TIDMVER
RNS Number : 4293Q
Vernalis PLC
12 September 2017
12 September 2017
LSE: VER
Vernalis plc
Results Announcement for the year ended 30 June 2017
Tuzistra(R) XR prescriptions growing steadily
In-house salesforce to promote both Tuzistra(R) XR and
Moxatag(R) for the coming season
Independent market research continues to show significant market
opportunity for cough cold franchise
Vernalis plc (LSE: VER) today announces its audited financial
results for the year ended 30 June 2017, following the year-end
trading update published on 18 July 2017.
US Commercial performance:
-- Tuzistra(R) XR prescriptions increased three-fold to
approximately 35,000 for the year (2016: 12,000), reflecting:
-- increased insurance coverage and pharmacy stocking
-- improved salesforce effectiveness following expansion to 100
representatives, now brought in-house
-- refined marketing messaging and physician targeting
-- improved patient affordability following enhancements in
Vernalis' patient assistance program
-- Potential of Tuzistra(R) XR remains significant and has been
seen across the US, with high performing sales representatives in
all targeted regions
Financial Highlights for the year ended 30 June 2017
-- Reported revenue was GBP20.8 million (2016: GBP12.0 million),
ahead of market expectations, as previously communicated in the
July trading update
-- US Commercial net revenues (including Tuzistra(R) XR and
Moxatag(R) ) increased to GBP2.1 million (2016: GBP1.1 million),
which represented deliveries made to wholesalers
-- Underlying patient prescriptions increased significantly and
accounted for 70 per cent of sales volumes (2016: 42 per cent)
-- The remaining 30 per cent (2016: 58 per cent) reflected
expanded pharmacy stocking (29 per cent vs 2016: 48 per cent) and
some wholesaler stocking (1 per cent vs 2016: 10 per cent)
-- Inventory levels with wholesalers at year end remained at similar levels to 30 June 2016
-- Research collaboration income and milestones increased to
GBP12.0 million in the period (2016: GBP8.0 million) including
GBP5.0 million of milestones representing a record level of income
for the research business
-- Other collaboration income received was GBP2.4 million (2016:
GBPnil) and related to the clinical advancement of CPI-444 by
Corvus Pharmaceuticals Inc ("Corvus")
-- Frovatriptan royalty income was GBP4.3 million (2016: GBP2.9
million). This 45 per cent increase was primarily due to volume,
with three 12.5kg batches of API delivered to Menarini (2016: two
12.5kg batches of API)
-- Underlying Menarini sales were EUR16.7 million (2016: EUR20.8
million) representing a 20 per cent decrease due to continuing
competition from generics following patent expiry in December
2015
-- Operating costs before exceptional items were GBP45.2 million
(2016: GBP36.6 million) with the increase due to the further
expansion of the US sales and marketing activities
-- Unrealised foreign exchange gain arising from the conversion
of our US dollars and euros into sterling for reporting purposes
was GBP2.2 million (2016: GBP8.0 million)
-- Loss for the period was GBP21.6 million (2016: GBP17.1
million loss before exceptional items)
-- Balance sheet remained strong with GBP61.3 million of cash
resources and no debt at 30 June 2017
-- Cash resources including cash and cash equivalents and
held-to-maturity assets reduced by GBP22.7 million for the year and
included:
-- Cash used in operations of GBP20.8 million (2016: GBP23.6 million)
-- $6.0 million (GBP4.7 million) milestone payments to Tris
Pharma Inc ("Tris") for FDA acceptance to review CCP-07 and CCP-08
NDAs
US Commercial Pipeline:
-- CCP-07 and CCP-08 NDAs filed and accepted for review by FDA
Complete response letter (CRL) received in respect of each from
FDA in April and August 2017 respectively
-- Two further programmes in active development at Tris, with
proof-of-concept ("POC") targeted by the end of 2017/18
Other Operational Highlights:
-- NCE Development Pipeline: The Company announced in February
2017 that Corvus had reached the predefined criteria for expansion
of the cohort of patients with renal cell carcinoma treated with
single-agent CPI-444 in the ongoing Phase 1/1b study. The expansion
of this study triggered a $3 million milestone payment to Vernalis
under the licensing deal with Corvus. Promising evidence of
single-agent activity has also been seen in patients in other
disease-specific cohorts, including lung cancer and melanoma
Expected Newsflow:
-- CCP-07 and CCP-08: address CRL outstanding items, resubmission and potential FDA approvals
-- POCs on two remaining programmes in cough cold pipeline
(CCP-05 and CCP-06) (by end of 2017/18 financial year)
-- Commence full promotion of Moxatag(R) from September 2017 from existing inventory
-- Re-establish manufacture of Moxatag(R) in 2018
-- Receive milestones under existing collaborations
-- Secure new research collaborations
Ian Garland, Chief Executive Officer, commented,
"We remain very encouraged with the progress we have made in the
last 12 months as we continue to grow our sales and further
progress our cough cold development pipeline, despite some
challenges in the early stages of the commercial launch.
"Independent market research continues to show a significant
market opportunity for our cough cold franchise and we remain
excited by this prospect. Throughout the 2016/17 cough cold season
we saw Tuzistra(R) XR prescriptions grow steadily and we expect
similar levels of growth for the coming season as we focus on
broadening the effectiveness of our salesforce through more focused
physician targeting. Importantly, we will commence full promotion
of Moxatag(R) across this salesforce, starting this month. We are
also working closely with our partner Tris and the FDA to resubmit
the NDAs for CCP-07 and CCP-08 as quickly as possible.
"We would like to thank our staff for their contribution during
the year and our shareholders for their continued support. We look
forward to continued progress in the coming year and strong growth
in Tuzistra(R) XR prescriptions, as we build a major franchise in
cough and cold."
Presentation & Conference Call
Vernalis management will host a presentation at 9.30am (UK) at
the offices of FTI Consulting 200 Aldersgate, Aldersgate Street,
London, EC1A 4HD. It will also be available via webcast at
http://www.vernalis.com/investor-centre/presentations-and-webcasts
and www.cantos.com and via conference call, which can be joined by
dialling: +44 (0) 20 3003 2666. Please contact Matthew Moss at FTI
consulting +44 (0) 20 3727 1000 for details.
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.
-- ends -
Enquiries:
Vernalis plc: +44 (0) 118 938 0015
Ian Garland, Chief Executive Officer
David Mackney, Chief Financial Officer
Canaccord Genuity Limited (Nominated
Adviser and Joint Broker): +44 (0) 20 7523 8000
Henry Fitzgerald-O'Connor
Emma Gabriel
Shore Capital (Joint Broker): +44 (0)20 7408 4090
Bidhi Bhoma
Toby Gibbs
FTI Consulting: +44 (0) 20 3727 1000
Ben Atwell
Simon Conway
Stephanie Cuthbert
Stern Investor Relations: +1 212 362 1200
Stephanie Ascher
Jane Urheim
Notes to Editors
About Vernalis
Vernalis is a revenue generating, commercial stage
pharmaceutical company with significant expertise in drug
development. The Group has three approved products: Tuzistra(R) XR,
targeting the US prescription cough-cold market; Moxatag(R) , 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 pediatric patients 12 years
and older; and frovatriptan 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 has also 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 ten 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, the
Company's ability to successfully commercialise its cough-cold
products and Moxatag(R) through its own salesforce, 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(R) XR, Moxatag(R) , 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.
Operational Review
Our vision is to become a diversified, self-sustaining,
specialty pharmaceutical company. Currently, we are focussed on
strengthening the commercial proposition for our first launched
product, Tuzistra(R) XR, and progressing the remainder of our cough
cold pipeline.
