Vernalis intends to raise £40m (gross) through the issue of 80m new shares at 50p per share. This equity raise will remove any uncertainty over whether Vernalis’s cash position is sufficient to take it through to sustainable profitability in FY18 (on our current forecasts). New funds will be used to boost existing working capital required for a conservative Tuzistra XR roll-out, upcoming Moxatag re-launch and future launches of the remaining four US cough cold programmes in development with Tris. The share placing is on a non pre-emptive basis and is conditional on being passed at the General Meeting scheduled on 12 May 2016.
Net proceeds, coupled with existing cash resources of £54m (at end-December 2015), will cover ‘a conservative risk-adjusted roll-out plan’ for Tuzistra XR, upcoming Moxatag re-launch and the planned roll-out of the four other products in the cough cold franchise (two of which remain on track for NDA filing by end-2016). It will also facilitate increased promotional activity, if appropriate.
New funds ensure that Vernalis can focus on executing its operational plan as it has sufficient resources to invest in establishing the cough cold platform for future sales growth. With operating costs of c £40m pa (and limited room to make savings), these additional funds provide an ample cash cushion, based on our Tuzistra XR sales estimates in FY17 and FY18 and the timing of success-based milestone payments to Tris ($46m in aggregate), to take Vernalis through to sustainable profitability.