Vernalis buys back rights to drug

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The Independent Online

Vernalis, the drug developer formerly known as British Biotech, is to launch an estimated £30m rights issue after buying back the rights to its only marketed drug.

The company said yesterday it needs extra funds after agreeing to buy out Elan, its US marketing partner for the migraine treatment Frova, for $50m (£27m) in instalments.

The Independent revealed last October that Vernalis was considering ending the deal with Elan after persistently disappointing sales. Frova sales in North America were $13.7m in the final three months of 2003, but Simon Sturge, the chief executive of Vernalis, admitted he had given up hope of an early milestone payment from Elan, which would be triggered when annual sales hit $100m.

"Our estimates for that point were 2006 and moving out. In the hands of Elan, Frova was reaching the hospital market very well, but most migraine drugs are prescribed by general practitioners," he said.

Vernalis plans to re-licence Frova to a new partner, and is also making a start on a new trial of the product as a prevention for pre-menstrual migraine. This extra use for the product would differentiate it in a crowded market for migraine pills.

The company's shares were up 0.5p at 62p despite the promise of a rights issue within 12 months. Jonathan Senior, an analyst at Evolution Beeson Gregory, said: "Investors are buying in with the expectation of getting rights issue shares on highly favourable terms."

He said Vernalis, which has £24m in the bank, could be expected to raise a minimum of £25m. but yesterday's positive results from a new heart attack and stroke drug should mean it can raise more than £30m.