Verona Pharma plc (NASDAQ:VRNA) Q1 2023 Earnings Call Transcript May 13, 2023

Operator: Good morning. Welcome to Verona Pharma’s First Quarter 2023 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the 3 months ended March 31, 2023. A copy can be found in the Investor Relations tab on the corporate website, www.veronapharma.com. Before we begin, I’d like to remind you that during today’s call, statements about the company’s future expectations, plans and prospects are 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.

Any such forward-looking statements represent management’s estimates of the — as of the date of this conference call. While the company may elect to update such forward-looking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause its views to change. As a reminder, this call is being recorded and will remain available for 90 days. I’d now like to turn the call over to Dr. David Zaccardelli, Chief Executive Officer. Please go ahead.

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 Senior Vice President of Commercial. During the first quarter, we continued to make substantial progress towards the planned submission of our NDA for nebulized ensifentrine for the maintenance treatment of COPD in the United States. We recently had a pre-NDA meeting with the FDA and believe that we are aligned on the content of the regulatory package. The NDA will comprise data from the successful Phase III ENHANCE program and other ensifentrine clinical studies including safety data from approximately 3,000 subjects. We remain on schedule to submit the NDA in the second quarter and look forward to providing an update later this quarter.

In parallel, our pre-commercialization efforts and U.S. launch activities are proceeding as planned. After reporting our positive ENHANCE-2 data in August 2022, we began adding key leadership positions across commercial, HR, IT and finance functions and after announcing the ENHANCE-1 data in December 2022, we expanded these efforts adding leadership positions across medical affairs and compliance and deepened our commercial teams in marketing, market access and commercial operations. Our pre-commercialization efforts continue to accelerate as we prepare the market for the potential launch of ensifentrine in the second half of 2024. These efforts are critical in setting the stage for ensifentrine, which has the potential to be the first novel MOA launched for the maintenance treatment of COPD in over 10 years.

Turning to our global partnering strategy. Last month, Nuance Pharma, our development partner in Greater China, announced they enrolled the first subject in their Phase III trial evaluating ensifentrine for the maintenance treatment of COPD in China. As a reminder, Nuance Pharma has exclusive right to develop and commercialize ensifentrine in Greater China, and as such, will play a key role in addressing the global need for a novel treatment for COPD. Nuance Pharma previously received clearance from China’s Center for Drug Evaluation to begin Phase I and Phase III studies with ensifentrine for COPD in China, and we look forward to providing further updates as these studies progress. We believe ensifentrine, if approved, has the potential to change the treatment paradigm for COPD.

The data from our Phase III ENHANCE program was highly positive. And ensifentrine successfully met the primary endpoints in both ENHANCE-1 and ENHANCE-2, demonstrating statistically significant and clinically meaningful improvements in lung function as well as remarkable reductions in the rate and risk of exacerbation. The success of these trials and our work towards submitting the NDA for ensifentrine brings us closer to providing ensifentrine to a patient population in urgent need of a new effective treatment option. As announced earlier this month, we are looking forward to presenting additional analysis from the ENHANCE study at the American Thoracic Society International Conference later this month. We will present 12 abstracts and a clinical trial symposium on subgroup data and pooled analysis from ENHANCE-1 and ENHANCE-2 covering exacerbation, symptoms, quality of life use of rescue medication, healthcare utilization and safety.

An overview of the ENHANCE trial results will be presented as part of the clinical trial symposium reserved for highlighting new breakthroughs. The abstracts are published on the ATS website and in the May issue of the American Journal of Respiratory and Critical Care Medicine. We will also be hosting a webcast and conference call on Tuesday, May 23, to discuss these data. Currently, more than 380 million patients suffer from COPD worldwide. And it is the third leading cause of death. Despite the availability of existing COPD treatment, approximately 50% of patients experienced symptoms for more than 24 days per month, and physicians require new and effective COPD therapies to provide relief to their patients. With its novel mechanism of action as a selective PDE3 and PDE4 inhibitor, we believe ensifentrine, if approved, will be a transformational advance in the treatment for COPD patients.

In conclusion, we expect 2023 to be another pivotal year for Verona as we advance towards our mission of delivering ensifentrine to patients with COPD. I will now turn the call over to Mark to review our financial results for the first quarter.

Mark Hahn: Thank you, Dave, and good morning, everyone. We ended the first quarter of 2023 with $291.4 million in cash and equivalents. We believe our balance sheet remains strong and with the cash currently on hand, expected receipts from the U.K. tax credit program and funding expected to be available under the Oxford loan facility, we expect to have sufficient runway at least through the end of 2025, including the planned commercial launch of ensifentrine in the United States pending regulatory approval. For the quarter ended March 31, 2023, the net loss after tax was $16.7 million compared to net loss after tax of $24.8 million for the same period in 2022. This represents a loss of $0.03 per ordinary share or $0.22 per ATS for the quarter compared to a loss of $0.05 per ordinary share or $0.41 per ATS for the first quarter of 2022.

Research and development costs were $12.6 million for the quarter ended March 31, 2023, compared to the $17.6 million reported for the first quarter of 2022. The decrease was primarily due to a $5.1 million decrease in clinical trial and other development costs as Q1 2022 was a period of heavy trial enrollment and Q1 2023 was focused on finalizing data analysis and related activities of the Phase III ENHANCE program. Selling, general and administrative expenses were $9.6 million for the quarter ended March 31, 2023 compared to $7.4 million reported for the same period in 2022. This increase was primarily due to a $2.7 million increase in people-related costs, including share-based compensation as well as an increase of $0.8 million in cost related to the build-out of our commercial infrastructure as we prepare for a potential commercial launch.

The increase in SG&A expenses was partially offset by the nonrecurring $2 million charge related to the modification of our Ligand agreement, which was incurred during the first quarter of 2022. I’ll now turn the call back over to the operator for the Q&A.

Q&A Session

Operator: [Operator Instructions] The first question is from Yasmeen Rahimi with Piper Sandler.

Operator: The next question is from Andreas Argyrides with Wedbush Securities.

Operator: The next question is from David Risinger with SVB Securities.

Operator: The next question is from Tom Shrader with BTIG.

Operator: The next question is from Boobalan Pachaiyappan with H.C. Wainwright.

Operator: The next question comes from Joon Lee with Truist.

Operator: Next, we have a follow-up question from Yasmeen Rahimi with Piper Sandler.

Operator: This concludes our question-and-answer session. I would like to turn the conference back over to David Zaccardelli for any closing remarks.

David Zaccardelli : Great. Just I want to thank everyone for your questions, and thank you to the patients and healthcare professionals that participated in the ENHANCE program. We are extremely excited about the potential of ensifentrine and look forward to providing you further updates. And of course, finally, I’d like to thank our shareholders for their continued support and absolutely the dedicated and talented team at Verona for their commitment. Operator, that concludes today’s call.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.