TIDMVRP
The 'Proposed Placing and Notice of General Meeting' announcement for Verona
Pharma plc released last Friday, 17 June 2016 at 16.54, has been re-released in
the interest of market clarity. The announcement text is unchanged and is
reproduced in full below.
THIS ANNOUNCEMENT IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO OR FROM THE UNITED STATES,
AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER
JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE
UNLAWFUL. THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT
CONSTITUTE AN OFFER OR AN INVITATION TO ACQUIRE OR DISPOSE OF ANY SECURITIES.
ATTENTION IS ALSO DRAWN TO THE IMPORTANT NOTICE AT THE OF THIS
ANNOUNCEMENT.
Verona Pharma plc
("Verona Pharma" or the "Company")
Proposed Placing to raise c. GBP44.7 million (US$63.3 million)
and
Notice of General Meeting
Capitalised terms in this announcement have the same meaning as in the Circular
being published in conjunction with the proposed placing (unless otherwise
indicated) and are also defined below.
17 June 2016, Cardiff - Verona Pharma plc (AIM: VRP), the drug development
company focused on first-in-class medicines to treat respiratory diseases,
announces that it has successfully secured funding commitments to raise gross
proceeds of c. GBP44.7 million (US$63.3 million), through a conditional placing
(the "Placing") with new and existing investors, including a number of
specialist US, UK and European healthcare funds. The Placing was significantly
oversubscribed.
The net proceeds of the Placing are expected to fund RPL554 through a Phase 2b
clinical trial in chronic obstructive pulmonary disease (COPD) patients and
additional Phase 2 studies in both COPD and cystic fibrosis.
MTS Securities, LLC is acting as the US placement agent and N+1 Singer is
acting as the UK broker and nominated adviser in connection with the Placing.
The Placing is not being underwritten.
Highlights
· The Placing will raise gross proceeds of c. GBP44.7 million (US$63.3
million) through the issue of 1,555,796,345 Units at a price of 2.873 pence per
Unit (each comprising one Placing Share and one Warrant)
· The net proceeds of the Placing will predominantly be used to progress
RPL554 through a Phase 2b clinical trial in COPD patients, and to fund
additional clinical Phase 2 studies in COPD and cystic fibrosis as well as
further supportive pre-clinical work
· The funding enables the Company to materially advance the development
of RPL554 and build on the significant progress made to date with the revised
formulation
· The cornerstone investors in the Placing are specialist healthcare
focused funds Vivo Capital, OrbiMed and Edmond de Rothschild Investment
Partners
o Other new investors include New Enterprise Associates, Novo A
/S, Abingworth and Aisling Capital with participation of existing investors
including Arix Bioscience, Hargreave Hale and Polar Capital
· The Placing Price represents the average closing mid-market price of
an Ordinary Share during the five trading days to 15 June 2016, being the last
practicable date prior to investors signing their binding Placing commitments
· Each Warrant will be exercisable into 0.4 of a Warrant Share, at an
exercise price per Warrant Share of 3.4476 pence, being 120 per cent. of the
Issue Price
· On or shortly after Admission, representatives from certain of the
investors will join the Board as non-executive directors
· The Company has undertaken to use commercially reasonable efforts to
procure a listing on NASDAQ and raise a further tranche of funding in the
future
The Placing is conditional upon, amongst other things, approval by existing
shareholders at a general meeting to be held at 11.00 a.m. on 22 July 2016 at
the offices of Shakespeare Martineau LLP at Allianz House, 6th Floor, 60
Gracechurch Street, London, EC3V 0HR (the "General Meeting"). Admission of the
Placing Shares to trading on AIM is expected to take place on 29 July 2016.
Jan-Anders Karlsson, CEO of Verona Pharma, commented:
"We have made significant clinical progress with our first-in-class drug
RPL554. This drug has shown the potential to become an important novel and
complementary treatment option for patients with COPD, a debilitating and
progressive disease that impacts about 65 million people worldwide and is still
among the four leading causes of death globally.
"The funds raised from the Placing will allow the Company to focus on
conducting a comprehensive Phase 2b clinical trial programme for nebulised
RPL554 as a potential treatment for patients with COPD. We will also explore in
the clinic for the first time the use of RPL554 as a novel treatment for cystic
fibrosis expanding the potential of the drug into another respiratory disease
where there remains a significant unmet need. This follows on from the
compelling data we have generated in translational, preclinical models of this
disease."
David Ebsworth, Non-Executive Chairman of Verona Pharma added:
"The Board would like to thank both the proposed new and our existing
shareholders for their support. Indeed, this powerful syndicate of highly
experienced bioscience investors have conducted significant due diligence in
the product ahead of investing in the proposed Placing announced today, which
we believe further attests to the potential value of RPL554.
"This funding will enable us to progress RPL554 through significant value
inflection points. The strength of the data package for the product generated
to date gives us confidence that a substantial Placing provides the optimal
opportunity to retain maximum value in the Company without compromising our
future strategic options.
"A subsequent listing of ADSs on NASDAQ as part of a US IPO for Verona Pharma
is a natural evolution in our corporate strategy to focus on the US market
opportunity, with its broadly accepted use of nebulisers in the treatment of
patients with COPD. It will also allow the Company easier access to a larger
pool of investors in the US who have a deep understanding of the healthcare
market in which Verona Pharma operates."
The Company's lead drug, RPL554, is a dual phosphodiesterase PDE3/PDE4
inhibitor with both bronchodilator and anti-inflammatory properties that has
the potential to become a novel treatment for patients with obstructive lung
diseases such as chronic obstructive pulmonary disease (COPD), cystic fibrosis
and potentially asthma. Furthermore, based on data generated to date, Verona
Pharma believes RPL554 can provide relevant clinical and health economic
benefits in a commercial setting.
A circular to Shareholders containing, amongst other things, the notice of the
General Meeting (the "Circular") will be published by the Company today and
posted to Shareholders. An extract from the Circular is set out below. Copies
of the Circular will be available at the Company's website:
www.veronapharma.com.
This announcement should be read in conjunction with the Circular in its
entirety, which contains further details on the terms of the Placing and
related matters.
