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Vernalis shares rise 28% after US cold medicine deal

UK biotech firm’s licensing deal on slow-release drugs with Tris Pharma sees £69m pledged in oversubscribed fundraising

Shares in Vernalis have surged after the biotechnology firm sealed a key deal with US company Tris Pharma to develop slow-release cough and cold medicines. The arrangement cheered investors, who pledged three times the company’s £20m market value in a fundraising.

The chief executive, Ian Garland, hailed the licensing deal as a transformational move that would turn the drug developer into a pharmaceutical group with up to six new cough and cold treatments and its own salesforce to tap into the bn (£1.27bn) US market. At present, Vernalis has two drugs on the market, Frovatriptan for migraines and the Parkinson’s disease treatment Apokyn.

The Reading-based firm was formed from parts of troubled industry pioneer British Biotech, which was once one of the most promising UK biotech companies before suffering a series of setbacks, most notably the Food and Drug Administration’s rejection of Frova as a treatment for menstrual migraine in the US in 2007.

“We have waited a long time for a deal of this nature, and are delighted that the company has finally executed,” said Shawn Manning and Elizabeth Klein, analysts at Singer.

The shares leapt 28% to 25.2p on the news.

Privately owned Tris will develop new formulations of existing slow-release, longer-lasting cough and cold medicines, in return for staged payments and sales-based royalties from Vernalis. Once the drugs have been approved by the US regulator – which could happen in 12 to 24 months’ time because the efficacy of Tris’ extended-release liquid technology has already been proven – Vernalis will hire 120 to 200 sales reps to market the medicines to American doctors.

“They [Tris] have a broad range of products already validated with the FDA to show their technology works; their products have been used by millions of patients,” said Garland, who joined Vernalis in 2009 after turning around Acambis and selling it to Sanofi-Aventis. “This is a dramatic change to the pipeline for Vernalis.”

There are 35m prescriptions for cough and cold remedies in the US every year and there is only one slow-release product on the market, UCB’s Tussionex.

Vernalis’ fundraising at 20p a share, which also came on Friday, was heavily oversubscribed, a spokesman said. Vernalis raised £65.9m after costs to fund the partnership with Tris and give it a warchest for similar future deals.

Vernalis is also developing a cancer treatment with Novartis, which the Swiss pharmaceutical firm flagged as a potential blockbuster drug last summer, with sales of more than bn a year. Vernalis would earn royalties of 4% if the drug proves successful, although it will not be filed for regulatory approval before 2015. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds