31 January 2013 - London, UK – Verona Pharma plc announces a placing (the “Placing”) of
approximately 29.0 million Ordinary Shares of 0.1 pence in the capital of the Company (“Shares”) at 4
pence each (the “Placing Price”) to raise approximately £1.1 million before expenses.
The Board also announces that the Company has entered into a £5.0 million equity financing facility
(“EFF”) with Darwin Strategic Limited (“Darwin”), a company majority owned by funds managed by the
Henderson Volantis Capital Team, a subsidiary of Henderson Global Investors who also hold a 9.35
per cent interest in the Company.
The Board is seeking authority from Shareholders to issue Shares to Darwin under the EFF.
Background to the Fund Raising
Following his appointment as Chief Executive Officer of Verona on 1 June 2012, Jan-Anders Karlsson
undertook a comprehensive review of the Company’s operations with the objective of accelerating
shareholder value creation.
Since its admission to trading on AIM in 2006, the Company has raised £10.6 million of equity capital
from its Shareholders. With these funds it has developed two “first in class” drugs to treat unmet
needs in respiratory disease; RPL554, which is targeted at Chronic Obstructive Pulmonary Disease
(“COPD”) and asthma, and VRP700, which is targeted at chronic, severe cough. Each of these drugs
has passed into Phase IIa trials, having successfully concluded pre-clinical and clinical Phase I
Verona has demonstrated that RPL554 delivers clinically significant bronchodilation in COPD and
asthma, and has a unique mechanism of action which is expected to be complementary to existing
treatments. It has also been demonstrated to be well tolerated by patients with no evidence, at current
dosage levels, of beta2-agonist-like side effects, anti-cholinergic drug-like side effects or PDE-4-like
Verona has also demonstrated in an investigator led Phase IIa study that VRP700, with a novel
mechanism of action, creates significant activity in the treatment of chronic, severe cough.
COPD is estimated to be the third leading cause of death globally by 2020. There are currently at least
10 million diagnosed sufferers in the US, which results each year in approximately 8 million primary
care visits, 1.5 million emergency room visits, 750,000 hospitalisations and 119,000 deaths.
Cough is the most common symptom in most lung diseases. There are currently approximately 35
million prescriptions in the US for cough and cold each year, notwithstanding that current therapies are
ineffective or have significant side effects.
Taking into account the progress achieved in the development of its proposed drugs and the
significant unmet respiratory disease needs described above, the Board has refined Verona’s strategy
to focus initially on developing RPL554, with nebulised delivery, to treat severe COPD, and on
developing VRP700 to treat chronic, severe cough. The Directors believe that this focus on significant
unmet market needs will afford the greatest prospect of accelerating shareholder value accretion.
Whilst these target indications will represent the near term focus of Verona, the Company will in due
course focus on broadening the therapeutic use of RPL554, including its anti-inflammatory potential and
use in treating asthma, and on progressing its early stage NAIPS research programme, any of which
could lead to significant further value accretion, albeit in the longer term.
The Board recognises the value an experienced and resourceful commercial partner could bring to
the development of its drug candidates. However, it does not intend to partner these drug candidates
until it can extract a commercially attractive return for the Company and its Shareholders.
The ongoing work programme described below has been designed by the Board to further de-risk the
two drug candidates and to enable the Company to develop a stronger commercial argument and
articulate a more comprehensive value proposition in future partnering discussions.
Use of Proceeds
The Directors intend that the net proceeds of the Placing and drawdowns under the EFF will be used:
- To finance a larger and longer duration bronchodilator study of RPL554 in COPD patients;
- To finance an RPL554 bronchodilator dose-response study in COPD patients;
- To finance comparator studies of RPL554 against other bronchodilators used as standard of
care in COPD patients;
- To finance a further VRP700 study, first referred to on 8 December 2011, to confirm
VRP700’s activity in chronic, severe cough patients; and
- To provide working capital for the Company until completion of the larger and longer duration
RPL554 bronchodilator study.
Principal Terms of the Placing
The Company has raised approximately £1.16 million before expenses by the issue of 28,971,528
Shares (the “Placing Shares”), under the Placing.