-Ends-
For further information please contact:
Verona Pharma plc Tel: +44 (0)20 3283 4200
Jan-Anders Karlsson, Chief Executive
Officer
N+1 Singer (UK NOMAD and Lead Broker) Tel: +44 (0)20 7496 3000
Aubrey Powell / Jen Boorer
MTS Securities, LLC (US Placement Tel: +1 (212) 887 2100
Agent)
Mark Epstein, Partner
FTI Consulting Tel: +44 (0)20 3727 1000
Simon Conway/Stephanie Cuthbert/Julia
Phillips
IMPORTANT NOTICE
The Circular is not an offer of securities for sale in the United States. The
securities being offered by the Company may not be offered or sold in the
United States absent registration or an exemption from registration. The
offering of securities described in the Circular has not been and will not be
registered under the United States Securities Act of 1933, and accordingly, any
offer or sale of the securities may be made only in a transaction exempt from
the registration requirements of the Securities Act.
Expected Timetable of Principal Events
Publication of the Circular 17 June 2016
Latest time and date for receipt of 11.00 a.m. on 20 July 2016
completed Forms of Proxy to be valid
at the General Meeting
General Meeting 11.00 a.m. on 22 July 2016
Announcement of results of General 22 July 2016
Meeting
Admission and commencement of dealings 29 July 2016
in the Placing Shares on AIM
Despatch of definitive share by 16 August 2016
certificates for Placing Shares in
certificated form
Despatch of definitive certificates by 16 August 2016
for Warrants
Notes:
(1) References to times in the Circular are to London time (unless otherwise
stated).
(2) The timing of the events in the above timetable and in the rest of the
Circular is indicative only and may be subject to change.
(3) If any of the above times or dates should change, the revised times and/
or dates will be notified by an announcement to an RIS and otherwise
communicated to Placees.
(4) Certain of the events in the above timetable are conditional upon,
amongst other things, the approval of the Resolutions to be proposed at the
General Meeting.
(5) The Company's SEDOL code is B06GSH4 and ISIN code is GB00B06GSH43.
(6) The Warrants will not be separately admitted to trading on AIM, but the
Warrant Shares which will arise following any valid exercise of Warrants will
be admitted to trading as part of the single class of shares admitted to
trading on AIM.
Key Statistics
Number of Existing Ordinary Shares in 1,009,923,481
issue(1)
Number of Placing Shares 1,555,796,345
Proceeds of the Placing (before GBP44.7 million
expenses)
(US$63.3 million)
Net proceeds of the Placing receivable GBP41.9 million
by the Company(2)
Percentage of Enlarged Share Capital 60.6 per cent.
represented by the Placing Shares
Maximum number of Warrant Shares 622,318,538
arising from potential exercise of
Warrants(3)
Maximum percentage of Enlarged Share 24.3 per cent.
Capital represented by the Warrant
Shares(3)
Percentage of Enlarged Share Capital 84.9 per cent.
represented by the New Shares(3)
Number of Ordinary Shares in issue 2,565,719,826
immediately following the Placing
Market capitalisation of the Company GBP73.7 million
immediately following the Placing at
the Issue Price
Notes:
(1) As at 16 June 2016, being the last practicable date prior to the date of
the Circular and assuming no further issue of Ordinary Shares between the date
of the Circular and Admission.
(2) Net proceeds are stated after deduction of estimated total expenses of
approximately GBP2.8 million.
(3) Assumes all Warrants are exercised on a 'for cash' basis and no further
issue of shares between Admission and the date of exercise. In practice the
Warrants will likely be exercised after the US IPO and the number of Warrant
Shares arising will be lower than the maximum if the cashless exercise
mechanism is used by Warrantholders (as described in more detail in paragraph
5 of part I and paragraph 4.4 of part III of the Circular).
Exchange rates
The rate of exchange used throughout the Circular, unless otherwise stated, is
US$1.4158: GBP1.00 and GBP0.7061: US$1.00 being the closing rate on 16 June 2016,
the last practicable date prior to the date of the Circular.
Letter from the Chairman
Introduction
The Company proposes to raise a total of approximately GBP44.7 million (before
expenses) through a Placing of 1,555,796,345 Units with new and existing
institutional investors at a price of 2.873 pence per Unit. Each Unit comprises
one Placing Share and one Warrant. The Company has obtained conditional
commitments to raise approximately GBP41.9 million (net of expenses).
The Placing comprises a UK Placing and a US Placing. The US Placing is being
directed at US Persons only, and the Placing Shares to be issued thereunder
will be admitted to trading on AIM on Admission.
N+1 Singer is acting as lead UK broker for the Company and MTS Securities, LLC
is acting as US Placement Agent. The Placing is not being underwritten.
Each Warrant will be exercisable into 0.4 of a Warrant Share, at an exercise
price per Warrant Share of 3.4476 pence, being 120 per cent. of the Issue
Price. Further particulars of the Warrants including the conditions under which
they may be exercised are provided below and in paragraph 4.4 of part III of
the Circular. The Warrants will not be separately admitted to trading on AIM,
but the new Warrant Shares will, following valid exercise of the Warrants in
accordance with the terms of the Warrant Instrument, be admitted to trading as
part of the single class of shares admitted to trading on AIM.
The net proceeds of the Placing will be used to progress RPL554 through several
Phase 2 studies, including a Phase 2b study after which the Board will consider
whether continuing development alone by the Company or partnering the drug
candidate would be likely to provide a commercially attractive return for
Shareholders.
The UK Placing and the US Placing are conditional, inter alia, upon the passing
by the Shareholders of the Resolutions at the General Meeting, including
special resolutions which will give the Company the required authority to
dis-apply statutory pre-emption rights in respect of the allotment of the New
Shares and to authorise the adoption of new articles of association (the "New
Articles"), conditional on Admission. Subject to all relevant conditions being
satisfied (or, if applicable, waived), it is expected that the Placing Shares
will be admitted to trading on AIM on or around 29 July 2016 (with Warrant
certificates delivered on or around 16 August 2016).
The purpose of this letter is to outline the reasons for the Placing and
explain why the Board considers the proposals described in the Circular to be
in the best interests of the Company and Shareholders as a whole, and why the
Directors recommend that you vote in favour of the Resolutions, as they intend
to do in respect of the Ordinary Shares held by them, in order to give effect
to the Placing.
