Verona Pharma plc
Q3 2020 Earnings Call Transcript

Published: 1 Nov 2020

[Operator:]

Welcome to the Verona Pharma Third Quarter 2020 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen-only mode. Earlier this morning, Verona Pharma issued a press release about its financial results for the three and nine months ended September 30, 2020. A copy can be found in the Investor Relations tab on the corporate website www.veronapharma.com. Before we begin, I would like to remind you that during today’s call statements about the Company’s future expectations, plans, and prospects are forward-looking. These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from our expectations expressed or implied by the forward-looking statements including without limitations the impact of the COVID-19 pandemic on the status, enrollment, timings, results and cost of our clinical trials and the continuity of our business.

[David Zaccardelli:]

Thank you, and welcome everyone to today's call. With me today are Mark Hahn, our Chief Financial Officer; Dr. Kathy Rickard, our Chief Medical Officer; and Chris Martin, our Vice President of Commercial. The third quarter of 2020 was another period of substantial progress for Verona Pharma. We started four clinical trials and achieved the 2020 goals, we outlined at the beginning of the year. First in May, we’ve received a positive response from the FDA to our end of Phase 2 package for nebulized Ensifentrine as maintenance treatment for COPD. Second in July, we’ve raised $200 million in gross proceeds from our oversubscribed financing from a highly experience group of life science investors. Third in August, we restarted the multi dose 7-day portion of the Pressurized Metered-Dose Inhaler or the pMDI study. And finally in September, we initiated enrollment into our COPD Phase 3 ENHANCE trial. 2021 will be an exciting year potentially important value creating milestones as we progress Ensifentrine and to help patients with unmet medical needs. Let me detail each of our ongoing clinical studies. We are pleased our pivotal ENHANCE 1 and ENHANCE 2 Phase 3 trials are now underway. Both studies have enrolled patients and are on track to complete enrollment in 2021. The two randomized double-blind placebo-controlled trials will evaluate nebulized Ensifentrine as monotherapy and added on to single bronchodilator background therapy. Each study will enroll approximately 800 moderate to severe symptomatic COPD patients at more than 100 sites primarily in the U.S. and Europe. The two study designs will replicate measurements of efficacy and safety over 24 weeks, but ENHANCE 1 will also evaluate longer term safety in a subset of 400 patients over 48 weeks. We are confident in the clinical potential of Ensifentrine and encouraged by the well validated regulatory pathway for COPD. We believe Ensifentrine with its novel motive action, both bronchodilator and anti-inflammatory activity, combined with its favorable safety profile will be an important therapeutic for millions of COPD patients who are not well served by available treatments.

[Mark Hahn:]

Thanks, Dave. Before I review the third quarter financial results, we announced last month our plan delisting from the AIM stock market effective tomorrow October 30. Our ADSs will continue trading on the Nasdaq Global Market under the ticker symbol VRNA. This move is expected to further enhance trading liquidity by combining all trading transactions on Nasdaq, while reducing costs through duplicative listing and compliance fees. Now turning to the financial results, please refer to the press release we issued this morning, which is also being filed as 6-K with the SEC. Through the majority of operating costs and fundraising activities being denominated in U.S. dollars, beginning in Q3 and going forward, we representing our financial results in U.S. dollars. We ended the third quarter 2020 with $202 million in cash equivalents, which includes net proceeds of approximately $185 million raised in the July private placement. Our cash balance is expected to support our operations and Phase 3 ENHANCE program well into 2023. For the nine months ended September 30, 2020. The loss after-tax is $41.4 million compared to $31 million for the prior year period. This represents a loss of $1.68 per ADS for the nine months ended September 30, 2020, compared to a loss of $2.35 per ADs for the prior year. Research and development costs were $28.1 million for the nine months ended September 30, 2020, compared to $35.2 million for the nine months ended September 30 2019, a decrease of $7.1 million attributable primarily to lower clinical trial expenses. The largest driver of R&D expenses in the nine months in December 30, 2020 with startup costs for the Phase 3 ENHANCE program. In the same period of 2019, the primary expenses were related to the Phase 2b study with Ensifentrine and add on therapy to Tiotropium that read out in January of this year. General and administrative costs for $18.1 million for the nine months ended September 30, 2020 compared to $7.5 million for the nine months ended September 30, 2019, an increase of $10.6 million. This increase was primarily attributable to costs relating to executive changes, higher D&O insurance premiums, and higher share based payment costs.

