Vernalis plc to raise £40 million in Placing

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THE SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES, UNLESS REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION. 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 AND THE COMPANY DOES NOT CURRENTLY INTEND TO REGISTER ANY SECURITIES UNDER THE SECURITIES ACT. THIS ANNOUNCEMENT IS NOT FOR DISTRIBUTION DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES.

26 April 2016

VERNALIS PLC ("Vernalis" or the "Company")

Placing to raise £40 million and Notice of General Meeting

Highlights

· Placing to raise £40 million (before expenses) for the Company through the issue of 80,000,000 new Ordinary Shares at a Placing Price of 50 pence per share

· The Placing Shares have been conditionally placed by the Joint Bookrunners with institutional investors and certain Directors.

· The Placing Price is equivalent to the closing middle market price of an Ordinary Share on 25 April 2016 (of 50 pence per Ordinary Share)

· The net proceeds of the Placing, together with the Company's existing cash resources, are intended to provide sufficient working capital to cover a conservative risk-adjusted roll-out plan for Tuzistra® XR, the forthcoming re-launch of Moxatag® and the future launches of the remaining four US cough cold programmes under development with Tris, whilst enabling increased promotional activity, if deemed appropriate

· The Placing is on a non pre-emptive basis and is conditional on, inter alia, the passing of certain Resolutions at a General Meeting to be held on 12 May 2016

· Canaccord Genuity and Shore Capital are acting as Joint Bookrunners in connection with the Placing. Canaccord Genuity is also Nominated Adviser to the Company. The Placing is not being underwritten

Ian Garland, CEO of Vernalis commented: "We continue our transition to a sustainably profitable specialty pharmaceutical company. We have made significant investment in launching Tuzistra® XR, our first extended release cough cold product, and we look forward to leveraging our focused primary care sales force with the forthcoming re-launch of Moxatag® later this year. Our cough cold pipeline is maturing to plan with CCP-07 and CCP-08 on track to file new drug applications (NDAs) this year and two further cough cold programmes in active development, targeted to achieve proof-of-concept before the end of 2016.

"We are emerging from the first cough cold season of selling Tuzistra® XR with the product gaining commercial traction steadily, despite a mild US cough cold season. With launch data now in hand, we expect the net proceeds of the Placing together with our existing cash resources will provide sufficient working capital to support the planned roll-out of the other products in this franchise.

"We remain excited by the outlook and thank shareholders for their continuing support."

-- ENDS --

Enquiries:

Notes to Editors

About Vernalis

Vernalis is a revenue-generating, specialty pharmaceutical company with significant expertise in drug development. The Company has three approved products: Tuzistra® XR targeting the US prescription cough cold market; Moxatag®, a once-a-day formulation of the antibiotic, amoxicillin, indicated for the treatment of tonsillitis and/or pharyngitis secondary to Streptococcus pyogenes in adults and paediatric patients 12 years and older; and frovatriptan (Frova®) for the acute treatment of migraine. It has an exclusive licensing agreement to develop and commercialise multiple novel products focussed on the US prescription cough cold market as well as eight programmes in its NCE development pipeline. Vernalis also has 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 by collaborations with leading pharmaceutical companies, including Asahi Kasei Pharma, Biogen Idec, Endo Pharmaceuticals Inc., GlaxoSmithKline, Genentech, H. Lundbeck A/S, Menarini, Novartis Institutes for BioMedical Research, Servier, Taisho Pharmaceutical Co. Ltd., and Tris.

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

Vernalis Forward-Looking Statements

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 New Chemical Entity ("NCE") pipeline, the Company's ability to successfully commercialise its cough cold products and Moxatag® through its own sales force, as well as the Company'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 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, and the ability of the Company to identify and consummate suitable strategic and business combination transactions.

Introduction

Vernalis plc ("Vernalis" or the "Company") is pleased to announce that it has conditionally raised £40 million, by way of a non pre-emptive placing for cash of 80,000,000 new Ordinary Shares at the Placing Price of 50 pence per new Ordinary Share, conditional upon approval of Shareholders at the General Meeting.

