8 December 2009 Verona Pharma plc ("Verona" or the "Company") (AIM: VRP.L) Issue of equity to raise approximately £3 million The Board of Verona Pharma plc, the AIM quoted drug discovery company, is pleased to announce that it proposes to raise approximately £3 million, before expenses, at a price of 13 pence per share, via a placing arranged on the Company's behalf by Evolution Securities Limited and a subscription ("Fundraising"). The net proceeds will be applied to develop further the Company's lead drug, RPL554, as well as its two other drug development projects: Cough and NAIPs, whilst the Company pursues licensing partnership opportunities for RPL554. The Fundraising is conditional, inter alia, upon the Company obtaining approval from the Shareholders to grant the Board authority to allot the New Ordinary Shares and to disapply statutory pre-emption rights which would otherwise apply to the allotment of the New Ordinary Shares. Highlights * The Company proposes to raise approximately £3 million, before expenses, by the issue of up to 23,265,684 New Ordinary Shares at 13 pence per Ordinary Share * The money raised will be used to further develop RPL554, as well as its two other drug development projects: Cough and NAIPs * The Company continues to actively pursue licensing partnership opportunities for the future development of RPL554, and is currently in discussions with potential partners * The Company has taken the opportunity to raise the funds to progress work on the Cough and NAIPs projects while it continues to seek the most appropriate licensing partnership * The funding will also assist the Company as it continues to search for additional intellectual property ("IP") that meets its tightly defined areas of expertise * The Company has a low cash burn rate due to the "semi-virtual" nature of its operations * The Company has a complementary portfolio of respiratory drugs, which includes RPL554 and two further projects: Cough and NAIPs Commenting on the Fundraising, Prof. Michael Walker, Chief Executive Officer of Verona said: "We are delighted to announce the fundraising to raise approximately £3 million, before expenses, in order to progress RPL554 and further develop the remaining projects in our portfolio. This is an extremely exciting period for us as we continue to work towards the commercialisation of RPL554. We are in discussions with potential licensing partners and look forward to updating the market in due course. "With new funding in place we can actively pursue new IP and continue to advance our Cough and NAIPs projects alongside RPL554. We look forward to the future with confidence." Enquiries For more information please contact: Professor Clive Page 020 7863 3300 Chairman, Verona Pharma plc Barry Saint / Tim Redfern / Esther Lee 020 7071 4300 Evolution Securities Limited Suzanne Johnson-Walsh / Gemma O'Hara 020 7562 3350 Bishopsgate Communications Current trading and prospects While investigating licensing and partnering possibilities for RPL554, the Company continues to advance its other two current drug discovery projects, the Cough Project and the NAIPs Project. The Company continues to maintain a low cash burn rate, due to the "semi-virtual" nature of its operations and its sustained drive for efficient progress. At 31 October 2009, the Company had cash and short-term deposits of £1.2million. In addition, the Company plans to continue its search for additional drug discovery projects that fit within the Company's tightly defined area of expertise. The Directors believe that the current situation, where a number of large international pharmaceutical companies have patents that are due to expire, provides a significant commercial opportunity for companies like Verona and its drug discovery projects. Background to and reasons for the fundraising On 11 September 2009, the Company announced the final results of its clinical proof of concept trial for its lead drug compound RPL554. The study showed clear clinical benefits in patients with asthma and allergic rhinitis and a good safety profile. The Company is now actively seeking a licensing partnership to fund the further development of RPL554, and is currently in discussions with potential licensing partners. The net proceeds of the Fundraising are intended to pay for ongoing clinical development of RPL554 and to fund the working capital for the Group as it continues to develop its drug portfolio, whilst the Company seeks a licensing partner for RPL554. In addition, the funding will assist the Company as it continues to seek additional IP within its tightly defined areas of expertise. Details of the Fundraising The Company proposes to raise a total of approximately £2.7 million (net of expenses) by the issue of up to 22,457,223 Placing Shares at the Issue Price to placees, of which 6,205,300 Placing Shares will be placed with investors who may wish to fall within the Enterprise Investment Scheme ("EIS") within the meaning of the relevant legislation. The Company has applied for provisional advance assurance from HM Revenue & Customs ("HMRC") that, subject to all relevant conditions being fulfilled, any holding of Placing Shares issued to an investor wishing to fall within the EIS will be regarded by HMRC as satisfying the requirements of the EIS. The Directors intend to manage the Company so as to be in a position to maintain this status (so far as reasonably practicable within the commercial objectives of the Company and with regard to their duties and obligations as Directors), although no assurance can be given in this regard. The Company also proposes to raise a further £0.1 million (net of expenses) through the subscription for a further 808,461 new Ordinary Shares by Trevor Jones, a Director of the Company, and another individual, both at the Issue Price and on substantially the same terms as the Placing ("the Subscription"). The Issue Price represents a discount of 10.34 per cent. to the closing middle market price of 14.50 pence per Ordinary Share on 7 December 2009, being the last practicable date prior to the announcement of the Fundraising. The New Ordinary Shares will represent approximately 9.74 per cent. of the Enlarged Share Capital. The General Meeting to seek the Shareholders' approval for the Fundraising will be held at 9.00 a.m. on 24 December 2009 at the offices of Sprecher Grier Halberstam LLP at 5th Floor, One America Square, Crosswall, London EC3N 2SG. A circular to Shareholders convening the General Meeting is being despatched today. Application will be made for 17,060,384 of the New Ordinary Shares to be admitted to AIM. Trading in those New Ordinary Shares is expected to commence on 29 December 2009. Upon receipt of the provisional advance assurance from HMRC in relation to the remaining 6,205,300 of the New Ordinary Shares (or following agreement of the relevant placees to invest without it being obtained), the Company will make an application for some or all of such shares (as the case may be) to be admitted to trading on AIM and trading in these shares is expected to commence three business days later (provided that such admission shall not occur before 29 December 2009). The New Ordinary Shares will, when issued, rank pari passu in all respects with the existing Ordinary Shares, including the right to receive dividends and other distributions declared following date of allotment. Substantial Shareholder's and Director's participation in the Fundraising Williams de Broe is an existing substantial shareholder of the Company and has agreed to subscribe for 7,435,300 Placing Shares. Professor Trevor Jones, a Non-Executive Director of the Company, has also agreed to subscribe for 38,461 New Ordinary Shares pursuant to the Subscription at the Issue Price. ISSUE STATISTICS Issue Price 13p Number of Ordinary Shares in issue as at the date of this 215,481,355 document Number of Placing Shares being placed on behalf of the 22,457,223 Company Number of Subscription Shares being issued in connection 808,461 with the Subscription Estimated proceeds of the Placing receivable by the £2.7 million Company, net of expenses Estimated proceeds of the Subscription receivable by the £0.1 million Company, net of expenses Number of Ordinary Shares in issue following Admission(1) 238,747,039 New Ordinary Shares as a percentage of the Enlarged Share 9.74 per cent. Capital(1) (1) Assumes no Ordinary Shares are issued between the date of this announcement and Admission and that all of the New Ordinary Shares are admitted to trading on AIM DEFINITIONS The following definitions apply throughout this announcement unless the context otherwise requires: "Admission" admission of the relevant New Ordinary Shares to trading on AIM becoming effective in accordance with Rule 6 of the AIM Rules "AIM Rules" the rules governing the admission to and operation of AIM as published by the London Stock Exchange from time to time "Company" or "Verona" Verona Pharma plc "Cough Project" the Company's project to discover new potent, efficacious and patentable molecules for inhibiting cough "Directors" or "Board" the directors of the Company as at the date of this announcement or any duly authorised committee thereof "EIS" Enterprise Investment Scheme "EIS Shares" the 6,250,300 placing shares to be issued to certain placees and the subject of HMRC's provisional advance assurance "Enlarged Share Capital" the Ordinary Shares in issue immediately following Admission assuming all of the New Ordinary Shares are admitted to trading on AIM "Evolution Securities" Evolution Securities Limited, the Company's nominated adviser and broker "Fundraising" collectively, the Placing and the Subscription "HMRC" HM Revenue & Customs "GM" or "General Meeting" the general meeting of the Company to be held at 9.00 a.m. on 24 December 2009 "Group" the Company and its subsidiaries "Issue Price" 13 pence per New Ordinary Share "London Stock Exchange" London Stock Exchange plc "NAIPs Project" the Company's project to discover novel anti-inflammatory polysaccharides "New Ordinary Shares" the 23,265,684 new Ordinary Shares to be issued in connection with the Fundraising "Ordinary Shares" ordinary shares of 0.1p each in the capital of the Company "Placing" the conditional placing by Evolution Securities of the Placing Shares pursuant to the Placing Agreement "Placing Agreement" the conditional agreement dated 8 December 2009 between the Company and Evolution Securities relating to the Placing "Placing Shares" the 22,457,223 new Ordinary Shares to be issued in connection with the Placing including the EIS Shares "Shareholders" holders of Ordinary Shares "Subscription" the conditional subscription at the Issue Price for the Subscription Shares by Professor Trevor Jones and another individual pursuant to subscription letters entered into between each of them and the Company, on substantially the same terms as the Placing "Subscription Shares" the 808,461 new Ordinary Shares to be issued in connection with the Subscription Disclaimer Evolution Securities Limited, which is authorised and regulated by the Financial Services Authority, is acting as nominated adviser and broker to the Company in connection with the Placing. Its responsibilities as the Company's nominated adviser and broker under the AIM Rules for Nominated Advisers are owed solely to London Stock Exchange and are not owed to the Company or to any director or to any person. Evolution Securities Limited will not be responsible to anyone other than the Company for providing the protections afforded to clients of Evolution Securities Limited or for advising any other person in relation to the Placing and any other arrangements described in this announcement. Evolution Securities