Verona Pharma PLC (VRNA) 2021 Q3 法說會逐字稿

Welcome to Verona Pharma's Third Quarter 2021 Financial Results and Operating Highlights Conference Call. (Operator Instructions) And earlier this morning, Verona Pharma issued a press release announcing its financial results for the 3 and 9 months ended September 30, 2021. A copy can be found in the Investor Relations tab on their 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, including, without limitation, the impact of the COVID-19 pandemic on the status, recruitment, timing, results and costs of our clinical trials and the continuity of our business.

Any such forward-looking statements represents management's estimates as of the date of this conference call. While the company may elect to update forward-looking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause our 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.

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.

During the third quarter, we continued steady progress towards our goal of delivering ensifentrine, a novel inhaled PDE3 and PDE4 inhibitor and first-in-class product candidate for the maintenance treatment of COPD via our Phase 3 ENHANCE program. As a reminder, each of the 2 randomized, double-blind, placebo-controlled ENHANCE studies are planned to enroll approximately 800 moderate to severe symptomatic COPD patients for a total of 1,600 patients across sites in the U.S., Europe and Asia.

The ENHANCE-1 and ENHANCE-2 trials will replicate measurements of efficacy and safety data over 24 weeks with ENHANCE-1 also evaluating longer-term safety in approximately 400 patients over 48 weeks. As stated previously, our projected enrollment time lines in ENHANCE-1 and ENHANCE-2 were based on expected continued improvements in the COVID-19 pandemic and successful implementation of our COVID-19 mitigation efforts.

I'm excited to report enrollment is nearing completion, and we expect that by the end of November, both the 800 patient ENHANCE-2 trial and the 400 patient, 48-week subset of the ENHANCE-1 trial will be approximately 95% enrolled. We continued to make substantial progress during the third quarter, and we are pleased with our ability to advance recruitment in these international multi-site clinical trials during a global pandemic. Although the pace of enrollment is expected to slow due to the approaching holiday season, compounded by continued effects of the COVID-19 pandemic on the health care industry, we still expect to complete enrollment in ENHANCE-2 and the 48-week subset of ENHANCE-1 around year-end 2021.

Specifically reviewing our enrollment progress, as of November 8, 2021, ENHANCE-2 had approximately 90% of patients randomized into the study. Including those patients currently entered in the run-in period, we expect ENHANCE-2 to be approximately 95% enrolled by the end of November. As of November 8, 2021, the 48-week subset of ENHANCE-1 had approximately 95% of patients randomized into the study. Recall, completing recruitment of the 48-week subset in ENHANCE-1 is critical driver for reporting top line data from the study. Enrollment in full ENHANCE-1 trial is expected to complete in the second quarter of 2022.

Looking forward to results, we expect to report top line data for ENHANCE-2 mid-year 2022 and for ENHANCE-1 around the end of 2022. Although should COVID-19 related challenges increase further, our models predict time lines could shift by a quarter. In this scenario, top line data would be expected in Q3 2022 for ENHANCE-2 and Q1 2023 for ENHANCE-1.

We look forward to providing further guidance when recruitment is completed. The mitigation strategies we implemented at the start of the ENHANCE program have allowed us to make solid enrollment progress.

As a reminder, these include; inclusion of broad geographic coverage of sites, both in the U.S. and Europe to help manage the effect of local COVID impacts; requiring only essential on-site visits and adding flexibility around visits to ensure sites could follow their safety protocols; developing individual site plants to repair for events that may disrupt normal site operations, such as alternative methods for distributing study medication and for collecting data from patients and providing for COVID-19 testing and personal protective equipment at all sites to adhere to safety protocols.

Looking ahead, in support of our planned NDA submission, we expect to report results from our thorough QT study in December. This 32 patient study is designed to evaluate the effective ensifentrine, if any, on cardiac conduction. In addition to progress in our Phase 3 trials, we continued to add to the substantial clinical evidence in support of benefits of ensifentrine for the maintenance treatment of COPD. In October, Dr. Tara Rheault, our Vice President of Research and Development, presented Phase 2 data, demonstrating the positive effect of pressurized metered-dose inhaler or pMDI formulation of ensifentrine in patients with moderate to severe COPD at the CHEST Annual Meeting.

Data from Part B of the 2-part study, first reported in February 2021, showed ensifentrine delivered by pMDI over 1 week provided statistically significant, clinically meaningful and dose-dependent improvements in lung function and was well tolerated with adverse event profiles similar to placebo. The data are consistent with the results from dry powder inhaler, or DPI, and nebulizer formulations of ensifentrine. In September, Dr. Rheault presented an abstract describing a drug-drug interaction study assessing the effect of CYP2C9 inhibitor, fluconazole, on the pharmacokinetics of nebulized ensifentrine in healthy individuals at the European Respiratory Society International Congress. These data demonstrated co-administration of fluconazole had less than twofold, not clinically relevant effect on pharmacokinetic measures for ensifentrine.

