LONDON, March 19 /PRNewswire-FirstCall/ -- Vernalis Group plc (London: VER), the biopharmaceutical company specializing in CNS disorders, obesity and diabetes, today announced a profit after tax of 1.1 million* pounds sterling for the second half of 2001, including milestone income of 10.3 million pounds on FDA approval of frovatriptan. Turnover for the year increased by 372% to 13.8 million pounds, and full year losses declined by 53% to 9.9 million pounds(2000: 21.2 million pounds).
During the period the Company has entered into further collaborations with major pharmaceutical companies in its core areas of expertise, providing potential new multiple revenue streams from important and fast growing therapeutic areas. Funding and potential milestone income from the Company's commercial collaborations now exceeds $150 million in addition to the potential royalty revenues.
Highlights
Migraine (Frova(TM) / Migard(R))
* FDA approval in Q4 2001 triggered $15m in milestone payments
* US launch expected Q2 2002
* Approval granted in all 15 European Union countries in Q1 2002
* Roll out of European launches anticipated from Q2 2002
Sexual Dysfunction
* CTX filed following positive outcome in Phase I studies
* Phase II patient studies expected to commence Q2 2002
Obesity
* First candidate drug moving into Phase I Q2 2002
* New agreement with Roche provides funding to identify additional
candidate drugs, plus substantial potential milestones and royalties
*All figures Pounds Sterling unless otherwise noted
Parkinson's Disease
* Selection of first candidate drug announced in Q1 2002
Diabetes
* Roche and Vernalis pool intellectual property in new strategic alliance
* Collaboration targets novel mechanisms of action
* Vernalis to receive research funding plus potential milestones and
royalties
* New deal represents largest potential revenue stream to date
Corporate
* Company reports first ever half year profit in second half 2001
* Income from Frova(TM) approval and new deals with Roche strengthen
cashflow
* Registration of Company with SEC in the US completed Q3 2001 in
preparation forsecondary listing on Nasdaq
Commenting on the year, Chief Executive, Robert Mansfield said:
``I am delighted to see the Company recording its first ever half year profit in the second half of 2001. Our new strategic alliance with Roche in diabetes is a landmark deal for Vernalis that has significantly improved the Company's financial prospects. We are also very pleased to report that preparations are well advanced for the launch of Frova(TM) in the US and Migard® in Europe. We believe that the distinctive profile of frovatriptan provides an attractive new alternative for migraine sufferers. The imminent launch of frovatriptan in these major markets signals the start of a very exciting stage for the Company.
``Our portfolio of candidate drugs targets disease areas with large patient populations and we believe that this and our CNS focus will produce significant interest from the US investment community as we pursue our plans for a Nasdaq listing.''
Financial Review
The profit after tax of 1.1 million pounds for the second half of 2001 was a major achievement for Vernalis and enabled the Company to report a reduction in the full year loss of 53% compared to 2000.
Turnover increased by 372% due principally to the receipt of 10.3 million pounds ($15 million) in milestone income in the fourth quarter on FDA approval of frovatriptan. We maintained tight control over our operating costs, with administrative expenses and research and development costs both lower in the second half. Administrative expenditure excluding goodwill amortization was 29% lower than in 2000, as we began to realize the full benefits of the rationalization and integration program.
The consolidated loss for the year after tax reduced by 53% to 9.9 million pounds (2000: 21.2 million pounds). The second half net profit of 1.1 million pounds compares to a first half net loss of 11.0 million pounds.
Profit and Loss Account
Turnover for the year of 13.8 million pounds (2000: 2.9 million pounds) included total income of 10.9 million pounds in relation to frovatriptan milestone payments following FDA approval and sales of bulk drug for the manufacture of launch stocks. It also included payments of 2.8 million pounds from Roche under the collaboration on our obesity program.
Research and development expenditure amounted to 20.4 million pounds (2000: 18.6 million pounds). Expenditure in the second half was 9.9 million pounds compared to 10.5 million pounds in the first half.
Expenditure on development projects increased 4% to 9.8 million pounds (2000: 9.4 million pounds). New clinical studies started during the year included frovatriptan Phase IV post-approval studies and a Phase I drug interaction study with VML 670.
