Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

  • FEAnalytics.com
  • FEInvest.net
  • FETransmission.com
  • Investegate.co.uk
  • Trustnet.hk
  • Trustnetoffshore.com
  • Trustnetmiddleeast.com

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.

WHAT INFORMATION DO WE COLLECT ABOUT YOU?

We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.

COOKIES

In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.

HOW WE USE INFORMATION

We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.

ACCESS TO YOUR INFORMATION AND CORRECTION

We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.

WHERE WE STORE YOUR PERSONAL DATA

The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.

CHANGES TO OUR PRIVACY POLICY

Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

OTHER WEBSITES

Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.

CONTACT

If you want more information or have any questions or comments relating to our privacy policy please email publishing@financialexpress.net in the first instance.

 Information  X 
Enter a valid email address

Vernalis PLC (VER)

  Print      Mail a friend       Annual reports

Thursday 16 March, 2006

Vernalis PLC

Preliminary Results

Vernalis PLC
16 March 2006


16 March 2006

           Vernalis plc: Preliminary Announcement of Results for the
                          year ended 31 December 2005
                      A Transformational Year for Vernalis

Vernalis plc (LSE: VER, Nasdaq: VNLS) today announced its preliminary results
for the year ended 31 December 2005. Vernalis ended 2005 with a commercial
presence in North America, two marketed products and a substantially
strengthened product development portfolio. 2006 will be a year of significant
newsflow, in particular, the Phase III data from the confirmatory efficacy study
of Frova(R) for the intermittent, short-term prevention of menstrual migraine
(MM). If this study concludes successfully, Vernalis plans to file the
supplementary New Drug Application (sNDA) for this new indication with the U.S.
Food and Drug Administration (FDA) in the first half of 2006.

2005 Highlights

  • Acquired exclusive North American rights to Apokyn(R), a marketed
    product for the treatment of Parkinson's disease
  • Three late-stage clinical products added to portfolio through the
    acquisition of Cita NeuroPharmaceuticals and Ionix Pharmaceuticals
  • Positive data from the first two of the three studies required for Frova(R) 
    label expansion for the intermittent, short-term prevention of MM
  • Strengthened the balance sheet with net cash and liquid resources of
    £68.3 million at year end (2004: £33.3 million)
  • Loss for the year of £32.8 million (2004: £25.7 million) including £11.5
    million (2004 : £7.0 million) of non cash charges


2006 News

  • V1003 - Vernalis today announced the outcome of a Phase II trial of
    V1003. The primary end point of pain relief over the period of eight hours
    from drug administration was achieved
  • Launch of U.S. neurology sales force to market Apokyn(R) and co-promote
    Frova(R)
  • Frova(R) - All patients have completed treatment in the Phase III MM
    confirmatory efficacy study with results expected in May 2006
  • V10153 - The Phase IIa study in stroke patients is now expected to complete 
    in Q4 2006 due to slower than expected patient recruitment. A number of
    steps have been put in place, including a revision of the inclusion criteria 
    and evaluation of additional sites, in order to meet this revised timetable

Simon Sturge, CEO of Vernalis, commented, '2005 has been a year of substantial
progress for Vernalis, creating a European biopharmaceutical company in a space
of its own with a clear path to profitability and sustainability. In our 2004
Annual Report we stated that we believed we had a strong foundation upon which
to build a sustainable, self-funded R&D-based specialist bio-pharmaceutical
company and 2005 has seen us make significant progress towards this goal.'

'Vernalis now has a commercial presence in North America with two marketed
products being promoted by our own speciality neurology sales force. We also
added three new products to the clinical portfolio and have established a strong
Parkinson's disease franchise. Our business model will continue to drive revenue
growth towards Vernalis becoming a sustainable self-funding business with a
continuing revenue stream.'


2006 will be a year of significant newsflow - expected development progress for
key products/programmes

Frova(R): MM Phase III efficacy data                                    May 06
- For the intermittent, short-term prevention of MM
Frova(R): MM FDA regulatory submission                                  H1 06
- For the intermittent, short-term prevention of MM
V2006: Start Phase II (Biogen Idec)                                     H1 06
- A2A receptor antagonist for Parkinson's disease
V3381: Start Phase II                                                   H1 06
- Dual NMDA antagonist and MAO-A inhibitor for neuropathic pain
V10153: Complete Phase IIa                                              H2 06
- Novel long-acting thrombolytic for acute ischaemic stroke
V1512: Start Phase III                                                  H2 06
- Effervescent levodopa methylester/carbidopa for Parkinson's disease
V24343: Start Phase I                                                   H2 06
- Cannabinoid receptor antagonist for obesity and related disorders
Hsp90: Start Phase I (Novartis)                                         H2 06
- Novel oncology treatment

Vernalis' CEO Simon Sturge and CFO Tony Weir will discuss the company's 2005
results during a conference call today at 9:30 am BST.

The conference call may be accessed by dialling: +44 (0)1452 541 077, and
quoting 'Vernalis conference call.'  A replay facility will be available for 7
days following the call by dialling: +44 (0)1452 550000, with the access 
code: 6018077#.



Enquiries:

Vernalis plc                                           +44 (0) 118 977 3133
Simon Sturge, Chief Executive Officer
Tony Weir, Chief Financial Officer
Julia Wilson, Head of Corporate Communications

Brunswick Group                                        +44 (0) 20 7404 5959
Jon Coles
Wendel Verbeek

Safe Harbour statement: this news release may contain forward-looking statements
that reflect the Company's current expectations regarding future events.
Forward-looking statements involve risks and uncertainties. Actual events could
differ materially from those projected herein and depend on a number of factors
including the success of the Company's research strategies, the applicability of
the discoveries made therein, the successful and timely completion of clinical
studies, the uncertainties related to the regulatory process, the successful
integration of completed mergers and acquisitions and achievement of expected
synergies from such transactions, and the ability of the Company to identify and
consummate suitable strategic and business combination transactions.
     
     
1.   Operational Review

Marketed Products


Frova(R)

  • Vernalis exercised its Frova(R) co-promote option with Endo in February
    2005. Vernalis receives funding and assistance from Endo for up to 25
    specialty neurology sales representatives for up to 5 years
  • In January 2006, Vernalis launched its 34-person U.S. neurology sales
    force to co-promote Frova(R) alongside its licensing partner, Endo, as well
    as to market Apokyn(R)
  • U.S. net sales of Frova(R) in 2005 totalled $38.1 million. Vernalis
    received a fixed anniversary payment of $15.0 million from Endo in 2005 and
    will receive a second and final anniversary payment of $15.0 million in
    2006. From 1 January 2007 Vernalis will receive royalty payments
  • Frova(R) is marketed in Europe by Vernalis' licensee Menarini. Vernalis
    revenues for 2005 amounted to £3.0 million (£2.0 million in 2004), arising
    from Menarini's sales

Apokyn(R)

  • Vernalis owns exclusive North American commercial rights to the marketed
    product Apokyn(R), which is registered for rescue therapy in patients with
    advanced Parkinson's disease
  • Apokyn(R) was granted orphan drug designation by the FDA and has market
    exclusivity until 2011
  • Apokyn(R) sales from 4th November 2005 (the acquisition date) to 31st
    December 2005 amounted to $0.9 million
  • Estimated North American Apokyn(R) sales in 2006 will be in the range of
    $6.0 million to $7.5 million


Clinical Development Portfolio

Pain Franchise

  • Frova(R) for MM - All patients have completed treatment in the Phase III
    confirmatory efficacy study to support a label extension for the
    intermittent, short-term prevention of MM. In December 2005, results from
    the completed Phase III safety study of Frova(R) for the intermittent,
    short-term prevention of MM indicated that the drug's long-term safety
    profile (over 12 menstrual cycles) is consistent with safety data from
    previous shorter-term studies

Next Milestones: Phase III confirmatory efficacy study results expected in May
2006. If positive, FDA submission of full data package is expected in H1 2006

  • V1003 - Vernalis today announced the outcome of a Phase II trial of
    V1003. The primary end point of pain relief over the period of eight hours
    from drug administration was achieved

Next Milestone: Discussions on-going with Reckitt Benckiser on the next
development stage

  • V3381 (formerly CNP3381) - Acquired from Cita, this dual NMDA antagonist
    and MAO-A inhibitor has completed Phase I studies in neuropathic pain

Next Milestone: Phase II study in diabetic neuropathic pain patients expected to
start in H1 2006

Neurology Franchise

  • V1512 (formerly CNP1512) - Acquired from Cita, this patented
    effervescent formulation, combining levodopa methylester and carbidopa, has
    completed Phase II studies for Parkinson's disease

Next Milestone: Phase III study in Parkinson's disease patients expected to
start in H2 2006