Strengthened position of Tuzistra(R) XR in US market,
prescriptions growing steadily
Tuzistra(R) XR has been available to patients in the US market
for two cough cold seasons. During 2016/17 we markedly strengthened
its position with payers, pharmacies, physicians and patients. As a
result, we increased pharmacy stocking substantially during the
period and estimate that approximately three quarters of target
retail pharmacies in our geographical footprint have purchased
Tuzistra(R) XR since launch. We also made further gains in securing
unrestricted coverage with healthcare insurers, including another
top insurer at the end of 2016, giving Tuzistra(R) XR more than 75
per cent coverage.
To increase physician uptake and to provide patients with
immediate access to Tuzistra(R) XR at the time of their physician
visit, we introduced two-dose patient samples early in the 2016/17
cough cold season. This, coupled with an enhanced patient
assistance programme to reduce the out-of-pocket cost for both
insured and cash-paying patients, has dramatically improved the
access and affordability of Tuzistra(R) XR.
Last summer, we decided to expand our salesforce from 80 to 100
territories. The new sales representatives were recruited and
trained in time for deployment to the field at the start of the
season in October 2016. The combination of these initiatives
allowed us to triple the level of Tuzistra(R) XR prescriptions to
c. 35,000 in 2016/17 compared to c. 12,000 in the 2015/16 initial
launch year, achieving a peak annualised run-rate of c. 55,000
prescriptions.
In May 2017, we took the decision to bring the outsourced
inVentiv contract salesforce in-house. This was completed smoothly
in early July and, for the coming season, all field-based sales
staff are Vernalis employees. Building on the momentum established
during 2016/17, we are targeting a similar level of prescription
growth in the coming year and are guiding to between 105,000 and
115,000 prescriptions written with a closing annualised run-rate of
approximately 155,000 to 175,000 prescriptions.
Working with Tris to resubmit to FDA NDAs for CCP-07 and
CCP-08
The NDAs for both CCP-07 and CCP-08 were accepted for filing by
FDA last year and given PDUFA dates of 20 April 2017 and 4 August
2017 respectively. Unfortunately, our development partner Tris
received Complete Response Letters for both NDAs because of
outstanding items that needed to be resolved before approval could
occur. This was disappointing as plans had been made for the launch
of both CCP-07 and CCP-08 into the 2017/18 season which would have
leveraged our 100 person salesforce. The focus for both us and Tris
is to address these items as quickly as possible to enable
resubmission and subsequent approval of both NDAs, hopefully no
later than for launch during the 2018/19 season. However, this is
dependent upon the time Tris takes to resolve the outstanding
items.
Full promotion of Moxatag(R) to commence from September
Very limited promotional support was given to Moxatag(R) last
year because of the supply uncertainty. We have continued to
progress a new source of supply during the year and intend to
re-establish manufacture of Moxatag(R) in 2018. As a result and
utilising existing inventories, we have begun full promotion of
Moxatag(R) across the whole salesforce from the beginning of this
month.
Record year for Research and Positive Developments in NCE
pipeline
Revenues from frovatriptan have remained strong during the year,
despite competition from generics since December 2015. Our Research
business also had another good year with record levels of
collaboration and milestone income. In March 2017, we entered into
a new multi-year collaboration with our lead partner Servier, under
which we received an upfront payment of EUR2 million. In April
2017, we also received a US$2 million milestone payment following
the successful completion of one of our other collaborations.
Although the Research business has performed strongly during the
year and the level of income has been exceptional, with record
revenues, income in future years is highly dependent on the Company
continuing to secure new collaboration income and receive milestone
payments.
There have been a number of positive developments from multiple
existing partnerships in our NCE business. In February 2017, we
received a $3 million clinical milestone payment from Corvus
following the advancement of CPI-444 in early stage human oncology
studies. In April 2017, we received two research milestones and one
clinical milestone, totalling EUR2 million from our oncology drug
discovery collaboration with Servier, who have advanced a compound
targeting Mcl-1 into Phase I studies. Our RPL554 partner, Verona,
has also made good progress listing on the US NASDAQ market,
securing GBP70 million of further funding and initiating Phase IIb
studies in COPD. We continue to actively seek partners for other
in-house clinical stage programmes.
Financially, our operating loss of GBP26.4 million was better
than expected because of higher revenue from our frovatriptan, NCE
and research businesses and tight management of expenses across all
parts of our business. We ended the year with a strong balance
sheet, GBP61.3 million of cash resources and no debt, the cash
balance having benefited from further weakening of sterling against
the US dollar, in which we hold the majority of our cash.
We would like to thank Board members and our staff for their
contribution during the year and our shareholders for their
continued support. We look forward to continued progress in the
coming year and strong growth in Tuzistra(R) XR and Moxatag(R)
prescriptions.
Financial Review
Total revenues of GBP20.8 million
Revenue for the year ended 30 June 2017 totalled GBP20.8 million
(2016: GBP12.0 million), an increase of 73 per cent year-on-year.
This comprised GBP2.1 million of US Commercial Revenues (2016:
GBP1.1 million), GBP4.3 million related to the supply of
frovatriptan (2016: GBP2.9 million) and GBP14.4 million (2016:
GBP8.0 million) from research collaborations, and other
collaboration income.
US Commercial Revenues
Tuzistra(R) XR and Moxatag(R) revenue is recognised when title
and risk-of-loss passes to the customer and estimates are made for
the relevant deductions and obligations so as to reflect the
complete economic transaction.
Net revenue reflects the gross sales of product shipped to
wholesalers, reduced by estimates of rebates, discounts, allowances
and provision for product returns, given or expected to be given,
which vary by product arrangements and buying groups. These
estimates have been based on actual in-market data received pre-
and post- the end of the accounting period and have been applied to
inventory held at wholesalers and pharmacies. We will continue to
refine these estimates and methodologies over time as the breadth
of in-market data increases.
Tuzistra(R) XR
Revenues from Tuzistra(R) XR were GBP2.0 million for the year to
30 June 2017 (2016: GBP1.1 million). Prescriptions grew three-fold
in the year to c 35,000 (2016: c 12,000 prescriptions). The
annualised prescription run rate for Tuzistra(R) XR has continued
to grow steadily, reaching a peak of approximately 55,000
prescriptions, also approximately three- times the peak run rate at
the same stage in June 2016. Revenue growth was driven by patient
prescriptions (70%) and an expansion of pharmacy stocking of 29%
with wholesaler levels remaining consistent.
Moxatag(R)
Revenues from Moxatag(R) were modest, GBP0.1 million which
represented the initial launch quantities sold into the wholesale
channel. Promotional effort was restricted to a limited number of
regions over the last 12 months due to product supply constraints.
We have made good progress in re-establishing supply and so
Moxatag(R) will be promoted across the whole of the salesforce for
the coming season.
Frovatriptan sales remain robust in the face of generic
competition
Sales of frovatriptan by Menarini in Europe and Central America
were down 20 per cent in euro terms at EUR16.7 million for the year
to 30 June 2017 (2016: EUR20.8 million). The composition of matter
patents expired in December 2015 and whilst there has been a
reduction in both price and volume due to generic competition,
sales have remained robust. Volumes of tablet sales for the year to
30 June 2017 were also down at 8.2 million (2016: 9.0 million).
Vernalis receives 25.25 per cent of Menarini sales via a euro
royalty linked to the supply of API, so the reported royalties do
not necessarily track the underlying performance of Menarini in the
market.