Our expenditure on discovery research increased 15% to 10.6 million pounds (2000: 9.2 million pounds) reflecting increased activity on a number of projects, particularly our Parkinson's disease program and our new project in diabetes.
Administrative expenses excluding goodwill amortization decreased 29% to 3.2 million pounds (2000: 4.5 million pounds), predominantly due to the closure of our Guildford premises during 2000. Expenditure in the second half reduced to 1.5 million pounds compared to 1.7 million pounds the first half.
The tax credit on loss on ordinary activities of 1.3 million pounds (2000: 1.7 million pounds) represents amounts that we expect to receive from the Inland Revenue under legislation on research and development tax credits for small and medium size companies introduced by the Government during 2000.
Interest receivable amounted to 0.8 million pounds (2000: 1.4 million pounds), reflecting lower interest rates and average cash and short term investment balances during the year.
Interest payable increased to 0.6 million pounds (2000: 0.04 million pounds), reflecting interest on a $10 million loan which we drew down in two equal installments in December 2000 and March 2001.
Balance Sheet
Intangible fixed assets increased to 22.4 million pounds (2000: 7.0 million pounds) reflecting the capitalization of payments conditionally due to GlaxoSmithKline (GSK) under the agreement of December 2000 to buy out royalties due to GSK on sales of frovatriptan. Conditional on US launch of the product, the Company is committed to make four annual payments to GSK of $5 million, starting in 2002, with a fifth annual payment of $5 million contingent on the achievement of cumulative sales from launch of $300 million. Based on the Directors' expectation that these sales levels will be achieved, the full potential commitment of $25 million has been recorded as an intangible asset in the balance sheet at 31 December 2001 and will be amortized on a straight line basis from the date of launch until 2014, being the date of frovatriptan's patent expiry in the US.
Tangible fixed assets increased to 2.4 million pounds (2000: 2.3 million pounds). Capital expenditure during the year of 1.1 million pounds (2000: 1.0 million pounds) included 0.6 million pounds on laboratory equipment, 0.4 million pounds on computer equipment and software, and a further 0.1 million pounds on building improvements, fixtures and fittings. During 2001 we undertook a major program to upgrade our IT capabilities and infrastructure. This exercise is now largely complete and we expect capital expenditure to run at a much lower level in 2002.
Cash and short term investments of 18.0 million pounds at 31 December 2001 fell by 2.8 million pounds during the year (31 December 2000: 20.8 million pounds). The cash outflow from operating activities was 8.4 million pounds (2000: 22.7 million pounds). This was offset by net interest received of 0.8 million pounds (2000: 1.7 million pounds), net proceeds from the exercise of employee share options of 0.4 million pounds (2000: 0.2 million pounds), and receipts of 3.5 million pounds from the second draw down under the Elan loan facility. The average yield achieved on investments during the year was approximately 5.3%.
Creditors falling due within one year increased by 11.0 million pounds to 16.3 million pounds (2000: 5.3 million pounds). This is primarily due to reclassification of the Elan loan of 7.4 million pounds from amounts due after one year. The conditional payments to GSK described above have also been included in creditors at year-end.
Elan has an option, expiring during 2002, to pay Vernalis a reduced royalty on frovatriptan sales in return for agreeing to forgive the full amount of the loan including accrued interest. Our current expectation is that this option will be exercised. Subsequent to the balance sheet date the companies agreed to extend the repayment date for the loan, in the event that the option is not exercised, to May 2003.
Of the total conditional payments of $25 million to GSK described above, an amount of 3.4 million pounds ($5 million) has been included in creditors falling due within one year in respect of the first annual payment, and a further 13.7 million pounds ($20 million) has been included in creditors falling due after one year, relating to the four subsequent annual payments. Creditors due after one year increased by 10.5 million pounds to 14.1 million pounds (2000: 3.6 million pounds), reflecting the accounting treatment of the payments to GSK, offset by the reclassification of the Elan loan.
Headcount
Headcount levels have remained stable during 2001. At the end of the year Vernalis employed 133 permanent staff (2000: 126) of which 103 (2000: 105) were employed in research and development.
Financial Outlook
The milestone income following FDA approval of frovatriptan and the funding from the new agreements with Roche signed in early 2002 have significantly improved the near-term financial outlook for the Company. In the medium-term our funding requirements will continue to be influenced by the performance of frovatriptan in the market place. Our current expectation is that the product will be launched in the US and the first European markets in the second quarter of 2002.