Limited has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by Evolution Securities Limited for the accuracy of any information or opinions contained in this announcement or for the omission of any information. Notes To Editors About Verona Pharma plc (www.veronapharma.com ) Verona Pharma plc (AIM : VRP.L) is an AIM-quoted life sciences company dedicated to the research, discovery and development of new therapeutic drugs for the treatment of respiratory diseases including allergic rhinitis (hay fever), asthma and chronic obstructive pulmonary disease. The Company currently has three drug projects under development - RPL554, Cough and NAIPs - and continues to look for other possible drug development opportunities in the respiratory and inflammatory diseases markets. Globally, treatment of these diseases costs an estimated US$20 billion per annum. Despite such diseases being among the most prevalent in the industrialised world, many of the current treatments have unwanted side effects, and/or limited effectiveness. Verona was admitted to AIM in September 2006, and is run by two world experts in pharmacology and drug discovery. Michael Walker, CEO of Verona, is Emeritus Professor of Anesthesiology, Pharmacology and Therapeutics at the University of British Columbia, and a founder of other biotech, and biotech related companies. Chairman, Clive Page, is a Professor of Pharmacology at King's College London, and an internationally recognised authority in lung diseases and inflammation. RPL554 Verona's lead drug compound, RPL554, is a novel long acting inhibitor of both phosphodiesterase 3 and phosphodiesterase 4 enzymes, two enzymes known to be of importance in the development and progression of immunological respiratory diseases, particularly rhinitis (hay fever), asthma and possibly COPD. As a PDE 3 inhibitor, the drug is expected to result in bronchodilator actions, whilst the PDE 4 component is expected to be anti-inflammatory. RPL554 was selected from a class of compounds co-invented by Sir David Jack, the former Director of Research at Glaxo who led the team that discovered many of the commercially successful drugs in the respiratory market. The competitive advantages of RPL554 include the following: * combining bronchodilator (PDE 3) and anti-inflammatory actions (PDE 4) in a single drug, something that is currently achieved with a combination long acting beta agonist ("LABA") plus a glucocorticosteroid in an inhaler; * does not use steroids or beta agonists, which have known side effects; * planned to be administered by inhalation, thereby reducing the unwanted gastrointestinal side effects of many orally administered drugs; and * expected to be long acting, thereby allowing once a day treatment which is likely to increase medication compliance. During the first half of 2007, the synthetic pathway for the production of scaleable quantities of the RPL554 compound was developed and a sufficient quantity to complete planned preclinical and clinical studies was manufactured. In May 2008, Verona completed toxicological studies of RPL554 according to Good Laboratory Practices with LAB Research Inc. of Hungary, successfully establishing that the compound is safe to give to man in clinical trials. In February 2009, a Phase I/IIa clinical trial of RPL554 was commenced at the Centre for Human Drug Research at Leiden in the Netherlands. In September 2009, the Company announced that it had successfully completed the trial, demonstrating that the drug had a good safety profile and had beneficial effects in terms of bronchodilation and bronchoprotection in asthmatics and a clear trend for a reduction in the numbers of inflammatory cells in the nasal passages of allergic rhinitis patients although this did not reach statistical significance. The Company is currently seeking licensing agreements or partnerships for the further development and commercialisation of RPL554. Cough In November 2007, Verona announced that it had acquired significant know-how for a potential anti-tussive drug. This potential drug treatment appears to act to suppress the generation of the cough signals generated at the nerve endings in the lungs that initiate and sustain coughing. The Company is currently undergoing studies of a selected compound with the intention of commencing preclinical safety and effectiveness evaluation studies in early 2010. The programme will address the problem that while unexplained cough is one of the most common medical complaints, there remains no truly effective treatment for what can be a very debilitating condition. Most anti-cough treatments currently available are either morphine-based, or derivatives of morphine, but the limited efficacy and side effects of morphine, including its addictive effects, limit its use. NAIPs Verona's longer term focus is to investigate and apply new synthetic and analytical chemical techniques to the discovery and development of novel polysaccharide drugs. Verona is focussed on drugs that have anti-inflammatory effects that could prove useful in the treatment of various respiratory diseases as well as other diseases in which inflammation occurs. The polysaccharide, heparin, is a well known anti-coagulant that has been shown to have anti-inflammatory effects in a range of diseases, but it is limited by its anti-coagulant effect. Verona has identified a natural source of novel anti-inflammatory polysaccharide (NAIPs) without anti-coagulant actions in certain marine organisms, such as starfish. The Company is working in collaboration with Glycomar Limited of Scotland and Glycores 2000 S.r.l. of Italy to source and screen various naturally occurring and synthesised novel polysaccharide compounds as potential lead candidates for its NAIPs programme. UKMAT:12000878.3 1 1 UKMAT:12000878.3 END
VERONA PHARMA PLC
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