The reported frovatriptan royalties for the year to 30 June 2017
were GBP4.3 million (2016: GBP2.9 million) and this GBP1.4 million
increase was mostly due to a volume increase with three 12.5kg
batches of API delivered to Menarini during the year ended 30 June
2017 (2016: two 12.5kg batches of API). This increase in volume was
offset by a 20 per cent price reduction during the year owing to
continued competition from generic alternatives. The relative
weakening of sterling against the euro also improved performance as
this income stream is received in euros. Based on Menarini's
projections, we expect to deliver two batches of API for the
2017/18 financial year.
Research had an exceptional year with record revenues
Research collaboration income was GBP12.0 million for the year
to 30 June 2017 an exceptional result and an increase of GBP4.0
million (2016: GBP8.0 million). The increase was due to a
significant number of milestones being achieved across several
collaborations totalling GBP5.0 million for the year (2016: GBP0.6
million). We had seven active research collaborations during the
year to 30 June 2017, which in addition to milestones, generated
GBP7.0 million of FTE income (2016: GBP7.4 million). One of the
collaborations completed during the year and so we enter the
2017/18 financial year with six active collaborations.
Development income from legacy out-licenced programmes
Development income totalled GBP2.4 million (2016: GBPnil) and
related to a milestone earned from the out-licenced programme
CPI-444. Corvus, our partner announced in February 2017 results
from a successful Phase I study, and the expansion of that study
triggered a US$3 million payment to Vernalis under the licensing
deal with Corvus.
R&D costs were flat
Research and development expenditure were flat at GBP11.1
million for the year to 30 June 2017 (2016: GBP10.9 million before
exceptional items) and comprised GBP10.5 million (2016: GBP10.5
million) of internally funded research and development costs and
GBP0.6 million (2016: GBP0.4 million) of external costs associated
with the development pipeline.
S&M infrastructure expanded in the US
Sales and marketing expenditure was GBP28.6 million (2016:
GBP20.4 million). The increase in cost is due to an expansion of
the salesforce in order to increase the reach into target
prescribers as well as having salesforce costs for the entire year.
The year to 30 June 2016 included ten months of salesforce costs
following its recruitment in August 2015. A decision was made to
bring in-house the sale force from early July 2017, but this will
not increase the sales-force costs for the coming season.
G&A costs controlled
General and administrative expenditure was GBP5.5 million for
the year to 30 June 2017 (2016: GBP5.3 million), an increase of
GBP0.2 million for the year.
Exceptional gain
The exceptional gain in the year to 30 June 2016 of GBP2.7
million is a non-cash item and related to the successful settlement
of an onerous lease obligation.
There are no exceptional items included in the income statement
for the year ended 30 June 2017.
Operating loss before exceptional items consistent with prior
year
The operating loss before exceptional items was flat at GBP26.4
million for the year to 30 June 2017 (2016: GBP26.2 million). The
increase in income for the year almost completely offset the
increased sales and marketing costs due to the salesforce
expansion. The operating loss after exceptional items for the year
to 30 June 2016 was GBP23.6 million.
Finance income benefited from continued strengthening of the US
dollar
Interest earned on cash resources was GBP0.6 million (2016:
GBP0.3 million) reflecting the higher average cash balance for the
year. With the majority of our cash held in US dollars in order to
match our Tris and US commercial financing requirements, the yield
on these deposits was low but is improving following an interest
rate increase in the US. Finance income has continued to benefit
from the strength of the US dollar and euro, with a GBP2.2 million
unrealised foreign exchange gain on the conversion of US dollar-
and euro-denominated cash deposits into sterling at 30 June 2017
for financial reporting purposes. For the year to 30 June 2016
there was an unrealised foreign exchange gain of GBP8.0 million due
to the strengthening of the US dollar over this period after the 23
June 2017 UK EU referendum vote. At 30 June 2017 the sterling:US
dollar rate was 1.299, compared to the 30 June 2016 rate of
1.337.
Taxation income increase due to Tris pipeline advances and
deferred taxation
Taxation income of GBP2.2 million (2016: GBP0.8 million)
represents recoverable amounts under current legislation on R&D
tax credits for small and medium-sized companies and deferred
taxation, less US tax payable on the US commercial operations. The
increase in income is primarily due to the R&D tax credits
associated with the FDA filing acceptance milestone payments on
CCP-07 and CCP-08 that were made in the year to 30 June 2017 as
well as deferred taxation relating to temporary timing differences
on the US commercial provisions and the utilisation of losses by a
subsidiary entity.
Payments made to Tris that relate to development work performed
on our behalf will qualify for R&D tax credits. The approval
milestone payments which acquire the rights to the programmes from
Tris, do not qualify.
Loss for the year increases due to foreign exchange
In addition to the underlying trading result as described above,
the loss for the year to 30 June 2017 was GBP21.6 million (2016:
GBP17.1 million pre-exceptional loss) with the increase
predominantly due to a lower unrealised foreign exchange gain
compared to the prior year.
Balance sheet remains strong
Non-current assets increased to GBP24.0 million (2016: GBP19.9
million) due to the capitalisation of development milestone
payments made to Tris following the acceptance for review by FDA of
CCP-07 and CCP-08.
Current assets decreased to GBP70.1 million (2016: GBP92.5
million) primarily due to the decrease in cash resources resulting
from the ongoing investment in the US commercial operations.
Total liabilities increased to GBP11.4 million (2016: GBP9.8
million) due to an increase in creditors and provisions associated
with the US commercial operations.
Cash resources of GBP61.3 million
Cash resources comprising held-to-maturity financial assets and
cash and cash equivalents at 30 June 2017 totalled GBP61.3 million
(30 June 2016: GBP84.0 million). A significant proportion of these
cash resources continue to be denominated in non-sterling
currencies with most of the cash denominated in US dollars.
We continue to manage cash tightly. The GBP22.7 million decrease
in cash resources included GBP4.7 million ($6.0 million) in
payments to Tris for development milestones associated with CCP-07
and CCP-08 and their filing acceptance by FDA, partially offset by
a GBP2.2 million unrealised foreign exchange gain arising from the
conversion of our US dollars and euros into sterling for reporting
purposes. Cash used in operations decreased marginally to GBP20.8
million (2016: GBP23.6 million) due to the positive impact of
working capital movements from US commercial sales.
Underlying net cash burn, which excludes milestone income
received, milestone payments made and foreign exchange, increased
to GBP27.7 million (2016: GBP21.8 million), reflecting the
additional cost of the US commercial operations with the expansion
of the salesforce to promote Tuzistra(R) XR.
Outlook
Independent market research continues to show a significant
market opportunity for our cough cold franchise and we remain
excited by this prospect. We continue to make progress in improving
the effectiveness of our US commercial operations and are
optimistic about the growth potential of our existing products and
our ability to launch further products through this strategic asset
in the future. With GBP61.3 million of cash resources (being cash
and cash equivalents and held-to-maturity financial assets) on the
balance sheet at 30 June 2017, the directors believe that the
Company is sufficiently financed for the next 18 months but it is
likely that the business will require additional finance in order
to fully execute the commercial strategy for the full suite of
products in the Company's cough cold pipeline. Any future financing
considerations would reflect the pipeline progression with Tris,
and thus, the timing of milestone payments payable, together with
the speed of growth of Tuzistra(R) XR and Moxatag(R) sales.
Principal Risks and Uncertainties
Vernalis considers strategic, operational and financial risks
and identifies actions to mitigate these risks. The principal risks
and uncertainties for the year to 30 June 2017 can be found in the
Annual Report, available on the website www.vernalis.com.
