Update on Strategic Review and Formal Sale Process

15 March 2018

Vernalis plc ("Vernalis", the "Company", or the "Group")Update on Strategic Review, Formal Sale Process and Forthcoming Directorate Changes

Further to the Company's announcement on 28 February 2018, Vernalis plc (LSE: VER) today provides an update on its ongoing strategic review, including details of a restructuring of the Company and its US commercial operations.

The Board also announces that as part of the strategic review it has decided to seek offers for the Company and has appointed Evercore as its financial adviser for this process. The UK Panel on Takeovers and Mergers (the "Panel") has agreed that any discussions with third parties may be conducted within the context of a "formal sale process" as further described below.

Update on Strategic Review and Restructuring of its US Commercial Operations

The Board has undertaken a detailed evaluation of alternative forms of restructuring and has concluded that it is not financially viable to sustain Vernalis' independent US commercial sales and marketing operation. Consequently, with immediate effect, the Company will begin to wind down its US commercial business including ceasing direct promotion of Tuzistra® XR to physicians at the end of the current cough cold season and will close its US Commercial business by the end of September 2018.

In the period through to the end of September, the Company will explore options for the continued commercialisation of Tuzistra® XR, including co-promotion, out-licensing or sale of the New Drug Application ("NDA").

Given the requirements under the WARN Act in the US, all of the staff in the US business will continue to be employed until the middle of May 2018. A small number of these employees will be retained for a limited period after the middle of May with some staying through to the end of September 2018. During this time we will continue to distribute Tuzistra® XR whilst we explore the options for its future promotion.

We have already commenced discussions with Tris regarding the termination of our interest in the cough cold development programmes CCP-05, -06, -07 and -08. We will provide a market update on those discussions in due course. We have ceased all activities related to securing a new source of supply for Moxatag® but we will continue to distribute the product whilst we explore the options for its future promotion.

Alongside restructuring the US commercial operations, the Board will continue to explore strategic options to realise value for shareholders, including potentially the sale of the Company as a whole. The Board has set a target date for concluding this activity of 30 September 2018.

Ian Garland will continue in his role until completion of the US restructuring and will lead the efforts to realise value for shareholders from the remaining business over this same time horizon. He will step down from his position as CEO and a Director of the Company at the end of that time. David Mackney will also remain in his role until both activities are complete and then step down from his position as CFO and a Director of the Company. There are no other immediate changes to the Board; a decision on the future composition of the Board will be made in due course.  

While the Board deeply regrets having to implement the wide-reaching restructuring announced today, it would like to thank all staff for their hard work and multiple achievements since initiating the US cough cold strategy in 2012. A further update on progress with the restructuring will be provided on 28 March 2018 when the Company announces its half year results.

Formal Sale Process

The Panel has agreed that any discussions with third parties may be conducted within the context of a "formal sale process" (as referred to in the City Code on Takeovers and Mergers (the "Code")). Accordingly, it has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code such that any interested party participating in the formal sale process will not be required to be publicly identified under Rules 2.4(a) or 2.4(b) as a result of this announcement and will not be subject to the 28 day deadline referred to in Rule 2.6(a) of the Code for so long as it is participating in the formal sale process. Following this announcement, the Company is now considered to be in an "offer period" as defined in the Code, and the dealing disclosure requirements listed below will apply. The Company is not in receipt of any approaches and is not in discussions with any potential offeror at the time of this announcement.

Parties with a potential interest in making a proposal should contact Evercore (details below).

It is currently expected that any party interested in participating in the formal sale process will, at the appropriate time, enter into a non-disclosure agreement with Vernalis on terms satisfactory to the Board of Vernalis. The Company then intends to provide such interested parties with certain information on the business, following which interested parties shall be invited to submit their proposals to Evercore. The Board has set a target date for concluding this activity of 30 September 2018. Further announcements regarding timings for the formal sale process will be made when appropriate and as agreed with the Panel.

There can be no certainty that an offer will be made, nor as to the terms on which any offer will be made.

