BioWorld International Correspondent
LONDON - Shares in Vernalis Group plc fell by almost two-thirds Friday after CEO Robert Mansfield resigned as the company released poor financial results and warned of a shortfall in working capital.
Chairman George Kennedy told BioWorld International, "[Mansfield] decided to resign to pursue other interests. After consulting shareholders we decided not to stand in his way." Kennedy said the search for a replacement is under way, and in the meantime Peter Worrall, finance director, is in charge. The shares closed at 37.5 pence, down 64 percent.
For the year ending in December, Vernalis, a central nervous system specialist, reported sales of £5.9 million (US$9.3 million), down from £13.8 million in 2001, while the pre-tax loss rose to £18.1 million from £11.2 million a year earlier. The sharp fall came despite the U.S. launch of the company's migraine treatment, frovatriptan, in June 2002.
Mansfield had been CEO of Vernalis, based in Winnersh, since 1992. On Sept. 27, he claimed the company was on course to break even by the end of 2004 without further funding. But on Friday Vernalis said that while it is still aiming to become sustainably profitable by then, there will be shortfall in working capital prior to the receipt of a $15 million milestone from its U.S. marketing partner, Elan Corp. plc, of Dublin, Ireland.
The trigger point for the sales-related milestone is the end of the first 12-month period in which net sales of frovatriptan exceed $100 million. Worrall said he expects the payment to be triggered sometime in 2004. "It depends on sales growth. [Frovatriptan] has captured 2 percent of triptan market in the U.S., and the trend is up."
Worrall added that while it is clearly a very difficult market for raising money, major shareholders have been supportive. Another money-raising option is the sale of future royalties from frovatriptan. Other strategic options include M&A, and not having a CEO could make the process of merging easier.
Vernalis also has hopes of a deal with Eli Lilly and Co., of Indianapolis, later this year when it gets the preliminary results of a Phase IIa trial of VML 670, a treatment for sexual dysfunction that occurs as a side effect of taking selective serotonin reuptake inhibitor anti-depressants. Eli Lilly has an option to buy into VML670, in which case it would reimburse Vernalis' development costs.
Further revenue should also flow from frovatriptan sales in Europe. The drug had its first launch in Germany in November, and has since gone on the market in Ireland. Vernalis expects it to be launched in all the major European markets before the end of 2003.
In the meantime, the company has cut its R&D staff by 25 percent, to 74, saving £3 million per annum, and is deferring some R&D expenditure to conserve cash. Vernalis had £9 million at the end of December, but last year spent £18 million on R&D.