Vernalis is a revenue generating, commercial stage
pharmaceutical company with significant expertise in drug
development. The Group has three approved products: Tuzistra(R) XR
targeting the US prescription cough cold market; Moxatag(R) , a
once daily formulation of amoxicillin, indicated for the treatment
of tonsillitis and/or pharyngitis secondary to Streptococcus
pyogenes, and frovatriptan for the acute treatment of migraine.
Across the pharmaceutical industry as a whole, competition is
intense in the selling of approved products and more product
candidates fail in clinical studies than produce successful
marketed products. Success or failure with Vernalis' commercial
strategy, which includes the development and approval of products
as well as their successful promotion once approved, will have a
significant impact on the Company's prospects including the ability
to secure licensing agreements on existing products and/or to
secure further finance.
Statement of directors' responsibilities
Each of the directors confirm that, to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and loss of the
Group; and
-- the strategic report in the Report and accounts for the year
ended 30 June 2017 includes a fair review of the development and
performance of the business and the position of the Group, together
with a description of the principal risks and uncertainties that it
faces.
Consolidated income statement
for the year ended 30 June 2017
Year ended 30 June
2017 Year ended 30 June 2016
Exceptional
items
Pre-exceptional (note
Total items 3) Total
Note GBP000 GBP000 GBP000 GBP000
--------------------------------- ----- ------------------- ---------------- ------------ ---------
Revenue 2 20,790 12,034 - 12,034
Other income 509 396 - 396
Cost of sales (2,469) (2,004) - (2,004)
Sales and marketing expenditure (28,606) (20,428) - (20,428)
Research and development
expenditure (11,084) (10,932) - (10,932)
General and administrative
expenditure (5,550) (5,289) 2,651 (2,638)
--------------------------------- ----- ------------------- ---------------- ------------ ---------
Operating loss (26,410) (26,223) 2,651 (23,572)
Finance income 4 2,776 8,315 - 8,315
Finance expense 4 (112) (42) - (42)
--------------------------------- ----- ------------------- ---------------- ------------ ---------
Loss before income tax (23,746) (17,950) 2,651 (15,299)
Income tax credit 5 2,184 804 - 804
--------------------------------- ----- ------------------- ---------------- ------------ ---------
Loss for the year (21,562) (17,146) 2,651 (14,495)
--------------------------------- ----- ------------------- ---------------- ------------ ---------
Loss per share (basic and
diluted) 6 (4.1)p (3.8)p 0.6p (3.2)p
--------------------------------- ----- ------------------- ---------------- ------------ ---------
The notes form part of this condensed consolidated financial
information.
All activities related to continuing operations.
Consolidated statement of comprehensive income
for the year ended 30 June 2017
Year ended
30 June 2017 Year ended 30 June 2016
Exceptional
items
Pre-exceptional (note
Total items 3) Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------- -------------- ---------------- ------------ ---------
Loss for the year (21,562) (17,146) 2,651 (14,495)
Other comprehensive income:
Items that may subsequently
be reclassified to profit and
loss:
Exchange gain/(loss) on translation
of overseas subsidiaries 70 (100) - (100)
--------------------------------------- -------------- ---------------- ------------ ---------
Total other comprehensive income
/(expense) 70 (100) - (100)
--------------------------------------- -------------- ---------------- ------------ ---------
Total comprehensive expense
for the year (21,492) (17,246) 2,651 (14,595)
--------------------------------------- -------------- ---------------- ------------ ---------
Balance sheet
as at 30 June 2017
30 June 30 June
2017 2016
Note GBP000 GBP000
----------------------------------------------- ---- --------- ---------
Assets
Property, plant and equipment 7 1,409 1,673
Intangible assets 8 21,626 17,645
Deferred Taxation 696 -
Trade and other receivables 304 631
Non-current assets 24,035 19,949
Inventories 9 933 233
Trade and other receivables 5,860 7,225
Tax receivable 2,082 1,065
Held-to-maturity financial assets 10 54,056 76,997
Cash and cash equivalents 7,202 7,021
----------------------------------------------- ---- --------- ---------
Current assets 70,133 92,541
----------------------------------------------- ---- --------- ---------
Total assets 94,168 112,490
----------------------------------------------- ---- --------- ---------
Liabilities and shareholders' equity
Liabilities
Trade and other liabilities 1,271 1,422
Deferred income 52 85
Provisions for other liabilities and charges 11 394 504
Derivative financial instruments 12 - 37
----------------------------------------------- ---- --------- ---------
Non-current liabilities 1,717 2,048
Trade and other liabilities 6,305 5,095
Deferred income 382 922
Tax payable 64 80
Provisions for other liabilities and charges 11 2,839 1,333
Derivative financial instruments 12 85 281
Current liabilities 9,675 7,711
----------------------------------------------- ---- --------- ---------
Total liabilities 11,392 9,759
----------------------------------------------- ---- --------- ---------
Equity attributable to owners of the parent
Share capital 13 5,264 5,262
Share premium 514,791 514,791
Other reserves 14 255,458 253,932
Retained deficit (692,737) (671,254)
----------------------------------------------- ---- --------- ---------
Total equity 82,776 102,731
----------------------------------------------- ---- --------- ---------
Total liabilities and equity 94,168 112,490
----------------------------------------------- ---- --------- ---------
Statements of changes in shareholders' equity
for the year ended 30 June 2017
Share Share Other Retained
capital premium reserves deficit Total
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------------- -------- -------- --------- ----------- --------
Balance at 1 July 2015 4,434 476,392 253,365 (657,085) 77,106
------------------------------------------ -------- -------- --------- ----------- --------
Loss for the year - - - (14,495) (14,495)
Other comprehensive expense for the
year - - (100) - (100)
------------------------------------------ -------- -------- --------- ----------- --------
Total comprehensive expense for the
year - - (100) (14,495) (14,595)
Transactions with owners:
Issue of equity share capital 800 39,200 - - 40,000
Costs on issue of equity share capital - (1,097) - - (1,097)
Exercise of share options 28 296 (317) 326 333
Share-based payments charge - - 984 - 984
------------------------------------------ -------- -------- --------- ----------- --------
828 38,399 667 326 40,220
----------------------------------------- -------- -------- --------- ----------- --------
Balance at 30 June 2016 5,262 514,791 253,932 (671,254) 102,731
------------------------------------------ -------- -------- --------- ----------- --------
Loss for the year - - - (21,562) (21,562)
Other comprehensive income for the
year - - 70 - 70
------------------------------------------ -------- -------- --------- ----------- --------
Total comprehensive income/(expense)
for the year - - 70 (21,562) (21,492)
Transactions with owners:
Exercise of share options 2 - (79) 79 2
Share-based payments charge - - 1,535 - 1,535
------------------------------------------ -------- -------- --------- ----------- --------
2 - 1,456 79 1,537
----------------------------------------- -------- -------- --------- ----------- --------
Balance at 30 June 2017 5,264 514,791 255,458 (692,737) 82,776
------------------------------------------ -------- -------- --------- ----------- --------
Cash flow statement
for the year ended 30 June 2017
Year ended Year ended
30 June 30 June
2017 2016
Note GBP000 GBP000
-------------------------------------------------------- ----- ----------- -----------
Cash flows from operating activities
Loss for the year (21,562) (14,495)
Taxation 5 (2,184) (804)
Depreciation 626 607
Loss on disposal of tangible fixed assets 67 144
Amortisation of intangible fixed assets 8 911 713
Movement in provisions 11 1,402 (1,636)
Movement in deferred income (573) (681)
Share-based payments charge 1,535 984
Movement in derivative financial instruments (233) 619
Finance income 4 (2,776) (8,315)
Finance expense 4 112 42
Exchange loss/(gain) 153 (203)
-------------------------------------------------------- ----- ----------- -----------
(22,522) (23,025)
Changes in working capital
Inventories (700) (233)
Receivables 1,691 (1,109)
Liabilities 727 813
-------------------------------------------------------- ----- -----------
Cash used in operations (20,804) (23,554)
Taxation received 1,060 2,912
Taxation paid (601) (128)
Net cash (used in)/generated from operating activities (20,345) (20,770)
Cash flows from investing activities
Purchase of property, plant and equipment 7 (428) (212)
Proceeds for sale of property, plant and equipment 4 -
Purchase of intangible fixed assets 8 (4,779) (71)
Movement in held-to-maturity financial assets* 24,906 (27,329)
Acquisition of business - (3,677)
Interest received on cash and cash equivalents 24 26
Interest received on held-to-maturity financial
assets 594 204
-------------------------------------------------------- ----- ----------- -----------
Net cash generated from/(used in) investing activities 20,321 (31,059)
Cash flows from financing activities
Gross proceeds on issue of equity share capital 2 40,333
Costs on issue of equity share capital - (1,097)
----- ----------- -----------
Net cash generated from financing activities 2 39,236
Foreign exchange gain on cash and cash equivalents 203 782
-------------------------------------------------------- ----- ----------- -----------
Movements in cash and cash equivalents in the
year 181 (11,811)
Cash and cash equivalents at the beginning of
the year 7,021 18,832
-------------------------------------------------------- ----- -----------
Cash and cash equivalents at the end of the year 7,202 7,021
Held-to-maturity financial assets 10 54,056 76,997
-------------------------------------------------------- ----- ----------- -----------
Total cash, cash equivalents and held-to-maturity
financial assets 61,258 84,018
-------------------------------------------------------- ----- ----------- -----------
* Movement in held-to-maturity financial assets includes a
foreign exchange gain of GBP2.0 million for the year ended 30 June
2017 (GBP7.2 million gain for the year ended 30 June 2016).
