Vernalis Share Discussion Threads

[timbo003] 26/3/2018 07:57

Verona reported positive phase IIB results for RPL554 this morning.

With Vernalis due very significant milestone and royalty payments if and when RPL554 is approved, it further underpins the estimated sum of the parts valuation of VER which is considerably more than reflected in the current share price(see posts above)

[timbo003] 22/3/2018 11:57

Interim results due on Wednesday 28th March when will get an update of how things are progressing

>>>chris, for what its worth, I would say fair value for just their share in RPL554 (given that they do not have to spend anything on it whatsoever, unlike Verona) would be £5m plus their share of total sales of RPL554 in the first 10 years post launch ((£2bn to £10bn) *0.03) i.e. £60m to £300m, then apply a risk adjustment factor (25% chance of success) which would give (£16m - £76m) which corresponds to around 3p - 16p/share

Then add in what ever you think will be left of the cash in September, the UK contract business and whatever the rest of the pipeline may be worth.

[chrisdgb] 22/3/2018 09:55

It would be great to get a debate on the cash, less burn, less closures, plus sale of licences.....I think I get to an estimate of £25m.........??? 40% UPSIDE

[ffp] 20/3/2018 20:23

Yaaaawwwwwwwwwwwwwwwnnnnnnnnnnn

[meijiman] 20/3/2018 15:23

Fantastic stuff timbo. Most posters have looked at cash burn and closure costs and come up negative. You have highlighted value in the portfolio post closure from payment obligations and the pipeline. I believe there is more value than 3-4p from this company=the Marconi of the pharmaceuticals sector!

[timbo003] 20/3/2018 14:36

I suspect by end of September this year, the share price will be significantly above 3p per share (3p corresponds to a market capitalisation of around £15m). Reasoning as follows: The old management will have departed; the US business will have gone; on a sum of the parts basis for the remaining business a market cap of £15m looks way too cheap. Some more detailed thoughts below:

The Vernalis cash pile was £44m at end of Jan 2018



Historic cash burn for year to June 2017 was £21m/year (see annual report below) and £17m for 7 months to Jan 31st (see link above)



Direct promotion of the US cough product (Tuzistra) ceased beginning of March and all US staff will go mid May, there are likely to be some significant closure costs (early lease and contract terminations etc), so cash burn between Jan 31st 2018 and September 2018 is difficult to estimate, but perhaps £30m (worst case) which would leave a £14M cash pile.

There is a chance (albeit small) that they could end up selling Tuzistra for a cash sum, or licence it out. They may also go for compensation from their development partner (Tris), for failing to fulfil their obligations on the other joint development projects.

Once the US business has gone, the remaining UK business will still have some valuable assets (see annual report for more details). One of the more valuable assets is their stake in RPL554 (which is currently being developed by Verona Pharma) where it is possible to make a reasonable guestimate at the value:

Assuming RPL554 is launched during 2020 or 2021 in the US, it will be more or less off patent, yet Vernalis will still recieve a £5m up front payment on first approval, 25% of any sub licence revenue and a 3% royalty of Verona’s sales revenue for 10 years post launch (in each market), this is despite the fact that the Vernalis composition of matter patent will expire in 2020 or thereabouts.



From the Verona Pharma Aim admission document


Vernalis Royalty Payments (from Aim admission document p67 - 68)






Even if you assume that Verona only ever launch RPL554 in the USA in nebulised format for Emergency Room use only and at home use after discharge (to minimise chances of re-admission), gross revenues could easily average £200m/year, implying royalties to Vernalis of £60M over a 10 year period. A more likely scenario is that once the nebulised format has become established, Verona would subsequently launch in dpi and mdi formats, which are much larger opportunities, they would also roll out the products to Europe and other developed markets.






There will be further value in the other out-licencing assets (see below):



The one with most potential value is probably CPI-444 which is out-licenced to Corvus (Clinical stage, Nasdaq quoted Biopharma, market cap circa $300m) for which Vernalis are due to receive development milestone payments and royalties on sales. Corvus are developing CPI-444 with Genentech (Roche) and as the lead drug in their development portfolio, it probably has a realistic chance of progressing further.


There is also continuing royalty income for Frovatriptan (circa £2-3m annually) and a small research division which is mainly funded by collaborators on a fee for service basis, which currently benefits from occasional milestone payments and could eventually benefit from product royalties, should any of the current 6 collaborations lead to marketed products.