The Company has further agreed with Vivo Capital and the other US Purchasers to
seek to raise a further tranche of funding in the future ("Tranche 2"),
expected to be at an aggregate offering size reasonably acceptable to the
Company and to the holders of a majority of the Units issued at Tranche 1,
coupled with a listing of ADSs on NASDAQ (the "US IPO").
Background to and reasons for the Placing
The Company has made significant progress on the development of its lead drug
candidate, RPL554, to treat respiratory diseases with significant unmet medical
needs, such as COPD, cystic fibrosis and potentially asthma. RPL554 is a
first-in-class PDE3/PDE4 inhibitor currently being developed as a nebulised
maintenance treatment for COPD patients with moderate to severe disease and
possibly as a treatment of acute exacerbations of COPD in the hospital setting.
65 million people worldwide suffer from moderate to severe COPD and according
to the World Health Organisation, COPD was among the four leading causes
of death globally in 2015 together with lower respiratory tract infections
and after heart disease and stroke (http://www.who.int/mediacentre/factsheets/
fs310/en/). Currently available drugs are aimed at long-term maintenance
therapy, with the market dominated by large pharma. Despite the wide
availability of these therapies, COPD patients suffer acute periods of
worsening symptoms (exacerbations), which cause, in the US alone, some 1.5
million emergency department visits, 726,000 hospitalisations and 120,000
deaths per annum. There is an urgent need for new and more effective
treatments.
The Company has successfully completed five early clinical phase 1 and phase 2a
studies for RPL554, having dosed 105 subjects with an initial proof of concept
formulation. These single and multiple dose studies of the previous nebulized
formulation demonstrated that RPL554, when inhaled across a range of doses, is
an effective bronchodilator in patients with COPD and asthma and has
bronchoprotective properties (e.g. it reduces the hypersensitivity of airways
to inhaled irritants). RPL554 has a rapid onset of action and the magnitude of
the bronchodilator effect seems to be at least as profound as that of other
commonly used bronchodilator drugs. RPL554 has also been demonstrated to have a
potent anti- inflammatory effect in a number of pre-clinical models and in a
clinical trial.
Since 2014, the Company focused on the development of a new proprietary
suspension formulation of RPL554 which is stable, scalable and suitable for
commercial use. The first phase 1/2a study with this new nebulised formulation
started at the end of that year and the clinical phases of the SAD and MAD
study in healthy subjects and the MAD study in COPD patients were completed in
2015 (in each case over 5.5 days, with twice daily dosing). 112 subjects took
part in these phase 1/2a studies. The first two parts of the trial in healthy
subjects indicated that the new formulation is well tolerated, as 16 times the
previously used bronchodilator dose (vs. the old formulation) could be
administered without reaching a maximum tolerated dose. Initial observations
also revealed a longer residence time in the lung, lower peak plasma
concentrations and a longer plasma half-life than the previously used
formulation, suggesting that twice daily dosing may also be achievable.
Positive headline data from the third and final part of the phase 1/2a trial
with the new nebulised formulation was reported in September 2015, meeting its
objective and demonstrating safety and tolerability in COPD patients with
moderate severity of disease. Importantly, data also supported the findings
from the first two parts of the trial. The data demonstrated that as designed,
the new commercially scalable, suspension formulation is well tolerated at all
doses with no reports of serious adverse events. Lung function was also
significantly increased in all dose groups. This has allowed the Company to
study a broad dose range and confirm that the duration of the bronchodilation
effect seems appropriate for twice daily dosing.
Following this positive data from the Phase 1/2a study, and following full data
from the final part of this trial, the Company has also completed and reported
the outcomes of two additional phase 2a studies. As announced in June 2015, the
Company conducted a second single-dose Phase 2a dose-finding study on RPL554 in
29 asthma patients in a double-blind, placebo-controlled, seven-way crossover
study. The primary objective of this study was to establish the bronchodilator
effect and duration of action as compared to the most widely used
bronchodilator. Results from this study were reported in March 2016. The
primary objective was met, with nebulised RPL554 demonstrating a dose-dependent
and highly statistically significant (p<0.0001) bronchodilator response in
asthma patients. The maximum bronchodilator effect of RPL554 in this study was
comparable to the effect observed with the supramaximal dose (7.5mg) of
nebulised salbutamol used in this study. RPL554 did not elicit any serious
adverse events or adverse events of concern at any dose suggesting that the
compound may have a large safety margin.
The Company has also investigated the possibility that RPL554 can be used in
combination with existing bronchodilator drugs with a study in COPD patients
that started in October 2015. The primary objective of the study was met, with
RPL554 producing a highly significant (p<0.001) and a clinically meaningful
additional (>60 per cent.) bronchodilation on top of standard doses of commonly
used bronchodilators, salbutamol and ipratropium bromide. The bronchodilator
effects seen with the combinations were significantly (p<0.001) larger than
those of either salbutamol or ipratropium bromide alone, which were in turn all
significantly greater than placebo. In addition, the combination of RPL554 with
salbutamol or ipratropium bromide caused a significant reduction (p=0.0002 and
p=0.004 respectively) in trapped air in the lung (residual volume) as compared
to salbutamol or ipratropium bromide alone, suggesting that RPL554 treatment
may reduce dyspnea, a major debilitating symptom of COPD. Consistent with
previous studies, RPL554 was well tolerated both alone and in combination.
The Company also plans further studies in 2016 to explore the potential of
RPL554 in cystic fibrosis.
The Board believes that RPL554 has the potential to become a novel treatment
for patients with obstructive lung diseases such as COPD, cystic fibrosis and
potentially asthma, and that it can provide clear healthcare economic benefits
in a commercial setting. The Company has considered all available options for
further funding of its development programmes, as without further capital the
Company has sufficient resources to fund its near terms plans only. Having done
so, the Board believes that the Placing is required in order to finance the
Company adequately through to the end of the first Phase 2b study, a major
value inflection point at which the Board considers it will be better placed to
consider whether to continue development alone or to partner its drug
candidates, should this provide a sufficiently attractive return at that time.