Notes to the financial statements
1. Accounting policies and basis of preparation
This financial information for the years ended 30 June 2017 and
30 June 2016 does not comprise statutory financial statements. This
financial information and announcement was approved for issue on 11
September 2017 and has been extracted from the 30 June 2017 audited
statutory financial statements that were also approved by the board
on the same date. These statutory financial statements have not yet
been delivered to the registrar of Companies. Statutory financial
statements for the year ended 30 June 2016 were approved by the
Board of directors on 28 September 2016 and delivered to the
Registrar of Companies. The auditors' report on the financial
statements for the year ended 30 June 2017 and the year ended 30
June 2016 were (i) unqualified, (ii) did not included a reference
to any matters to which the auditors drew attention by the way of
emphasis without qualifying their report and (iii) did not contain
a statement under section 498 (2) or (3) of the Companies Act
2006.
Basis of preparation
These financial statements have been prepared in accordance with
EU endorsed International Financial Reporting Standards (IFRS),
Interpretations Committee and the Companies Act 2006 applicable to
companies reporting under IFRS. The financial statements have been
prepared under the historical cost convention as modified by
financial assets and liabilities (including derivative financial
instruments) at fair value through the profit or loss.
The accounting policies applied are consistent with those of the
audited financial statements for the years ended 30 June 2017 and
30 June 2016, as described in those financial statements.
Copies of this announcement are available from the company
secretary and the announcement is also on the Company's website at
www.vernalis.com. The audited Report and accounts for the year
ended 30 June 2017 and the accounts are available on the investor's
section of the Company's website.
Going concern
With GBP61.3 million of cash resources (being cash and cash
equivalents and held-to-maturity financial assets) on the balance
sheet at 30 June 2017, the directors believe that the Company is
sufficiently financed for the next 18 months but it is likely that
the business will require additional finance in order to fully
execute the commercial strategy for the full suite of products in
the Company's cough cold pipeline. Any future financing
considerations would reflect the pipeline progression with Tris,
and thus, the timing of milestone payments payable, together with
the speed of growth of Tuzistra(R) XR and Moxatag(R) sales.
2. Segmental information
For the year ended 30 June 2017, and the prior year, the Group
has two segments, Commercial and Research & Development. In
line with the reporting to the Executive Committee, which comprises
the executive directors and other senior management, the
performance of these segments is reviewed at a sales and operating
profit level which does not include the full allocation of general
administrative costs which are reported separately. The Commercial
segment covers all areas relating to the commercial sale of
pharmaceutical products, the manufacture, distribution and
operating expenses directly related to that activity. The Research
and Development business includes all activities related to the
research and development of pharmaceutical products for a range of
medical disorders and includes the income generated by
collaboration, milestones or royalties as well as the costs
directly associated with those activities. There is no segmentation
of the balance sheet. Charges such as depreciation, impairment,
amortisation and other non-cash expense are expensed to the
relevant segment.
The Group discloses the following other information, not all of
which represents segmental information required by IFRS 8.
Revenue analysis
The revenue analysis in the table below is based on the country
of registration of the fee-paying party:
Year ended Year ended
30 June 30 June
2017 2016
GBP000 GBP000
------------------- ----------- -----------
United Kingdom - 5
Rest of Europe 14,237 8,133
North America 4,577 1,162
Rest of the World 1,976 2,734
------------------- ----------- -----------
20,790 12,034
------------------- ----------- -----------
Year ended Year ended
30 June 30 June
2017 2016
GBP000 GBP000
---------------- ----------- -----------
Product sales* 6,389 3,994
Royalties - 5
Collaborative 14,401 8,035
---------------- ----------- -----------
20,790 12,034
---------------- ----------- -----------
*Includes frovatriptan royalty linked to the supply of API,
received at 25.25 per cent of Menarini sales.
The analysis of segmental revenues and operating losses are as
follows:
Year ended 30 June 2017 Year ended 30 June 2016
Research Research
Commercial and Development Total Commercial and Development Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ----------- ----------------- --------- ----------- ----------------- ---------
Revenue 6,389 14,401 20,790 3,994 8,040 12,034
Other income - 509 509 - 396 396
Cost of sales (2,103) (366) (2,469) (2,004) - (2,004)
Depreciation and
amortisation (69) (431) (500) (37) (401) (438)
Share-based payments
charge (556) (294) (850) (189) (238) (427)
Other operating expenses (27,981) (10,359) (38,340) (20,202) (10,293) (30,495)
--------------------------- ----------- ----------------- --------- ----------- ----------------- ---------
Segmented (loss)/profit (24,320) 3,460 (20,860) (18,438) (2,496) (20,934)
Corporate and unallocated
cost* (5,550) (2,638)
Operating loss (26,410) (23,572)
Net finance income 2,664 8,273
--------------------------- ----------- ----------------- --------- ----------- ----------------- ---------
Loss before income
tax (23,746) (15,299)
--------------------------- ----------- ----------------- --------- ----------- ----------------- ---------
*The corporate and unallocated cost for the year ended 30 June
2016 included the exceptional credit of GBP2,651,000 relating to
the surrender of a lease in Cambridge.
3. Exceptional items
Exceptional items represent significant items of income and
expense, which, due to their size, nature or the expected
infrequency of the events giving rise to them, are presented
separately on the face of the income statement to give a better
understanding to shareholders of the elements of financial
performance in the period, so as to facilitate comparison with
prior periods and to better assess trends in financial performance.