The net proceeds of the Placing, together with the Company's existing cash resources, are intended to provide sufficient working capital to cover a conservative risk-adjusted roll-out plan for Tuzistra® XR, the forthcoming re-launch of Moxatag® and the future launches of the remaining four US cough cold programmes under development with Tris, whilst enabling increased promotional activity, if deemed appropriate.

The Placing is conditional upon, amongst other things, the Directors obtaining appropriate Shareholder authorities at the General Meeting to allot the Placing Shares and to disapply pre-emption rights which would otherwise apply on their issue and allotment to the Placees.

The Circular and the Notice of General Meeting will be posted in due course and will also be available from the Company's website at: www.vernalis.com.

Subject to completion of the Placing, IAML, which currently holds 35.55 per cent. of the voting rights of the Company, will increase its holding of the voting rights of the Company to 37.03 per cent. Vernalis is a public company resident in the United Kingdom and, accordingly, its Shareholders are entitled to the protections afforded by the Takeover Code and enforced by the Panel. Under Rule 9 of the Takeover Code, where any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company which is subject to the Takeover Code but does not hold shares carrying more than 50 per cent. of such voting rights, and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in such company in which he is interested, that person is normally required to make a general offer in cash to all shareholders in the company at the highest price paid by him or any person acting in concert with him for an interest in such shares within the preceding 12 months. The Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 if, amongst other things, those shareholders of the Company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him and do not have any interest in the proposed transaction which may compromise their independence pass an ordinary resolution on a poll at a general meeting (the Whitewash Resolution) approving such a waiver. In addition, the Panel may also waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Code) if independent shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were one to be put to the shareholders of the company at a general meeting. The Panel has agreed to a waiver of both (a) the requirement for IAML to make a general offer in cash for the Company; and (b) the requirement for a Whitewash Resolution to be considered at the General Meeting, following receipt of written confirmations agreeing to such waiver from the Majority Shareholders, holding, in aggregate, in excess of 50 per cent. of the shares of the Company capable of being voted at a general meeting of the Independent Shareholders. Further details relating to the Accelerated Rule 9 Waiver and the Takeover Code are set out below.

Background to, reasons for and use of proceeds of, the Placing

Vernalis aims to become a sustainably profitable specialty pharmaceutical company

Vernalis' strategy is to transition to a sustainably profitable specialty pharmaceutical company by developing late stage, low-development risk NDAs, which the Company will commercialise through its own US commercial infrastructure. Currently Vernalis is focused on developing and commercialising such products for the prescription cough cold market in the US.

Vernalis recently launched its first prescription cough cold extended-release product, Tuzistra® XR in the US

Importantly, in the six-month period to 31 December 2015, Vernalis launched its first approved prescription cough cold product, Tuzistra® XR, following its US approval on 30 April 2015. An integrated launch plan, including trade distribution, payer and patient access, and brand marketing, was implemented immediately following approval. Following recruitment, the field sales force began promotion in September 2015 targeting high-prescribing physicians ahead of the start of the 2015/2016 US cough cold season. During the 2015/2016 US cough cold season the field sales force steadily increased the number of new prescribers each week, with an acceleration from January 2016.

Vernalis' upcoming US re-launch of Moxatag® highlights how the Company can further leverage its commercial infrastructure

Vernalis took a further step towards advancing its strategy through the acquisition in October 2015 of US rights to Moxatag®, the only US approved once-daily formulation of amoxicillin. As a result of inconsistent promotion by its former licence holders since its launch, Moxatag® has very low current sales levels. Vernalis plans to increase sales through its US commercial sales force as the target physician audience and marketing characteristics of Moxatag® are very closely aligned with the Company's existing prescription cough cold products. Vernalis expects to re-launch Moxatag® through its US commercial infrastructure in the second quarter of the calendar year 2016 following completion of ongoing manufacture of launch supplies and patient samples.

Vernalis estimates the US market size for prescription cough cold treatments to be c.$3 billion of which the Company expects to gain a modest share

Tuzistra® XR is the only codeine-based extended-release oral suspension cough cold treatment in the US prescription cough cold market, which sees 30 to 35 million prescriptions written each year. Vernalis estimates the potential US market size for cough cold products to be approximately $3 billion per annum at current brand pricing. The Company estimates that the narcotic segment, which Tuzistra® XR is targeting, has a potential value of approximately $1.8 billion per annum.