The Placing Shares will be issued free of all liens, charges and encumbrances and will, when issued
and fully paid, rank pari passu in all respects with the existing ordinary shares, including the right to
receive all dividends and other distributions declared, made or paid after the date of their issue.
Application has been made to the London Stock Exchange for the admission of the Placing Shares to
trading on AIM (“Admission”). It is expected that Admission will occur and that dealings will commence
at 8.00 a.m. on 14 February 2013, at which time it is also expected that the Placing Shares will be
enabled for settlement in CREST.
Following Admission, the Company's enlarged issued share capital will comprise 336,175,923
Ordinary Shares. From Admission, this figure of 336,175,923 Ordinary Shares may be used by
Shareholders in the Company as the denominator for the calculations by which they will determine if
they are required to notify their interest in, or a change in their interest in, the share capital of the
Company under the FSA’s Disclosure and Transparency Rules.
Subscriptions by Directors
Jan-Anders Karlsson, Chief Executive of the Company, Claire Poll, and Professor Trevor Jones have
agreed to subscribe respectively for 500,000, 250,000 and 25,000 Placing Shares at the Placing
Principal terms of the EFF
The EFF agreement with Darwin provides Verona with a facility of up to £5m which (subject to certain
limited restrictions) can be drawn down at any time over the next three years. The timing and floor
subscription price of any draw down is at the sole discretion of the Company.
Verona is under no obligation to make a draw down and may make drawdowns at its discretion, up to
the total value of the EFF, by way of issuing subscription notices to Darwin. Following delivery of a
subscription notice, Darwin will subscribe and the Company will allot to Darwin new Ordinary Shares.
The subscription price for any Ordinary Shares to be subscribed by Darwin under a subscription
notice will be the average of the three lowest closing bid prices of the Ordinary Shares over the 15
trading days following the subscription notice.
Verona is also obliged to specify in each subscription notice a minimum price below which Ordinary
Shares will not be issued to Darwin. The Company will have the right (with the consent of Darwin) to
modify that minimum price at any time during the relevant Pricing Period.
The number of Ordinary Shares which may be issued under any individual subscription notice may be
up to the lower of 25 per cent of the Company's issued share capital following completion of the
relevant subscription, or four times the average daily trading volume of Verona’s Ordinary Shares
over the 15 trading days preceding the issue of the relevant subscription notice. This may be reduced
in certain circumstances, including where the minimum price is not maintained or the trading volume
is less than 10,000 shares. The maximum amount of a subscription notice may not exceed £500,000
without Darwin's permission. Darwin is entitled to a commission of up to 5 per cent of amounts
subscribed but may agree with Verona in lieu thereof for the subscription price for the Ordinary
Shares to be discounted by 5 per cent.
There is also an over-allotment facility available to Verona, under which the Company may authorise
Darwin, at Darwin's discretion, to increase the amount of the draw down by up to the aggregate
undrawn amount under the EFF. Darwin may direct allotments under the EFF to its parent fund,
Henderson Global Investors’ AlphaGen Volantis Fund.
Darwin and Verona may mutually agree at the end of the pricing period to a variation of subscription
price. This may allow for a larger subscription via any over-allotment facility authorised by the
The issuance of a Subscription Notice is conditional upon the satisfaction of certain Subscription
Notice Conditions which have been agreed between Darwin and Verona. Any subscription notice
which Verona may issue will only be valid to the extent that it has the requisite shareholder authority
to issue the maximum number of Ordinary Shares that Darwin may be required to subscribe under the
relevant subscription notice.
Darwin and Verona may terminate the EFF agreement if certain conditions are not met.
The Directors are seeking the approval of Shareholders to allot 125 million new Ordinary Shares
which represents the maximum number of shares issuable to Darwin assuming such shares are
issued at the Placing Price.
In conjunction with the EFF, Verona has entered into a warrant agreement with Darwin dated 31
January 2013 to subscribe for up to 5,000,000 Ordinary Shares, such warrants to be exercisable at a
price of 4.8p and to be exercisable at any time prior to the expiry of 36 months from the date of the
Current Trading and Prospects
The Company continues to trade in line with the Board’s expectations, with a monthly overhead of
approximately £100,000, before taking into account expenditure on potential drug trials.
