Vernalis shares soar after $350m US marketing deal

Shares in Vernalis, the former British Biotech, doubled yesterday after the drug research group called off a planned rights issue and signed a $350m (£215m) licensing deal for its main product.

Shares in Vernalis, the former British Biotech, doubled yesterday after the drug research group called off a planned rights issue and signed a $350m (£215m) licensing deal for its main product.

The company has sold the rights to market its migraine treatment, Frova, in North America to Endo, the US speciality pharmaceuticals group, in one of the biotech sector's biggest-ever deals.

Vernalis spent $50m earlier this year buying out its Irish marketing partner, Elan, after disappointing sales. Now Endo is paying a guaranteed $60m over two years and further milestone payments of up to $295m.

Frova does not currently stand out in the crowded market for prescription migraine pills, but Endo hopes the drug could soon be approved as a preventative treatment for menstruation-associated migraines. The US group is also lending Vernalis $50m to pay off the debts to Elan that will start coming due later this year. Simon Sturge, the Vernalis chief executive, said the rights issue promised earlier this year is no longer necessary.

He said: "We now have no need to raise further funding to repay Elan. As with any biotech, that is not to say that we won't, but there is no immediate need to do so."

Vernalis shares jumped 49.5p to 97p, to their highest level since the company, then called British Biotech, began a string of mergers with the acquisition of RiboTargets 16 months ago. It paid £48m in shares for Frova's creator, Vernalis, a year ago.

The shares had fallen 23 per cent since March when the company saida rights issue would be conducted within a year.

Endo's specialism is pain management - and Mr Sturge said Vernalis had chosen the company over bigger pharmaceuticals group because it guaranteed Frova would "get the attention it deserves". He said: "We believe it is the ideal partner. It is not a small company - it is worth almost $3bn - and it has an excellent track record."

Sam Fazeli, biotech analyst at Nomura, welcomed the deal. "Endo has long expressed an interest in the migraine market. This should translate to a hungry sales force and afford Frova the best chance of penetrating the market," he said.

Yesterday's deal also commits Endo to fund and train a salesforce for Vernalis, should it choose later this decade to expand from drug development into marketing its own drugs - a key moment for a little biotech company hoping to move into the big league.