Tuzistra® XR has gained commercial traction steadily since launch, despite a mild US cough cold season

As announced in Vernalis' unaudited financial results for the six months ended 31 December 2015, revenue recognised in the six month period to 31 December 2015 from Tuzistra® XR totalled £0.6 million. The 2015/2016 US cough cold season has been mild with 8.3 million prescriptions for cough cold products being recorded between September 2015 and February 2016, down approximately 15 per cent. on the prior year. Total codeine and hydrocodone cough cold prescriptions were down approximately 25 per cent. on the prior year through to January 2016 against this backdrop. Vernalis made progress against many of its US commercial goals for the 2015/2016 cough cold season, setting up its commercial supply chain and distribution capabilities, securing national wholesale distribution and starting to build pharmacy distribution in the Company's target geographies. Pharmacy stocking has not progressed as rapidly as the Company had initially hoped but it continues to build steadily. Vernalis' payer access goal is to achieve tier-3 unrestricted access for 75 to 80 per cent. of commercial lives by the end of the second year after launch. The Company has made good progress towards this goal having already secured such coverage for approximately 55 per cent. of commercial lives. Vernalis has positioned Tuzistra® XR at a WAC price of $499.20 for a 473ml bottle. So far the Company has recorded an average prescription size of 168ml, making the average WAC price per prescription $177. Excluding the one-time launch incentive costs, the Company has achieved approximately $70 to $75 net per prescription and Vernalis believes it is on track to achieve approximately $80 net per prescription during the next 2016/2017 cough cold season.

Vernalis expects to file 2 NDAs for additional extended-release cough cold products by the end of 2016

The remaining four US cough cold programmes under development with Tris continue to make good progress. Both CCP-07 and CCP-08 are now at pivotal bio-equivalence study stage, with CCP-07 having completed its pivotal single-dose and multiple-dose studies in December 2015 and April 2016 respectively. Having collected satisfactory stability data through 9 of the required 12 months, CCP-08 has also completed its single-dose pivotal study (April 2016) and is now in a multiple-dose study. NDAs are targeted to be filed for both programmes in calendar year 2016. Tris continues to work on achieving proof-of-concept for CCP-05 and CCP-06 and could attain that goal for both programmes by the end of the 2016 calendar year.

Vernalis' cash burn has increased, as expected, as the Company continues to invest in the US launch of its portfolio of products

The Board is committed to managing the Company's cash position closely in view of the ongoing commercial roll-out of Tuzistra® XR and planned re-launch of Moxatag® in the US, together with the milestone payment obligations to Tris for the development of the remaining cough cold programmes. Vernalis has demonstrated continued significant progress in its critical US commercial business. In line with its strategy, Vernalis has made significant investment in launching Tuzistra® XR which will continue as the products gain more traction. As at 31 December 2015, Vernalis had cash resources of £54.0 million and no debt. However, Vernalis saw a substantial increase in its cash burn in the six months to 31 December 2015, being £10.6 million during this period. Operating costs in the six months to 31 December 2015 were £19.0 million. This first half run rate provides a reasonable guide for anticipated costs in the second half of the 2016 financial year for research and development and general and administration expenses, but first half sales and marketing expenses only had four months of sales force costs included and so the sales and marketing expenses will increase for the second half of the 2016 financial year. The Company expects cash burn at an increased level during the remainder of the financial year as it continues to invest in the US launches and its frovatriptan royalty income declines following the expiry in December 2015 of the core patent.

Whilst Vernalis remains convinced as to the long-term potential of the Company's cough cold franchise, there may be a possible cash requirement in 18 months and this suggests it is prudent to raise capital now so as to avoid the risk of a future cash shortfall

With a predictable infrastructure cost following establishment of the US commercial team and visibility on the likely timing of milestone payments to Tris, the main uncertainty in predicting the near term cash requirements of the business relates to the sales trajectories of Tuzistra® XR, Moxatag® and the other Tris pipeline products. While the Company remains unchanged in its belief in the long-term potential of Tuzistra® XR and other pipeline products, the in-market commercial experience gained since the launch of Tuzistra® XR indicates a possibility that sales of Tuzistra® XR may build more slowly in the initial seasons following launch than previously anticipated. While future product launches may result in faster commercial uptake as the Company benefits from the experience gained from the launch of Tuzistra® XR, assuming a more cautious approach to near term sales of both Tuzistra® XR and the other Tris products could create a potential cash requirement in the next 18 months. The Directors believe that it is prudent to raise additional capital now to avoid the possibility of a future cash shortfall in the event that commercial uptake of the Company's products is slower than anticipated. Vernalis therefore proposes to raise £40 million (before expenses) by way of the Placing, which is intended to ensure that the Company remains well capitalised under such circumstances. 