[Operator:]

The first question comes from Joon Lee of Truist Securities. Please go ahead.

[Joon Lee:]

Hi. Congrats on the progress and thanks for taking my question. Just can you help us understand us your strategy for Pressurized Metered-Dose Inhaler. You're using that formulation for your COVID-19 study at -- and at the same time you're doing a math study separately. So there seems to be a little bit of a multiple variables here. And you're recording those studies, I believe first half of ‘21 for the math and I -- according to clinical trial of that March of 2021 would be the completion date for the COVID-19 study using the pMDI formulation. So how would you analyze the results of these two studies and present them next year? Thank you.

[David Zaccardelli:]

Yes, thank you very much for the question. And as you know, we have previously completed a work on a dry powder inhaler, both single dose and multiple dose over 7 days, and subsequently completed a single dose study with a Metered-Dose Inhaler and have now restarted as you mentioned, the 7 day multi dose trial with the Metered-Dose Inhaler. When you look at the data and our analysis of it, as well as of course, we submitted all of this to the FDA and in support of our IND and treatment of hospitalized COVID-19 patients. We believe that the data in totality from the pMDI supports it to use, it supports its activity. We do have a level of information, of course on dose response and its relation to previous work on the DPI. We think we have support for sure that shows that Ensifentrine can be delivered by pMDI and we are completing that work, as you mentioned. So I think that is consistent with moving forward. We believe that the use of the pMDI for the COVID-19 study was most applicable in that setting in concert with discussion with the investigator. And we're pleased that the FDA also supported that with the acceptance of our IND to move forward with the pMDI. And we really look forward to reporting out both the multi dose 7-day, which, as you pointed out, we would expect in the first half of 2021, hopefully, in the earlier part of that and subsequently probably reporting out on the COVID-19 study.

[Joon Lee:]

So have you decided on the order or just studies reporting now will it be MDI first, and then the COVID-19 study or vice versa or simultaneous --?

[David Zaccardelli:]

Yes, it's a little difficult to predict, because we, the experience with enrollment rates in COVID-19 are not extremely well understood. And I'm sure you can appreciate that. If I had to make a judgment, I would expect that the 7-day pMDI study would read out first, but we will we will see how it .

[Joon Lee:]

Right, and then one final detail question. I might have missed that. But what's your total share count as of today? And when should we expect the 10-Q to be filed?

[David Zaccardelli:]

Mark?

[Mark Hahn:]

Yes. Hey, Joon, great question. So the -- there's actually a 6-K, that will be filed and that they actually went out today. So it was filed during this call. And there's -- I'm just looking at, the share count is going to be presented in ADS’ now, as opposed to ordinary shares, right because we were delisting from the AIM effective end of today. So it'll be -- we will be talking just in terms of ADSs going forward. And that number is about $57.8 million ADSs.

[Joon Lee:]

That was great. Thank you very much. And good luck, Thanks.

[David Zaccardelli:]

Thank you.

[Operator:]

The next question is from Suji Jeong of Jefferies. Please go ahead.

[Suji Jeong:]

Hi, thanks for taking my question. I just want to ask a couple questions about the COVID-19 study as well as ex-U.S. partnership. Before COVID-19 study for the data in first half 2021, you expect to report data from both primary and secondary endpoints and for the extra strategy? Just want to share your further thoughts on that strategy? And do you expect to wait until Phase 3 data to make such partnerships? Thank you.

