The Boards of Vectura and Innovata have reached agreement on the terms of a recommended all share offer by Vectura for the whole of the issued and to be issued share capital of Innovata.

The combination of the two companies will create an Enlarged Group with a portfolio of revenues from marketed products, a strong development pipeline and a range of formulation, device and delivery technologies for drugs inhaled as dry powders.

With its combined expertise, facilities and cash resources, the Boards of Vectura and Innovata believe that the Enlarged Group will be a UK leader in pulmonary product development, a fast growing area of the pharmaceutical industry.

The Enlarged Group will have revenues generated from eight marketed products; benefit from two complementary developments pipelines; be able to offer a range of device and formulation technologies addressing a large and fast growing market sector; be financially strong (combined pro forma cash of £92m at 30 September 2006); and be expected to benefit from an enhanced market presence and increased market capitalisation.
It is proposed that the Acquisition be implemented by way of a Court approved scheme of arrangement under Section 425 of the Companies Act

Under the terms of the Proposal, Innovata Shareholders will receive 0.2858 new Vectura Shares for every Innovata Share. On the Scheme becoming effective, Innovata Shareholders will own 46 per cent, and Vectura Shareholders will own 54 per cent, respectively of the enlarged share capital of Vectura, assuming no further issue of Innovata Shares or Vectura Shares prior to the date on which the Scheme becomes effective.

Vectura has received irrevocable undertaking and letters of intent to vote in favour of the Proposal at the Vectura Shareholder Meeting in respect of 31,134,286 Vectura Shares (representing approximately 18.4 per cent. of Vectura's existing issued share capital).
The Boards of both Vectura and Innovata intend unanimously to recommend the Acquisition to their respective shareholders. The acquisition is expected to be completed by 16 January 2007. Jack Cashman, chairman of Vectura, commented, "We believe that Innovata and Vectura represent an excellent strategic fit.

The combination of the two businesses will create an Enlarged Group with a portfolio of licensed and marketed products, a broader and well balanced pipeline of mid to late stage products in clinical development, and the cash resources to progress development of our lead candidates. We believe that the Enlarged Group will have all the constituents in place to become a UK leader in pulmonary product development. It is the intention of the Vectura Directors for the Enlarged Group to move from AIM to the Official List during 2007 and we believe this should provide further liquidity and a higher profile with investors."