  • V2006 - Vernalis' partner Biogen Idec filed an Investigational New Drug
    Application (IND) with the FDA in December 2005 for this adenosine A2A
    receptor antagonist in development as a potential novel treatment for
    Parkinson's disease

Next Milestone: Phase II study in Parkinson's disease patients expected to start
in H1 2006

  • V10153 - In August 2005, Vernalis initiated a Phase IIa study of this
    novel thrombolytic agent for the treatment of acute ischaemic stroke. Due to
    slower than expected patient recruitment, the study is now due to complete
    in Q4 2006. A number of steps have been put in place, including a revision
    of the inclusion criteria and evaluation of additional sites, in order to
    ensure this revised timetable is met

Next Milestone: Completion of Phase IIa study in acute ischaemic stroke expected
in Q4 2006

Other Programmes

  • Hsp90 - Vernalis' partner Novartis selected a pre-clinical development
    candidate for this potential oncology treatment

Next Milestone: Phase I study expected to start in H2 2006

  • MMP-12 - Vernalis' partner Serono started a Phase I study in January
    2005 of this matrix metalloprotease inhibitor-12 looking at its therapeutic
    potential in inflammatory disorders including multiple sclerosis patients

Next Milestone: Serono is undertaking and funding all development activities
associated with the programme with Vernalis receiving milestone and royalty
payments

  • V24343 - This potent and selective cannabinoid receptor antagonist
    programme progressed from research into pre-clinical development for the
    potential treatment of obesity and related disorders

Next Milestone: Phase I study expected to start in H2 2006



Pain Franchise

Frova(R) - Acute Migraine

Frova(R) is a selective 5-HT1B/1D receptor agonist approved as an acute oral
treatment for migraine headache and its associated symptoms. It is one of a
class of prescription drugs called triptans, a number of which are already
approved for this acute indication. Frova(R) is distinguished from other
triptans by its long half-life and is also being developed for the intermittent,
short-term prevention of menstrual migraine.

Vernalis co-promotes Frova(R) in the U.S. with Endo Pharmaceuticals. Endo
re-launched the product during 2005 with an expanded sales force and a new
marketing strategy focused on the benefits of Frova(R)'s long duration of
action. These messages are beginning to resonate with the targeted neurologists,
evidenced by a growth in the number of prescriptions from this community in
addition to the general market.

In Europe, frovatriptan is marketed in nine countries by Menarini. The drug was
approved throughout the then 15 member states via the mutual recognition
procedure in January 2002, with France acting as the reference member state.
Menarini launched the product in Germany, the first European market, during
November 2002. Subsequent launches have taken place in The Republic of Ireland,
the United Kingdom, Austria, The Netherlands, Italy, Spain, Greece and Slovakia.
Frovatriptan sales have grown steadily, with strong market share gains in both
Germany and Menarini's home territory of Italy. In Germany and Italy
frovatriptan currently represents in excess of 10% and 11%, respectively, of the
overall triptan market share. In December 2004, Menarini successfully completed
a second round of mutual recognition to include the EU accession countries as
well as Iceland and Norway.  Frovatriptan has also been approved in Switzerland,
Bulgaria, Romania and six Central American countries with further launches
expected in these markets during 2006.

U.S. net sales of Frova(R) in 2005 amounted to $38.1 million (2004: $33.3
million). Endo's new marketing efforts, focused on neurologists, resulted in a
growth in prescriptions from this community as Endo and Vernalis pave the way
for the expanded label for the intermittent, short-term prevention of MM.
Vernalis received a fixed payment of $15 million from Endo in September 2005.
Vernalis' gross revenues from Menarini's sales of frovatriptan in Europe
increased to £3.0 million (2004: £2.0 million).

Frova(R) - Menstrual Migraine

Vernalis is currently completing further studies aimed at obtaining approval for
Frova(R) for use as an intermittent, short-term prevention of MM, a form of
migraine suffered by over 60 percent of female migraineurs. In the U.S., this
represents approximately 12 million women. None of the triptan class of drugs is
currently approved for this indication and Frova(R)'s long half-life
(approximately 26 hours) suggests that it might be an appropriate treatment for
this novel application. Vernalis has successfully completed two Phase III
studies, including an initial efficacy study and a 12 month safety study. A
confirmatory efficacy study is currently on-going in order to complete the data
package for a supplemental New Drug Application (sNDA) to the FDA.

Initial Efficacy Study: In October 2002, positive study data were first
presented from a study of more than 500 menstrual migraine sufferers in the
U.S., suggesting that short-term prevention with Frova(R) was effective in
preventing migraine headaches triggered by menstruation. The study was a
crossover design covering three menstrual cycles in which patients were
administered each of placebo, once-daily and twice-daily dosing with Frova(R)
for one month. The data demonstrated a highly statistically significant
improvement in the numbers of patients who were headache-free during their
menstrual cycles for both once and twice-daily dose regimens of Frova(R)
compared to placebo (p < 0.0001). These data were published in a leading
journal, Neurology (2004, 63: 261-269).

Safety Study: In December 2005, Vernalis announced data from a long-term safety
study that investigated the higher dose regimen from the initial efficacy study.
Female patients were administered Frova(R) for six days each month (2 x 2.5 mg
twice-daily on day one, and 2.5 mg twice-daily for five days) covering their
menstrual cycles. The study results indicated that Frova(R) is well-tolerated
when used as a six-day dosing regimen for up to twelve menstrual periods as
preventive therapy for MM. Importantly, more than 300 patients received twelve
months of treatment, exceeding the study objective of treating 100 patients for
twelve menstrual cycles.

Confirmatory Efficacy Study: Over 550 patients who were difficult to treat using
acute therapies were included in the confirmatory study, which is investigating
the same treatment regimens that were found to be efficacious in the initial
efficacy study. Patients were treated for six days each month covering their
menstrual cycle starting two days before the expected onset of headache and were
randomised to either placebo, once-daily or twice-daily dosing with Frova(R) for
three menstrual cycles. All patients have completed treatment and the results
from the study are expected in May 2006. Provided the positive initial study
results are confirmed, Vernalis plans to undertake regulatory submission to the
U.S. FDA during H1 2006. The regulatory review of the sNDA for the MM indication
is anticipated to take twelve months after submission. If approved by the FDA
for this expanded indication, Vernalis will receive a $40 million milestone
payment from Endo.

V1003 - Post-Operative Pain

V1003 is a novel, proprietary intranasal formulation of buprenorphine, an opiate
analgesic, for the management of post-operative pain in hospital and home
settings. Vernalis is developing the product in partnership with Reckitt
Benckiser, who manufacture and market buprenorphine globally. Buprenorphine is a
well-known analgesic and the proprietary intranasal formulation has the
potential to provide a convenient alternative to current treatments, enabling
patients to manage post-operative pain prior to hospital discharge, as well as
at home during recovery. Two successful Phase I clinical studies have been
completed and have demonstrated rapid attainment of potentially analgesic plasma
levels.
Vernalis today announced the achievement of the primary end point of a Phase IIa
study of V1003 for the management of post-operative pain. The randomized, double
blind, placebo-controlled single dose Phase IIa study in 360 patients undergoing
bunionectomy compared V1003 to both placebo and Vicodin(R), one of the most
widely prescribed oral pain killers. The primary end point was pain relief over
the period of eight hours from drug administration.

A range of four doses of V1003 was investigated: 0.1, 0.2, 0.4 and 0.6 mg. These
were compared to Vicodin(R) (hydrocodone 10mg, paracetamol 1g) and placebo, with
an equal number of patients in each of the six study groups. The results
demonstrated that doses of V1003 of 0.2 mg and above were statistically superior
to placebo for the primary end point. A dose response was demonstrated for V1003
and the highest dose tested (0.6 mg) was statistically superior to Vicodin(R)
for pain relief with a strong trend to superiority at lower doses. A similar
pattern was observed in the secondary efficacy measure of time to rescue
medication with V1003, once again demonstrating a strong trend to superiority
over Vicodin(R).

There were no serious adverse events reported in the trial, and there were few
reports of local irritancy following the nasal delivery of V1003. The most
frequent adverse events associated with V1003 were nausea, vomiting, dizziness,
sleepiness and were in keeping with its status as a potent opiate analgesic.
These events were reported more frequently with V1003 than with Vicodin(R),
which is a weaker opiate, or placebo.
Vernalis and Reckitt Benckiser are working together on the most appropriate
development programme for nasal delivery of buprenorphine.

