Verona Pharma plc
Q4 2019 Earnings Call Transcript

Published: 28 Feb 2020

[Operator:]

Welcome to Verona Pharma Full Year 2019 Financial Results and Operating Highlights Conference Call. All lines have been placed on mute to prevent any background noise. Following the speakers’ remarks, there will a question-and-answer session. Before we begin, I would like to remind you that during today's call statements about the company's future expectations, plans and prospects constitutes forward-looking statements. 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.

[David Zaccardelli:]

Thank you, operator. And welcome to everyone on today's call. I'm joined today by Mark Hahn, Chief Financial Officer; and Dr. Kathy Rickard, the Chief Medical Officer of Verona. Mark and I are delighted to join Verona Pharma at this exciting time in the Company's development. We believe this is a fantastic opportunity and ensifentrine with its novel mode of action is truly differentiated from other COPD therapies on the market or in development. With both bronchodilator and anti-inflammatory properties in a single molecule ensifentrine has the potential to become an important therapeutic for millions of patients suffering from respiratory disease. In addition to the potential of ensifentrine, we were attracted to the opportunity by the strength and experience of the Verona Pharma team. Our highly accomplished clinical team has been involved in the development of many leading respiratory therapies and will be instrumental in advancing ensifentrine through its Phase 3 program. As an area of drug development, chronic respiratory disease has not benefited from significant innovation in many years, despite the large market size and unmet medical need for patients. Chronic obstructive pulmonary disease, COPD, is predicted to become the third leading cause of death worldwide by 2030 according to the World Health Organization. COPD affects over 380 million people globally. Yet new treatment options are limited, particularly for those more severe population. In the U.S. alone, more than 1.2 million COPD patients remain symptomatic, despite receiving maximum therapeutic treatment. The evidence backing ensifentrine's efficacy and safety as a treatment for COPD is substantial with 15 clinical studies conducted to-date in over 1,300 individuals. Earlier this month, we announced results from a Phase 2b clinical trial with nebulized ensifentrine were published in the medical journal Respiratory Research. Highlights of this 405 patient trial include significant improvements in bronchodilation, as well as symptoms of COPD -- in COPD patients receiving nebulized ensifentrine therapy at all doses compared to placebo.

[Mark Hahn:]

Thank you, Dave and hello everyone. Before I review our financial results for 2019, I'd like to reiterate Dave's sentiments about Verona Pharma and share my enthusiasm about joining the company at this exciting stage. Turning to the financial results, please refer to the press release that we issued this morning which is also filed as a 20-F with the SEC. Given that we are headquartered in the U.K. our financial results are reported in British pounds. For your convenience, we've also included a translation to U.S. dollars based on the year-end December 31st exchange rate of £1 to $1.3269. Turning to the income statement for the year ended December 31, 2019, our operating loss for the 12 months was £41.1 million or $54.5 million compared to £25.6 million in 2018.

[David Zaccardelli:]

Thanks Mark. We believe that the upcoming development and regulatory milestones are important value creating activities directly supporting the commercial value of ensifentrine both in the nebulized formulation as well as our handheld inhaler formulations.

[Operator:]

And your first question comes from the line of Tom Shrader of BTIG.

[Julian Harrison:]

This is Julian on for Tom. Thanks for taking my questions. First, I understand you're exploring the possibility of only one dose instead of two for Phase 3, just wondering if you have a sense at this time for the relative cost for pivotal development considering the possible outcomes here. Thanks.

[David Zaccardelli:]

Yes. Thank you so much for the question. I think that we understand that we may need to include two doses in the Phase 3 program, although we fully believe that one dose should be satisfactory based on the data that's generated to date. Clearly, we'll be covering this topic with the FDA in the upcoming in the Phase 2 meeting. And of course, we have developed cost estimates on various scenarios depending on the Phase 3 program after the meeting. And I think we will definitely report back to everyone once we have clarity after the Phase 2 meeting on the actual Phase 3 clinical program, the cost and the timing.

[Julian Harrison:]

Okay. Great. Thanks. That's helpful. And then I understand these are distinct formulations but is there anything from the upcoming MDI readouts that could help inform pivotal development for nebulized ensifentrine or is it fair to say you already have everything you need at this time data-wise to arrive at a final plan for Phase 3?

[David Zaccardelli:]

Yeah with regard to nebulized ensifentrine, we think we have adequate data to support the Phase 3 program as it stands. Of course, we look forward to the additional data on MDI and will hopefully fully support the continued development in that dosage form and further creates evidence of the effect and benefit of ensifentrine.

[Julian Harrison:]

Great. Thanks for taking my questions.