The net proceeds of the Placing, together with the Company's existing cash resources, are intended to provide sufficient working capital to cover a conservative risk-adjusted roll-out plan for Tuzistra® XR, the forthcoming re-launch of Moxatag® and the future launches of the remaining four US cough cold programmes under development with Tris, whilst enabling increased promotional activity, if deemed appropriate.

Details of the Placing

The Company is proposing to raise gross proceeds of £40.0 million (£38.9 million net of expenses) through the issue of the Placing Shares at the Placing Price to the Placees. The Placing Price of 50 pence is equivalent to the closing middle market price of 50 pence per Existing Ordinary Share on 25 April 2016, being the latest practicable date prior to the publication of this document.

The Placing Shares will represent approximately 15.2 per cent. of the Enlarged Share Capital. The Placing Shares will be allotted and issued fully paid and will, on issue, rank pari passu with the Existing Ordinary Shares including the right to receive, in full, all dividends and other distributions declared, paid or made thereafter in respect of the Ordinary Shares together with all rights attaching to them and free from all liens, charges and encumbrances of any kind. Application will be made for the Placing Shares to be admitted to trading on AIM. Conditional upon completion of the Placing, it is expected that Admission and dealings in the Placing Shares will commence at 8.00 a.m. on 13 May 2016.

The Placing Shares are not being made available to the public and none of the Placing Shares are being offered or sold in any jurisdiction where it would be unlawful to do so. The Placing Shares have not been and will not be registered under the relevant laws of any of the Restricted Jurisdictions or any state, province or territory thereof and may not be offered, sold, resold, delivered or distributed, directly or indirectly in or into any of the Restricted Jurisdictions or to, or for the account or benefit of, any person with a registered address in, or who is a resident of or ordinarily resident in, or a citizen of, any Restricted Jurisdictions except pursuant to an applicable exemption.

The distribution of this announcement in jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this announcement come should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws or regulations of such jurisdictions. This announcement is not for distribution directly or indirectly into the United States.

None of the Placing Shares, this announcement nor any other document connected with the Placing have 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 Shares or the accuracy or adequacy of this announcement or any other document connected with the Placing. Any representation to the contrary is a criminal offence.

The Placing 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. The Placing Shares may not be offered, sold, taken up, resold, transferred or delivered, directly or indirectly, within, into or in the United States or to any national resident or citizen of, or any corporation, partnership or other entity created or organised under the laws of the United States, except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with the securities laws of any relevant state or other jurisdiction of the United States.

Accordingly, there will be no public offer of the Placing Shares in the United States.

The Placing Shares are being offered and sold only (i) outside the United States in offshore transactions within the meaning of and in accordance with Regulation S or (ii) within the United States to persons who are ''qualified institutional buyers'' in transactions exempt from the registration requirements of the Securities Act.

It is expected that, subject to the Placing Agreement becoming unconditional in all respects, the Placing Shares to be issued will be registered in the names of each of the Placees and definitive evidence of title to the Placing Shares will be delivered under CREST on the date of their Admission where delivery is requested in Uncertificated Form, or despatched by first class post by 20 May 2016 where delivery is requested in Certificated Form. No temporary documents of title will be issued.

Placing Agreement

Pursuant to the terms of the Placing Agreement, Canaccord Genuity, Nominated Adviser and Joint Broker to the Company, and Shore Capital, Joint Broker to the Company, have conditionally placed the Placing Shares at the Placing Price with the Placees. The Placing Agreement is conditional upon, amongst other things, the satisfaction of the following conditions: (a) the Resolutions having been duly passed at the General Meeting; (b) Admission taking place not later than 8.00 a.m. on 13 May 2016, or such later time and date as Canaccord Genuity and Shore Capital may agree, being not later than 8.00 a.m. on 27 May 2016; (c) none of the warranties given by the Company in the Placing Agreement being untrue, inaccurate or misleading prior to Admission; and (d) the performance by the Company of its obligations under the Placing Agreement in all respects prior to Admission.

Canaccord Genuity or Shore Capital are entitled to terminate their respective obligations under the Placing Agreement if, amongst other things: (a) prior to Admission, there is a material adverse change in the financial position or prospects of the Group (in the opinion of Canaccord Genuity or Shore Capital, acting in good faith); (b) prior to Admission, Canaccord Genuity or Shore Capital becomes aware that any of the warranties given by the Company in the Placing Agreement are untrue or inaccurate in a material respect or misleading; (c) prior to Admission, the Company has failed to comply with any of its obligations under the Placing Agreement; or (d) prior to Admission, certain force majeure events occur which in the opinion of Canaccord Genuity or Shore Capital, acting in good faith, would make it inadvisable or impracticable to proceed with the Placing.

Subject to the terms of the Placing Agreement, Canaccord Genuity and Shore Capital have agreed to pay the proceeds from the Placing to the Company by no later than three business days from the date of Admission. Canaccord Genuity and Shore Capital have confirmed that, as at the date of the Placing Agreement, they had conditionally placed all of the Placing Shares with institutional investors. The Placing is not underwritten.

The Takeover Code

Rule 9 of the Takeover Code

The Directors believe that IAML's continued support of the Company and its commitment to participate in the Placing is necessary to ensure both the success of the Placing and the future of the Company.

The proposed issue of the Placing Shares to IAML gives rise to certain considerations and consequences under the Takeover Code. Brief details of the Panel, the Takeover Code and the protections that they afford to Shareholders are described below.

The Takeover Code is issued and enforced by the Panel. The Panel has been designated as the supervisory authority to carry out certain regulatory functions in relation to takeovers pursuant to the Takeover Directive (2004/25/EC). Its statutory functions are set out in and under Chapter 1 of Part 28 of the Act.

The Takeover Code applies to all takeover and merger transactions, however effected, where the offeree company is, amongst other things, a listed or unlisted public company resident in the United Kingdom, the Channel Islands or the Isle of Man (and certain categories of private limited companies).

Vernalis is a public company resident in the United Kingdom and, accordingly, its Shareholders are entitled to the protections afforded by the Takeover Code and enforced by the Panel. The proposed issue of the Placing Shares to IAML gives rise to certain considerations under the Takeover Code.

Under Rule 9 of the Takeover Code, any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined under the Takeover Code) in shares which (taken together with shares in which persons acting in concert with him are interested) carry 30 per cent. or more of the voting rights of a company which is subject to the Takeover Code, is normally required by the Panel to make a general offer in cash to all the other shareholders of that company to acquire the balance of the equity share capital not already held by that person.

In addition, Rule 9 also provides that where any person, together with persons acting in concert with him, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company which is subject to the Takeover Code but does not hold shares carrying more than 50 per cent. of such voting rights, and such person, or any person acting in concert with him, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in such company in which he is interested, that person is normally required to make a general offer in cash to all shareholders in the company at the highest price paid by him or any person acting in concert with him for an interest in such shares within the preceding 12 months.

IAML

IAML is currently interested in approximately 35.55 per cent. of the voting rights of the Company and has committed to take up 36,200,000 Placing Shares in the Placing (representing, in aggregate, 6.9 per cent. of the Enlarged Share Capital).

Following completion of the Placing, IAML will have increased its holding in the voting rights of the Company to 37.03 per cent., which, without a waiver of the obligations under Rule 9 of the Takeover Code, would require IAML to make a general offer for the Company.

Dispensation from Rule 9 of the Takeover Code

Under Note 1 on the Notes on Dispensations from Rule 9 of the Takeover Code, the Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 of the Takeover Code if, amongst other things, the shareholders of a company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with him pass a Whitewash Resolution on a poll at a general meeting approving such waiver.

The Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Takeover Code) if independent shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were such a resolution to be put to the shareholders of the company at a general meeting.