[the stinger] 20/3/2018 08:35

Push up today....4 to 5p

[bones698] 19/3/2018 18:27

Stinger keep hoping . I don't see much value here once they pay off everything . The fact they have done this now says there won't be much left. I expected 3p but that is looking high now and maybe the fire sale won't being in anything like as much as I thought . Cash will go fast

[the stinger] 19/3/2018 14:20

Expecting a bounce to 5p soon

[pugg1ey] 19/3/2018 11:43

you ok stinger?

[the stinger] 19/3/2018 07:52

Bargain Price...

[bageo] 16/3/2018 21:00

Wonder that the "agreement" with Tris will be - a complete lack of detail on their FDA failings - was the contract any good and ver get anything back or will a termination fee be required!!!

[yasx] 16/3/2018 20:50

Chuckle chuckle.

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romeike23 Feb '17 - 12:13 - 1562 of 1777
I doubt there is more to fall, I expect the share price to gradually recover to same level as before the results, about 32p. The results raised more questions that answers as is so common on AIM but the company is in a decent financial position and has everything to play for still.

[yasx] 16/3/2018 20:47

Incidentally Romeike, I think my timing will prove to be just fine fairly shortly. unlike you, who invested in this dud months ago...I think with you now giving up means a bounce must be due since you are surely a good contrarian signal on this stock given your woeful record here.

romeike14 Feb '17 - 16:29 - 1534 of 1777
Bought another £7,000 under 30p. Even if this dips on results it is still a good buy at this price.

[the stinger] 16/3/2018 20:46

7p soon pugg1ey....

[yasx] 16/3/2018 17:25

Romeike,

It is a punt and I am well aware of the risks - but, on the flip side there is a significant cash position and notwithstanding liabilities I expect the remnants (in terms of the net cash position) to be substantially higher than the current m/c.

Time will tell.

[romeike] 16/3/2018 16:43

And looks like your timing was really bad yesX, despite the many warnings on here. A very really possibility of the whole company going down at this point if they don't find a buyer.

[fhmktg] 16/3/2018 16:04

Suspension coming soon, if it keeps on dropping like this?

[twodegrees] 16/3/2018 15:10

At this rate it might be gone by the end of the day.

[yasx] 16/3/2018 10:35

Another Woodford disaster - but, with the news yesterday, I wonder if any value left in the rump with cash greater than m/c but liabilities will be incurred - currently 3.5p to but, and I this morning have tucked in. Extremely high risk, not for widows and orphans

[romeike] 15/3/2018 15:58

The only reason this is happening now is because the rug has been firmly pulled by the II's, as evidenced by the departure of the CEO and CFO. As with most failures in business, left to his own devices Garland would have ploughed on regardless, blind to his own incompetence until investors were looking at administration.

I would like to see them go further and look to claw back bonus payments made to Ian Garland who must be among the most inept CEO's in recent times. It takes much more than a massive pay packet to make a decent CEO. Shame about the CFO, certainly in investor calls he stood out as competent compared to Garland's rambling nonsense and refusal to give "a running commentary" to even basic questions.

It is hard to truly comprehend the absolute failure on almost every front here. The company has failed abysmally to recognise threats or to invest in its strengths, preferring instead to risk everything on a fantasy sales strategy and a pipeline of expensive codeine-based products into a market dominated by cheap, quick fixes.

Fair value 3 - 4, but an opportunity here depending on who they get in to replace the CEO, if it is someone respected then could be worth a look, but until then AVOID.

[nobbygnome] 15/3/2018 14:26

>> bones

Even if only £20 million were left nevertheless that is more or less the market cap now. Plus the company has various research programs and royalty streams which are worth something.

So there is upside IMHO...

Nobby

[timbo003] 15/3/2018 14:23

>>Bones, maybe, but my experience of working with colleagues in the US, is that it was very much a hire and fire culture, with minimal notice period and little if any compensation, especially so for new hires.

There will certainly be other liabilities that will cost the company, such as penalties for early lease surrender, but I would be surprised if the cost of firing staff will amount to more than what it would have cost to employ them up to end of September

[pugg1ey] 15/3/2018 14:19

If someone buys this as a shell they will have to spend another wad of cash making all the UK staff redundant, terminating leases etc.