[Operator:]

And your next question comes from the line of Liana Moussatos of Wedbush.

[Liana Moussatos:]

Thank you for taking my question. So for serious strategic discussions, do you need to wait for the multi-dose MDI data in the second half?

[David Zaccardelli:]

Hi, good morning Liana. I guess with regard to -- if I understand your question, I think with regard to nebulized ensifentrine in our plan for Phase 3, we do not need to wait on the MDI data. Clearly we're interested in it as additional supporting information for our program overall, demonstrating its use in other formats in a handheld formulation. But it doesn't impact our strategy with regard to Phase 3 program for nebulized ensifentrine.

[Liana Moussatos:]

What about commercial partnership?

[David Zaccardelli:]

Yes, well I think again additional data is always supportive. You can imagine as we've progressed nebulized ensifentrine having also dosage forms and a DPI and an MDI are very attractive, we're very excited about that and making sure that we have that data for partnering conversations. As you know Mark and I just joined in the last month or so. So we're actually getting our arms around all aspects of partnering and our best strategy for creating shareholder value and the best strategy for ensifentrine not only in the U.S. but globally.

[Liana Moussatos:]

Okay. Thank you very much.

[Operator:]

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

[Iris Long:]

Hi, good morning. This is Iris on for Patrick. Thanks for taking our question. So regarding the Phase 3 trial design and efficacy endpoints we have a few questions. So if the intention is to conduct two six months trials with no or single bronchodilator background treatment. So first, how many patients would you anticipate to be enrolled in these trials? And then what type of bronchodilator would patients be treated with on background treatment? Is there a particular proportion of patients that should be on no therapy versus background therapy? And then finally what is the threshold improvement of FEV1 that would be expected to be necessary from a regulatory standpoint as well as a clinician perspective? Thanks.

[David Zaccardelli:]

Thank you very much for the question. And there is a fair amount to unpack with that one. I want to turn it over to Dr. Rickard to provide her thoughts on it, although I would say that much of that is going to be an outcome of our end-of-Phase 2 meeting with the agency.

[Kathy Rickard:]

So as discussed in previous calls, we are planning on two 24-week studies. Our primary endpoint will be a form of lung improvement including some type of FEV1 evaluation. We plan on including some other secondary endpoints including symptoms in the study. This will all be discussed with the FDA at the end of Phase 2 meeting where we'll be finalizing that including patient numbers and what we'll see as far as extend of improvement and so forth. So that'll be coming towards the second quarter of this year.

[Iris Long:]

Okay, thank you. And then one more question regarding the payer perceptive. So can you discuss your work with payers and their willingness to reimburse for a novel COPD therapy? And then secondly where could we anticipate pricing for nebulizer versus the inhaler formulation.

[David Zaccardelli:]

Yes, thank you for the question. We have been doing extensive market research and also payer research. We're still some time away from commercialization, although we are attentive to the topics you mentioned. We are comfortable that payers would pay for a novel therapeutic in COPD. We think that the price point could be supported at least at, if not over the current pricing for nebulized products in COPD. We're continuing to discuss with payers that concept and will continue to refine as I mentioned in our goals for this year our approach commercially both with prescribers and payers.

[Iris Long:]

Thank you.

[Operator:]

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

[Adam Walsh:]

Hey thanks for taking my question this morning and Mark and David congrats on your new roles there. Let me start I have a couple -- let me just start broadly since you've arrived recently at the company. Maybe Mark and David you could speak to whether or not there've been any strategic changes in the strategic plan since your arrival. That would be a good place to start? Thanks.

[David Zaccardelli:]

Thanks Adam. Thanks for the question. I think with regard to the strategy for Verona it remains essentially the same. Although again, as I mentioned in my opening remarks we're very focused laser focused on executing around our Phase III program in COPD. It is an emphasis for the company. We think the greatest value creation for shareholders as well as advancing the product to help patients sits within that space. So I think we will look forward to continuing to execute around the COPD program, as I mentioned in my remarks. All of that, again was the strategy of the company. We'll continue to do the other activities around that, as I mentioned including the payer prescriber dynamics, as well as continuing to assess the best approach for partnering as we look forward to the next year or two as we continue to execute on the Phase III program.

[Adam Walsh:]

So just on the partnering front there were some questions earlier about whether the PMDI multi-dose data worth dating for a partnership. And we know you're constantly looking, but maybe just a little bit more granularity on that? I mean are you continuing to kind of hold discussions in the meantime as those data mature? Is that something that you're looking for in terms of a potential non-diluting financing mechanism over the course of the next 12 months?