The Company has obtained such written confirmation from the Majority Shareholders who are Independent Shareholders and the Panel has accordingly waived the requirement for a Whitewash Resolution to be put to a meeting of Independent Shareholders. Accordingly, the Placing may be effected without the requirement for IAML to make a Rule 9 Offer or a Whitewash Resolution to be put to Shareholders.

Accelerated Rule 9 Waiver

The Majority Shareholders understand that, under Note 1 on the Notes on the Dispensations from Rule 9, the Takeover Panel will normally waive the requirement for a general offer to be made in accordance with Rule 9 if, inter alia, those shareholders of the company who are independent of the person who would otherwise be required to make an offer and any person acting in concert with it and do not have any interest in the Placing which may compromise their independence pass an ordinary resolution on a poll at a general meeting (a Whitewash Resolution) approving such a waiver. The Majority Shareholders also understand that the Panel may waive the requirement for a Whitewash Resolution to be considered at a general meeting (and for a circular to be prepared in accordance with Section 4 of Appendix 1 to the Takeover Code) if independent shareholders holding more than 50 per cent. of the company's shares capable of being voted on such a resolution confirm in writing that they would vote in favour of the Whitewash Resolution were one to be put to the shareholders of the company at a general meeting.

Majority Shareholders

As at 25 April 2016, (being the latest practicable date prior to the publication of this document), the respective shareholdings of the Majority Shareholders and the percentage of voting rights in the issued ordinary share capital of the Company that they each hold making them eligible to give written consent to the Panel for the purposes of waiving the requirement for a Whitewash Resolution were as follows:

Independent Shareholders consenting to the Accelerated Rule 9 Waiver

* The above percentages represent the number of Existing Ordinary Shares held by each of the Majority Shareholders, in respect of which they control the voting rights, as a percentage of the total number of Existing Ordinary Shares held by all Independent Shareholders.

Confirmations and Acknowledgements

The Majority Shareholders have confirmed:

1. that the Majority Shareholders are the beneficial owners of 150,673,200 Ordinary Shares, in respect of which they control the voting rights, representing 33.85 per cent. of the voting rights of the Company, and have absolute discretion over the manner in which their shares are voted. The Ordinary Shares are held free of all liens, pledges, charges and encumbrances;

2. that (a) save for the fact that the Majority Shareholders and IAML are both Shareholders in the Company, there is no connection between the Majority Shareholders and IAML, (b) the Majority Shareholders do not have any interest or potential interest, whether commercial, financial or personal, in the outcome of the Placing, and (c) the Majority Shareholders are independent shareholders of the Company for the purposes of the Takeover Code; and

3. that, in connection with the Placing:

(a) the Majority Shareholders consent to the Panel granting a waiver from the obligation for IAML to make a Rule 9 Offer to the Shareholders of the Company;

(b) subject to Independent Shareholders of the Company holding more than 50 per cent. of the Ordinary Shares capable of being voted on a Whitewash Resolution to approve the waiver from the obligation for IAML to make a Rule 9 Offer giving separate confirmations in writing, the Majority Shareholders consent to the Panel dispensing with the requirement that the waiver from such obligation be conditional on a Whitewash Resolution being approved by Independent Shareholders of the Company at a general meeting; and

(c) the Majority Shareholders would vote in favour of a Whitewash Resolution to waive the obligation for IAML to make a Rule 9 Offer were one to be put to the Independent Shareholders of the Company at a general meeting.

In giving the confirmations referred to above, the Majority Shareholders acknowledge:

1. that, if the Panel receives such confirmations from Independent Shareholders of the Company holding more than 50 per cent. of the shares capable of being voted on a Whitewash Resolution, the Panel will approve the waiver from the obligation for IAML to make a Rule 9 Offer without the requirement for the waiver having to be approved by Independent Shareholders of the Company at a general meeting;

2. that if no general meeting is held to approve the Whitewash Resolution to waive the obligation for IAML to make a Rule 9 Offer:

(a) there will not be an opportunity for any other person to make any alternative proposal to the Company conditional on such Whitewash Resolution not being approved by Independent Shareholders of the Company;

(b) there will not be an opportunity for other Shareholders in the Company to make known their views on the Placing; and

(c) there will be no requirement for the Company either (i) to obtain and make known to its Shareholders competent independent advice under Rule 3 of the Takeover Code on the Placing and the waiver of the obligation for IAML to make a Rule 9 Offer or (ii) to publish a circular to Shareholders of the Company in compliance with Appendix 1 of the Takeover Code in connection with this matter.

