Vernalis slides on fear of fundraising

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The Independent Online

Shares in Vernalis, the former British Biotech, slipped yesterday as the group revealed it has less cash in the bank than forecast and investors began to fret it will need to raise funds this year.

The company, chaired now by the biotechnology industry veteran Peter Fellner, laid out a list of drug development milestones it expects to pass in 2004 and predicted it would be able to generate income from licensing one of its new products to a larger pharmaceuticals company.

But the stock closed down 5.5p at 61.5p as analysts expressed some scepticism over Vernalis' claim to have enough money to survive until the end of next year. The group had £27m on 30 November, about £1m less than the City expected, and lost £20.5m in the six months to October.

Vernalis in its present form was assembled by Dr Fellner last year through the mergers of British Biotech with RiboTargets and then Vernalis. It has one drug on the market, a migraine pill that grew sales by 20 per cent over the past six months but which accounts for barely 3 per cent of the lucrative US market.

By the summer Vernalis will have proof-of-principle trial results on its novel heart attack drug, and earlier stage data on a painkiller and a treatment for Parkinson's disease.

Tony Weir, the finance director, said: "We have a cash life going out to the end of 2005. The key message is that we have got a lot of activity and news flow this year, so we will see the progress we have made and then consider the long-term cash strategy."

Sam Fazeli, a life sciences analyst at Nomura, said: "The key issue, as far as we're concerned, remains cash. Vernalis may need to raise money from the capital markets.

"Even with positive trial data, the potential of significant share price performance will be capped by the market's knowledge that Vernalis may have to do a fundraising."

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