V3381 - Neuropathic Pain

V3381 is a novel drug candidate that is being developed as a treatment for
neuropathic pain. V3381 has a dual mechanism of action, that of an NMDA
antagonist and an MAO-A inhibitor, that is believed to control pain in both the
peripheral and central nervous system. Neuropathic pain is a chronic form of
pain related to damage to nerves and their signalling processes and, unlike
other forms of pain, is generally non-responsive to current analgesics, does not
diminish over time and can increase in both intensity and area. This type of
pain occurs in later stages of diabetes, post-herpetic neuralgia (shingles),
side effects of chemotherapy, trigeminal (facial) neuralgia, HIV infection,
spinal cord injuries and other nerve injuries (eg amputation).

V3381 has undergone pre-clinical and clinical studies in which it was determined
to be safe and well-tolerated. In two proof of concept studies V3381 achieved a
reduction of the area and intensity of pain reported by volunteers in a model of
neuropathic pain. A maximum tolerated dose study in healthy volunteers has
recently been completed in order to establish the dose range for Phase II
clinical studies. An Investigational New Drug (IND) application has been
submitted to the FDA. Vernalis plans to initiate a Phase II clinical study of
V3381 in diabetic neuropathic pain patients in H1 2006. The randomised double
blind study will assess safety, pharmacokinetics and preliminary efficacy on
multiple doses in the U.S. and Canada.

Neurology Franchise

During 2005 Vernalis has significantly expanded its Parkinson's disease
franchise which now includes the marketed product Apokyn(R) and two development
programmes V1512 and V2006. It is estimated that approximately 1.5 million
people in the U.S. have Parkinson's, a disease that occurs when certain neurons
in an area of the brain called the substantia nigra are damaged or destroyed.
Normally these nerve cells release dopamine - a chemical that transmits signals
between nerve cells (called a neurotransmitter). This signalling pathway
co-ordinates muscle movement and posture so that movements are smooth and
controlled. Everyone loses some dopamine-producing neurons as a normal part of
aging. People with Parkinson's disease, however, have usually lost 80% or more
of their dopamine containing neurons in the substantia nigra and often
experience trembling, muscle rigidity, difficulty walking and problems with
balance and co-ordination. The muscle rigidity, or 'off' episodes, are
debilitating periods of partial loss of movement or total immobility experienced
by patients. The disease is progressive and the signs and symptoms worsen over
time. Although Parkinson's disease may eventually be disabling, the disease
often progresses gradually and most people have many years of productive living
after initial diagnosis.

Apokyn(R) - Advanced Parkinson's Disease

Apokyn(R) is the only therapy available in the U.S. for the acute, intermittent
treatment of immobilising 'off' episodes associated with advanced Parkinson's
disease. It is administered by means of an injector pen, as needed, to treat
periods of immobility in people with advanced disease. In April 2004, Apokyn(R)
received FDA approval with Orphan Drug designation to treat approximately
112,000 Parkinson's patients who experience the severe 'on/off' motor
fluctuations unresponsive to other therapies. It was launched in the U.S. in
July 2004 and acquired by Vernalis from Mylan Bertek in November 2005. Mylan
Bertek originally licensed the product from Britannia Pharmaceuticals Limited in
1999. Apokyn(R) is now marketed by Vernalis' newly established neurology sales
force, which is focusing its promotional efforts on the high-prescribing
neurologists who treat Parkinson's disease and migraine in key U.S. metropolitan
areas.

In clinical studies, Apokyn(R) was shown to be effective in the acute,
intermittent treatment of 'off' episodes, demonstrating a highly significant
improvement in Unified Parkinson 60 Disease Rating Scale (UPDRS) Part III motor
scores at 20 minutes, with statistical improvements in some measures noted as
early as 10 minutes.

Since Apokyn(R) may cause a decrease in blood pressure when first administered:
initial treatment is usually conducted under medical supervision. Initial
administration of Apokyn(R) is also associated with nausea and vomiting, so it
is usual for patients to take an anti-emetic drug prior to initiating treatment.
Evidence suggests, however, that these side-effects become better tolerated with
subsequent administration.

Apomorphine has an established safety record having been marketed in Europe by
Britannia Pharmaceuticals Limited for a number of years as both a sub-cutaneous
injection and a continuous sub-cutaneous infusion using a small portable pump
for patients with frequent fluctuations or who require multiple injections in a
day. In November 2005, Vernalis entered into a collaboration with Britannia to
explore the development of new formulations of apomorphine for the U.S. market.
Vernalis has exclusive rights to Britannia's technology to develop a continuous
sub-cutaneous infusion of apomorphine in the U.S. and to negotiate terms for a
nasal powder formulation of apomorphine, which is currently in Phase II clinical
studies in Europe.

V1512 - Parkinson's Disease

V1512 is an innovative, patented effervescent formulation combining levodopa
methylester, a more soluble form of levodopa, and carbidopa. Levodopa, commonly
known as L-dopa, has been the cornerstone of Parkinson's disease treatment for a
number of years. L-dopa, however, has side effects and becomes less effective
during disease progression. After a number of years of treatment, patients often
develop unwanted movements (dyskinesias) despite continuing L-dopa therapy.

There is clinical evidence that V1512 may reduce the periods when patients
suffer from the debilitating effects of Parkinson's disease, as well as
providing a more effective method of delivering the drug than current therapy.
As Parkinson's disease progresses, patients may experience frequent 'off'
episodes. It is believed that this is caused in part by poor absorption of
L-dopa, as current formulations of the drug are relatively insoluble and may be
delayed in transit through the gastrointestinal tract. V1512 represents a
significant opportunity to improve the effectiveness of L-dopa therapy by
presenting it in a more soluble form (levodopa methylester), which has the
potential to be absorbed more rapidly and consistently and, hence, to provide
enhanced clinical efficacy. Vernalis acquired the worldwide rights, excluding
Italy, to V1512 through its acquisition of Cita NeuroPharmaceuticals in December
2005.

Eighteen clinical studies, including two European Phase II clinical studies and
a proof of concept study, have been completed involving levodopa methylester
alone or as part of V1512. In these studies, 696 volunteers and patients have
received the drug without any significant safety or tolerability issues. These
studies achieved statistical significance with respect to the studies' primary
end-point, being faster onset of action (8.5 minutes faster activity per dose in
patients with one or two times per day dosing); increased mobility time after
each dose (15.4 minutes less 'off' episodes per dose in patients); improved
reliability of drug response compared to current levodopa-based drugs (important
in patients with gastrointestinal dysfunctions) and increased water solubility
resulting in an easier mode of administration (effervescent tablet that
dissolves in three tablespoons of water). The studies supported regulatory
approval for the drug in Italy where it is now marketed by Chiesi for rescue
(fast onset) in Parkinson's disease.

Vernalis plans to initiate a Phase III programme of V1512 in H2 2006 aimed at
obtaining regulatory approval in North America and Europe. The primary end-point
for these pivotal studies will be the reduction of total daily 'off' episodes.
Also in H2 2006, Vernalis plans to initiate a pharmacokinetic study of V1512 in
Parkinson's disease patients in order to compare the plasma levels of L-dopa
with Sinemet(R), the most widely prescribed form of L-dopa treatment for
Parkinson's disease patients in the U.S.

V2006 - Parkinson's Disease

V2006 is an adenosine A2A receptor antagonist in development as a potential
novel treatment for Parkinson's disease. A2A receptor antagonists may possess
advantages over conventional dopaminergic therapies, helping to restore motor
function in patients with Parkinson's disease with fewer of the side-effects
such as nausea and dyskinesia (uncontrolled movements) associated with
conventional dopaminergic treatments.

Phase I development of V2006 has been completed. In June 2004, Vernalis entered
into an agreement with Biogen Idec to develop and commercialise V2006. Biogen
Idec is conducting and funding future development and will pay milestones and
royalties on the successful development and commercialisation of products.
Vernalis has an option to co-promote products arising out of this collaboration
in the U.S.  Biogen Idec filed an IND in December 2005 with plans to commence
Phase II studies in H1 2006.

V10153 - Ischaemic Stroke

V10153 is a novel thrombolytic protein which is being developed for the
treatment of acute ischaemic stroke; a type of stroke that is caused by blockage
of a blood vessel, unlike a hemorrhagic stroke which is caused by bleeding.
Ischaemic stroke is the most common type of stroke, accounting for over 80
percent of all strokes and occurs when a blood clot (thrombus) forms and blocks
blood flow in an artery bringing blood to part of the brain.
Current therapeutic options for stroke sufferers are severely limited. Only one
agent, recombinant tissue plasminogen activator (rtPA), is approved for use in
the acute setting and treatment must be administered within the first three
hours after a stroke has occurred. In August 2005, a multi-centre Phase II
clinical study of V10153 commenced with the aim to determine whether this novel
thrombolytic can safely benefit patients who have recently experienced an acute
ischaemic stroke up to nine hours after the stroke has occurred. The study is
being conducted in two parts, with Part A designed to identify a safe and
potentially efficacious dose of V10153. Due to slower than expected patient
recruitment, the study is now due to complete in Q4 2006.  A number of steps
have been put in place, including a revision of the inclusion criteria and
evaluation of additional sites, in order to meet this revised timetable. Part B
of the study will be a placebo controlled extension of the study to confirm the
initial indications of efficacy from Part A, subject to satisfactory regulatory
review.

V10153 was initially evaluated by a consortium of cardiologists in the U.S. and
Europe (the TIMI Study Group) in a Phase IIa ascending dose study to establish
proof-of-concept (i.e. that it can dissolve clots and restore coronary
bloodflow) in patients who have suffered acute myocardial infarction (AMI). Data
showed that V10153 was well-tolerated throughout the dose range of 1-10 mg/kg in
patients with AMI. Restoration of bloodflow was observed in blocked coronary
arteries in up to 40 percent of patients after 60 minutes following doses of 5
mg/kg and greater. These results are comparable to the efficacy reported for
other marketed thrombolytic therapies using a similar experimental protocol.
V10153 was found to be safe in the range of doses tested.
Vernalis is developing a large scale manufacturing process for V10153 to provide
product for Phase III studies in collaboration with Diosynth, a division of Akzo
Nobel.

Other Programmes

V24343 - Obesity

Vernalis' research group has successfully progressed a series of potent and
selective cannabinoid receptor antagonists as novel treatments for obesity.
According to the World Health Organisation, obesity is a major contributor to
the global burden of chronic disease and disability and has reached global
epidemic proportions, with more than one billion adults overweight and at least
300 million of these considered clinically obese. CB1 receptors, initially
identified in the brain, are also present in several other peripheral tissues,
including adipocytes (fatty tissues). These receptors are part of the
endocannabinoid system, a natural physiological system that is thought to play a
role in the regulation of both appetite and peripheral energy metabolism,
thereby affecting body weight.
In August 2005, V24343 was selected as the lead clinical candidate and a
pre-clinical programme, which includes process and formulation development,
pre-clinical safety and drug metabolism and pharmacokinetics, is underway.
Phase I studies are expected to commence in H2 2006.


MMP-12 - Multiple Sclerosis

This specific inhibitor of MMP-12, with therapeutic potential in inflammatory
disorders including multiple sclerosis, entered into a Phase I study in January
2005. It is the first compound to enter the clinic resulting from the research
collaboration with Serono focused upon identifying selective metalloenzyme
inhibitors (MEI) for the treatment of serious inflammatory diseases.  The
primary objectives of the Phase I study are to elucidate the safety,
tolerability and pharmacokinetic properties of the compound.  Serono will
conduct and fund all development activities associated with the programme with
Vernalis receiving milestone and royalty payments.

Hsp90 inhibitors - Oncology

Inhibition of Hsp90 is believed to have significant potential in the treatment
of a broad range of cancers. This programme is utilising the company's
structure-based design technology to identify potent and specific inhibitors of
this novel drug target for use against various cancers.
In December 2003, Vernalis formed a research collaboration with the Novartis
Institutes for BioMedical Research, Inc., (Novartis) to investigate inhibitors
of Hsp90.  After an initial six-month evaluation period, Novartis exercised its
option to license exclusive worldwide rights to Vernalis' Hsp90 inhibitors. The
companies are conducting a joint research programme under which Novartis
provides research funding to Vernalis for an initial three-year period. In
addition, Novartis is responsible for funding and conducting the development of
product candidates as well as for commercialisation.

In December 2005, Vernalis announced that Novartis had selected a preclinical
development candidate. This triggered a $1.5 million milestone payment to
Vernalis. The compound is expected to enter clinical development in H2 2006.

Pin1 - Oncology

In March 2005, Vernalis acquired the intellectual property rights, know-how and
associated assets relating to an oncology target Pin1 from Pintex
Pharmaceuticals Inc. A programme is underway to discover development candidates
acting against the Pin1 target. Pin1 over expression is observed in a number of
cancer indications and Vernalis is looking to capitalise on its success with
Hsp90 through utilising its structure-based drug discovery suite of
technologies.

2. Expected Development Progress

   • Frovatriptan: MM efficacy data                                   May 06

   • Frovatriptan: MM FDA regulatory submission                       H1 06

   • V2006: Initiate Phase II (Biogen Idec)                           H1 06

   • V3381: Start of Phase II in neuropathic pain                     H1 06

   • V10153: Completion of Phase IIa in stroke                        H2 06

   • V1512: Start of Phase III in Parkinson's disease                 H2 06

   • V24343: Start of Phase I in obesity and related disorders        H2 06

   • Hsp90: Initiate Phase I (Novartis)                               H2 06

3. Financial Review

The financial results for the year ended 31 December 2005 are the first annual
results prepared in accordance with International Financial Reporting Standards
(IFRS). In accordance with IFRS 1, the results for the year ended 31 December
2004 have been restated to comply with IFRS.

Income Statement

The loss for the year ended 31 December 2005 was £32.8 million (2004: £25.7
million). The increase is principally due to higher levels of research and
development expenditure, interest payable and similar charges, and goodwill
impairment. Non-cash charges relating to goodwill impairment, exchange
movements, intangible asset amortisation, share option charges and movement in
provisions amounted to £11.5 million (2004: £7.0 million).

Turnover was £14.1 million (2004: £15.2 million) and comprised £3.0 million in
respect of Frova(R) product sales and royalties (2004: £10.0 million), £0.5
million in respect of Apokyn(R) sales (2004: £nil) and £10.4 million in respect
of revenue recognised under collaboration and similar agreements (2004: £5.2
million) and other revenues of £0.2 million (2004: £nil). In 2005, the
frovatriptan income comprised solely European generated revenues arising from
Menarini's sales of £3.0 million (2004: £2.0 million) as no variable royalty is
received from Endo until 1 January 2007. In 2004, Frova(R) revenues from North
America amounted to £8.0 million comprising royalties and product sales prior to
the licensing to Endo on 17 August 2004. Apokyn(R) revenues of £0.5 million
(2004: £nil) represent product sales from 4 November 2005, when the product was
acquired from Mylan, to 31 December 2005. Revenues from collaboration and
similar agreements amounted to £3.2 million (2004: £1.3 million) in respect of
Frova(R), including recognition of a proportion of the US $15 million
anniversary payment from Endo that was received in September 2005. Other
collaboration income amounted to £7.2 million (2004: £3.9 million) and related
to the agreements with Novartis, Serono, Reckitt Benckiser and Biogen.

Cost of sales amounted to £5.0 million (2004: £5.6 million) and comprised £0.1
million in respect of Apokyn(R) (2004: £nil) and £1.2 million in respect of
European sales of frovatriptan (2004: £0.9 million) and £3.7 million in respect
of amortisation of the cost of acquiring the product rights to Frova(R) and
Apokyn(R) (2004: £2.7 million). In 2004, cost of sales for Frova(R) in North
America amounted to £2.0 million.

Research and development expenditure increased to £26.5 million (2004: £21.4
million). In 2005, expenditure of £17.3 million (2004: £14.5 million) was
incurred on internally funded R&D and £9.2 million (2004: £6.9 million) on
external costs associated with development of the product portfolio. The
increase in external costs is due to additional costs on the Phase III
development of Frova(R) for MM. The increase in internal costs reflects higher
average headcount levels and inflation.

Selling, general and administrative expenses amounted to £15.5 million (2004:
£15.7 million) and comprised goodwill impairment of £6.4 million (2004: £nil)
and other costs of £9.1 million (2004: £15.7 million). The goodwill impairment
charge in 2005 has arisen due to the discontinuation of V140. Sales and
marketing expenditure increased to £1.6 million (2004: £1.3 million) due to the
establishment of the US commercial operation. Other administrative costs
decreased to £7.4 million (2004: £8.5 million) due to lower levels of
professional fees. Restructuring costs have decreased to £0.1 million (2004:
£1.5 million) and in 2004, administrative expenses also included a charge of
£4.4 million in respect of vacant leases.

As a result, the operating loss for the year increased to £32.8 million (2004:
£27.5 million).

Interest receivable and similar income increased to £3.9 million (2004: £2.9
million). Bank interest increased to £2.0 million (2004: £0.7 million) due to
the higher average cash balances following the Placing and Open Offer in
February 2005. Exchange gains amounted to £1.3 million (2004: £1.7 million) and
an implicit interest receipt of £0.5 million (2004: £0.5 million) was recorded
relating to the fair value accounting for the accrued income due from Endo in
2005 and 2006. Interest payable and similar charges increased to £5.5 million
(2004: £2.8 million). Loan interest increased to £1.5 million (2004: £0.9
million) due to a full year's expense in relation to the $50 million loan from
Endo. Exchange losses increased to £3.7 million (2004: £0.7 million) and
principally resulted from retranslation of the loan from Endo due to the
weakening of sterling compared with the US dollar during 2005.