Looking forward, we also anticipate the potential to generate income from earlier stage programs in our portfolio. In January 2002 the announcement of the selection of the first candidate drug from our Parkinson's disease program attracted attention from multi-national and regional pharmaceutical companies interested in forming a collaboration with us.
Furthermore, we expect the two new deals with Roche in obesity and diabetes to have a very positive impact on the Company's financial prospects. In addition to committed research funding over the next two years, we have the potential to receive substantial milestone payments from these programs when candidate drugs progress through development, as well as very competitive royalties on future sales. Funding and potential milestone income from the Company's commercial collaborations now exceeds $150 million in addition to the potential royalty revenues.
In addition, we continue to make the business more efficient by eliminating non-essential expenditure, and we have also taken steps to focus our research and development resources on the key programs. Taken together these measures have enabled us to achieve ongoing cost reductions.
Portfolio Review
Migraine (Frova(TM) / Migard®)
We have made very significant progress in the last year and regulatory approval has now been achieved in the US and throughout the European Union (EU). In November 2001 FDA granted approval to market Frova(TM) in the US for the acute treatment of migraine. In January 2002 we received notification of regulatory approval for Migard® in 14 EU countries, having already received approval in France, which acted as the reference member state for the EU mutual recognition process.
Our licensees for frovatriptan, Elan for North America and Menarini for Europe, are now well advanced with preparations for launch in their respective territories. Elan has announced its intention to appoint a co-promotion partner and to launch the drug early in the second quarter. We anticipate that Menarini will commence the roll out into the initial European markets during second quarter 2002.
We expect our marketing partners to focus on the potential advantages from frovatriptan's prolonged presence in the bloodstream compared to other drugs in its class, particularly for patients with long duration migraines. The Vernalis clinical team is now conducting a number of new studies designed to further exploit this distinctive feature of the drug and to expand its clinical profile.
The first of the new studies, which is now complete, was designed to investigate the use of frovatriptan early in a migraine attack when patients' symptoms were still only mild. Preliminary results indicate that in the majority of cases, the symptoms had either completely resolved or had not progressed beyond the mild stage two hours after taking the drug. Importantly, the incidence of headache recurrence in a 24 hour period following dosing was very low, which is consistent with the experience of patients who have taken frovatriptan in earlier trials. We expect results from this study to be published later this year.
Patient recruitment has now been completed in a 400 patient, multi-center study in the US which will investigate the prevention of migraine attacks in women with menstrually associated migraine. It is estimated that 30% or more of female migraine sufferers often experience attacks during their menstrual period. This study is designed to show that frovatriptan is an effective preventative treatment for this form of migraine. We expect to have preliminary results from this study by the end of this year.
Sexual Dysfunction - VML 670
Approximately 60% of the estimated 150 million people receiving medication for depression are treated with selective serotonin re-uptake inhibitors (SSRIs), and it is estimated that around 30-40% of these patients, both male and female, experience some form of sexual dysfunction as a side effect of the treatment.
VML 670 is a potent and selective 5-HT1A receptor agonist that we are developing as a treatment for sexual dysfunction experienced by patients taking SSRIs. We believe that VML 670 has the potential to restore normal sexual function in these patients, based on our understanding of the role of 5-HT1A receptors in modulating sexual activity.
We have now successfully completed a series of Phase I safety studies in human volunteers. Phase II patient trials are scheduled to commence in the second quarter of 2002.
Obesity - VR 1065
Obesity is now recognized as a global epidemic and the incidence is increasing markedly both in developed and developing countries. It has been shown to substantially increase the risk of developing type 2 diabetes, coronary heart disease, hypertension, osteoarthritis and cancer. It is estimated that more than 250 million people worldwide are clinically obese. In the US, obesity affects around 35% of the population and more than 50% are overweight. The UK has one of the highest rates of obesity in Europe at around 18% of the population.
The important role played by the 5-HT2C receptor in controlling eating and satiety was a ground breaking discovery by Vernalis scientists in 1997. In many obese people, this control mechanism does not appear to work effectively and leads to excess food consumption, which the body stores as fat. Compounds that activate this receptor can help to promote the feeling of satiety and control the urge to eat to excess. Our program is focused on developing novel and highly selective 5-HT2C receptor agonists as drugs to improve weight loss.