The Board anticipates that the Company will have a cash balance at 1 February 2013 of
approximately £800,000 before taking into account the net proceeds of the Placing and any draw
down under the EFF.
In the course of 2013, the Board anticipates that the Company will announce the results of the RPL554
anti-inflammatory study in the first quarter and the further VRP700 study in the fourth quarter. In 2014,
it expects the Company to announce the results of the RPL554 COPD dose response study in the first
half and the larger and longer duration RPL554 COPD study in the second half.
A circular convening a general meeting to approve the issue of Ordinary Shares to Darwin pursuant to
the EFF is being sent to shareholders and will be available on the Company’s website today.
Recommendation and voting intentions
The Directors, acting in good faith, believe that the terms of the EFF and the passing of the Resolutions
are most likely to promote the success of the Company for the benefit of its members as a whole. The
Directors unanimously recommend Shareholders to vote in favour of the Resolutions as they intend to
do in respect of their aggregate beneficial holdings of 20,162,389 Ordinary Shares representing
approximately 6.6 per cent. of the Existing Ordinary Shares.
For further information please contact:
Verona Pharma plc Tel: 020 7863 3300
Clive Page, Chairman
Jan-Anders Karlsson, CEO
WH Ireland Limited Tel: 020 7220 1666
FTI Consulting Tel: 020 7831 3113
About Verona Pharma plc
Verona Pharma is developing first-in-class drugs to treat respiratory disease, such as COPD, asthma
and chronic, severe cough. The Company has three drug programmes, two of which are in Phase II.
The lead programme, RPL554, is an innovative dual phosphodiesterase (PDE) 3 and 4 inhibitor with
both bronchodilator and anti-inflammatory properties. VRP700 is an innovative product for
suppressing chronic, severe cough in patients with underlying lung disease. In its third programme,
Verona Pharma is investigating novel anti-inflammatory molecules, called NAIPs, for a wide range of
respiratory and inflammatory diseases.
About RPL554 for the treatment of COPD and Asthma
Verona’s lead drug, RPL554, is a dual phosphodiesterase (PDE) 3 and 4 inhibitor being developed as
a novel treatment for chronic obstructive airways disease such as COPD (chronic obstructive
pulmonary disease) and asthma with bronchodilator and anti-inflammatory effects. Both effects are
essential to aid breathing, especially in sufferers of COPD. There is currently no drug combining both
effects in a single molecule. In addition, current treatments have unwanted side effects and/or limited
effectiveness. The product is currently in phase II for both diseases.
COPD is a chronic lung disease with significant unmet need and for which current treatment is far
from optimal. COPD is most commonly characterised by fixed airflow obstruction and chronic airways
inflammation resulting from exposure to tobacco smoke. Asthma, which remains one of the most 5
common chronic diseases in the world, is characterised by recurrent breathing problems and
symptoms such as breathlessness, wheezing, chest tightness, and coughing. The market for COPD
and asthma drugs is currently estimated to be GBP20 billion [source: visiongain].
About VRP700 for the treatment of Cough
VRP700 is Verona Pharma's lead drug compound for the treatment of cough, having a novel
mechanism of action involving the suppression of cough initiating signals originating from cough
sensory nerve endings located in the lungs. A clinical trial completed at the University of Florence,
Italy in September 2011 clearly demonstrated significant anti-tussive effects with nebulised VRP700 in
hospitalized patients with chronic severe cough.
Cough can be a very debilitating comorbidity reported by patients, especially those with respiratory
conditions such as asthma, COPD, lung cancer, interstitial lung disease, fibrosis or lung infections. It
is a neglected symptom which is often self-medicated. Consumer spending on OTC medications,
including those for cough, grew by 10% over 2005-10, to reach GBP532 million [source: Mintel].
However, there is very little clinical evidence for such OTC cough medications being really effective
and it is widely recognised by the medical community that there is a large need for more effective
drugs to control and prevent pathologically induced coughing.