Verona Pharma plc
Q3 2019 Earnings Call Transcript

Published: 10 Nov 2019

[Operator:]

Hello ladies and gentlemen, and welcome to the Verona Pharma Third Quarter 2019 Conference Call. At this time, all participants are in a listen-only mode. There will be a question and answer session to follow the completion of the prepared remarks. As a reminder, this call is being recorded. I would now like to turn the call over to, Ms. Kimberly Minarovic, Managing Director, Argot Partners.

[Kimberly Minarovich:]

Thank you, Lisa. Good morning or afternoon, depending on which time zone you are in, and welcome to today's call to review Verona Pharma's results for the three and nine months ended September 30, 2019.

[Jan-Anders Karlsson:]

Thank you, Kimberly. And thank you to our participants for joining us today. It's my pleasure to update you on the clinical progress that we have made during the quarter. So 2019 is a busy year with a number of important value-creating clinical milestones. Today's update will naturally focus on the new exciting data with a dry powder formulation of ensifentrine, as well as ongoing studies with a nebulizer formulation. As a reminder, ensifentrine or previously RPL554 is a unique, first-in-class dual PDE3 and PD4 inhibitor with both bronchodilator and anti-inflammatory properties that we believe will increase lung function, reduce symptoms and improve quality of life in millions of patients with chronic obstructive pulmonary disease or COPD. We believe that ensifentrine is truly differentiated from existing COPD medications, as it is able to further improve breathing and reduce symptoms in patients already on maximum standard-of-care treatments, dose that have run out of treatment options. Ensifentrine is currently in Phase 2b clinical development for the maintenance, treatment of COPD, a disease that is progressive and life-threatening with no cure. In the U.S. alone, the medical costs related to COPD are predicted to rise to $49 billion in the next year, 2020 and the World Health Organization or WHO, predicts that COPD will become the third leading cause of death globally by 2030. We believe that ensifentrine has the potential to be the first novel-class of bronchodilator in over 40 years with a differentiated profile. This would be a breakthrough for a large number of patients who remain symptomatic with a deteriorating lung function despite being on maximum standard-of-care bronchodilator therapy. That is a combination of the two different types of bronchodilators that are available today at the same time. Treatment options for COPD patients are limited with a lack of innovation, particularly for a more severe population. These patients urgently need better treatments. Our clinical data continue to support efficacy and tolerability of ensifentrine and in September this year, at the European Respiratory Society Congress in Madrid, we presented positive results from the Phase 2 study of the dry powder inhaler or DPI formulation in COPD patients, and it was very well received. All primary and secondary lung function endpoints were achieved in this randomized, double-blind placebo-controlled crossover study evaluating efficacy and tolerability of twice daily dosing for seven days of this novel DPI or dry powder formulation in 35 patients. These data were first announced in August this year.

[Piers Morgan:]

Thank you, Jan-Anders, and hello everyone. I will provide a brief recap of our financial position for the third quarter of 2019. Also, please refer to the press release that we issued this morning, which is also been filed as a 6-K with the SEC. This release includes unaudited financial results inclusive of income, balance sheet and cash flow statement for the three months ended September 30, 2019. Given that we are headquartered in the UK, our financial results are in British pounds. For your convenience, we have included a translation to U.S. dollars using the noon buying rates of the Federal Reserve Bank of New York on September 30, 2019, which is GBP 1 to US$1.2305 in respect to certain key figures. Turning to the income statement for the three months ended September 30, 2019. Our operating loss for the three months ended September 30, 2019 was GBP 13.9 million or US$17.2 million, compared to GBP 6.8 million for the third quarter of 2018. The loss after tax for the third quarter 2019 was GBP 10.1 million or US$12.5 million, compared to GBP 2.3 million for the prior year period. This represents the loss of 9.6 pence per diluted share or a loss of US$0.952 per ADS for the third quarter ended September 30, 2019 and this compares to a loss of 2.2 pence per diluted share for the prior quarter. The total comprehensive loss is calculated as follows

[Operator:]

Your first question comes from the line of Lucy Codrington with Jefferies.

[Lucy Codrington:]

Hi, there. Thank you for taking my questions. Just a couple for me. The first relates to the recruitment for the MDI study. I don't recall that being an issue for the DPI study. So I just wonder, if you can give us some more detail as to why recruitment has been slow. And then, secondly, if you could just give us an update of where you are in terms of the CMC for the handheld devices? And any other studies that might need to be done prior to any partnership deals for those? Thank you.

