Verona Pharma PLC (VRNA) 2021 Q1 法說會逐字稿

Welcome to Verona Pharma First Quarter 2021 Financial Results and Operating Highlights Conference Call. At this time, all participants are in listen-only mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the 3 months ended March 31, 2021. A copy can be found at 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 and achievements to be materially different from our expectations expressed or implied by the forward-looking statements, including, without limitation, the impact of COVID-19 pandemic on the status, recruitment, timing, results and cost of our clinical trials and the continuity of our business.

Any such forward-looking statements represent management estimates 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 claims -- it disclaims any obligation to do so even if subsequent events cause its view to change.

As a reminder, this call is being recorded and will remain available for 90 days. I'd like to turn the call over to Dr. David Zaccardelli, Chief Executive Officer.

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 first quarter of 2021 set a positive tone for what we expect to be another exciting year of substantial progress for Verona Pharma. Over the past 3 months, we continue to enroll patients into the 2 Phase III trials under way in our ENHANCE program and announced data from 2 clinical trials. The patient recruitment in ENHANCE-1 and ENHANCE-2 clinical trials is ongoing across sites in the U.S., Europe and Asia. Like other clinical trials, we continue to face headwinds from the ongoing COVID-19 pandemic. We continue to navigate the situation, and based on our current enrollment and projections, we currently remain on track to complete enrollment in both studies in the second half of 2021. However, the COVID-19 pandemic and its effects on clinical site personnel, local community restrictions, patient availability and study conduct is adversely affecting our ability to continue to increase enrollment in the ENHANCE trials. While we continue to make steady progress on enrollment, we expect the continued worldwide implementation of the COVID-19 vaccine to reduce the pandemic's impact and improve our ability to complete enrollment in the second half of 2021.

In addition, we are mitigating the effects of COVID-19 pandemic with other actions, including site-specific tactics such as increased advertising and supporting patient recruitment logistics. The 2 randomized, double-blind, placebo-controlled studies are designed to evaluate ensifentrine as monotherapy and added on to single bronchodilator background therapy.

Each study is expected to enroll approximately 800 moderate to severe symptomatic COPD patients. The 2 studies are designed to replicate measures -- measurements of efficacy and safety data over 24 weeks. ENHANCE-1 will also evaluate longer-term safety in a subset of approximately 400 patients over 48 weeks.

The primary end point is improvement in lung function measured by forced expiratory volume in 1 second, or FEV1, over 12 hours with ensifentrine after 12 weeks of treatment. Key secondary end points include measurement of COPD symptoms and health-related quality of life through 24 weeks assessed via the validated SGRQ and ERS patient-reported outcome tools. Additional lung function end points, including peak and morning trough FEV1 will also be assessed. Exacerbations will be analyzed by individual study and in a pooled analysis.

In February, we announced positive results from the multiple-dose part of our Phase II trial with the pressurized metered-dose inhaler, or pMDI, formulation of ensifentrine in moderate to severe COPD patients. Ensifentrine delivered by pMDI met the primary end point of improved lung function with ensifentrine demonstrating a clinically and statistically significant dose-dependent improvement in peak FEV1 over 4 hours post-dose with ensifentrine compared to placebo after 7 days of treatment.

In addition, ensifentrine demonstrated clinically meaningful and statistically significant improvements in trough FEV1 and average FEV1 over 4 and 12 hours with an adverse event profile similar to placebo. These data support twice-daily dosing of ensifentrine via pMDI for the treatment of COPD and are consistent with results from Phase II trials with our nebulized and dry powder inhaler, or DPI formulations.

The development of pMDI and DPI formulations of ensifentrine provides expanded opportunities, including life cycle management, new indications, and partnering. Last week, we reported data from a 45 patient pilot study with pMDI ensifentrine, demonstrating that ensifentrine added on to standard of care was safe and well tolerated in patients hospitalized with COVID-19. The study was not designed to demonstrate clinical efficacy and no clinical efficacy benefit with ensifentrine treatment added on to standard of care was observed in the trial.

The study evaluated a single dose regimen in recently hospitalized patients with COVID-19 and was designed to determine if there were notable signals for efficacy with ensifentrine across a variety of important patient outcomes. Based on the results of this pilot study, we do not plan any further studies of ensifentrine in the treatment of COVID-19 at this time.

Turning to Corporate Development. We strengthened our Board with the appointment of Lisa Deschamps, Senior Vice President, Chief Business Officer, Novartis Gene Therapies as a Nonexecutive Director. Lisa is responsible for strategic planning and worldwide commercialization of pipeline and commercial assets across the gene therapy portfolio. She has significant global and U.S. experience in bringing respiratory and other specialized therapeutic area products to the marketplace. As we prepare to commercialize ensifentrine, her leadership and strategic and commercial expertise will be extremely valuable to the team.

Looking ahead, we expect 2021 to be another exciting and productive year as we anticipate several important milestones during the coming year and beyond, including, in May, we will be presenting 3 abstracts demonstrating favorable safety, symptom, and quality of life data from our Phase IIb clinical trials with nebulized ensifentrine in COPD at the American Thoracic Society 2021 International Conference.

In the second half of 2021, we expect to complete enrollment in both of the Phase III ENHANCE trials. And longer term, based on forecasted recruitment and study progress, we expect to announce top line data from ENHANCE-2 in the first half of 2022 and from ENHANCE-1 in the second half of 2022.