Use of Proceeds
The net proceeds of the Placing will be approximately GBP41.9 million, which are
expected to fund RPL554 through a Phase 2b clinical trial in chronic
obstructive pulmonary disease (COPD) patients and additional Phase 2 studies in
both COPD and in cystic fibrosis. The net proceeds are expected to be allocated
approximately as to:
Clinical development of RPL554 for COPD in a Phase 2b GBP19.6 million
study and additional clinical Phase 2 studies such as:
(i) Phase 2b 4-week dose-ranging study in
COPD
(ii) 4 to 6-week anti-inflammatory study
(iii) <1 week add-on study in COPD patients
(iv) Cystic fibrosis pharmacodynamics/
pharmacokinetic study (proof of concept study to be
funded separately later)
(v) Preparatory work for other clinical trials
General working capital* GBP13.7 million
Pre-clinical development, including dry powder GBP8.6 million
inhalation (DPI)/metered dose inhalation (MDI)
Total (net of estimated fees) GBP41.9 million
*covering continuing operating expenditure as increased for the above
development work and for the anticipated costs of listing and maintaining the
NASDAQ listing.
Principal terms of the Placing
The Company has conditionally raised a total of approximately GBP44.7 million
(before expenses) by the Placing of 1,555,796,345 Units at the Issue Price to
the Placees. Each Unit comprises one Placing Share and one Warrant over 0.4 of
a Warrant Share. Further particulars of the Warrants are provided below.
The UK Placing is conditional, inter alia, upon:
(i) the passing of the Resolutions;
(ii) the Placing Agreement not having been terminated in accordance
with its terms prior to Admission;
(iii) written confirmation from the Company that, as far as it is aware
(having made reasonable enquiries of the Directors, its advisers and the US
Placees), there is no fact, matter or circumstance existing which would allow
the US Purchasers to terminate the Purchase Agreement; and
(iv) Admission.
If any of the above UK conditions are not satisfied or waived (where capable of
waiver), the UK Units will not be issued and all relevant monies received from
the investors in the UK Placing will be returned to them (at the risk of these
investors and without interest) as soon as possible thereafter.
The US Placing is conditional, inter alia, upon (including certain customary
conditions for a transaction of this nature):
(i) the passing of the Resolutions;
(ii) the receipt of a certificate of a Director confirming that the
representations and warranties of the Company in the Purchase Agreement are
true and correct in all material respects (except those that are qualified by
materiality, which shall be true and correct in all respects) as of the date of
the Purchase Agreement and as of Admission, and that all covenants, obligations
and agreements of the Company required to be performed prior to Admission have
been performed;
(iii) the Placing Agreement not having been terminated in accordance
with its terms prior to Admission; and
(iv) Admission.
If any of the above US conditions are not satisfied or waived (where capable of
waiver), the US Units will not be issued and all relevant monies received from
the investors in the US Placing will be returned to them (at the risk of these
investors and without interest) as soon as possible thereafter.
The New Shares when issued will be issued free of all liens, charges and
encumbrances and will, when issued and fully paid, rank pari passu in all
respects with the Existing Ordinary Shares, including the right to receive all
dividends and other distributions declared, made or paid after the date of
their issue.
Application will be made to the London Stock Exchange for the admission of the
Placing Shares to trading on AIM. It is expected that Admission will occur and
that dealings in the Placing Shares will commence at 8.00 a.m. on 29 July 2016,
at which time it is also expected that the Placing Shares will be enabled for
settlement in CREST. A block listing application will be made in respect of the
Warrant Shares for the purpose of admitting the Warrant Shares to trading on
AIM in due course.
Shareholders in the Company who are not participating in the Placing
proportionate to their economic interest will have their interest in the
Company significantly diluted as a consequence of the issue of the New Shares.
Furthermore, Shareholders who participate in the Placing, but who do not
participate in Tranche 2, would be further significantly diluted as a
consequence of the issue of Ordinary Shares as part of the US IPO.
Information relating to the Placing Agreement, the Purchase Agreement and the
Placement Agent Agreement appear in paragraphs 4.1, 4.2 and 4.3 of part III of
the Circular.
The Warrants
Each Warrant will be exercisable into 0.4 of a Warrant Share, at an exercise
price per Warrant Share of 3.4476 pence, being 120 per cent. of the Issue
Price. Upon exercise, fractional entitlements to Warrant Shares, determined on
an aggregate basis with all other Warrants then being exercised by the
applicable Placee, will be rounded down to the nearest whole Warrant Share.
The exercise price per Warrant is 3.4476 pence (being a 20 per cent. premium to
the Issue Price) and each Warrant shall become exercisable on the earlier of:
(i) the first anniversary of Admission; or (ii) the closing of Tranche 2, and
the exercise period shall end on the fifth anniversary of such date. In the
event that the Company announces the execution of a definitive agreement
providing for an Acquisition prior to the closing of Tranche 2, the exercise
period shall instead begin immediately following such announcement, and shall
still end on the sixth anniversary of Admission.
The Warrants may be exercised either in cash or on a cashless exercise basis,
whereby the Warrantholder will forfeit such number of Warrant Shares as
represent at the relevant time the value of the exercise price, and receive
bonus shares equal to the Warrantholder's net entitlement. Such bonus shares
will be issued by way of a capitalisation issue. Shareholders should note that
the number of Warrant Shares to be forfeited in connection with a cashless
exercise of Warrants will be determined by the future price of the Company's
Shares. Warrantholders must also be Shareholders in order to be able to
exercise on a cashless exercise basis.
Warrantholders shall be entitled to require that their Warrant Shares be
converted into ADSs, at the cost of the Company.
The terms of the Warrants include a Black-Scholes valuation provision that
would be applicable on a reorganisation, consolidation, merger, demerger or
sale of shares or transfer of all or substantially all of the assets of the
Company, where the holders of the Company's outstanding shares as of
immediately before the transaction beneficially own less than a majority by
voting powers of the outstanding shares of the surviving or successor entity as
of immediately after the transaction, or the acquisition by any person of at
least 50 per cent. of the voting power of the Company ("Acquisition"). The
provision provides a basis for valuation of the Warrants in circumstances where
the Warrants are not assumed for exchange-traded shares of the acquiring entity
(or its ultimate parent) under circumstances where the Warrants continue until
their expiry. In such circumstances, Warrantholders shall be entitled to
receive or demand from the Company the Black-Scholes value per share in
accordance with the provisions of the Warrants. Details of the Warrant and the
Black-Scholes value calculation are described in more detail in paragraph 4.4
of part III of the Circular.