[Jan-Anders Karlsson:]

Hi, Lucy. Thanks for your comments. So, on the MDI, it's disappointing. It started as being done in two centers in UK. One of the centers we have used before, and I've actually exhausted the patient pool, it’s quite surprisingly, and that's why it's taking a little longer to recruit into this study. It's a center-specific question and it takes longer to go to different centers and restart again. So, we think this is a short delay, nevertheless disappointing. DPI study was run in U.S., and there are more patients obviously available and quite the different system also for including patients in clinical trials. So that ran very well and our other study, the ongoing Phase 2b study is of course also being run in U.S. And as you know that we completed enrollment in very short time. So we're extremely pleased with that study and how it's going. Your other question was around CMC. So we have prototype formulations for DPI and MDI. Prototype means they work very well in a capsule-based device for the DPI and of course, the standard canister for the MDI and we have long stability now. So that looks good. What one would have to do is, for a dry powder formulation, adjust it specifically to a partner's device and that will be extra work. But of course, we cannot really do it until we have a relationship in place, because all of them have different or slightly different devices. On the MDI side, it's a little different. The main supplier of MDIs in the world I believe is 3M, at least commercially available for us and that would be done the same canister in any type of MDI device. So that's more straightforward. I think we absolutely, as I said before, we need to have the data from the DPI and the MDI studies available before we start any partnering discussions, unless of course we have anything else ongoing there. So, we are waiting for the MDI data to be able to provide opportunities for those companies or partners that prefer to use DPI devices and at the same time perhaps having conversations with those that would prefer to work more with MDI devices. So that's where we are and during the next six months, I am sure we'll have more clarity on this front.

[Lucy Codrington:]

That’s really helpful. Thank you.

[Jan-Anders Karlsson:]

Thank you.

[Operator:]

Your next question comes from the line of Adam Walsh with Stifel.

[Edwin Zhang:]

Hi, this is Edwin Zhang on for Adam. Thanks for taking the questions. For the Phase 2b nebulized intervention dose-ranging studies about to readout, I guess in December, do you need to see dose-dependent effect to support the Phase 3 trial next year? That is my first question. On the primary endpoint, we use peak FEV1. What is the view from regulators on the importance of other endpoints, for example, trough FEV1? Thank you.

[Jan-Anders Karlsson:]

Thank you. Hi. So, thanks for the question. I think on the nebulized study that's ongoing, the four-week Phase 2b study, we expect it to readout around year-end, as early as before or just after. You noticed that we already completed a study. So, of course, we have now a cleanup in the database completion, et cetera. So around year-end, it’s the guidance on that. Do we need to see a dose-dependent effect? I think, ideally we'd like to see an element of that. It's not necessary. I think FDA has a tendency to select the lower dose available in such a study if at all possible. And I think we would like to look at all the data from, of course the ongoing study, but also previous studies and make a robust conversation and argument, of course to FDA, while we then depending on the data believe one dose is better than another dose and it will be a conversation. The good thing with ensifentrine is that, we really have a well-tolerated compound. We don't think there is any of the doses that we use today that have any particular safety concerns or already even FDA or regulators, as far as we know, have any particular issues. While they want to push to a lower dose, if at the same time, the safety is not a concern I think at least we'll make an argument to find a dose that we believe will be the most relevant for moving forward into Phase 3 studies. And then, you asked related to this also about peak effects and other measures of lung function. In all our studies, as you know, of course we use peak effect for easy primary endpoints in terms of measurements. It's very simple and straightforward and little discussion. Of course, we are also measuring average FEV1. So around a peak say 2, 3, 4 hours throughout the whole day, throughout 24 hours, and we look at trough effects and we look at all dose effects and select those that we think are most appropriate. For FDA for a dose-ranging study, we think that we can choose any of those parameters and have a productive conversation with the FDA. And remember, this is a first-in-class, it is a new product. And it has different properties. We are just talking about the lung function measured by FEV1 here. What we think is the most important probably aspect of the company is of course the anti-inflammatory effect and the symptom improvement, which patients have every day and if we can make a difference in that respect, I think we have a very attractive product actually for patients, especially those that we think are already treated with a lot of drugs or maximum treatment even. And where perhaps it’s completely a new mechanism of action can make a difference for patients. That would be very attractive, and that's what we think we have in our differentiated compound.

[Edwin Zhang:]

Great. Thank you so much.

[Jan-Anders Karlsson:]

Thanks.

[Operator:]

Your next question comes from the line of Liana Moussatos with Wedbush Securities.

[Liana Moussatos:]

Hi. Thank you for taking my question. Are you in any kind of discussions with companies that are interested in the DPI formulation? And you ended Q3 with GBP 41.1 million. What's the runway? And do you think that the Phase 3 is more likely to start in the second half of next year than the first half?