As we prepare for the planned NDA submission, I'm pleased to announce Caroline Diaz will join Verona Pharma starting next week as Senior Vice President of Regulatory Affairs, bringing more than 18 years of experience in both large and small pharmaceutical companies across key regions. Ms. Diaz has previously served at ReViral as Vice President, Regulatory Affairs as well as Vice President, Regulatory and Quality at Dova Pharmaceuticals where she worked with Mark and me. At Dova, she built the regulatory function from the ground up and led regulatory strategy development and implementation efforts, resulting in the first marketing approvals for the company. Her expertise will be invaluable as we further prepare our regulatory strategy for ensifentrine, and we are delighted to welcome her to the team.

We continue to work towards our goal to deliver ensifentrine to the millions of COPD patients who are not well served by available treatments. Worldwide, there are over 380 million COPD patients and COPD is the third leading cause of death. In the U.S., where Verona is preparing to commercialize ensifentrine, COPD affects more than 25 million patients and sales in the maintenance COPD market total over $10 billion. Despite maximum therapy with existing medications, more than 1 million patients remain symptomatic. Outside of the U.S., millions of COPD patients in Europe, China also remain symptomatic and in need of additional treatments.

We are pleased with our progress and as we look ahead, we anticipate several important milestones. These include results from the QT study, completion of enrollment in the ENHANCE trials, and importantly, top line data for the ENHANCE trial program in 2022.

I will now turn the call over to Mark to review our third quarter financial results.

Thank you, Dave. We ended the third quarter of 2021 with $166.5 million in cash and equivalents. During the third quarter, we received a $25 million upfront payment from our Nuance Pharma license agreement and $8 million from the U.K. R&D tax credit program relating to our qualified R&D expenditures in 2020. We believe the combination of our cash position and expected cash receipts from the U.K. R&D tax credit program and potential borrowings under the $30 million debt financing facility, will support our operations and current clinical development programs through at least the end of 2023.

For the 3 months ended September 30, 2021, the net profit after tax was $11.1 million compared to a loss after tax of $18.9 million for the same period in the prior year. The net profit this quarter is due to recognition of the $40 million aggregate upfront consideration from the Nuance agreement. This represents a profit of $0.05 per ordinary share or $0.40 per ADS for the 3 months ended September 30, 2021, compared to a loss of $0.20 per ordinary share or $1.60 per ADS in the same period of 2020.

Research and development costs were $22.6 million for the 3 months ended September 30, 2021, compared to the $12.8 million reported for the same period in 2020. The $9.8 million increase is primarily driven by costs associated with the Phase 3 ENHANCE clinical program, partially offset by a decrease in share-based compensation charges.

General and administrative costs were $10.9 million for the third quarter of 2021 compared to the $8.3 million reported for the same period in 2020. This increase of $2.6 million was driven primarily by costs relating to the Nuance agreement, partially offset by a reduction in costs relating to the July 2020 PIPE financing. The U.K. R&D tax credit for the 3 months ended September 30, 2021, was $4.7 million compared to a credit of $2.3 million for the same period in 2020, increasing in line with the higher qualifying R&D expenditures incurred with the ENHANCE Phase 3 program this year.

Year-to-date, we have accrued approximately $10.6 million under this program. Under the terms of the U.K. R&D tax credit program, we intend to submit for reimbursement of this amount, along with any amounts to be accrued in the fourth quarter, sometime in the first half of 2022, and we expect to receive the payment later in 2022. This non-dilutive source of capital continues to be an important element in our financing strategy.

I'll now turn the call back over to the operator for the Q&A.

(Operator Instructions) And the first question today will come from Andreas Argyrides with Wedbush Securities.

When you guys plan on reporting ENHANCE-2 results, will you be providing an update or any data from ENHANCE-1 at the time? And then from the QT study, how do you envision that being part of the NDA submission?

Thanks for the question. I think at this time, when we report our top line data from ENHANCE-2 somewhere around mid-year 2022. I think that we will still be, of course, ongoing in ENHANCE-1, so I don't anticipate any specific update, although we may provide a status of where we are and reconfirming our plans for reporting top line results in ENHANCE-1, but we'll see where we're at, at that time. And with regard to the QT study, I think it's nothing more than, of course, completing the required elements as we understand them and know them from our discussions with the FDA and ensuring that we have a thorough QT study in an NDA submission. Again, at this time, we don't expect any unusual findings, but of course, we're reporting results of the study later on this year and merely consider it an element that is expected in an NDA for a new chemical entity.

The next question will come from Ram Selvaraju with H.C. Wainwright.

This is [Boobalan] dialing in for Ram Selvaraju. Just, I know you guys are really busy with ENHANCE programs but were there any advances made in terms of advancing ensifentrine for treating cystic fibrosis?