The tax credit of £1.6 million (2004: £1.8 million) represents amounts that are
expected to be received under current legislation on research and development
tax credits for small and medium-sized companies.

Balance Sheet

Non-current assets increased to £91.7 million (2004: £50.9 million). Property,
plant and equipment increased slightly to £1.9 million (2004: £1.6 million).
Goodwill decreased to £4.9 million (2004: £8.0 million) since the goodwill
arising in the year on the acquisition of Ionix and Cita of £3.2 million was
offset by the impairment charge of £6.4 million following the decision to
discontinue development of V140. Intangible assets increased to £84.3 million
(2004: £33.2 million) due to the acquisition of the rights to Apokyn(R) and the
development programmes acquired through the acquisition of Ionix and Cita. The
principal intangible assets acquired during the year were £9.8 million for
V1003, £15.5 million for V1512, £16.1 million for V3381, and £13.0 million for
Apokyn(R). The valuation of Apokyn(R) is based on the acquisition price. For the
development programmes, V1003, V1512 and V3381, which were acquired as part of
business combinations, the valuation is based on the risk adjusted expected net
present value of future cash flows. In 2004, non-current assets included £7.4
million ($15 million) due from Endo after more than one year.

Current assets increased to £93.1 million (2004: £53.7 million) due principally
to the fund raisings in February 2005 and November 2005. Inventories increased
to £0.8 million (2004: £nil) and related to stocks of Apokyn(R). Trade and other
receivables increased to £24.0 million (2004: £20.4 million). Trade receivables
increased to £2.3 million (2004: £0.9 million) and reflected £0.5 million owed
by Menarini for frovatriptan sales in Europe and £1.8 million due under
collaboration agreements. Research and development tax credits decreased to £4.0
million (2004: £6.4 million) following payment of some earlier claims. Other
receivables increased to £13.0 million (2004: £8.3 million) due to an amount of
£3.6 million in respect of a tax-assisted financing arrangement entered into by
Cita. There is an equal amount included within other payables and the
arrangements were unwound on 6 January 2006. Other receivables also include £8.7
million representing $15 million due from Endo in September 2006. Cash
resources, comprising held to maturity financial assets of £28.1 million (2004:
£15.0 million) and cash and cash equivalents of £40.2 million (2004: £18.3
million), increased to £68.3 million (2004: £33.3 million). The reasons for the
increase are explained in the cash flow section below.

Non-current liabilities were £69.6 million (2004: £67.0 million) and current
liabilities were £32.3 million (2004: £19.7 million). Borrowings reflect the $50
million loan from Endo which is repayable in 2009 and increased to £30.9 million
(2004: £26.4 million). The increase was due to the roll-up of interest and
exchange movements on the weakening of sterling compared to the US dollar.
Deferred income totalled £31.6 million (2004: £36.1 million) of which £5.1
million (2004: £4.8 million) was due within one year and £26.5 million (2004:
£31.3 million) was due in more than one year. The balance relates to a portion
of the initial payments received from Endo, Biogen Idec and Novartis in
connection with the collaboration agreements which commenced in 2004. The
initial amounts received from Endo are being recognised over the patent life of
Frova(R) and, for Biogen Idec and Novartis, over the expected useful lives of
the agreements. The reduction in deferred income in the year was due to the
transfer of a portion to the profit and loss account. Provisions totalled £8.9
million (2004: £10.5 million) of which £4.1 million (2004: £3.7 million) was
within current liabilities and £4.8 million (2004: £6.9 million) was within
non-current liabilities. The balance is made up of £4.7 million (2004: £5.7
million) in respect of vacant leasehold properties, £1.7 million (2004: £1.7
million) in respect of dilapidation obligations at the end of property leases
and £2.2 million (2004: £3.0 million) in respect of Frova(R) returns and rebates
prior to the collaboration with Endo. Trade and other payables totalled £30.4
million (2004: £13.7 million) of which £23.0 million (2004: £11.2 million) was
within current payables and £7.4 million (2004: £2.5 million) was within
non-current payables. The principal reason for the increase is the recognition
of £11.8 million (2004: £nil) in respect of the deferred consideration that may
become payable following the acquisition of Cita. The deferred consideration is
recognised to the extent that it is considered more likely than not that it will
become due. If any deferred consideration becomes due, Vernalis has the option
to satisfy the obligation by either the issue of shares or a cash payment. An
amount of £7.2 million is recognised within current payables and £4.6 million
within non-current payables. Other increases are due to the payable related to
the tax assisted finance (described above) of £3.6 million, the assumption of
£1.8 million liabilities on the acquisition of Cita and £1.3 million of unpaid
transaction costs relating to the placing and acquisition of Cita.

Vernalis' share capital was increased during the year due principally to the
acquisitions of Ionix and Cita and two placings of the ordinary shares. On 22
March 2005, 43,250,107 new ordinary shares were issued following a Placing and
Open Offer at 70 pence per share which raised £30.3 million (£28.4 million net
of expenses). On 26 July 2005, 17,847,769 new ordinary shares were issued in
connection with the acquisition of Ionix. On 14 December 2005, 26,915,831 new
ordinary shares were issued in connection with the acquisition of Cita and
67,749,457 new ordinary shares were issued following a Placing and Open Offer at
63 pence per share which raised £42.7 million (£40.6 million net of expenses).

Cash Flow

Cash resources, comprising held to maturity financial assets and cash and cash
equivalents increased from £33.3 million at 1 January 2005 to £68.3 million at
31 December 2005. The increase of £35.0 million arises as a result of the net
proceeds from two placings of new shares in March 2005 and December 2005
totalling £69.0 million. Excluding the proceeds from financing, cash resources
decreased by £34.0 million of which £18.7 million was utilised in investing
activities and £15.8 million was used in operations offset by exchange gains of
£0.5 million. The amount utilised in investing activities comprised £13.0
million on Apokyn(R), £2.8 million to GSK in respect of the royalty buy-out for
Frova(R), £3.1 million on the costs associated with business combinations, and
£1.3 million on the purchase of tangible and intangible fixed assets (other than
Apokyn(R), V1003, V1512 and V3381) offset by net interest received of £1.6
million. The amount used in operations of £15.8 million benefited from the
receipt of £4.3 million in R&D tax credits.

Outlook for 2006

Income is expected to increase in 2006 as a full year of sales from Apokyn(R) in
North America will be recognised compared with two months in 2005. In addition,
revenues from frovatriptan in Europe are expected to show a small increase. Endo
will make a contractual anniversary payment of $15.0 million to Vernalis in
September 2006 (as in September 2005) in respect of Frova(R) in North America
with a variable royalty based on sales commencing on 1 January 2007. Recurring
revenues, representing release of deferred income from licensing agreements
entered into prior to 31 December 2005 are expected to be approximately £5.1
million. This is a non-cash item and includes recognition of a proportion of the
$15 million payment from Endo. Additional revenues may arise on achievement of
milestones in existing collaborations or any further licensing agreements.

External development costs are expected to increase over 2005 due to expenditure
on the newly acquired products: Apokyn(R), V1512 and V3381; and additional costs
on the manufacture of V10153. Internal R&D expenditure will also increase due to
higher levels of headcount arising from the acquisition of Ionix and Cita and
the broader development portfolio.

The establishment of Vernalis Pharmaceuticals Inc, the Company's North American
commercial operation, and the sales and marketing expenditure to support Apokyn
(R) will also give rise to additional costs in the period.

4. Directors

Mr Keith Merrifield will retire from the Board at the upcoming Annual General
Meeting in May 2006 after 10 years service. The Board would like to thank him
for his wise and very valuable contributions to the company throughout a
prolonged period of considerable change.

