items		(15,299)		(3,729)		(9,259)
Income tax credit			804		1,946		2,858
Loss after tax
	Before exceptional items		(17,146)		(2,026)		(6,644)
	After exceptional items		(14,495)		(1,783)		(6,401)
Cash resources			84,018		61,258		61,258

*The Group changed its accounting reference date from 31 December to 30 June on 18 November 2014 to align the external reporting period with the seasonality of the US cough cold market, which will become a major component of the Group’s commercial business. While the financial highlights and financial review below focus on the audited 12 months ended 30 June 2016 compared to the unaudited 12 months ended 30 June 2015, figures for the audited 18 month period to 30 June 2015 are also presented.
Financial Highlights for the 12 months ended 30 June 2016

• Revenue was £12.0 million (2015: £13.7 million):
  • Tuzistra^® XR net revenue was £1.1 million and represents deliveries mad e to wholesalers by 30 June 2016
  • Research collaboration income was flat at £8.0 million (2015: £7.9 million) but included an increase in FTE income offset by a reduction in milestone receipts. Our research organisation remained self-funded
  • As expected frovatriptan royalty income was lower than the prior year at £2.9 million (2015: £4.9 million); most of this decrease was due to a volume decline, with two 12.5kg batches of API delivered to Menarini during the 12 months to 30 June 2016 (2015: three 12.5kg batches of API)
    • Menarini’s underlying sales for the 12 months to 30 June 2016 were down 18 per cent at EUR 20.8 million (2015: EUR 25.2 million)
    • As previously highlighted, major patent expiry occurred in December 2015 and subsequent generic entries have already started to impact both pricing and volumes
• Operating costs before exceptional items were £36.6 million (2015: £21.7 million); the increase was due to the significant investment in Tuzistra^® XR sales, marketing and other US commercial infrastructure
• Pre-exceptional loss for the period was £17.1 million (2015: £2.0 million) and loss after exceptional items was £14.5 million (2015: £1.8 million), including an exceptional gain on the surrender of an onerous building lease; the increase in the loss was due to the additional operating costs in excess of gross margin following the launch of Tuzistra^® XR
• Cash resources including cash and cash equivalents and held to maturity assets increased by £22.8 million in the 12 months and included:
  • £38.9 million (net of expenses) equity placing completed in May 2016
  • $5.4 million (£3.7 million) payment for the acquisition of Moxatag^®
  • £8.0 million foreign exchange gain on retranslation of US dollar and euro cash resources into sterling (2015: £4.1 million)
  • Underlying net cash burn increased to £21.8 million for the year (2015: £8.5 million)
• Balance sheet remains strong with £84.0 million of cash resources and no debt at 30 June 2016

Operational Highlights
US Commercial Pipeline:

• Tuzistra^® XR, the only 12-hour, extended-release, codeine based cough cold suspension product, launched in the US ahead of the 2015/16 cough cold season
• Focused US primary care sales force fully recruited, trained and deployed to the field
• US rights to Moxatag^®, the only US approved once-a-day formulation of amoxicillin, acquired in October 2015, validating the Company’s ability to expand its US commercial portfolio
• CCP-07 filed with FDA and accepted for review in September 2016. PDUFA date of 20 April 2017
• CCP-08 pivotal single-dose and multiple dose comparative bioavailability studies successfully completed and NDA submission remains on track for calendar year 2016
• Two further programmes in active development at Tris, with proof-of-concept (“POC”) now targeted during the 2016/17 financial year

Other:

• NCE Development Pipeline: Completion of the Phase 2 POC study of V158866 in August 2015 which ended in-house investment in NCE pipeline
• Corvus Pharmaceuticals, Inc. announced (in January 2016) as the worldwide licensee for the adenosine antagonist programme with CPI-444 (formerly V81444), initially being developed for immuno-oncology with clinical studies expected in 2016
• RedoxTherapies, our partner for vipadenant (V2006), acquired by Juno Therapeutics Inc. (Juno), a leader in CAR[-T] and TCR technologies. Juno will continue to explore the utility of vipadenant in immuno-oncology
• Verona Pharma plc announced positive phase II study results for RPL554 in COPD and raised £45 million via an equity placing
• Research Collaborations: Six active collaborations during the year ended 30 June 2016; business remained self-funded

Expected 2016/17 Newsflow (all dates calendar year unless otherwise stated):

• CCP-07: potential approval by FDA (Q2 2017 calendar year)
• CCP-08: NDA submission (2016 calendar year )
• Re-launch Moxatag^® in the US market through our focused US primary care sales force (H2 2016 calendar year)
• POCs on two remaining programmes in cough cold pipeline (CCP-05 and CCP-06) (during 2016/17 financial year)
• Achieve milestones under existing collaborations
• Secure new research collaborations
• Continue to leverage our US commercial infrastructure with possible complementary new product acquisitions/in-licensing

Ian Garland, Chief Executive Officer, commented, “The last twelve months have seen a major transformation in our business as we launched the first product from our cough cold franchise, Tuzistra^® XR, into the US market. We have made a significant investment in our commercial infrastructure to support the launch of Tuzistra^® XR, and this will continue during the product’s launch phase as we seek to gain a greater share of the US cough cold market. We will leverage this investment and our US commercial infrastructure to launch the once-a-day antibiotic, Moxatag^® in the second half of 2016. The cough cold pipeline continues to mature with CCP-07 and CCP-08 on track for potential approvals in 2017.
Our cash position was bolstered following the recent equity raise to continue the promotional investment in Tuzistra^® XR as well as launch Moxatag^® and our additional products, CCP-07 and CCP-08 in the near term. We remain very excited about the growth potential of the business.”
Presentation & Conference Call
Vernalis management will host a presentation at 9.30am (UK) at the offices of FTI Consulting 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. It will also be available via webcast at https://www.vernalis.com/investor-centre/presentations-and-webcasts and www.cantos.com and via conference call, which can be joined by dialling: +44 (0) 20 3003 2666. Please contact Matthew Moss at FTI consulting +44 (0) 20 3727 1000 for details.
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
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Enquiries:

Vernalis plc:	+44 (0) 118 938 0015
Ian Garland, Chief Executive Officer
David Mackney, Chief Financial Officer
Canaccord Genuity Limited (Nominated Adviser and Joint Broker):	+44 (0) 20 7523 8000
Dr Julian Feneley
Rupert Winckler
Henry Fitzgerald-O’Connor
Emma Gabriel
Shore Capital (Joint Broker):	+44 (0)20 7408 4090
Bidhi Bhoma
Toby Gibbs
FTI Consulting:	+44 (0) 20 3727 1000
Ben Atwell
Simon Conway

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