BioWorld International Correspondent

LONDON - Fallout from the malaise in the capital markets has hit the heart of UK biotech, with quoted companies Vernalis plc, Ardana plc and Medical Marketing International Group (MMI) plc announcing cutbacks and restructuring that leave all three open to acquisition.

After underperforming in the overall market in London by more than 36 percent in 2007, many of the 40 or so other quoted biotechs are short of cash and looking similarly vulnerable.

Earlier this month CeNeS Pharmaceuticals plc said it is more likely to be acquired than to seal a partnership deal for its morphine derivative, while privately held Hunter Fleming plc with three Phase II products, was acquired in an all-share deal valuing it at $11.6 million, after failing to raise fresh capital.

Restive shareholders in the technology commercialization company MMI forced David Best, executive chairman and founder, from his post when an independent review of its technologies found that although there is "good potential" they are too immature for any partnering deals to be imminent. That is at odds with recent assessments from Best who in a statement in November implied the company was close to reaching what he called, "commercialization trigger points."

With slightly more than six month's cash left, the shareholders have appointed an outsider, Phil Cartmell, to replace Best, who has gone on long-term sick leave, along with Margaret Mitchell, IT director, who is married to Best.

Shares in the Cambridge-based company fell by more than 50 percent to £0.32 (US63 cents) when the news was announced Feb. 22.

A day earlier, one of the UK's leading biotechs, Vernalis plc, announced a restructuring that will see it offload its U.S. operations and cut headcount from 210 to 90. Of the 90 staff to be retained, 75 will be R&D staff, essentially reforming the company as an early stage research operation, based at a single site in Cambridge. CEO Simon Sturge has left the company.

Vernalis shares lost more than 85 percent of their value in 2007, with the biggest fall coming on the back of the FDA's rejection in September of the company's migraine product Frova as a treatment for menstrual migraine.

That failure also meant the Winnersh-based company missed out on a $40 million milestone payment from its marketing partner Endo Pharmaceuticals Inc of Chadds Ford, Pa., leaving it unable to repay Endo $20 million of a $56 million loan. Now Vernalis is settling the loan, paying Endo $7 million cash and foregoing future royalties on Frova until annual sales, which are currently about $50 million, reach $85 million.

At the same time, Vernalis will divest Apokyn, a treatment for Parkinson's disease, and the rest of its U.S. commercial operations, and close its clinical development operations in Canada.

Vernalis will retain its four in-house clinical-stage programs and maintain its partnerships with Biogen Idec Inc., and Novartis AG.

Another mainstay of the UK sector, Ardana plc, put itself on the block after failing to persuade shareholders to put in more money. With just £6.6 million (US$12.9 million) cash, sufficient for six months at the current burn rate, the reproductive health specialist said it is seeking "to sell or merge in order that the value of its pipeline can be maximized."

The Edinburgh, Scotland-based company also announced a restructuring program to reduce cash burn.

The crisis followed a review instituted by Huw Edwards who became CEO in October 2007, following the resignation of Maureen Lindsay.

Ardana's share price has drifted down from a high of £1.23 to just £0.28 in the past 12 months, and did not move in response to the fire sale announcement. The company has three marketed products, but said that none of those is earning sufficient money currently to be material to its financing needs.

Following the review, Ardana said it would devote its efforts and resources to the higher-value, nearer-term opportunities in its pipeline, such as Teverelix LA and its testosterone cream. The company recently reported positive clinical results in both those products.

It is in U.S. partnering discussions on the co-development of Teverelix LA in the treatment of prostate cancer and benign prostatic hyperplasia, and the co-development and commercialization of the testosterone cream for male hypogonadism, and said there is interest in other products in the portfolio.

Despite that, the company has failed to persuade its major shareholders to put in more money and hold on for partnerships to be concluded.