[Jan-Anders Karlsson:]

Yes. Hi, Liana. Thank you. And so, first of all, we have a policy of not really discussing ongoing or tentative discussions with other companies. I think that is appropriate. We believe the dry powder formulation is actually very attractive. It was a – it is a prototype and of course, we need to perfect it. But even so, we found very - actually surprisingly, large effects on FEV1 in COPD patients that we reported out in Madrid and that was noticed. And we also had a very nice 12-hour duration on FEV1 area under the curve, or measured as trough and we believe that's what make it a very nice twice-a-day handheld treatment for many more patients than the nebulizer perhaps. So that's interesting and we believe that's a way forward. On the runway, perhaps Piers you want to comment on that?

[Piers Morgan:]

Sure. Hi, Liana. So, the runway, we didn't provide a forecast on it and it will slightly depend - the current cash flow side depends on the precise timing of the start of the Phase 3. But we think it will take us through into the beginning of 2021, based on our existing cash resources.

[Liana Moussatos:]

And do you think the Phase 3 for COPD will start in the second half of next year?

[Jan-Anders Karlsson:]

Yes, sorry. So yes, I think it's – with data coming around year-end, FDA has very long lead times, as you know, for Type-C meetings, end-of-Phase 2 meetings. It's probably around 70 days after applying for such a meeting. I think we will be into the second half of next year before we start the Phase 3 studies actually.

[Liana Moussatos:]

Thank you.

[Operator:]

Your next question comes from the line of Tom Shrader with BTIG.

[Julian Harrison:]

Hi. This is Julian on for Tom. Thanks for taking my questions. First, beyond your end-of-Phase 2 Meeting with the FDA, just wondering if you could briefly talk about any steps you've taken or plan to take in the near future to prepare for the pivotal program of ensifentrine? And how much bearing the - I guess, ongoing Phase 2b add-on study could have on the final designs with these trials?

[Jan-Anders Karlsson:]

Yes, thank you. Thank you. So that's a very important question, because we had in mind to say something. I think, we really see the value of the compound for many of the COPD patients that really have few alternatives and as I said earlier, there are all many of those patients out there, millions in U.S. only and there is very little new innovative drugs in this space for these patients. Ensifentrine may be one of them. So clearly to aim for those patients, we are having a two-pronged approach. One is to design a Phase 3 program that gives us an optimum opportunity to have a regulatory approval and the second part of it - and I come back to the first in a second, is really to design a program that also makes it easier for patients and physicians and pulmonologists to understand how to use ensifentrine and where to use it the best. So those are two aspects. The first aspect on is basically two pivotal trials and we have spent a lot of time of course, with KOLs and advisors and ex-FDA advisors on outlining a program that we believe have a good chance of reaching primary endpoints in a positive way and also minimizing the number of patients that we believe we need to have in this program for regulatory approval in U.S., and then of course globally. I think that program with the data that we have already in hand and with the data coming from the ongoing study, we understand pretty well the statistics – we will understand the statistics around it and also, the other aspects of how to run this program in the most efficient way including U.S. patients and also those from abroad, of course. The other aspect of the regulatory approval and we believe we will get the regulatory approval with a broad label for maintenance used in COPD, because that's the label many of the drugs, if not all of them, most recently have achieved and that would allow us to commercialize ensifentrine in essentially all lines of treatment in the U.S. and also use publications for promotions by sales reps, et cetera. That would be an interesting and an attractive positioning, but we would want to enhance it by also reconfirming in new trials, longer and larger trials than we did before that actually ensifentrine really has the ability to add significant and meaningful lung function improvement in patients already on maximum treatment. And in U.S. there are millions of those patients on dual and triple therapy that reduce – still have a declining lung function, still are very symptomatic and are really reaching out for something new and different and that's where we believe that our studies and ensifentrine really can make a difference in these patients. So that's what this is leading up to. Slightly long answer, I hope that explains the strategy and of course, it's based on the collective data that we have gathered and wisdom from the team, but also from the community and KOLs.

[Julian Harrison:]

Okay. Thank you. That's very helpful. And then, on the partnership front, just curious about the relative interest levels you are seeing in the MDI and DPI formulations. Is there one of the two that you are more excited about? And would you view this as both being a single partnership opportunity? Or could you vision them being partnered separately since within large pharma my understanding is some lean towards MDI and others prefer DPI.

[Jan-Anders Karlsson:]

Yes. I think for the same indication and we don't really talk much about partnership unfortunately, but certainly, the DPI and the MDI devices could only be partnered with one company as far as I understand it. At the same time, you would need to find a different, completely different indication if you want to split it out. That might be possible in the future somehow. But at this moment, I think we just want to gather enough data to show the comparative data from the two different devices and also hopefully, as we have seen with the DPI that we have two attractive proposals for treating patients that really want to get the different bronchodilator and anti-inflammatory effect than what's available today. And then it's, as you say, then it's up to different companies with different preferences for different devices and of course, we want the broadest possible discussion with as many partners as possible when we are all done.