[David Zaccardelli:]

Thanks. Thanks for the question. I think with regard to the COVID-19 study, it -- we anticipate that that would be the case that the primary and secondary are -- all the endpoints that we're measuring in the study could be reported out in that timeframe. As I mentioned, we're in the active recruitment phase of the study. And the recruitment rate, varies depending on case-and-case load at the University of Alabama. So our ability to project exactly, enrollment rates at a single center, given a lack of history with COVID-19 is a little bit challenging, as you would expect. But right now, as we stand here today, that would be our expectation to report out on the measurements that are contained within the study during that period. So with regard to partnership ex-U.S. we are, as we've completed and articulated previously, our financing and initiation of our ENHANCE trials, you can be assured we are turning our attention and very actively engaging and in our outreach and discussions and progression of partnerships outside the U.S. that is going on. We're not at this time thinking that we need to wait for any particular reason on Phase 3. Of course, predicting timing with partnerships because it requires a partner to of course, participate and depends on their situation and their timing. And of course, we need to be very prudent with our assessment of the economics related to such partnerships and make sure that it is consistent with how we view Ensifentrine. As you know, we continue to hold worldwide rights to Ensifentrine and so we want to be very thoughtful and careful about that. But we are actively right now engaging in that activity.

[Suji Jeong:]

Great. Thank you.

[Operator:]

The next question is from Tom Shrader of BTIG. Please go ahead.

[Tom Shrader:]

Good morning, everybody. Thanks for the update. I have a couple of COVID questions just because it's pretty topical. But in COPD, Ensifentrine is kind of a perfect match, right. It's a neutrophil drug for a neutrophilic inflammation, is it -- the same thing hold for COVID, which I think is mostly a lymphocyte infiltration does your molecular data lineup as well as it did in COPD?

[David Zaccardelli:]

Okay. Thanks for the question. I'm going to turn that over to Kathy, to comment on it.

[Kathy Rickard:]

Hi. Yes, so COPD is both on lymphocyte and in neutrophil. So we've talked about neutrophil more but both of them are present in the disease. As far as COVID, I think we believe that Ensifentrine can help in several different ways. And all by the mechanisms that we see with Ensifentrine PD3 and PD4 inhibitors, number 1 with bronchodilation improving patient's pulmonary function. Number 2 with the anti-inflammatory effects from we know that some PDE 4 have shown as a viral effect in these type of situations. And number 3, effects the CFTR receptor, which helps improve neutrophil clearance and along clearing agents and mucus from the lung. So we believe that three areas will also help improve patients with COVID. Certainly, we'll know more as we go through the study and we get the results from our studies, and as other compounds that have similar mechanisms are also now progressing through that. So I hope that helps.

[Tom Shrader:]

Yes, absolutely. And if I can ask for kind of a global question. Is it important to you to get or is it attractive for you to get non-dilutive federal funding for the COVID trials? And your sense of the climate is the spigots still wide open, or the funding agencies more reserved now until we have vaccine data, just you comment on how important it is and how easy it is to do right now?

[David Zaccardelli:]

Yes, I’ll give you -- yes, I will give my general review. I think that we -- when we embarked on the initiative, we looked at that, not only within the U.S., but outside the U.S. for different funding operations, opportunities. You can imagine that was very dynamic process. And it's constantly changing. We made the decision based on the cost of the study, the speed that we could manage ourselves and not get entangled with government funding and that process that we do proceeded with managing the study ourselves. We thought that was in the best interest of the patients, the best interest in getting the data as quickly as we could. And it was able to be accommodated within our funding and our available money. So as we get the data from the study, and we look at what we may do next and of course that will be influenced by the status of COVID-19 in the U.S. and globally and the data to guide us will determine the best strategy after we see the data from the study.

[Tom Shrader:]

Okay, great. Thanks for the detail.

[Operator:]

The next question is from Edward Nash of Canaccord Genuity. Please go ahead.