Exceptional items include, but are not limited to, restructuring
costs and the provision for vacant leases.
Year ended Year ended
30 June 30 June
2017 2016
GBP000 GBP000
------------------------------------------------- ------------ ------------
Credit - release of provision for vacant leases - 2,651
------------------------------------------------- ------------ ------------
The exceptional credit of GBP2,651,000 for the year ended 30
June 2016 related to the surrender of a lease in Cambridge.
4. Finance income/expense
Year ended Year ended
30 June 30 June
2017 2016
GBP000 GBP000
--------------------------------------------------------------- ----------- -----------
Finance income
Interest on cash, cash equivalents and held-to-maturity
assets 608 291
Exchange gains on cash, cash equivalents and held-to-maturity
assets 2,168 8,024
--------------------------------------------------------------- ----------- -----------
2,776 8,315
--------------------------------------------------------------- ----------- -----------
Finance expense
Unwinding of discount on accruals - 5
Unwinding of discount on provision (note 11) 1 37
Unwinding of discount on deferred consideration (note
16) 111 -
--------------------------------------------------------------- ----------- -----------
112 42
--------------------------------------------------------------- ----------- -----------
5. Income tax credit
Analysis of current tax credit in the year:
Year ended Year ended
30 June 30 June
2017 2016
GBP000 GBP000
--------------------------------------------------------- ----------- -----------
Current tax:
Research and development tax credits 2,082 1,065
Corporation tax on Research and Development Expenditure
Credit (RDEC) (87) (79)
Overseas corporation tax (392) (161)
Adjustments in respect of prior years (115) (21)
--------------------------------------------------------- ----------- -----------
Total current tax 1,488 804
--------------------------------------------------------- ----------- -----------
Deferred tax
Origination of temporary differences 528 -
Adjustments in respect of prior years 168 -
--------------------------------------------------------- ----------- -----------
Total deferred tax 696 -
--------------------------------------------------------- ----------- -----------
Total income tax credit 2,184 804
--------------------------------------------------------- ----------- -----------
6. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the year.
For diluted loss per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion for all
dilutive potential ordinary shares.
For diluted loss per share, all potential ordinary shares
including options and deferred shares are anti-dilutive as they
would decrease the loss per share.
Year ended Year ended
30 June 30 June
2017 2016
Attributable loss before exceptional items (GBP000) (21,562) (17,146)
Exceptional items (GBP000) - 2,651
Attributable loss (GBP000) (21,562) (14,495)
Weighted average number of shares (basic and diluted)
in issue (000) 526,328 455,258
------------------------------------------------------- ----------- -----------
Loss per ordinary share before exceptional items (4.1)p (3.8)p
------------------------------------------------------- ----------- -----------
Exceptional items - 0.6p
------------------------------------------------------- ----------- -----------
Loss per share (basic and diluted) (4.1)p (3.2)p
------------------------------------------------------- ----------- -----------
7. Property, plant and equipment
Additions of GBP0.4 million were made during the year ended 30
June 2017 (2016: GBP0.8 million).
There were no capital commitments at 30 June 2017 (30 June 2016:
GBP0.2 million).
8. Intangible assets
Assets not
Assets yet in
Goodwill in use use Total
GBP000 GBP000 GBP000 GBP000
----------------------------------------- --------- --------- ----------- ---------
Cost
At 1 July 2016 8,954 52,166 3,909 65,029
Additions - 62 4,717 4,779
Reclassification of royalty credit - 113 - 113
Transferred to in use - 80 (80) -
----------------------------------------- --------- --------- ----------- ---------
At 30 June 2017 8,954 52,421 8,546 69,921
----------------------------------------- --------- --------- ----------- ---------
Accumulated amortisation and impairment
At 1 July 2016 (8,954) (38,130) (300) (47,384)
Amortisation charge in the year - (911) - (911)
----------------------------------------- --------- --------- ----------- ---------
At 30 June 2017 (8,954) (39,041) (300) (48,295)
----------------------------------------- --------- --------- ----------- ---------
Net book value at 30 June 2017 - 13,380 8,246 21,626
----------------------------------------- --------- --------- ----------- ---------
Cost
At 1 July 2015 8,954 37,570 13,042 59,566
Additions - business combinations - 4,022 - 4,022
Additions - other - 16 55 71
Reclassification of royalty credit - 1,370 - 1,370
Transferred to in use - 9,188 (9,188) -
----------------------------------------- --------- --------- ----------- ---------
At 30 June 2016 8,954 52,166 3,909 65,029
----------------------------------------- --------- --------- ----------- ---------
Accumulated amortisation and impairment
At 1 July 2015 (8,954) (37,417) (300) (46,671)
Amortisation charge in the year - (713) - (713)
----------------------------------------- --------- --------- ----------- ---------
At 30 June 2016 (8,954) (38,130) (300) (47,384)
----------------------------------------- --------- --------- ----------- ---------
Net book value at 30 June 2016 - 14,036 3,609 17,645
----------------------------------------- --------- --------- ----------- ---------
Useful life and net book value of intangible assets
30 June 30 June 30 June 30 June
2017 2016 2017 2016
Useful Useful
Assets in use Life Life GBP000 GBP000
------------------------------------ -------- -------- -------- --------
Frova(R) to 2014 to 2014 - -
------------------------------------ -------- -------- -------- --------
Finance software to 2022 to 2022 121 145
------------------------------------ -------- -------- -------- --------
Other software to 2024 to 2024 132 -
License to Tris' extended-release
technology to 2036 to 2036 3,108 3,281
Tuzistra(R) XR to 2036 to 2036 6,572 6,818
Moxatag(R) to 2027 to 2027 3,447 3,792
Total assets in use 13,380 14,036
30 June 30 June
2017 2016
GBP000 GBP000
------------------------------------ -------- -------- -------- --------
Assets not yet in use - cough cold
development pipeline 8,246 3,609
------------------------------------ -------- -------- -------- --------
In accordance with IAS 21 "The effects of changes in foreign
exchange rates", goodwill and other intangible assets that are
created in relation to the acquisition of a foreign subsidiary are
maintained in the functional currency of that subsidiary.
Additions
Additions of GBP4.8 million were made in the year ended 30 June
2017. GBP4.7 million related to two milestone payments under the
Tris development and licensing collaboration agreement of US$3
million each, for the accepted filings with FDA of the CCP-07 and
CCP-08 NDAs. These are held in "assets not yet in use" pending the
approval of these product by FDA.
In the year ended 30 June 2017, there was an additional
reclassification of GBP0.1 million (2016: GBP1.4 million) from
prepayments. This amount was part of the NDA acquisition payment
made for Tuzistra(R) XR and was treated as a prepayment in the
accounts to 30 June 2016 as the amount can potentially be offset
against future royalty payments to Tris. The recoverability of the
royalty prepayment is dependent upon the net sales levels of
Tuzistra(R) XR achieved over a 30 month period from commercial
launch and the amount expected to be recovered from Tris is now
GBP1.5 million lower than initially expected. These transfers from
prepayments into the Tuzistra(R) XR intangible asset were made on
net sales estimates at the time, and will be amortised over the
remaining useful economic life to 2036, consistent with other
Tuzistra(R) XR milestone payments.
In the year ended 30 June 2016 there were additions of GBP4.1
million, of which GBP4.0 million related to the Moxatag(R)
acquisition. A further GBP9.2 million was moved to "assets in use"
following the approval and subsequent launch of Tuzistra(R) XR.
Impairments
During the year ended 30 June 2017 and the prior year there were
no impairments.