[David Zaccardelli:]

Yes right I think that of course more data always is support of advancing our discussions with partners and we look forward to progressing the MDI data in addition to already the data created on the DPI. But I think that ensifentrine as a nebulized formulation is an incredible opportunity in its own right. And when we talk about partnering there is the U.S. in which we think that commercially we could progress well with the nebulized product in the U.S., but we do hold worldwide IP rights to ensifentrine and the opportunities in other countries are substantial. It also really requires a partner who has expertise in those countries probably has commercial engine already in place, where ensifentrine can make a real impact and help patients as well as that partner. I don't consider the MDI gating in advancing the conversations. I do consider it enhancing and helping any partner to understand the opportunity in its entirety and other indications potentially asthma and other respiratory diseases. Also helps them, guide them depending on the partner what type of formulation fits well with the technologies they may have or have used in the past for other products. And I think that we will see over the coming months the progress on partnering with a perspective of global assessment of any partnering discussions, but I think that that is secondary to our focus on executing on the Phase 3 program in COPD.

[Adam Walsh:]

Hey, that's really helpful. Thank you.

[Operator:]

And your next question comes from the line of Peter Welford of Jefferies.

[Peter Welford:]

Hi. Yes. Thanks. Couple of questions left. Firstly, just with regards to PMDI, there seems to be sort of a series of setbacks of the timeline for the multi-dose relative to the initial sort of planning for that study. I wonder if you can just outline, I guess why that does seem to slip back a bit for the multi-dose data and what the challenges are potentially doing that. Secondly then just with regards to the Phase 3, I think the prior management alluded to the cost potentially being around $125 million or so or in that sort of ballpark. Is that would you say, on the assumption of probably your most extreme plan for Phase 3 is that an average or would you say on the other hand there is room for that to be lower should, for example, your decision with the FDA be just placebo single dose in the Phase 3 program? And then finally just with regards to partnering, I'm curious is it possible do you think to separate the ensifentrine rights by formulation? I guess, I'm thinking your commentary with regards to focus on executing the nebulized program, is it possible for you to retain that while also doing a deal for the DPI, MDI formulations or do you very much regard this as expeditiously more of a geographical focus but that it's very difficult to consider separating different formulations of the product? Thank you.

[David Zaccardelli:]

Thanks very much for the questions. I guess to start with regard to the MDI program and any delays I think there has been a slight shift in the timelines that I'm not sure are really material. We do want to ensure that we have the right patients enrolled in the study and recruitment has just required it to be extended slightly. So I think that in an effort to do the best science, the best clinical research, we're fairly on target on the timelines with, as I said, yes, you've pointed out a slight delay. But we do have clarity on finishing enrollment in the first part of the study already, and then will progress and look at to get the rest of the data not only from the first part, but the rest of the part of the study in the second half of the year. With regard to the cost of the Phase 3 program, fully aware of what numbers have been generally mentioned. We are confirming that with regard to the final study design of the Phase 3 program. As was mentioned, there are a number of factors that may go into the total cost, with regard to how many doses are in the Phase 3 program, et cetera. We really want to come back with to you, once we have that clarity after the end of Phase 2 meeting. I think the numbers mentioned to date are perfectly fine for working estimates. But I think that we want to come back to you when we have a much better clarity on what the Phase 3 program is, what we think it's going to cost and how long it's going to take. With regard to partnering, your point is well taken and understood and we're looking now at all options. Typically, a geographical license works best as people like to have sort of an understanding and utilization, because there're such overlap potentially in the different formulations; handheld and nebulized and how it may be used in patients within the same disease. So, I think, we're looking at it from the geographical basis initially, but we're open to all approaches depending on the circumstance with the partner.

[Peter Welford:]

That's great. Thank you very much.

[Operator:]

And your final question comes from the line of Liana Moussatos of Wedbush.

[Liana Moussatos:]

Thanks for taking my second question. If the Phase 3 is a single dose, are you thinking 3 milligrams and if there're two doses would it be 1.5 and 3?

[David Zaccardelli:]

Yes, great. Thanks Liana for that. I think, as you've looked at the data, you're making those assessments and those are reasonable and rational. At the same time, we'll be reviewing all the data with the FDA, of course, providing our guidance and what we think we should do in the Phase 3 program. And we'll come back to you once we have that clarity from them and let you know what dose was agreed.

[Liana Moussatos:]

Thank you.

[Operator:]

And there are no further questions in queue at this time. And I'll turn the call back over to Mr. Zaccardelli.

[David Zaccardelli:]

So, thank you, everyone, for joining us today. We appreciate your continued support and look forward to updating you on our clinical developmental progress for ensifentrine. So talk with you all soon. Thanks very much.