[Edward Nash:]

Hi, good morning, guys, really busy quarter. And congratulations on getting these trials up and running. I wanted to ask, first of all, just regarding the COVID, again, just those patients since the since the PI felt that it was most applicable to use the MDI versus nebulized delivery. Just -- can you maybe just talk about is there any way for us to gauge what the severity of those patients is? And we can use maybe just through oxygen level or just any other metric you may have? And then the second question I have is just with regard to partnerships, I guess this is on COVID, has there been in the interest actually you have to do a study outside of the United States?

[David Zaccardelli:]

Kathy, you want to comment -- based on the first part of that?

[Kathy Rickard:]

Sure. It follows the severity patients. All patients have to be hospitalized. So that gives you an indication that they're severe enough to be hospitalized. But certainly there's a large group of patients that don't require hospitalization. And they need to be hospitalized because many of them are requiring additional oxygenation. And they roll can require any levels of oxygenation, even given by my navel which is probably the least severe all the way up to non-invasive pipe delivery systems. For precluding mechanical ventilation once they go on mechanical ventilation, they are no longer in the trial from that perspective.

[David Zaccardelli:]

And I think with regard to partnerships outside the US and then COVID-19. I think that it's interesting on several fronts, as people are pointing out, of course, it is a progression of our pMDI formulation within an active IND in the U.S. And that utilizes that formulation. Of course, it's another respiratory disease, which we stated from the beginning, that anti tension could be applicable in multiple respiratory diseases. And so I think it's, again, another demonstration of the utilization . And so there's an overarching interest from that standpoint. It by no way diminishes or takes-off the focus that the bulk of the information we have today. And the progression of anti and COPD is still the cornerstone of our development program. And where we focus, as you can see our energy to make sure that we bring that Phase 3 program through. So that continues to be our primary focus, but we will see what we want to do with COVID-19 after we get the results from the study.

[Edward Nash:]

Great. Thanks very much.

[Operator:]

The next question comes from Liana Moussatos of Wedbush Securities. Please go ahead.

[Unidentified Analyst:]

Hi, this is Swetha for Liana. Thank you for taking my question. Does the company plan to provide updates on Phase 3 ENHANCE trial initial enrollment, when the trial is half or fully enrolled? And can you comment on the initial enrollment rate given that the trial was initiated a few weeks back? And do you anticipate any delays due to COVID-19 in the trial enrollment?

[David Zaccardelli:]

Right. No, thank you so much for the question. As we assured during our quarterly calls, we will definitely be responsive and updating on the general status of the ENHANCE program. Whether we're giving you exact patient counts or enrollment and numbers, that's probably not our focus. But we will guide to whether we're still tracking to how we've articulated the timing and keeping in mind that we're looking at results from ENHANCE to sometime at the beginning of 2022 and ENHANCE 1 later in 2022. And so we will continue to update against that based on enrollment, at least as our quarterly calls. As far as enrollment rates so far, as you pointed out, we got underway, as we press released later in September. So it's been just a few weeks of enrollment, I can say that we are pleased with where we are based on our plans and our tracking for where we should be three or four weeks into the trial. And although it is early days, and we're pleased with the number of sites that are online, the number of patients being screened the number of patients that are enrolling. So we will have of course much greater insight over the coming months on that because we're at the beginning phase of the program, so. So right now we're pleased with where we're at. And that I missed another question what is that.

[Unidentified Analyst:]

Thank you.

[David Zaccardelli:]

All right, thank you.

[Operator:]

This concludes our question and answer session, I would like to turn the conference back over to Dr. David Zaccardelli for closing remarks.

[David Zaccardelli:]

Thank you everyone for your questions today. I would also like to thank our dedicated and talented team for their commitment to developing and initiating a robust clinical program during these unprecedented times. We do look forward to updating you on our progress and announcing additional clinical data in 2021 as we talked about today, and we hope that you and your families and colleagues stay safe and healthy during this time. Operator, that concludes today's call.

[Operator:]

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.