Unaudited statement of changes in shareholders' equity
For the year ended 31 December 2005

                                                                2005      2004
                                                      Note      £000      £000

Revenue                                                  2    14,131    15,195
Cost of Sales                                                 (4,991)   (5,573)
Research and development expenditure                         (26,491)  (21,423)
Selling, general and administrative expenses                 (15,483)  (15,722)
                             ------------------------ ------  --------  --------
Selling, general and administrative expenses are as
follows
Restructuring costs                                              102     1,493
Goodwill impairment                                            6,371         -
Provision for vacant lease                                        29     4,401
Other                                                          8,981     9,828
                                                              --------  --------
                                                              15,483    15,722
                             ------------------------ ------  --------  --------

Operating loss                                               (32,834)  (27,523)
Interest receivable and similar income                   3     3,892     2,933
Interest payable and similar charges                     3    (5,490)   (2,821)
                                                              --------  --------
Loss on ordinary activities before taxation                  (34,432)  (27,411)
Tax credit on loss on ordinary activities                      1,584     1,758
                                                              --------  --------
Loss for the period                                          (32,848)  (25,653)
                                                              ========  ========


Loss per share (basic and diluted)                       4     (16.3)p   (17.4)p


The results for the year are derived entirely from continuing activities


Unaudited statement of changes in shareholders' equity
For the year ended 31 December 2005

Group             Share        Share         Other         Retained     Total
                capital      premium      reserves         earnings
                   £000         £000          £000             £000      £000
                -------     --------       -------          -------   -------
Balance at 1
January 2004     38,813      298,226       153,092         (456,201)   33,930
Revaluation
of assets
available        
for sale              -            -           597                -       597
                -------     --------       -------         --------   -------

Net income
recognised
directly in
equity                -            -           597                -       597
Loss for the
year                  -            -             -          (25,653)  (25,653)
                -------     --------       -------         --------   -------
Total
recognised
income and
expense for
the period            -            -           597          (25,653)  (25,056)
Issue of
equity share
capital             679        7,616             -                -     8,295
Equity share
options charge        -            -           728                -       728
                -------     --------       -------         --------   -------
Balance at 31 
December 2004    39,492      305,842       154,417         (481,854)   17,897

Revaluation
of assets
available     
for sale              -            -           (79)               -       (79)
                -------     --------       -------         --------   -------

Net income
recognised
directly in
equity                -            -           (79)               -       (79)
Loss for the
year                  -            -             -          (32,848)  (32,848)
                -------     --------       -------         --------   -------
Total
recognised
income and
expense for
the period            -            -           (79)         (32,848)  (32,927)
Issue of
equity share
capital           7,788       91,903             -                -    99,691
Expenses on
issue of
share capital                 (4,021)            -                -    (4,021)
Shares to be
issued                -            -         1,034                -     1,034
Equity share
options               -            -         1,217                -     1,217
charge
Exchange loss
on translation   
of overseas           -            -           (31)               -       (31)
                -------     --------       -------         --------   -------
subsidiaries
Balance at 31               
December 2005    47,280      393,724       156,558         (514,702)   82,860
                -------     --------       -------         --------   -------


Unaudited balance sheet
At 31 December 2005

                                                          2005            2004
                                          Note            £000            £000
Assets
Property, plant and equipment                            1,910           1,596
Goodwill                                     5           4,851           8,014
Intangible assets                            6          84,345          33,211
Available for sale financial assets                        601             680
Other receivables                            7               -           7,418
                                                      --------         -------
Non current assets                                      91,707          50,919
Inventories                                                752              49
Trade and other receivables                  7          24,013          20,355
Held to maturity financial assets                       28,052          15,000
Cash and cash equivalents                               40,243          18,323
                                                      --------         -------
Current assets                                          93,060          53,727
                                                      --------         -------
Total assets                                           184,767         104,646
                                                      --------         -------
Liabilities
Borrowings                                   8         (30,938)        (26,364)
Other non-current liabilities                9          (7,412)         (2,467)
Deferred income                                        (26,457)        (31,294)
Provisions                                              (4,780)         (6,877)
                                                      --------         -------
Non current liabilities                                (69,587)        (67,002)
Borrowings                                   8             (33)            (18)
Trade and other liabilities                  9         (22,971)        (11,237)
Deferred income                                         (5,147)         (4,839)
Provisions                                              (4,169)         (3,653)
                                                      --------         -------
Current liabilities                                    (32,320)        (19,747)
                                                      --------         -------
Total liabilities                                     (101,907)        (86,749)
                                                      --------         -------
Net assets                                              82,860          17,897
                                                      ========         =======

Equity
Share capital                                           47,280          39,492
Share premium                                          393,724         305,842
Other reserves                                         156,558         154,417
Retained deficit                                      (514,702)       (481,854)
                                                      --------         -------
Total equity                                            82,860          17,897
                                                      --------        --------

Unaudited cash flow statements
For the year ended 31 December 2005

                                                              2005       2004
Cash flows from operating activities                          £000       £000

Loss before tax                                            (34,432)   (27,411)
Depreciation                                                   921      2,327
Loss on disposal of tangible fixed assets                       12        836
Amounts written off goodwill                                 6,371          -
Amortisation of intangible fixed assets                      3,983      2,664
Amounts written off investments                                  -        (12)
Option charge                                                1,217        728
Interest receivable                                         (3,892)    (2,933)
Interest payable                                             5,490      2,821
Exchange gain                                                 (511)      (366)
                                                           -------    -------
                                                           (20,841)   (21,346)
Changes in working capital
(Increase)/decrease in receivables                           7,914    (16,178)
(Decreased)/increase in liabilities                           (133)       355
(Decrease)/increase in provisions                           (1,807)     4,260
(Decrease)/increase in deferred income                      (4,529)    35,299
Increase in inventories                                       (703)         -
                                                           -------    -------
Cash (used in)/generated from operations                   (20,099)     2,390
Taxation received                                            4,284      1,129
Interest paid                                                   (8)      (216)
                                                           -------    -------
Net cash (used in)/generated from operating activities     (15,823)     3,303
Cash flows from investing activities
Purchase of tangible fixed assets                             (589)      (101)
Acquisition of subsidiary undertaking                       (3,104)         -
Sale of tangible fixed assets                                    -      3,250
Purchase of intangible fixed assets                        (16,570)   (30,841)
Sale of investment                                               -         12
Interest received                                              710         19
Interest received on financial assets held to maturity         898        664
                                                           -------    -------
Net cash used in investing activities                      (18,655)   (26,997)
Cash flows from financing activities
Finance charge on US dollar secured loan                         -       (372)
Interest payable on US dollar secured loan                       -       (388)
Receipt of US dollar secured loan                                -     27,539
Repayment of sterling secured loan                               -     (1,485)
Movement in held to maturity financial assets              (13,052)    (6,933)
Issue of shares                                             72,958      8,295
Share issue costs                                           (3,996)         -
Capital element of finance lease payments                      (23)      (738)
                                                           -------    -------
Net cash generated from financing activities                55,887     25,918

Foreign exchange on cash and cash equivalents                  511        (48)
                                                           -------    -------
Movements in cash and cash equivalents in the period        21,920      2,176
Cash and cash equivalents at the beginning of the period    18,323     16,147
                                                           -------    -------
Cash and cash equivalents at the end of the period          40,243     18,323
                                                           =======    =======

Notes to the financial statements
For the year ended 31 December 2005

1 Accounting policies and basis of preparation

Basis of preparation
Prior to 2005 the Group prepared its audited annual financial statements under
UK Generally Accepted Accounting Practices (UK GAAP). For the year ended 31
December 2005, the Group is required to prepare its annual consolidated
financial statements in accordance with accounting standards adopted in the
European Union (EU). As such those financial statements will take account of the
requirements and options in IFRS 1 'First-time Adoption of International
Financial Reporting Standards (IFRS)' as they relate to the 2004 comparatives
included therein.

The financial information based on IFRS for the year ended 31 December 2004 and
31 December 2005 is unaudited and has been prepared in accordance with the
Group's accounting policies. The financial statements have been prepared under
the historical cost convention as modified by the revaluation of available for
sale investments and certain other financial assets and liabilities. A summary
of the more important group accounting policies is set out below.

Certain of the requirements and options in IFRS 1 relating to comparative
financial information presented on first-time adoption may result in a different
application of accounting policies in the 2004 restated financial information to
that which would apply if the 2004 financial statements were the first financial
statements of the Group prepared in accordance with IFRS. An explanation of how
the transition from UK GAAP to IFRS has affected the Group's financial position,
income statement and cash flow was set out in the interim results to June 2005
which are available on the company website.

The preliminary financial information has not been audited and does not
constitute statutory accounts within the meaning of Section 240 of the Companies
Act 1985. The Company's statutory accounts for the year ended 31 December 2004,
prepared under UK GAAP, have been delivered to the Registrar of Companies; the
report of the auditors on these accounts was unqualified and did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.

Accounting policies

Basis of consolidation
The consolidated financial statements include the financial statements of
Vernalis Plc and its subsidiaries.

Share-based payments
The Group makes equity-settled and cash-settled share-based payments to its
employees and directors. Equity-settled share-based payments are measured at
fair value at the date of grant and expensed on a straight-line basis over the
vesting period of the award. At each balance sheet date, Vernalis revises its
estimate of the number of options that are expected to become exercisable.

Cash-settled share based payments are accrued over the vesting period of the
award based on the current expected fair value at each balance sheet date.

When share options are exercised, the proceeds received net of any transaction
costs, are credited to share capital (nominal value) and share premium.