Yes. Thanks for the question. I think as we've mentioned previously and guided to that we continue to believe that ensifentrine could be a treatment for multiple respiratory diseases, including cystic fibrosis, asthma and maybe others. The profile as a PDE3, PDE4 inhibitor could be applicable across a number of respiratory diseases. However -- and even though we do have, of course, experience previously in cystic fibrosis and asthma that show great promise, we continue to be incredibly focused on completing the ENHANCE program. I think as that occurs and as we continue to progress to a potential NDA, of course, we will turn our attention to other diseases and also ensure that we have the right funding in place to progress the development of ensifentrine beyond COPD. So I think you can expect for at least a fair amount of 2022 to be continued to be focused on execution around the ENHANCE-3, hence a program and Phase 3 program and then we'll progress from there with ensifentrine and other diseases.

Thanks for the clarity. So what are your thoughts on inhaled pirfenidone being developed by Avalyn Pharma?

Well, I don't think we have really formed any particular opinion on it. I think that from our perspective, ensifentrine as a novel mechanism of action and as we see it, really will be the first product to come out, that is a new mechanism for inhaled route. I don't think, we really see any issues with other products in development, but we continue to assess the development landscape and of course, we can continue to update our thoughts as we progress.

Thank you. And how do you expect the R&D cost to evolve for the remainder of the year and for 2022? So it looks like I want to see how the cadence or overall shape looks like.

I'm sorry, [Boobal,] were you asking what we expect the spend to be on R&D for the balance of this year and next year?

Yes, yes, yes. With respect to R&D costs.

Yes. Yes, great. So the R&D expense for this quarter was about $22.6 million and as you know, we're in the kind of the belly of the beast of enrolling patients in the Phase 3 program. I think from an expectation perspective, you would think that, that might increase a bit in Q4 as we're kind of still remaining in the peak and then it'll start to taper back down in Q1 and Q2. And then when we get into Q3 and Q4 of next year, it should be substantially lower than we're seeing this year as we are through the majority of the costs being spent on the Phase 3 program.

And the next question will be from Joon Lee from Truist Securities.

This is (inaudible) for Joon. Our question is related to the process that you are having for finding or selecting your business partners and if you could provide some color on that? And the next question would be, if you have any plans to commercialize outside U.S. by yourself?

Right. So yes, thanks for the question. Let me take the second first, as we've mentioned, our strategy is to partner outside the U.S. for ensifentrine that we -- our plans are to commercialize it in the U.S., but look for partnerships outside the U.S. You can see that we have begun to execute on that strategy, of course, with our collaboration partnership with Nuance in Greater China.

We are very pleased to have that agreement in place and have ensifentrine progressing in Greater China with our partner, Nuance Pharma. So as far as our criteria or plans, again, we continue our BD efforts and looking for partners outside the U.S. This is an ongoing process that it's difficult to have an exact time line, even though, as you can see, we've continued to execute on it. It needs to be the right partner with the right scope and capabilities and focus. Of course, the monetary aspects of any partnership also have to be consistent with the underlying value of ensifentrine in that marketplace.

As you know, we're progressing through the Phase 3 program and that value proposition continues to increase as we progress with the development of ensifentrine. So it depends on their capabilities, the economics of the partnership and as those come together, then we plan to execute on those partnerships, but we'll see how that progresses in 2022.

And a follow-up question on different note. Could you provide some insight on the reason behind the cytochrome study, CYP study and the reason for doing that study?

Yes. I think, of course, you know through development, it is very typical to look at drug-drug interaction studies, especially when you're looking at the way your product ensifentrine, in this case, is metabolized and understanding the impact on other drugs that may impact the same pathway for metabolism. This is normal typical. We're merely just updating, again, the work we've done comprehensively, which what I would say are all the typical and required elements that go into an NDA. Each drug is different in the type of drug-drug interaction studies they may need to do depending on the disease, the other drugs that are used and also its metabolic pathway. In this instance, in our plans and as we presented to the agency, doing this drug-drug interaction study, specifically looking at CYP2C9 is what we were planning to do. And again, it's just more of completing the requirements that are typical under an NDA.

(Operator Instructions) The next question will be from Tom Shrader from BTIG.

I just have a couple of quick follow-ups on questions that have really been explored. The fluconazole study, is that it for drug-drug interactions or is that sort of an evolving process with the FDA?

I believe that's where we're at this time. I don't think we need to do any others. I don't know if Kathy, you want to comment on that?

Yes. Currently, at this time, we have no other requirements for drug-drug interaction studies.

Okay. And then on the QT study, is there any preclinical data that speaks to that? You don't sound concerned, but do you go into that with the animal data, essentially saying nothing or is there anything we should think about?

Yes. Kathy, you want to comment?

I think, the animal data has all been reinsuring and showing us that we don't have a significant cardiac effect and so we expect that we'll see that in the study that we're expecting results on shortly.

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Dr. Zaccardelli for any closing remarks.

Thank you, operator. I'd just like to say that we'd like to thank everyone for your questions and to thank the patients and health care professionals participating in the ENHANCE program. In Q4, we will be presenting at several investor conferences, including Stifel, Jefferies London and Piper Sandler and of course, look forward to speaking to many of you then. I'd like to thank our shareholders for their continued support and always the dedicated and talented team at Verona for their commitment. Operator, that concludes today's call.

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