[Julian Harrison:]

Okay. Great. Thanks very much.

[Jan-Anders Karlsson:]

Thank you.

[Operator:]

Your next question comes from the line of Patrick Trucchio with Berenberg Capital Markets.

[Iris Long:]

Hi, good morning. This is Iris Long on for Patrick. Thanks for taking the questions. So, just a follow-up on the Phase 3 study for the approval of the nebulized formulation. So you mentioned that you anticipate to run two Phase 3 studies. I am just wondering, how many patients do you believe you have to enroll for each of the study? And then, also based on the sub-analysis data that generated so far, do you anticipate to have – to stratify the patients enrolled? Or otherwise would you need to limit enrollment criteria? Thanks.

[Jan-Anders Karlsson:]

Yes, thanks very much. So, I think the - to be specific on the Phase 3 studies, we will be waiting for the ongoing study to readout to fully understand the statistics and the number of patients that we need in each treatment group. In principle, we believe that it would be most appropriate to do a comparison between placebo and one dose of ensifentrine. And as we discussed before, a dose that of course we would have to agree with FDA and where we think we have good arguments for selecting a dose that has both bronchodilator and anti-inflammatory effects in COPD patients. That will be - as you allude to, across various subgroups of patients on background or no background treatments and also on different degrees of severity, et cetera that you could maybe study separately and both statistically and clinically look at this in different groups. I think that discussion is also requires the readout of the ongoing study before we can finalize that. And before, and of course after we have the agreement with FDA, we'll of course, publish in much more detail exactly what the plans are, the dose is, and how we intend to go about the recruitment in various countries, et cetera. But it's a little premature until we have the data readouts around year-end for the ongoing four-week study.

[Iris Long:]

Okay, thank you. That's helpful. Just a follow-up, do you think that the placebo-adjusted improvement in FEV1 that ensifentrine will have to demonstrate from the Phase 3 trial, just from a regulatory approval perspective and from the payer perspective, I am wondering what should we think about the endpoints here.

[Jan-Anders Karlsson:]

Yes, I think, yes, it will have to be placebo or active comparator. Right now, we are leaning towards a placebo comparison in a U.S.-powered study. I think the endpoints that we are looking at will have to be around FEV1. Different endpoints that have been used has been trough FEV1 or a 12-hour area under the curve FEV1. And of course, a number of important secondary endpoints that we think will also be relevant, especially as we believe we have a compound that's particularly important as an anti-inflammatory to reduce symptoms in patients. So, we have already, as I said, in the Madrid Meeting earlier this year, and also in a meeting at CHEST, we presented data around symptom improvement with ensifentrine from our four-week study. Shorter studies are not so meaningful, but the four-week study, the symptom improvement on many of the different scales that we used in that study was really quite impressive and clearly met the minimally clinically important difference. So, it was thought to be clinically meaningful by physicians and KOLs. And I think that aspect we will also make sure as we capture in an appropriate way so that we can use it maybe in a label and certainly in publications later on that we of course want to share with the physicians and pulmonologists. And this is all built up to provide a strategy for informing decisions and KOLs on how to use ensifentrine in the right group of patients where we also believe that there is a big commercial potential for RPL554, ensifentrine. And of course, we are talking about patients already on therapy that really need something new and different and that's what we will build up the Phase 3 program to deliver.

[Iris Long:]

Got it. Thank you. That’s very helpful.

[Jan-Anders Karlsson:]

Thanks.

[Operator:]

At this time, there are no further questions. I would like to turn the call back over to Mr. Jan-Anders Karlsson.

[Jan-Anders Karlsson:]

Yes, thank you, Lisa. So, 2019 is an important year, obviously, as we talked about for Verona Pharma. We have a number of, we think significant value-creating clinical milestones before we go into an end-of-Phase 2 meeting with the FDA, and obviously the start of Phase 3 regulatory trials with nebulized ensifentrine for COPD next year. We believe the broad set of data that we have obtained with nebulized ensifentrine to-date including then the ongoing Phase 2b study and our plan for the regulatory Phase 3 trials will improve our chances of achieving an attractive label for ensifentrine. The nebulized and handheld formulations of ensifentrine with its unique bronchodilator and anti-inflammatory properties have the potential to provide further treatment alternatives for millions of COPD patients that are symptomatic, that have ran out of treatment options, we believe that providing different formulations of ensifentrine for these different needs of COPD patients will significantly enhance ensifentrine's commercial potential. We look forward to catching up with some of you over the coming weeks at conferences in New York and London and I also wanted to thank you for joining us today. We appreciate your continued support. Look forward to updating you on clinical development progress with ensifentrine. And finally, thank you, operator. That concludes today's call. Have a good day.

[Operator:]

You're welcome. This concludes today's conference. You may now disconnect.