If – as they say – the US is the graveyard of British companies, Vernalis (VER) has just put up its own headstone. The group has invested heavily in its American commercial platform in a bid to accelerate sales of its first cough and cold medicine, Tuzistra. But with the 2017- 2018 flu season all but over and revenue still well short of management’s guidance of 105,000-115,000 prescriptions, it has become clear the investment has not paid off. The group’s two new drugs have also proven more costly to commercialise than previously expected. Management has run out of options and decided to put the business up for sale.
It’s an enormous disappointment for a company that was once flagged as a great British biotech hopeful and, just two years ago, was 10 times the size. But Vernalis’s failure is a lesson in biotech investment: it’s risky and, if a drug fails, investors can end up with nothing. A diversified portfolio is, therefore, essential.
At the end of January, the group had net cash of £44m and, based on the current cash burn, this is likely to be £27m in June. Management plans to close the US commercial business by September, hoping to licence Tuzistra to another pharma company and sell the pipeline drugs. For investors, a takeover offer for the whole company would be preferable.