If Tranche 2 is completed within a year after Tranche 1, to the extent that any
Placee does not fully subscribe for an equivalent value of Ordinary Shares or
ADSs in Tranche 2 (including the value of any Ordinary Shares or ADSs acquired
in any concurrent Exempt Placement made on substantially the same terms as the
US IPO) as subscribed for in Tranche 1, subject to allocations in Tranche 2
being potentially adjusted downwards by the underwriter in connection with the
US IPO (on the terms set out in the Purchase Agreement)), such Placee will
(subject to certain limited exceptional circumstances) forfeit any Warrants
issued to it in Tranche 1. However, if the Placee's allocation is reduced by
the managing underwriter in the US IPO, then the required level of
participation to retain the Warrants in full shall be only that amount that is
allocated to the Placee in Tranche 2.
Given the potential cashless exercise mechanism of the Warrants (and also the
possible forfeiture of Warrants as described above), it is likely, in the
Company's reasonably held opinion, that the number of Warrant Shares to be
issued following the exercise of Warrants over time will be materially lower
than the maximum number possible.
A block listing application will be made to the London Stock Exchange of
622,318,538 new Ordinary Shares to be admitted to AIM in connection with the
prospective issue of the Warrant Shares. Once applied for, these new Ordinary
Shares will be issued from time to time pursuant to the valid exercise of
Warrants which is expected to be following the US IPO. The Company will make a
further notification in this regard in due course.
Tranche 2 (US IPO)
Pursuant to the Purchase Agreement, the Company has agreed to use its
commercially reasonable efforts to complete a firm commitment registered public
offering of ADSs in the United States with an aggregate offering size
reasonably acceptable to the Company and to the holders of a majority of the
Units issued in Tranche 1, coupled with a listing of such ADSs on NASDAQ. The
Company has agreed to use its commercially reasonable efforts to consummate the
US IPO as promptly as possible and no later than 180 days following Admission,
or by such later date as may be agreed by the Company and Placees holding a
majority of the US Units issued in the US Placing. To the extent participating
by a Placee in the US IPO would conflict with U.S. securities laws or other
legal requirements so as to materially delay or interfere with the US IPO,
investor participation in the US IPO may instead be effected through a
concurrent Exempt Placement that would be made on substantially the same terms
as the registered public offering. We refer to the US IPO and the concurrent
Exempt Placement as Tranche 2. Following the US IPO and as requested by
Placees, New Shares held by such Placees may be converted into ADSs (subject to
any limitations under United States securities laws). The Company will pay the
reasonable expenses of the Placees in respect of the conversion of New Shares
issued in connection with the Placing into ADSs (to the extent required) at the
appropriate time.
It is expected that the Company's entire share capital will remain admitted to
trading on AIM following the US IPO. Any such transaction will require separate
approval by Shareholders. While the Company has agreed to use its commercially
reasonable efforts to facilitate the US IPO, there is no certainty that the US
IPO will proceed as targeted, or at all. Additional information in respect of
the prospective US IPO is set out in part II of the Circular.
The ADSs will be negotiable instruments, representing ownership of Ordinary
Shares. They are designed to facilitate the purchase, holding and sale of
Ordinary Shares by US investors. Each of the offered ADSs will represent an
exact number of Ordinary Shares. This number will be determined by the
Directors during the offering process. Other than a potential Regulation S
offering in the UK, there will be no offer to the public in the United Kingdom
(including to the Company's existing Shareholders generally) of ADSs or
Ordinary Shares in connection with the US IPO.
Vivo Capital, a current Shareholder of the Company, is acting as a cornerstone
investor in relation to the US Placing and is expected to act as a cornerstone
investor in Tranche 2.
Novo Management Rights Letter
Pursuant to the Purchase Agreement, the Company has agreed to provide a
customary management rights letter to Novo. Pursuant to the letter, which will
be delivered prior to Admission, the Company will grant Novo certain
contractual management rights relating to the Company, including matters such
as (i) the right to consult with the Company's management on significant
business issues, (ii) examine the Company's books and records and inspect the
Company's properties, (iii) designate a non-voting representative on the
Company's board of directors, and (iv) receive information with respect to
significant corporate actions.
The Company has agreed to deliver the Novo Management Rights Letter in order to
assist Novo in avoiding becoming subject to the requirements of the U.S.
Employee Retirement Income Security Act of 1974. According to the terms of the
Novo Management Rights Letter, Novo has a right to designate a non-voting board
observer to attend all meetings of the Board of Directors. The Novo Management
Rights Letter will terminate on the earlier of (i) the consummation of the US
IPO, or (ii) such time as Novo ceases to hold at least 50 per cent. of the
shares held by it on closing of the Placing.
Board representation and the Relationship Agreements
The Company will enter into the Relationship Agreements with Vivo Capital,
OrbiMed, Arix/Arthurian and Abingworth to regulate its relationships with those
investors from Admission and to limit their influence over the Group's
corporate actions and activities and the outcome of general matters pertaining
to the Group. Further details of the Relationship Agreements are provided in
paragraph 4.6 of part III of the Circular. The Relationship Agreements will
become effective on Admission.
Pursuant to the Relationship Agreements, the Company has further agreed,
conditional on Admission, to appoint representatives designated by Vivo
Capital, OrbiMed, Arix/Arthurian and Abingworth to the Board of Directors. The
investors' respective rights to maintain representatives on the Board of
Directors shall continue for so long as each respectively continue to
beneficially hold not less than the lesser of (i) 6.5 per cent. of the
Company's issued Ordinary Shares from time to time (with beneficial ownership
for this purpose being determined without regard to any exercise limitations or
conversion blockers), and (ii) 60 per cent. of the sum of the number of
Ordinary Shares held by them on Admission and, after completion of the US IPO,
the number of Ordinary Shares they are obligated to purchase in connection with
the US IPO in order to avoid forfeiture of their Warrants.
Following Admission, Arix and Arthurian (WLSIF) are expected to own over 10 per
cent. of the Enlarged Share Capital. Dr. Ken Cunningham, a non-executive
director, will continue to serve as the appointed board representative of Arix/
Arthurian.
As described above the Company entered into the Novo Management Rights Letter
under which Novo has a right to designate a non-voting board observer to attend
all meetings of the Board of Directors. Novo's right to maintain a board
observer on the Board of Directors shall continue until (i) the consummation of
the US IPO, or (ii) such time as Novo ceases to hold at least 50 per cent. of
the shares held by it on closing of the Placing.