We made excellent progress during 2001 in our existing collaboration with Roche and received a third milestone payment in June following selection of VR 1065 as the first candidate drug. Roche has subsequently conducted a pre-clinical development program with VR 1065 and anticipates commencing clinical trials in human volunteers early in the second quarter of 2002.
Based on the considerable success of this program, we announced a second collaboration with Roche in obesity in February 2002 with the objective of taking further candidate drugs into clinical development. This new agreement provides additional research funding and increased milestones and royalties to reflect the potential market value of successful products in the field of obesity. Under both arrangements, Roche will fully fund the development of candidate drugs arising from this new collaboration.
Parkinson's disease - VER-11135
We made tremendous advances on this project last year and in January 2002 were able to announce the selection of VER-11135 our first candidate drug. This compound has now entered pre-clinical development with the objective of commencing Phase I clinical studies in the first half of 2003.
Most conventional therapies for Parkinson's disease are based on dopamine replacement. Although generally effective in the short term, these treatments can have severe, or even disabling, side effects and their effectiveness tends to decrease over time. In addition, current therapies that target dopamine do not slow down or stop progression of Parkinson's disease.
The neurotransmitter adenosine plays an important role in motor co-ordination and movement control. The adenosine A2A receptor is found in high density in the part of the brain responsible for motor function, where it appears to direct the activity of other neurotransmitter mechanisms that are dysfunctional in Parkinson's disease. We believe this may provide a novel approach to treat the symptoms of Parkinson's disease and to slow or stop its progression. This hypothesis is supported by data that Vernalis and other companies have generated on this class of compound. We have identified novel chemical classes of A2A receptor antagonists including compounds that have been shown to be effective in models of Parkinson's disease.
There is increasing evidence that A2A antagonists may also offer benefits to patients with other CNS disorders including depression and Alzheimer's disease.
Diabetes - Novel Targets
Type 2 diabetes comprises a group of diseases characterized by high uncontrolled levels of blood sugar. Diabetes is associated with serious medical conditions including coronary heart disease, kidney failure, stroke, high blood pressure, blindness, nervous system disorders and disruption of blood supply to limbs, ultimately leading to amputation.
In the US alone it is estimated that type 2 diabetes affects approximately 14 million individuals and this is projected to increase by 40% by 2020. Diabetes can lead to multiple organ damage and it is estimated that 65% of diabetics die as a result of heart attack or stroke. There is mounting evidence that type 2 diabetes, which is often described as ``adult-onset'' diabetes, is now beginning to appear in adolescent and teenage children, probably as a result of the increasing prevalence of obesity in the young.
Our new strategic alliance with Roche is an important new deal for Vernalis with significant commercial potential. The agreement pools intellectual property and resources to discover, develop and commercialize new candidate drugs for the treatment of diabetes that target novel mechanisms of action for control of blood sugar levels.
In addition to the research funding over the next two years, we have the prospect of substantial milestone payments as well as very competitive royalties on future worldwide sales. Overall this represents potentially our largest commercial deal to date.
This press release contains forward-looking statements, including statements regarding Vernalis' strategy and prospects. Statements that are not historical facts are based on Vernalis' current expectations, beliefs, estimates and assumptions. Such statements are not guarantees of future performance and involve risks, uncertainties and other important factors that may cause Vernalis' actual results, performance or achievements to be materially different from those anticipated by such forward-looking statements. Important factors which may affect Vernalis' future operating results include the following: Vernalis may not receive milestone or royalty payments when expected or at all, Vernalis' product candidates may not receive regulatory or marketing approval or gain market acceptance in key markets when anticipated or at all, Vernalis may be unable to conduct its clinical trials as quickly as it has predicted, Vernalis' product candidates may not demonstrate therapeutic efficacy, Vernalis may be unable to obtain sufficient capital when needed to develop its product candidates, and other important factors described in the section entitled ``Risk Factors'' in Vernalis' Registration Statement on Form 20-F filed with the US Securities and Exchange Commission.
For a copy of this press release or to learn more about Vernalis, please visit our website at vernalis.com. |