Intangible assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value
of the Group's share of the identifiable net assets (including intangible
assets) of the acquired subsidiary at the acquisition date. Goodwill is not
subject to amortisation but is tested at each balance sheet date for impairment
and is carried at cost less accumulated impairment losses. Gains and losses on
disposal of an entity include the carrying amount of goodwill relating to the
entity or investment sold. Goodwill that was previously directly written off to
reserves under UK GAAP is not included in the gain or loss on disposal of an
entity.

Internally generated intangible assets - Product research and development
Expenditure on new or substantially improved products is capitalised as an
intangible asset and amortised over the expected useful life of the product
concerned. Capitalisation commences from the point at which the technical
feasibility and commercial viability of the product can be demonstrated and the
Group is satisfied that it is probable that future economic benefit will result
from the product once completed. This is usually at the point of regulatory
filing in a major market. Capitalisation ceases when the product is ready for
launch.

Expenditure on research and development activities which do not meet the above
criteria is charged to the income statement as incurred.

Other Intangibles
Other intangibles are recognised when they have been acquired separately for
cash or other monetary assets. Assets acquired which are used in product
development are not amortised until they are included in a commercially
available product. To this point they are therefore subject to annual impairment
review.

Impairment of assets
Assets that are not subject to amortisation are tested at each balance sheet
date for impairment. Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the assets carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of an asset's fair value less cost to sell and
value in use. For the purpose of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (cash
generating units).

Investments
The Group classifies its investments in the following categories: loans and
receivables, held to-maturity investments and available-for-sale financial
assets. The classification depends on the purpose for which the assets were
acquired. Management determines the classification of its investments at initial
recognition and re-evaluates this designation at every reporting date.

At each balance sheet date management assesses whether there is objective
evidence that a financial asset or group of financial assets is impaired. On
disposal or impairment of the investment, gains or losses recorded in equity are
recycled through the income statement.

Loans and receivables
Loans and receivables are non-derivative financial assets or liabilities with
fixed or determinable payments that are not quoted in an active market. Assets
in this category are recognised at amortised cost and included in trade and
other receivables, and loans in the balance sheet.

Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or
determinable payments and fixed maturities that the Group's management has the
positive intention and ability to hold to maturity. Assets in this category are
held at amortised cost. Held-to-maturity investments include short term
investments with original maturities of more than 90 days.

Available-for-sale financial assets
Available for sale financial assets are non-derivative financial assets that are
designated as available for sale or are not classified as loans and receivables,
held to maturity investments or financial assets at fair value through the
profit or loss. Assets in this category are recognised at fair value with
unrealised gains and losses arising from changes in fair value recognised in
equity.

Cash and cash equivalents
Cash and cash equivalents include cash in hand, bank deposits repayable on
demand and other short-term highly liquid investments with original maturities
of 90 days or less.

Revenue
Revenue, which excludes value added tax, represents the value of goods and
services supplied. Product sales are recognised on despatch to the customer, net
of a provision for expected sales returns and rebates to be paid in future
years. Non-refundable access fees, options fees and milestone payments
receivable for participation by a third party in commercialisation of a compound
are recognised when they become contractually binding provided there are no
related commitments of the Group. Where these receipts are inducements to enter
into contracts, they are recognised over the expected life of the contract.
Where there are related commitments, revenue is recognised on a percentage of
completion basis in line with the actual levels of expenditure incurred in
fulfilling these commitments. All other licence income and contract research
fees are recognised over the accounting period to which the relevant services
relate. Revenues derived from grants received are recognised in line with the
related expenditure. Royalty income is recognised in relation to sales to which
the royalty relates.

2 Revenue

Analysis of Revenue

A geographical analysis of revenue according to the country of registration of
the fee-paying parties is as follows.

                                                     2005                 2004
                                                    £'000                £'000

United Kingdom                                      2,178                  161
Rest of Europe                                      3,622                3,822
North America                                       8,317               11,207
Rest of the World                                      14                    5
                                               ----------            ---------
                                                   14,131               15,195
                                               ----------            ---------

An analysis of revenue by category is set out in the table below:

                                                        2005              2004
                                                       £'000             £'000

Product Sales                                          3,602             9,330
Royalties                                                110               688
Collaborative Agreements                              10,419             5,177
                                                  ----------         ---------
                                                      14,131            15,195
                                                  ----------         ---------

3 Finance Charge (net)

                                                                   2005      2004
                                                                   £000      £000
Interest receivable and other similar income
Interest on cash, cash equivalents and held-to-maturity assets    1,997       664
Exchange gains on other payable                                       -       468
Exchange gains on long term loan                                      -     1,266
Exchange gains on other receivable                                1,320         -
Unwinding of discount on other receivable                           531       529
Other interest                                                       44         6
                                                             ---------- ---------
                                                                  3,892     2,933
Interest payable and similar charges
Loans repayable wholly or partly within five years                1,489       866
Finance leases                                                        4       107
Exchange loss on other receivables                                    -       686
Exchange loss on long term loan                                   2,987         -
Exchange loss on other payable                                      429         -
Exchange loss on deferred consideration                             257         -
Unwinding of discount on deferred consideration on purchase of
intangible assets                                                     -       519
Unwinding of discount on royalty buy out from GSK                    94       571
Unwinding of discount on provision                                  226         -
Other interest payable                                                4        72
                                                             ---------- ---------
                                                                  5,490     2,821
                                                             ---------- ---------
Net finance (charge)/ credit                                     (1,598)      112
                                                             ---------- ---------

4 Loss per share

                                                              2005        2004

Attributable loss (£000)                                    32,848      25,653
Weighted average number of shares in issue (000)           202,174     147,388
                                                        ----------   ---------
Loss per share (basic and diluted)                           (16.3)p     (17.4)p
                                                        ----------   ---------

All potential ordinary shares including options and deferred shares are
anti-dilutive.

5 Goodwill

For the year ended 31 December 2005                                      £'000

Cost
At 1 January 2005                                                       17,223
Additions through business combinations                                  3,208
                                                                     -----------
At 31 December 2005                                                     20,431
                                                                     -----------

Aggregate impairment
At 1 January 2005                                                        9,209
Impairment charge for the year                                           6,371
                                                                     -----------
At 31 December 2005                                                     15,580
                                                                     -----------

Net book value at 31 December 2005                                       4,851
                                                                     -----------

For the year ended 31 December 2004                                      £'000

Cost
At 1 January 2004 and 31 December 2004                                  17,223
                                                                     -----------

Aggregate impairment
At 1 January 2004 and 31 December 2004                                   9,209
                                                                     -----------

Net book value at 31 December 2004                                       8,014
                                                                     -----------


During the year ended 31 December 2005 goodwill has arisen from the acquisitions
of Ionix Pharmaceuticals Limited and Cita NeuroPharmaceuticals Inc.

6 Intangible Assets

For the year ended 31 December 2005                                      £'000

Cost
At 1 January 2005                                                       38,008
Additions through business combinations                                 41,327
Additions separately acquired                                           13,790
Disposals                                                                 (300)
                                                                       ---------
At 31 December 2005                                                     92,825
                                                                       ---------

Aggregate amortisation
At 1 January 2005                                                        4,797
Charge for the period                                                    3,683
                                                                       ---------
At 31 December 2005                                                      8,480
                                                                       ---------

Net book value at 31 December 2005                                      84,345
                                                                       =========

For the year ended 31 December 2004                                      £'000
Cost
At 1 January 2004                                                       16,488
Additions separately acquired                                           21,520
                                                                       ---------
At 31 December 2004                                                     38,008
                                                                       ---------

Aggregate amortisation
At 1 January 2004                                                        2,133
Charge for the period                                                    2,664
                                                                       ---------
At 31 December 2004                                                      4,797
                                                                       ---------

Net book Value at 31 December 2004                                      33,211
                                                                       ---------

Intangible assets acquired during the year were:

Additions through business combinations                                  £'000

V3381                                                                   16,084
V1512                                                                   15,462
V1003                                                                    9,781
                                                                       ---------
                                                                        41,327
                                                                       ---------

Additions separately acquired                                            £'000

Pintex                                                                     631
Apokyn                                                                  12,992
Britannia                                                                  167
                                                                       ---------
                                                                        13,790
                                                                       ---------

The following useful lives have been determined for the intangible assets:
Apokyn (R) - to 2015
Frova (R) - to 2014

Intangible assets at 31 December 2004 represent the capitalisation of payments
conditionally due to GlaxoSmithKline (GSK) agreed in December 2000 to buy out
royalties due to GSK on sales of frovatriptan, and the consideration paid to
Elan in respect of the re-acquisition of the North American rights to
frovatriptan in May 2004.