Following Admission, the Company will conduct an executive search to recruit
suitable senior finance resources.
New Articles
In connection with the issue of the Warrants and in order to facilitate the US
Placing, it is proposed that the Company will adopt the New Articles at the
General Meeting conditional upon the relevant special resolution being passed.
The New Articles will incorporate certain amendments allowing for, inter alia,
the issue of the Warrant Shares and ADSs.
The New Articles will also contain provisions allowing the Company to issue
Warrant Shares in respect of the exercise of the Warrants (in accordance with
the terms of the Warrant Instrument) by way of a non pre- emptive bonus issue
of fully paid up Warrant Shares to the relevant Warrantholder. Such bonus
shares will be issued by way of a capitalisation issue. This change is required
to allow for the cashless exercise of the Warrants in accordance with the terms
of the Warrant Instrument, whereby the Warrantholder will forfeit Warrant
Shares representing the cost of exercise, and receive Warrant Shares by means
of a bonus issue as described above.
The principal changes to the current articles of association of the Company are
summarized in part IV of the Circular. A copy of the New Articles is available
for inspection on the Company's website at www.veronapharma.com. Hard copies of
the New Articles are available at the Company's registered office from today
until the date of the General Meeting, and at the place of and on the date of
the General Meeting from 11.00 a.m. until the close of the meeting.
Recent trading and prospects
The Company reported a loss after tax of GBP7.42 million for the year ended 31
December 2015 (2014:
GBP2.76 million), broadly in line with market expectations and reflecting tight
cost control despite the planned increase in R&D spend, especially on clinical
studies.
The Company's net cash outflow from operating activities for the year ended 31
December 2015 was
GBP6.35 million (2014: GBP3.54 million) reflecting clinical progress, with cash and
cash equivalents as at
31 December 2015 of approximately GBP3.5 million (2014: GBP10 million). Having
reported in the first half of 2016 on the Phase 1/2a trials described above,
clinical activity is expected to be at a lower level in 2016 than in 2015 as
the Company plans its next substantive batch of clinical and pre-clinical
studies to be funded by the net proceeds of the Placing.
Risk factors and additional information
The attention of Shareholders is drawn to the risk factors set out in Part II
of the Circular and the information contained in part III of the Circular,
which provide additional information on the Verona Group. Shareholders are
advised to read the whole of the Circular and not rely solely on the summary
information presented in this letter.
General Meeting
The Directors do not currently have authority to allot all of the New Shares
and, accordingly, the Board is seeking the approval of Shareholders to allot
such shares at the General Meeting. Shareholder approval is not being sought at
the General Meeting to issue any Ordinary Shares under Tranche 2.
A notice convening the General Meeting, which is to be held at the offices of
Shakespeare Martineau LLP at Allianz House, 6th Floor, 60 Gracechurch Street,
London EC3V 0HR at 11.00 a.m. on 22 July 2016, is set out at the end of the
Circular. At the General Meeting, the following Resolutions will be proposed:
· Resolution 1 which is an ordinary resolution to authorise the Directors
to allot relevant securities up to an aggregate nominal amount of GBP
1,555,796.35, being equal to 1,555,796,345 Placing Shares (i.e. the maximum
number of Placing Shares available under the Placing).
· Resolution 2 which is conditional on the passing of resolution 1 and is
an ordinary resolution to authorise the Directors to issue Warrants to
subscribe for Ordinary Shares up to an aggregate nominal amount of GBP622,318.54,
being equal to 622,318,538 Ordinary Shares (i.e. the maximum number of Ordinary
Shares that could be allotted pursuant to the exercise of the warrants).
· Resolution 3 which is conditional on the passing of resolutions 1, 2, 4,
5 and 6 (inclusive) and is an ordinary resolution authorising the Directors to
capitalise such sums as they may determine from time to time, not exceeding the
amount standing to the credit of any of the Company's reserve accounts from
time to time or any sum standing to the credit of the profit and loss account
or otherwise available for distribution from time to time to pay up in full, up
to 622,318,538 Ordinary Shares and to allot and issue such new shares on a
non-pre-emptive basis, and to do all acts and things to satisfy any entitlement
to Warrant Shares.
· Resolution 4 which is conditional on the passing of resolution 1 and is
a special resolution to authorise the Directors to issue and allot
1,555,796,345 Placing Shares pursuant to the Placing on a non pre- emptive
basis.
· Resolution 5 which is conditional on the passing of resolution 2 and is
a special resolution to authorise the Directors to issue and allot warrants to
subscribe for 622,318,538 Ordinary Shares on a non pre-emptive basis.
· Resolution 6 is a special resolution to adopt the New Articles.
The authorities to be granted pursuant to resolutions 1, 2, 4 and 5 shall
expire on the conclusion of the Annual General Meeting ("AGM") of the Company
to be held in 2017 (unless renewed varied or revoked by the Company prior to or
on that date) and shall be in addition to any Directors' authorities to allot
relevant securities and disapply statutory pre-emption rights granted at the
Company's AGM to be held in 2016, which shall expire on the conclusion of the
AGM of the Company to be held in 2017. The authority given pursuant to
resolution 3 shall expire on 30 July 2022 (unless renewed, varied or revoked by
the Company prior to or on that date).
Action to be taken in respect of the General Meeting
The Directors unanimously consider that completion of the Placing is in the
best interests of the Company and accordingly strongly recommend that you vote
in favour of the Resolutions to be proposed at the General Meeting to give
effect to the Placing, as they intend to do in respect of those Ordinary Shares
in respect of which they have a beneficial interest, being 7,469,774 Ordinary
Shares in aggregate, representing 0.74 per cent. of the current issued Ordinary
Share capital of the Company as at the date of the Circular.
Enclosed with the Circular is a Form of Proxy for use by Shareholders at the
General Meeting.
Related party matters
Dr. David Ebsworth, the Company's Non-Executive Chairman, is investing in the
Placing on the same terms as the other Placees.
Arix has agreed to subscribe for 64,517,620 units pursuant to the UK Placing.