Impairment Review
Goodwill and intangible assets that are not yet ready for use
are subject to impairment review at least annually. Intangible
assets in use are amortised over their expected useful lives and
are reviewed when there is an indication that an impairment may
have occurred. If the balance sheet carrying amount of the asset
exceeds the higher of its value-in-use to the Group or its
anticipated fair value less cost of sale, an impairment loss for
the difference is recognised.
The impairment analysis is performed in line with Group's
accounting policies detailed in note 1.
Value-in-use calculations are utilised to calculate recoverable
amounts. Value in use is calculated as the net present value of the
projected risk-adjusted, post-tax cash flows of the cash-generating
unit (being the related products) relating to the intangible asset,
and applying a discount rate of the Group post-tax weighted average
cost of capital of approximately 10 per cent. These calculations
use cash flow projections based on financial budgets approved by
management covering a five year period. In the case of not-in-use
assets, these models have been extended to reflect five years
post-launch cash flows. Cash flows beyond the five year period, or
in the case of not-in-use assets, five years post launch, are
projected over the useful life of the products. In relation to
intangible assets in-use, cash flows reflect zero growth beyond the
approved five year financial plan, or five years post-launch, for
intangible assets not-in-use.
The determination of these underlying assumptions relating to
the recoverability of intangible assets is subjective and requires
the exercise of considerable judgement. These assumptions reflect
past experience and/or external sources of information. Key
assumptions include:
Tuzistra(R) XR Moxatag(R) Assets not In Use
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
* Speed of market penetration * Securing manufacturing supply * Probability and timing of regulatory approval
* Selling price and margins together with erosion rates * Speed of market penetration * Speed of market penetration. This included modelling
after the end of patent protection due to generic a five year post- launch growth based on conservative
competition market assumptions
* Selling price and margins together with erosion rates
after the end of patent protection due to generic
* Competitive environment (launch of competing products competition * Selling price and margins together with erosion rates
, after the end of patent protection due to generic
marketing initiatives etc.) competition
* Competitive environment (launch of competing products
,
* Discount factor - 10% marketing initiatives etc.) * Competitive environment (launch of competing products
,
marketing initiatives etc.)
* Discount factor - 10%
* Discount factor - 10%
------------------------------------------------------------ ------------------------------------------------------------ ------------------------------------------------------------
Changes in key assumptions about our business and prospects, or
changes in market conditions, could result in an impairment charge.
Certain events could occur which could lead to an impairment e.g.
regulatory approval not received from the FDA.
None of the Group's intangible assets at either 30 June 2017 or
30 June 2016 was internally generated.
Tuzistra(R) XR
The product continued to see steady growth during its second
cough cold season as market barriers were removed. Despite the
steady growth seen over the last year, the script levels achieved
were below expectation and therefore the carrying value of the
intellectual property, including the royalty prepayment, has been
reviewed for impairment. The licence to Tris' extended release
technology is not attributable to any product but has been
aggregated with the carrying value of Tuzistra(R) XR, and a
possible impairment considered with reference to the Tuzistra(R) XR
sales forecasts.
The value-in-use calculation for Tuzistra(R) XR, does not
indicate a need to impair the carrying value of the intangible
asset at 30 June 2017.
Moxatag(R)
The previous manufacturer of Moxatag(R) , Suir, went into
liquidation in May 2016. During the year, the Company has
progressed a new source of supply and intends to manufacture
Moxatag(R) in 2018. There has been no triggering event during the
year which necessitated an impairment review.
Assets not yet in use - cough cold development pipeline
At 30 June 2017, the assets not in use relate to future
commercial products, CCP-07 and CCP-08. Milestone payments of
US$6.0 million have been made for each of these products under the
Tris development and licensing collaboration agreement. As these
products are not yet in use they require an annual impairment test,
and the value-in-use calculation performed, based on future
milestones, royalties and revenues indicated that there was no
impairment adjustment required at 30 June 2017.
The value-in-use calculation for both CCP-07 and CCP-08 was run
on a combined model with more conservative market penetration
sensitivities and a higher rate of discount applied. The
calculations did not indicate a need to impair the carrying value
of either intangible asset at 30 June 2017.
9. Inventories
30 June 30 June
2017 2016
GBP000 GBP000
----------------------------------------- -------- --------
WIP - 72
Finished goods 1,050 639
Less provision for obsolete inventories (117) (478)
----------------------------------------- -------- --------
Inventories 933 233
----------------------------------------- -------- --------
The cost of inventories recognised as an expense and included in
cost of sales for the year ended 30 June 2017 amounted to
GBP574,000 (2016: GBP744,000).
Included in the cost of inventories for the year ended 30 June
2017 is an obsolescence provision of GBP117,000 (2016: GBP478,000)
where it is estimated that inventory will not be sold prior to
becoming short dated.
The provision movement in the year ended 30 June 2017 related to
the destruction of obsolete inventories. The expense included in
cost of sales in relation to the inventory provision for the year
to 30 June 2017 is GBPnil (2016: GBP478,000).
10. Held-to-maturity financial assets
Group held-to-maturity financial assets of GBP54,056,000 (30
June 2016: GBP76,997,000) represent fixed-rate, short-term deposits
placed with a range of banks at fixed-terms of three months or
greater, a floating-rate long-term bank deposit placed as
collateral against the Group's foreign currency exchange contracts,
a floating-rate 100-day notice deposit account and collateral given
by Vernalis Therapeutics Inc in support of local credit
facilities.
11. Provisions for other liabilities and charges
Property Revenue Total
GBP000 GBP000 GBP000
-------------------------------- --------- -------- --------
At 1 July 2016 504 1,333 1,837
Arising during the year - 4,568 4,568
Utilised during the year - (3,166) (3,166)
Exchange differences - (7) (7)
Unwinding of discount (note 4) 1 - 1
At 30 June 2017 505 2,728 3,233
-------------------------------- --------- -------- --------
Property Provision
The provision relates to dilapidation obligations on existing
leases.
Revenue Provision
When calculating US commercial revenues, provisions are made for
rebates, discounts, allowances and product returns estimated, given
or expected to be given which vary by product arrangements and
buying groups. These provisions are calculated based on contractual
obligations, available current / future market information and
historic experience. Amounts are reviewed throughout the reporting
period and reflect the best estimate at each reporting date. These
provisions are expected to be settled within the ordinary operating
cycle of the business.
12. Derivative financial instruments
30 June 30 June
2017 2016
GBP000 GBP000
----------------------------------------------------- --------- ----------
Financial liabilities carried at fair value through
profit or loss
Current - Foreign currency forward contracts 85 281
Non-current - Foreign currency forward contracts - 37
----------------------------------------------------- --------- ----------
85 318
----------------------------------------------------- --------- ----------
The fair value of all foreign currency forward contracts are
based on year-end prices in an active market.
13. Share capital
Number Number Nominal
issued authorised Value Issued Authorised
000 000 GBP GBP000 GBP000
------------------ ------- ----------- ------- ------- ----------
Ordinary
1 July 2016 526,196 Unlimited 0.01 5,262 Unlimited
Issue of shares 249 - 0.01 2 -
------------------ ------- ----------- ------- ------- ----------
30 June 2017 526,445 Unlimited 0.01 5,264 Unlimited
------------------ ------- ----------- ------- ------- ----------
Ordinary
1 July 2016 443,442 Unlimited 0.01 4,434 Unlimited
Issue of shares 82,754 - 0.01 828 -
------------------ ------- ----------- ------- ------- ----------
30 June 2016 526,196 Unlimited 0.01 5,262 Unlimited
------------------ ------- ----------- ------- ------- ----------
Issue of shares - year ended 30 June 2017
249,026 shares were issued following the exercise of options
under the LTIP and Sharesave schemes.