The Majority Shareholders consider themselves to be sophisticated investors in relation to equity investments. The Majority Shareholders confirm that they will not sell, transfer, pledge, charge, or grant any option or other right over, or create any encumbrance over, or otherwise dispose of their Ordinary Shares until after the conclusion of the General Meeting to approve the Placing.

Following completion of the Placing, IAML will not be entitled to increase its interest in the voting rights of the Company without incurring an obligation under Rule 9 of the Takeover Code to make a general offer (unless a dispensation from this requirement has been obtained from the Panel in advance).

For the avoidance of doubt, the Accelerated Rule 9 Waiver applies only in respect of an increase in the shareholding of IAML resulting from the Placing and not in respect of another increase in their shareholding. IAML has not taken part in any decision of the Board relating to the proposal to seek an Accelerated Rule 9 Waiver from the Panel.

General Meeting

A notice convening the General Meeting to be held at 10.30 a.m. on 12 May 2016, at the offices of Covington & Burling LLP, 265 Strand, London WC2R 1BH, United Kingdom will be set out at the end of the Circular.

Irrevocable Undertakings

The Directors, who in aggregate hold 1,742,272 Existing Ordinary Shares, representing in aggregate, 0.4 per cent. of the Existing Ordinary Shares, have irrevocably undertaken to vote in favour of the Resolutions at the General Meeting.

The Company has received an irrevocable undertaking from each of IAML, Woodford Investment Management and GAM in respect of, in aggregate, 308,914,970 Existing Ordinary Shares representing, in aggregate, 69.40 per cent. of the Existing Ordinary Shares, to vote in favour of the Resolutions in respect of each of their own shareholdings in the Company.

Directors' dealings

The Directors of the Company are subscribing for shares in the Placing at the Placing Price as follows:

1 Assuming no issue, prior to Admission, of any Ordinary Shares apart from the Placing Shares.

2 Including 50,550 Ordinary Shares held jointly by a connected person

Related Party Transaction

IAML holds 158,241,770 Existing Ordinary Shares, representing approximately 35.55 per cent. of the Existing Ordinary Shares and Woodford Investment Management has a holding of 115,467,297 Existing Ordinary Shares (including voting rights over 109,957,297 Existing Ordinary Shares), representing approximately 25.94 per cent. of the Existing Ordinary Shares (including voting rights over 24.70 per cent.). IAML is subscribing for 36,200,000 Placing Shares at the Placing Price, representing approximately 45.25 per cent. of the Placing and Woodford Investment Management is subscribing for 29,600,000 Placing Shares at the Placing Price, representing approximately 37.00 per cent. of the Placing. As IAML and Woodford Investment Management are both deemed to be substantial shareholders under the AIM Rules, each of their individual participations in the Placing constitutes a related party transaction under Rule 13 of AIM Rules.

The Directors consider, having consulted the Company's Nominated Adviser, Canaccord Genuity, that the terms of the subscription for Placing Shares by each of IAML and Woodford Investment Management are fair and reasonable insofar as Shareholders are concerned.

Recommendation

Shareholders should note that, if either of Resolutions 1 or 2 are not passed, the Placing will not proceed. The Directors consider the terms of the Placing and Accelerated Rule 9 Waiver to be fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. The Directors therefore unanimously recommend that Shareholders vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings of Existing Ordinary Shares amounting, in aggregate, to 1,742,272 Existing Ordinary Shares, representing approximately 0.4 per cent. of the Existing Ordinary Shares.

KEY STATISTICS

1 This assumes no further exercise of options under the Share Schemes.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the above timetable is subject to change. If any of the above times and/or dates change, the revised times and/or dates will be notified to Shareholders by announcement through a Regulatory Information Service. References to time in this document are to London time. The timetable above assumes that the Resolutions are passed at the General Meeting without adjournment.

DEFINITIONS

The following definitions apply throughout this document unless the context requires otherwise:

GLOSSARY OF SCIENTIFIC AND OTHER TERMS