Vernalis plc has cheered the UK biotech sector by raising £22.1 million in a fully underwritten placing of 799 million shares, priced at 3 pence per share, a 25.9 per cent discount.
The deal values the company at no more than the £10 million cash it has in the bank. Ian Garland, CEO, said there is no alternative for the company, which will otherwise run out of money in October this year. “We are valuing the company at net cash, which means we are putting zero value on any of the programs,” he said.
Existing shareholders are being offered eleven new shares for every five they already own. Garland joined Vernalis in December, fresh from overseeing the sale of vaccines specialist Acambis for £276 million. Since then he has considered all the options for Vernalis, including merger and acquisition possibilities and winding up the company.
If shareholders feel bad about the discounted placing, they suffered a far bigger blow last year, when the FDA refused to extend the label for the company’s migraine treatment Frovatriptan to menstrual migraine. That forced a large-scale restructuring that saw staff numbers fall from 210 to 90, and Vernalis’s retreat back to being a small development-stage biotech.
The aim now is to progress programs through to the point where they can be partnered. Given that the portfolio of ten products is now valued at zero, the money raised should enable Garland to deliver some value back to shareholders.