Placing and Open Offer

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Vernalis plc

·; Announces agreement to regain 100% of Frovatriptan Royalty Stream

·; Announces £30 million Fully Underwritten Placing and Open Offer

Vernalis plc (LSE: VER), a development stage pharmaceutical company with a broad pipeline of clinical and early stage programmes, announces today that it has reached an agreement to regain the right to 100% of the royalties from Menarini's sales of frovatriptan by terminating agreements entered into with Paul Capital Healthcare in 2008 ("Paul Capital Healthcare Agreements") in exchange for a one-off net cash payment of $32.57 million (approximately £21 million). In addition, Paul Capital Healthcare has agreed to subscribe for 2.1 million Vernalis warrants. Vernalis also announced that it is raising approximately £30 million (approximately £28.5 million net of expenses) through a fully underwritten Placing and Open Offer of 39,413,722 New Ordinary Shares at a price of 76 pence per New Ordinary Share, a portion of the proceeds of which will be used to make the payment to Paul Capital Healthcare.

A shareholder circular (which is also a prospectus) being issued by the Company and containing details of the Placing and Open Offer is expected to be posted to Shareholders shortly. In addition, the Company is carrying out a Share Capital Reorganisation to reduce the nominal value of its Ordinary Shares from 20 pence to 1 pence.

Highlights

·; Vernalis has reached an agreement to regain the rights to 100% of Menarini royalties (25.25% of net sales) by terminating the Paul Capital Healthcare Agreements in exchange for a one time net payment of $32.57 million (approximately £21 million) in cash; in addition, Paul Capital Healthcare has agreed to subscribe for 2.1 million Vernalis warrants

o Menarini sales of frovatriptan increased 15% in 2009 to €32.4 million

·; Announces Placing and Open Offer of 39,413,722 New Ordinary Shares at a price of 76 pence per share, raising £30 million (approximately £28.5 million net of expenses), a portion of which will be used to make the payment to Paul Capital Healthcare

·; Open Offer to Qualifying Shareholders on the basis of 19 New Ordinary Shares for every 29 Existing Ordinary Shares

·; Offer price of 76 pence represents a discount of approximately 6.7% to the closing price of an Existing Ordinary Share at the close of business on 10 February 2010

·; Vernalis becomes debt-free, reduces cash burn and extends cash runway beyond 2012

·; The Directors have agreed to take up a total of 125,529 New Ordinary Shares, through their entitlements under the Open Offer ("Directors' Shares"), investing in aggregate £95,402

·; Existing major Shareholder, Invesco Asset Management Ltd ("IAML"), has agreed to increase its holding in the Company, subject to clawback under the Open Offer, to up to 46 per cent of the issued share capital

·; Placing and Open Offer has been fully underwritten by Piper Jaffray, which intends to place shares with new and existing Shareholders, subject to clawback to satisfy valid applications by Qualifying Shareholders under the Open Offer

·; A waiver has conditionally been granted by the Takeover Panel from the usual requirements under Rule 9 of the Takeover Code for a person acquiring an interest in 30% or more of a company to make a general offer to all Shareholders, subject to Independent Shareholder approval

·; A General Meeting to approve the Placing and Open Offer and other Resolutions is to be held on 1 March 2010

A prospectus being issued by the Company and containing details of the Placing and Open Offer, the Share Capital Reorganisation and the Rule 9 Waiver will be posted to Shareholders shortly. Shareholders in the United States, Canada, Australia, New Zealand, Japan, South Africa or any other excluded territory will not, subject to certain exceptions, be able to participate in the Placing and Open Offer but will be able to vote on the Rule 9 Waiver.

Reasons for the Placing and Open Offer and use of net proceeds

Vernalis had cash resources of £26.4 million as of 31 December 2009 which will provide a cash runway until mid 2011. The Directors currently expect to use approximately £21 million of the net proceeds from the Placing and Open Offer to terminate the Paul Capital Healthcare Agreements and settle the outstanding debt arising from them, which will extend Vernalis' cash runway beyond 2012.

The remaining net proceeds of the Placing and Open Offer will be used as follows:

·; approximately 75% to develop programmes sourced either from ongoing research, in-licensing or acquisition activities; and

·; approximately 25% to be used for general working capital to further extend the Company's cash runway inclusive of administrative overheads and associated costs.

Ian Garland, Chief Executive Officer of Vernalis, commented:

"Regaining the full frovatriptan royalties will make Vernalis debt-free and put us in the enviable position of having a sustainable and growing revenue stream. Together with the cash we will receive from the successful fundraising announced today, this gives us the financial security to progress our pipeline, to diversify our asset base through in-licensing and acquisition opportunities and to continue to re-build shareholder value".

A conference call for analysts will be held today at 9.00 a.m. BST. For details, contact Valerie Mugridge at Brunswick on telephone number +44 (0) 20 7396 5325. An instant replay of the call will be available via Vernalis' website at www.vernalis.com. The replay will be available for 30 days.

