LONDON (Reuters) - British anti-scarring specialist Renovo RNVO.L has failed to reach a deal in takeover talks, prompting it to cut its headcount by over a third, and sending its shares down as much as 13 percent.
The company said on Thursday it will pare down its operations and concentrate on getting its key drugs to market after takeover talks were unsuccessful.
“(We decided) the restructuring would deliver more near-term and long-term value for shareholders than any offer that could have been contemplated from the preliminary approaches that we received,” Chief Executive Mark Ferguson told Reuters.
The restructuring is expected to cut operating costs by 20 to 30 percent and will leave the company with 25 million pounds to 30 million pounds in cash when it gets its key trial result in 2011 for Juvista, its lead drug.
“They’ve managed to cut costs pretty significantly and I think that’s good because the real value in this business is going to be when the Phase III results come out for Juvista,” said fund manager Jamie Brooke at Gartmore, Renovo’s biggest shareholder.
Juvista — an anti-scarring treatment — is being developed in the U.S. by Shire SHP.L, the British specialty drugmaker which ruled itself out as a possible bidder for Renovo in April.
Renovo said on April 6 that it was in early talks after getting a preliminary approach from an undisclosed company.
It currently employs about 160 staff, although it will not know the exact number of redundancies until it has finished consultations.
Renovo said its executive directors will not get a pay increase this year and will defer any bonus awarded for the year until the Juvista Phase III result.
Shares in Renovo were down by 8 percent to 25.5 pence by 12:10 p.m.. The company's shares have risen by 1 percent in the past three months, compared with the FTSE Small Cap index .FTSC which had risen by 28 percent.
Editing by Matt Scuffham; Editing by Rupert Winchester