The Board of Vernalis reserves the right to alter or terminate the process at any time and if it does so it will make an announcement as appropriate. The Board of Vernalis also reserves the right to reject any approach or terminate discussions with any interested party at any time.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Conference Call

There will be a conference call for analysts and investors today at 9.30 (UK). Please contact FTI Consulting on 020 3727 1000 or email [email protected] for details.

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Enquiries:

Notes to Editors

About Vernalis

Vernalis is a revenue generating, pharmaceutical company with significant expertise in drug development. The Group has three approved products: Tuzistra® XR targeting the US prescription cough-cold market; Moxatag®, a once-daily formulation of the antibiotic, amoxicillin, indicated for the treatment of tonsillitis and/or pharyngitis secondary to Streptococcus pyogenes in adults and pediatric patients 12 years and older; and frovatriptan for the acute treatment of migraine. Vernalis has also nine programmes in its NCE development pipeline in addition to significant expertise in fragment and structure based drug discovery which it leverages to enter into collaborations with larger pharmaceutical companies. The Company's technologies, capabilities and products have been endorsed over the last five years by collaborations with leading pharmaceutical companies, including Asahi Kasei Pharma, Biogen Idec, Endo, GSK, Genentech, Lundbeck, Menarini, Novartis, Servier and Tris.

For further information about Vernalis, please visit www.vernalis.com 

Vernalis Forward-Looking Statement

This news release may contain forward-looking statements that reflect the Company's current expectations regarding future events including the clinical development and regulatory clearance of the Company's products, the Company's ability to find partners for the development and commercialisation of its NCE pipeline, and the Company's ability to find partners for the commercialisation of Tuzistra® XR and Moxatag®. 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 Company'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 Company to identify and agree beneficial terms with suitable partners for the commercialisation and/or development of its products, as well as the achievement of expected synergies from such transactions, the acceptance of Tuzistra® XR, Moxatag®, frovatriptan and other products by consumers and medical professionals, the successful integration of completed mergers and acquisitions and achievement of expected synergies from such transactions, the ability of the Company to exit or renegotiate contracts on reasonable terms and achievement of expected synergies from such transactions and the ability of the Company to identify and consummate suitable strategic and business combination transactions.

Rule 26.1 disclosures

A copy of this announcement will be made available (subject to certain restrictions relating to persons resident in restricted jurisdictions) on Vernalis' website at www.vernalis.com by no later than 12 noon (London time) on the business day following the release of this announcement in accordance with Rule 26.1 of the Code. The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

Rule 2.9 of the Code

For the purposes of Rule 2.9 of the Code, Vernalis confirms that it has in issue 526,819,624 ordinary shares of one pence each with ISIN number GB00B3Y5L754. 

Disclosure requirements of the Code 

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (London time) on the 10th business day following the announcement in which any securities exchange offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure. 

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8 of the Code. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3 of the Code.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4 of the Code).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Other Notices

Evercore Partners International LLP ("Evercore"), which is authorised and regulated by the Financial Conduct Authority in the UK, is acting exclusively as financial adviser to Vernalis and no one else in connection with the matters described in this announcement and will not be responsible to anyone other than Vernalis for providing the protections afforded to clients of Evercore nor for providing advice in connection with the matters referred to herein. Neither Evercore nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Evercore in connection with this announcement, any statement contained herein, the acquisition or otherwise. Apart from the responsibilities and liabilities, if any, which may be imposed on Evercore by FSMA, or the regulatory regime established thereunder, or under the regulatory regime of any jurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, neither Evercore nor any of its affiliates accepts any responsibility or liability whatsoever for the contents of this announcement, and no representation, express or implied, is made by it, or purported to be made on its behalf, in relation to the contents of this announcement, including its accuracy, completeness or verification of any other statement made or purported to be made by it, or on its behalf, in connection with Vernalis or the matters described in this announcement. To the fullest extent permitted by applicable law, Evercore and its affiliates accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise (save as referred to above) which they might otherwise have in respect of this announcement or any statement contained therein.