7 Trade and other receivables

                                                            2005         2004
                                                            £000         £000

Other receivables                                              -        7,418
                                                          --------     --------
Non current trade and other receivables                        -        7,418

Trade receivables                                          2,292          860
Interest receivable                                          524          122
Research and development tax credits                       3,996        6,433
Other receivables                                         12,969        8,263
Prepayments and accrued income                             4,232        4,677
                                                          --------     --------
Current trade and other receivables                       24,013       20,355
                                                          --------     --------
Total trade and other receivables                         24,013       27,773
                                                          ========     ========

Other receivables at 31 December 2005 includes £8,662,000 (2004: £7,418,000) in
relation to the fair value of the $15 million receivable from Endo in August
2006. During the year an exchange gain of £1,320,000 and an implicit interest
receipt of £531,000 linked to the unwinding of the discount has been recognised
in the income statement in relation to this asset.

8 Borrowings

Non-current
                                                               2005       2004
                                                               £000       £000

US dollar secured loan                                       30,839     26,364
Obligations under finance leases                                 99          -
                                                             --------   --------
Non current borrowings                                       30,938     26,364

Obligations under finance leases                                 33         18
                                                             --------   --------
Current borrowings                                               33         18
                                                             --------   --------
Total borrowings                                             30,971     26,382
                                                             --------   --------

Borrowings included above are repayable as follows:
Under one year                                                   33         18
Over one and under two years                                      -          -
Over two and under five years                                30,938     26,364
Beyond 5 years, by instalments                                    -          -
                                                             --------   --------
                                                             30,971     26,382
                                                             --------   --------

The US dollar secured loan relates to $50 million borrowed from Endo, net of
finance charges of £0.3 million, and interest payable of $3.4million (£2
million) which the Group has elected to roll up into the loan at December 2004
and December 2005. It is secured against all royalty and milestone income
receivable by Vernalis in respect of the licence deal with Endo. Endo have the
right to offset half the royalty payments and milestones payable to Vernalis
against the loan from 2007. The loan is repayable in full in August 2009. The
weighted average interest rate is 5 per cent fixed for the term of the loan.

9 Trade and other liabilities

                                                            2005         2004
                                                            £000         £000

Royalty buy out from GSK (a)                               2,788        2,467
Deferred consideration                                     4,624            -
                                                          ------     --------
Non current trade and other liabilities                    7,412        2,467
                                                          ------     --------

Trade payables                                             3,975        3,134
Taxation and social security payable                         301          226
Other payables (b)                                         3,626           72
Accruals                                                   7,825        5,227
Royalty buy out from GSK (a)                                   -        2,578
Deferred consideration for acquisitions                    7,244            -
                                                          ------     --------
Current trade and other liabilities                       22,971       11,237
                                                          ------     --------
Total trade and other liabilities                         30,383       13,704
                                                          ======     ========

(a) The royalty buyout from GlaxoSmithKline (GSK) relates to the fair value of
payments conditionally due under the agreement of December 2000 to buy out
royalties due to GSK on sales of frovatriptan. The Group is committed to making
one further annual payment of $5 million, the first having been made in
September 2002. A fifth payment of $5 million is due 90 days after cumulative
global sales exceed $300 million. During 2005, an exchange loss of £0.4 million
and an implicit interest charge of £0.1 million have been recognised in the
income statement.

(b) Included within other liabilities (and other receivables) is £3,592,000
(CAD7,204,000) relating to tax assisted finance that was completed by Cita
NeuroPharmaceuticals Inc on 23 December 2004. This arrangement unwound on 6
January 2006.

10 Acquisitions

The Group purchased Ionix Pharmaceuticals Limited and Cita NeuroPharmaceuticals
Inc during the year. Both transactions have been accounted for as acquisitions.
In each case 100% of the voting rights shares were acquired.

All intangible assets acquired have been recognised at their respective fair
values. The fair values incorporated for identifiable intangible assets have
been independently calculated by external consultants. The residual excess of
consideration paid over the fair value of the net assets acquired is recognised
as goodwill in the financial statements.

Shares issued as consideration for the acquisitions were valued at the market
price at the date of acquisition.

Ionix Pharmaceuticals acquisition

On 26 July 2005 the Company acquired Ionix Pharmaceuticals, a company
specialising in the discovery and development of new analgesic medicines for the
treatment of acute and chronic pain. Of the consideration of 19,685,040 ordinary
shares, 17,847,769 (90%) were issued on completion. The remaining balance of 10%
is due to be issued in July 2006 subject to any reduction in the purchase price
for warranty or indemnity claims. The deferred consideration has been included
in the fair value calculations below as the Directors do not consider that any
warranty or indemnity claims are likely to occur.

The pre-acquisition carrying values and provisional fair values of the net
assets acquired were:

                Carrying values pre-acquisition   Fair value adjustments         Provisional fair value
                                          £'000                    £'000                          £'000
Assets
Tangible fixed
assets                                      759                     (283)   (1)                     476
Intangible
fixed assets                                  -                    9,781    (2)                   9,781
                                     ------------               ---------- -----              -----------
Non-current
assets                                      759                    9,498                         10,257
                                     ------------               ---------- -----              -----------
Trade and other
receivables                                 751                        -                            751
Cash and cash
equivalents                                 406                        -                            406
                                     ------------               ---------- -----              -----------
Current assets                            1,157                        -                          1,157
                                     ------------               ---------- -----              -----------
Total assets                              1,916                    9,498                         11,414
Liabilities                                                            -
Current                                                                -
liabilities
Trade and
other payables                             (291)                       -                           (291)
                                     ------------               ---------- -----              -----------
Total
liabilities                                (291)                       -                           (291)
                                     ------------               ---------- -----              -----------
Net assets
acquired                                  1,625                    9,498                         11,123
Goodwill                                                                                            926
                                                                                              -----------
Consideration                                                                                    12,049
                                                                                              -----------
Consideration
satisfied by:
Shares issued                                                                                    11,080
Cash                                                                                                969
                                                                                              -----------
                                                                                                 12,049
                                                                                              -----------

(1) Write down of unwanted Property Plant and Equipment
(2) Purchase price allocation to separately identifiable intangible fixed assets

An additional milestone payment of £5 million is payable on the successful
registration of V1003. This amount has not been provided for.

Cita NeuroPharmaceuticals acquisition

On 14 December 2005 the Company acquired Cita NeuroPharmaceuticals, a Canadian
company focused on the development and commercialisation of small molecule drug
candidates for neurological diseases and disorders. On completion the Company
issued 26,915,831 ordinary shares in the Company as initial consideration.
Deferred consideration of up to US$ 35 million is payable in six equal
instalments upon the achievement of certain milestones. Deferred consideration,
of £11,067,000 has been recognised in the fair value calculations below based on
management's assumptions as to the probabilities of each milestone being
reached.

The pre-acquisition carrying values and provisional fair values of the net
assets acquired were:

                Carrying values pre-acquisition   Fair value adjustments         Provisional fair value
                                          £'000                    £'000                          £'000
Assets
Tangible fixed
assets                                       45                        -                             45
Intangible
fixed assets                              3,443                   28,103    (1)                  31,546
                                     ------------               ----------  ----             ------------
Non-current
assets                                    3,488                   28,103                         31,591
                                     ------------               ---------- -----             ------------
Trade and other
receivables                               3,820                        -                          3,820
Cash and cash
equivalents                                 189                        -                            189
                                     ------------               ---------- -----             ------------
Current assets                            4,009                        -                          4,009
                                     ------------               ---------- -----             ------------
Total assets                              7,497                   28,103                         35,600
Liabilities
Current
liabilities
Trade and
other payables                           (2,196)                       -                         (2,196)
Other payables                           (3,592)                       -                         (3,592)
Provisions                                 (324)                       -                           (324)
Loan                                     (1,155)                    (128)   (2)                  (1,283)
                                     ------------               ---------- -----             ------------
Total
liabilities                              (7,267)                    (128)                        (7,395)
                                     ------------               ---------- -----             ------------
Net assets
acquired                                    230                   27,975                         28,205
Goodwill                                                                                          2,282
                                                                                             ------------
Consideration                                                                                    30,487
                                                                                             ------------
Consideration
satisfied by:
Shares                                                                                           16,688
Cash                                                                                              2,732
Deferred
consideration                                                                                    11,067
                                                                                             ------------
                                                                                                 30,487
                                                                                             ------------

(1) Purchase price allocation to separately identifiable intangible fixed assets
(2) Repayment of loan

Two additional milestone payments of $5.8 million are payable on the successful
registration of V3381. This amount has not been provided for.

There were no acquisitions in the prior year.

11 Post balance sheet events

There have been no post balance sheet events since the year end.




                      This information is provided by RNS
            The company news service from the London Stock Exchange