Arix is considered to be a related party under the AIM Rules by virtue of its
conditional entitlement to indirectly acquire Arthurian, the general partner of
WLSIF, an existing Substantial Shareholder. Its subscription is classified as a
related party transaction under AIM Rule 13. The independent directors, who are
for the purposes of Arix's subscription, Dr. David Ebsworth, Dr. Jan-Anders
Karlsson, Dr. Anders Ullman and Dr. Patrick Humphrey, consider having consulted
with the Company's nominated adviser, N+1 Singer that the terms of the
participation by Arix in the UK Placing are fair and reasonable insofar as the
Shareholders of the Company are concerned.
Irrevocable undertakings and indications of support
The Company has secured irrevocable undertakings from certain institutional
shareholders to vote in favour of the Resolutions in respect of which they have
a beneficial interest, representing 294,237,197 Ordinary Shares in aggregate or
approximately 29.1 per cent. of the Existing Ordinary Shares. Together with the
aggregate irrevocable undertakings from the Directors (which will be in the
same form as the irrevocable undertakings secured from certain institutional
shareholders), the Company has secured commitments from Shareholders holding,
in total, 298,836,971 Ordinary Shares (comprising approximately 29.6 per cent.
of the Existing Ordinary Shares) to vote in favour of the Resolutions. In
addition, the Company has received verbal indications of support from
Shareholders holding a total of 159,335,343 Ordinary Shares (representing
approximately 15.8 per cent. of the Existing Ordinary Shares). In aggregate,
the Company therefore reasonably considers that the Resolutions have the
backing, from irrevocable commitments and verbal indications of support, of
458,172,314 Ordinary Shares or approximately 45.4 per cent. of the voting
rights in the Company's Shares.
Additional Information
Your attention is drawn to the risk factors and additional information set out
in Parts II and III of the Circular. Shareholders are advised to read the whole
of the Circular and not rely solely on the summary information presented in
this letter.
Directors' Recommendation and Voting Intentions
The Directors, acting in good faith, believe that the Placing and the passing
of the Resolutions are most likely to promote the success of the Company for
the benefit of its Shareholders as a whole. The Directors unanimously and
strongly recommend the Shareholders to vote in favour of the Resolutions, as
they intend to do in respect of their aggregate beneficial holdings of
7,469,774 Ordinary Shares representing approximately 0.74 per cent. of the
Existing Ordinary Shares.
Total Voting Rights
The number of ordinary shares of 0.1 pence each in the capital of the Company
in issue and number of voting rights following admission of all of the Placing
Shares (subject, amongst other things, to the General Meeting) will be
2,565,719,826. Following Admission, the above figure may be used by
Shareholders as the denominator for the calculations by which they will
determine whether they are required to notify their interest in, or a change to
their interest in, the Company under the Financial Conduct Authority's
Disclosure and Transparency Rules.
Definitions
"Abingworth" Abingworth Bioventures VI LP
(acting through its manager,
Abingworth LLP)
"Abingworth Relationship Agreement the relationship agreement to be
entered into between the Company,
Abingworth and N+1 Singer to regulate
the Company's relationship with
Abingworth
"Acquisition" in relation to the Warrants, a
reorganisation, consolidation, merger,
demerger, sale of shares or transfer
of all or substantially all of the
assets of the Company, where the
holders of the Company's outstanding
shares as of immediately before the
transaction beneficially own less than
a majority by voting powers of the
outstanding shares of the surviving or
successor entity as of immediately
after the transaction, or a scheme of
arrangement or takeover offer
"Act" the Companies Act 2006
"Admission" the admission of the Placing Shares to
trading on AIM following completion of
the Placing
"ADSs" American Depositary Shares each of
which will consist of a fixed number
of Ordinary Shares or a right to
receive a fixed number of Ordinary
Shares, proposed to be issued pursuant
to Tranche 2
"AIM" the AIM market operated by the London
Stock Exchange
"AIM Rules the AIM Rules for Companies and
guidance notes as published by the
London Stock Exchange from time to
time
"Arix" Arix Bioscience Limited
"Arix Relationship Agreement" the relationship agreement to be
entered into between the Company,
Arix, Arthurian and N+1 Singer, to
regulate the Company's relationship
with Arix and Arthurian
"Arthurian" Arthurian Life Sciences SPV GP
Limited, as the general partner of
WLSIF
"Business Day" a day (other than a Saturday or
Sunday) on which commercial banks are
open for general business in London,
England
"Company" or "Verona" Verona Pharma PLC, a company
incorporated and registered in England
and Wales under the Companies Act 1985
with registered number 5375156
"Directors" or "Board" the directors of the Company as at the
date of the Circular, whose names are
set out on page 10 of the Circular
"Document" the Circular which for the avoidance
of doubt does not comprise a
prospectus (under the Prospectus
Rules) or an admission document
(under the AIM Rules)
"Enlarged Share Capital" the issued ordinary share capital
of the Company following Admission,
comprising the Existing Ordinary
Shares and the Placing Shares
"Exempt Placement" an exempt placement of the Company's
securities in accordance with
Regulation D and/or Regulation S
"Existing Ordinary Shares" the Ordinary Shares in issue as at the
date of the Circular
"FCA" the Financial Conduct Authority
"Form of Proxy" the form of proxy for use in relation
to the General Meeting enclosed with
the Circular
"FSMA" the Financial Services and Markets Act
2000 (as amended)
"General Meeting" the General Meeting of the Company,
convened for 11.00 a.m. on 22 July
2016 (or any adjournment thereof),
notice of which is set out at the end
of the Circular
"Group" the Company and its subsidiaries
"HMRC" Her Majesty's Revenue & Customs
"ISIN" International Securities
Identification Number
"Issue Price" 2.873 pence per Unit
"Issued Share Capital" the issued share capital of the
Company as at 16 June 2016 (being the
last practicable date prior to the
date of the Circular)
"Listing Rules" the Listing Rules of the UKLA made in
accordance with section 73A(2) of FSMA
"London Stock Exchange" London Stock Exchange plc
"Money Laundering Regulations" Money Laundering Regulations 2007,
the money laundering provisions of
the Criminal Justice Act 1993, Part
VIII of FSMA (together with the
provisions of the Money Laundering
Sourcebook of the FCA and the manual