Expected Timetable of Principal Events

Each of the times and dates in the above timetable is subject to change, in which event details of the new times and/or dates will be notified to the Financial Services Authority and the London Stock Exchange and, where appropriate, Shareholders. Please note that any Existing Ordinary Shares sold prior to close of business on 11 February 2010, the date on which the Existing Ordinary Shares will trade with entitlement, will be sold to the purchaser with the right to receive entitlements under the Open Offer.

If you have any questions relating to the procedure for acceptance, please telephone Capita Registrars between 9.00 a.m. and 5.00 p.m. (London time) Monday to Friday (except UK public holidays) on 0871 664 0321 from within the UK or +44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute (including value added tax) plus your service provider's network extras. Calls to the helpline from outside the UK will be charged at applicable international rates.

Different charges may apply from mobile phones and calls may be recorded and randomly monitored for security and training purposes. The helpline cannot provide advice on the merits of the Placing and Open Offer nor give any financial, legal or tax advice.

Background to Paul Capital Healthcare Transaction

In April 2008 Vernalis and Paul Capital Healthcare signed a financing agreement relating to frovatriptan, Vernalis' product for the treatment of migraine. Under the agreement, Vernalis received €18.4 million in cash from Paul Capital Healthcare and, in return, Paul Capital Healthcare received the rights to approximately 90% of Menarini's payments to Vernalis under their exclusive licence and supply agreement for the commercialisation of frovatriptan in Europe and certain other territories. Vernalis retained rights to approximately 10% of the royalties to cover the cost of Active Pharmaceutical Ingredient supplied to Menarini.

Background to frovatiptan in Europe

Frovatriptan is approved in multiple European and other territories for the acute treatment of migraine and was launched across these markets by Menarini. Sales of frovatriptan increased 15% in 2009 to €32.4 million.

About Vernalis

Vernalis is a development stage pharmaceutical company with significant expertise both in de novo fragment and structure-based drug discovery and pre-clinical and clinical development. The Group has seven product candidates in clinical development (three of which are partnered), two programmes in pre-clinical, as well as other competitive research programmes. Our technologies, capabilities and products are endorsed by collaborations with leading, global pharmaceutical companies including GSK, Biogen Idec, Novartis, Servier, Chiesi, Menarini, and Endo.

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Enquiries:

Piper Jaffray Ltd., which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for the Company as sole sponsor, broker and underwriter in connection with the Placing and Open Offer and not for any other person and will not be responsible to any other person for providing the protections afforded to its customers or for providing advice in relation to the Placing and Open Offer, the contents of the Prospectus and, if relevant, the accompanying documents or any arrangements referred to therein.

This news release has been issued by Vernalis plc and is the sole responsibility of Vernalis plc.

The distribution of this announcement in certain jurisdictions may be restricted by law and such distribution could result in violation of the laws of such jurisdictions. In particular, this announcement is not for distribution in the United States, Australia, New Zealand, Canada, Japan or South Africa.

This announcement is not an offer of securities for sale in the United States. The Placing and Open Offer Shares have not been and will not be registered under the Securities Act or under the applicable securities laws of any state or other jurisdiction of the United States or qualified for distribution under any applicable securities laws in Canada, Australia, New Zealand, South Africa or Japan. The Placing and Open Offer Shares may not be offered or sold, directly or indirectly, within the United States absent registration or an exemption from registration under the Securities Act and in compliance with any applicable securities laws of the states of the United States. No public offering of the securities discussed herein is being made in the United States and the information contained herein does not constitute an offering of securities for sale in the United States, Canada, Australia, New Zealand, Japan or South Africa. This announcement is not for distribution directly or indirectly in or into the United States, Canada, Australia, New Zealand, Japan or South Africa.

Neither the Placing and Open Offer Shares, the related Prospectus, this announcement nor any other document connected with this Placing and Open Offer has been or will be approved or disapproved by the United States Securities and Exchange Commission or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the Placing and Open Offer Shares. Any representation to the contrary is a criminal offence.

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities. Any purchase of, or application for, the New Ordinary Shares should be made only on the basis of information contained in the Prospectus to be sent to Qualifying Shareholders shortly.

The delivery of this announcement shall not, under any circumstances, create any implication that there has been no change in the affairs of the Group since the date of this announcement nor that the information in it is correct as of any subsequent time.

This announcement may contain forward-looking statements that reflect the Group's current expectations regarding future events, including the clinical development and regulatory clearance of the Group's products, the Group's ability to find partners for the development and commercialisation of its products, the Group's liquidity and results of operations, as well as the Group's future capital raising activities. Forward-looking statements involve risks and uncertainties. Actual events could differ materially from those projected herein and depend on a number of factors, including the success of the Group's research strategies, the applicability of the discoveries made therein, the successful and timely completion of clinical studies, the uncertainties related to the regulatory process, the ability of the Group to identify and agree beneficial terms with suitable partners for the commercialisation and/or development of its products, the acceptance of the Group's products by consumers and medical professionals, and the ability of the Group to identify and consummate suitable strategic and business combination transactions.