Issue of shares - year ended 30 June 2016
2,754,138 shares were issued following the exercise of options
under the Long Term Incentive Plan and Sharesave schemes.
On the 13 May 2016, 80,000,000 shares were issued on a
non-pre-emptive basis to institutional investors and certain
directors at a placing price of 50 pence per share.
14. Other reserves
Capital
Merger Other Options Warrant Translation redemption
reserve reserve reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- -------- -------- -------- -------- ----------- ----------- -------
At 1 July 2015 101,985 78,125 10,896 1,155 3,538 57,666 253,365
Share-based payments
charge - - 984 - - - 984
Exercise of share
options - - (317) - - - (317)
Exchange loss on translation
of overseas subsidiaries - - - - (100) - (100)
------------------------------- -------- -------- -------- -------- ----------- ----------- -------
At 30 June 2016 101,985 78,125 11,563 1,155 3,438 57,666 253,932
Share-based payments
charge - - 1,535 - - - 1,535
Exercise of share
options - - (79) - - - (79)
Exchange gain on translation
of overseas subsidiaries - - - - 70 - 70
------------------------------- -------- -------- -------- -------- ----------- ----------- -------
At 30 June 2017 101,985 78,125 13,019 1,155 3,508 57,666 255,458
------------------------------- -------- -------- -------- -------- ----------- ----------- -------
15. Related party transactions
Identity of related parties
The Group consists of a parent, Vernalis plc, and principally
three wholly owned trading subsidiaries. The main trading companies
are Vernalis (R&D) Limited, the US registered Vernalis
Therapeutics, Inc and Vernalis Development Limited.
The Parent company is responsible for financing and setting
Group strategy. Vernalis (R&D) Limited carries out the Group
research and development strategy, employs all the UK staff
including the directors, and owns and manages all of the Group's
intellectual property including Tuzistra(R) XR and Moxatag(R) (but
excluding Vernalis(R) , Frova(R) and Migard(R) trademarks and any
frovatriptan-related patents, all of which are owned by Vernalis
Development Limited). Vernalis (R&D) Limited manages Group
funds and makes payments, including the expenses of the Parent
company. Vernalis Therapeutics, Inc. was registered in 2011 and
began trading in 2014, employs all US staff and is the Group's
sales and distribution company through which the commercial
products are sold in the US market.
At 30 June 2017, an amount of GBP2,951 (30 June 2016: GBP4,903)
was due from Dr Fellner and companies where Dr Fellner is a board
member, in respect of certain travel costs. Of the amount due at 30
June 2017, GBP1,791 had been repaid by 31 July 2017. The amount due
at 30 June 2016 was repaid in full by 30 September 2016.
16. Financial risk management
The main risks arising from the Group's financial instruments
are foreign currency risk, cash flow and liquidity risk, interest
rate risk, credit risk and fair value estimation.
The condensed financial statements do not include all financial
risk management information and disclosures required in the annual
financial statements but are consistent with those disclosed in the
Group's annual financial statements as at 30 June 2017.
The Group holds the following financial instruments:
30 June 2017 30 June 2016
--------------------------------------------------------------- ---------------------------------------------------------------
Fair Fair
value Financial value Financial
though liabilities though liabilities
Loans profit at Loans profit at
Held-to-maturity and and amortised Held-to-maturity and and amortised
investments receivables loss cost Total investments receivables loss cost Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Assets
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Trade and other
receivables* - 304 - - 304 - - - - -
Non-current
assets - 304 - - 304 - - - - -
Trade and other
receivables* - 2,552 - - 2,552 - 4,874 - - 4,874
Held-to-maturity
financial assets 10 54,056 - - - 54,056 76,997 - - - 76,997
Cash and cash
equivalents - 7,202 - - 7,202 - 7,021 - - 7,021
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Current assets 54,056 9,754 - - 63,810 76,997 11,895 - - 88,892
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Total assets 54,056 10,058 - - 64,114 76,997 11,895 - - 88,892
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Liabilities
Trade and other
liabilities - - 1,156 115 1,271 - - 1,028 394 1,422
Provisions
for other
liabilities
and charges 11 - - - 394 394 - - - 504 504
Derivative
financial
instruments 12 - - - - - - - 37 - 37
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Non-current
liabilities - - 1,156 509 1,665 - - 1,065 898 1,963
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Trade and other
liabilities** - - - 6,095 6,095 - - - 4,616 4,616
Provisions
for other
liabilities
and charges 11 - - - 2,839 2,839 - - - 1,333 1,333
Derivative
financial
instruments 12 - - 85 - 85 - - 281 - 281
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Current
liabilities - - 85 8,934 9,019 - - 281 5,949 6,230
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
Total liabilities - - 1,241 9,443 10,684 - - 1,346 6,847 8,193
------------------ ----- ----------------- ------------ ------- ------------ ------- ----------------- ------------ ------- ------------ -------
* Excluding amounts that relate to non-financial instruments of tax and prepayments.
** Excluding amounts that relate to non-financial instruments of
taxation and social security.
The assets and liabilities have all been stated at undiscounted
values with the exception of deferred consideration. The
undiscounted value of the deferred contingent consideration is
GBP2,513,000 (2016: GBP1,812,000) versus a discounted value of
GBP1,156,000 as at 30 June 2017 (2016: GBP1,028,000).
The assets and liabilities, which are measured at fair value
through profit and loss, are as follows:
Level 2:
Derivative financial instruments measured at fair value are
classified as level 2, where their value has been determined by
reference to observable market data. Foreign currency forward
contracts have been determined to be level 2 as their valuation has
been derived from forward exchange rates observable at the balance
sheet date together with the contractual forward rates and have
been measured using the market approach.
Level 3:
Financial instruments are classified as level 3 when one or more
of the key assumptions being modelled are not based on observable
market data. Deferred contingent consideration has been assessed as
level 3. The fair value of the deferred consideration arrangement
of GBP1,156,000 (30 June 2016: GBP1,028,000) was estimated by
applying an income approach. The fair value estimates are
internally calculated at each reporting date based on the discount
rate of 10 per cent and current best estimates of net revenues and
cost of goods which are used to calculate future royalties and
milestones. The key assessments and judgements included in the
calculation of deferred consideration include:
-- Market size and product market share
-- Estimate of gross and net selling price
-- Costs of manufacturing
-- Discount rates including a risk adjustment for ongoing supply
There have been no transfers between levels in the period and
there were no changes to valuation techniques.
Fair value measurements using significant unobservable inputs
(level 3)
Deferred
consideration
GBP000
--------------------------------------------- ---------------
At 1 July 2016 1,028
Credit - provision reversed during the year (10)
Utilised during the year (1)
Unwinding of discount (note 4) 111
Exchange differences 28
At 30 June 2017 1,156
--------------------------------------------- ---------------
Exchange differences are charged to sales and marketing
expense.
17. Seasonality
The Group's financial results have an accounting reference date
of 30 June to reflect the increasing impact of the US commercial
sales following the launch of Tuzistra(R) , XR, the Groups initial
cough product, which is subject to the seasonality of the US cough
cold market, with higher product demand during the winter
months.
18. Post-balance sheet events
In August 2017, the Company announced the FDA had issued a CRL
regarding the NDA for CCP-08.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKDDDOBKDKCD
(END) Dow Jones Newswires
September 12, 2017 02:00 ET (06:00 GMT)
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