of guidance produced by the Joint
Money Laundering Steering Group in
relation to financial sector firms),
the Terrorism Act 2000, the
Anti-Terrorism Crime and Security Act
2001, the Proceeds of Crime Act 2002
and the Terrorism Act 2006
"MTS Securities, LLC" MTS Securities, LLC, the Company's
placement agent based within the US in
accordance with Regulation D
"N+1 Singer" Nplus1 Singer Advisory LLP, together
with its associate Nplus1 Singer
Capital Markets Limited, acting as
lead UK broker to the Placing and as
nominated adviser and UK broker to the
Company
"NASDAQ" the NASDAQ Global Market or the NASDAQ
Capital Market
"New Articles" the new articles of association of the
Company proposed to be adopted at the
General Meeting
"New Shares" the Placing Shares and the Warrant
Shares (to the extent the Warrants are
exercised)
"Notice of General Meeting" the notice convening the General
Meeting as set out at the end of the
Circular
"Novo" Novo A/S
"Novo Management Rights Letter" the management rights letter to be
entered into between the Company and
Novo
"OrbiMed" OrbiMed Private Investments VI, LP
(acting through its general partner,
OrbiMed Capital GP VI LLC, acting
through its managing member, OrbiMed
Advisors LLC)
"OrbiMed Relationship Agreement" the relationship agreement to be
entered into between the Company,
OrbiMed and N+1 Singer to regulate the
Company's relationship with OrbiMed
"Ordinary Shares" ordinary shares of 0.1 pence each in
the capital of the Company
"Placees" certain institutional and other
investors subscribing for Units
(including the US Purchasers)
"Placement Agent Agreement" the placement agent engagement
relating to the US Placing between
the Company and MTS Securities, LLC
"Placing" the UK Placing and the US Placing as
further described in the Circular
"Placing Agreement" the placing agreement relating to the
UK Placing entered into between the
Company and N+1 Singer
"Placing Shares" up to 1,555,796,345 new Ordinary
Shares to be issued pursuant to the
Placing (which figure excludes the
Warrant Shares)
"Posting" the posting of the Circular
"Prospectus Rules" the Prospectus Rules made in
accordance with EU Prospectus
Directive 2003/71/EC
"Purchase Agreement" the purchase agreement relating to the
US Placing and Tranche 2 entered into
between the Company and the US
Purchasers
"Regulation D" Regulation D under the Securities Act
"Regulation S" Regulation S under the Securities Act
"Regulatory Information Service" has the meaning given in the AIM Rules
"Relationship Agreements" means the Vivo Relationship Agreement,
the OrbiMed Relationship Agreement,
the Arix Relationship Agreement and
the Abingworth Relationship Agreement
"Resolutions" the resolutions to be proposed at the
General Meeting as set out in the
Notice of General Meeting
"Restricted Jurisdiction" United States of America, Canada,
Australia, New Zealand, Japan, the
Republic of South Africa or the
Republic of Ireland and any other
jurisdiction where the extension or
availability of the Placing or
distribution of the Circular would
breach any applicable law
"Securities Act" the US Securities Act of 1933, as
amended
"SEC" U.S. Securities and Exchange
Commission
"Shareholders" the holders of Existing Ordinary
Shares
"Sterling" or "GBP" pounds sterling, the basic unit of
currency in the UK
"Substantial Shareholder" as defined in the AIM Rules, being a
Shareholder who has an interest,
directly or indirectly, in 10 per
cent. or more of the Issued Share
Capital or 10 per cent. or more of the
voting rights
"Tranche 1" the Placing
"Tranche 2" an anticipated placing of Ordinary
Shares proposed to take place within
180 days of completion of Admission
(or by such other date as may
reasonably be agreed between the
Company and Vivo), consisting of the
US IPO and any concurrent Exempt
Placement
"UK" or "United Kingdom" the United Kingdom of Great Britain
and Northern Ireland
"UK Placing" the conditional placing of UK Units by
N+1 Singer (which, for the avoidance
of doubt, does not include the US
Units to be subscribed for by the US
Purchasers) on the terms and subject
to the conditions of the Placing
Agreement
"UK Units" Units to be issued under the UK
Placing
"UKLA" the UK Listing Authority
"Unit" a unit comprising one Placing Share
and one Warrant
"US" or "United States" the United States of America, its
territories and possessions, any State
of the United States and the District
of Columbia
"US$" the United States dollar, the basic
unit of currency of the United States
of America
"US IPO" the proposed registration by the
Company under the Securities Act of
the ADSs to be issued in Tranche 2 and
the listing of ADSs on NASDAQ as
further detailed in paragraph 6 in
part I of the Circular
"US Placing" the conditional placing of US Units by
MTS Securities, LLC (which, for the
avoidance of doubt, does not include
the UK Units to be placed by N+1
Singer under the Placing Agreement) on
the terms and subject to the
conditions of the Purchase Agreement
and the Placement Agent Agreement
"US Purchasers" the US and certain other persons
acquiring Units pursuant to the
Purchase Agreement, all being
"accredited investors" within the
meaning of Rule 501(a) of Regulation D
"US Units" Units to be issued under the US
Placing
"Vivo Capital" Vivo Capital Fund VIII L.P.
"Vivo Relationship Agreement" the relationship agreement to be
entered into between the Company, Vivo
Capital and N+1 Singer to regulate the
Company's relationship with Vivo
Capital
"Warrantholders" the holder of the Warrants, each
being referred to as a
"Warrantholder"
"Warrant Instrument" the warrant instrument to be entered
into in respect of the Warrants, a
summary of which is in part III
"Additional Information"
"Warrants" the 622,318,538 warrants to subscribe
for 0.4 of an Ordinary Share each,
constituted by the Warrant Instrument
as more particularly described at
paragraph 5 of part I and paragraph
4.4 of part III of the Circular
"Warrant Shares" up to 622,318,538 new Ordinary Shares
which are the subject of the exercise
of the Warrants
"WLSIF" The Wales Life Sciences Investment
Fund LP
Glossary of Technical Terms
"bronchodilator" a substance that increases potential
airflow to the lungs by dilating
(enlarging) the airway
"COPD" chronic obstructive pulmonary disease
"MAD" multiple ascending dose, used in the
context of a study to investigate
safety, tolerability and
pharmacokinetics of a drug
"SAD" single ascending dose, used in the
context of a study to investigate the
safety tolerability and
pharmacokinetics of a drug
"supramaximal dose" being much higher or greater than what
is considered or usually maximal;
being greater or higher than the
corresponding maximal
END
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June 20, 2016 02:00 ET (06:00 GMT)
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