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

Thank you, Dave. We ended the first quarter of 2021 with $169.6 million in cash and equivalents. We believe the combination of our cash position, the $30 million debt financing facility secured in November and cash receipts from U.K. tax credits will support our operations and clinical development programs into 2023.

Looking at the P&L. For the first quarter ended March 31, 2021, the loss after tax was $21.3 million compared to $12.3 million for the first quarter last year. This represents a loss of $0.05 per ordinary share or $0.40 per ADS for the first quarter ended March 31, 2021, compared to a loss of $0.12 per ordinary share or $0.96 per ADS in the first quarter of 2020.

Research and development costs were $13.6 million for the first quarter ended March 31, 2021, compared to the $7.6 million reported for the first quarter 2020, an increase of $6 million, primarily due to costs for the Phase III clinical program and an increase in share-based compensation charges.

General and administrative costs were $9.3 million for the first quarter ended March 31, 2021, compared to the $6.9 million reported for the first quarter of 2020. This increase was driven primarily by an increase in share-based compensation charges, partially offset by executive change costs in Q1 of 2020. The U.K. R&D tax credit for the first quarter of 2021 was $2.1 million compared to a credit of $1.7 million for the same period in 2020, increasing in line with the higher qualifying R&D expenditures incurred with the Phase III ENHANCE program. We expect an increase in the tax credit in the coming quarters as spending on the ENHANCE program continues.

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

We will now begin the question-and-answer session. (Operator Instructions) Our first question is from Suji Jeong from Jefferies.

I think previously, you guys mentioned that the steeper part of the enrollment curve to be in the first quarter to second quarter. So I was just wondering if you are seeing this acceleration in the enrollment rate and whether you continue to expect the enrollment to complete by the end of third quarter?

Suji, thanks for the question. Yes. So enrollment continues to progress, as I mentioned on the call. It has accelerated, of course, from the beginning part of our recruitment process. There's always a constant evaluation of that week-over-week as far as where we are. And I think our acceleration based on where we are today and also how we've guided to complete by the end of 2021, we still feel that, that is within the trajectory that we're on and how we're progressing with enrollment worldwide.

As I mentioned, the COVID-19 pandemic continues to impact our ability to constantly increase enrollment, although, as I mentioned, we continue to make steady progress week over week. So I think that our best guidance at the moment is that we are on a trajectory that gets us to completion of enrollment by the end of 2021.

However, if we continue to see COVID-19 impacting enrollment, if we have any level of retraction in a trajectory even though we would still continue to make progress in its enrollment, that could jeopardize our time lines. At this time, we don't see that, but it is a constant progress. And also, as I mentioned, we're looking to see that the COVID-19 vaccine, especially in the second half of the year, continues to improve the situation globally and within sites and able to recruit patients. So I think we're still guiding, as we mentioned, on the call. And of course, we'll continue to update you for sure on the next quarterly call.

Great. And follow-up question to that is, could you share how many sites total are open for ENHANCE-1 and ENHANCE-2? And for ENHANCE-2 trial, when in first half of 2022, do you plan to report the top line data?

Right. So I think I won't start stating specific numbers as far as sites because inherently, we might be off 1 or 2. And so I would think the best way to characterize is we have well over 200 sites involved in both studies, well over 100 sites involved in each study, and that's on a global basis primarily in the U.S., Europe and in Asia, primarily in South Korea. And so we believe, based on our projections, our interviews with the sites that we have the very much the right number of sites in order to support our enrollment projections. We look at that continually. We have added or replaced sites that may have been impacted by COVID-19. That's been a relatively small number compared to the total number of sites we have. But at the end of the day, we feel we have definitely enough sites and, of course, quality sites in order to conduct this study. And we wouldn't want to expand that any more than we currently are.

I think it's too early to get specific on exactly when data would be reported in 2022. As I mentioned, our targets and based on where we are, we should be able to report ENHANCE-2 in the first half of 2022, ENHANCE-1 in the second half of 2022. These are impacted, specifically on ENHANCE-1 based on the enrollment of where the patients that are in the subset of the 48 weeks come into the trial. We track that. We're pleased with our advancement in that subgroup of enrollment as we stand here today. So it's coming together but a little too early to project the exact times in 2022.

Our next question is from Liana Moussatos from Wedbush Securities.

Congratulations on your progress. So you mentioned the 3 ATS abstracts, and abstract A2255 has data with the combination on top of tiotropium for GI and cardiac adverse events. And the GI looked very -- both of them look very modest. And I was just wondering why ensifentrine, which inhibits both PDE3 and 4, would have such mild, especially GI symptoms; whereas roflumilast, which just inhibits PDE4, it typically has more significant GI adverse events? And is it a target issue? Or is it a chemical issue that ensifentrine is more mild? Any comments on that?

Right. Thanks, Liana. And I think I'll make a general comment and definitely turn the question over to Dr. Kathy Rickard to speak to the data in those abstracts. I think the first thing we have to keep in mind is that, of course, the route of administration with ensifentrine by the inhaled route, I think, provides inherently a favorable safety profile by the route of administration, especially with regard to PDE4 inhibition versus an oral route or a more systemic exposure.

So I think we believe the inhaled route to be favorable and definitely has shown that to date from an efficacy and a safety standpoint. But I'll have Dr. Rickard comment on the abstract.

Yes. And that's correct, Dave. The route is driving a lot of the safety. When you deliver it inhaled, you're getting very low some exposure concentrations, which are generally which leads to the adverse events. So by delivering it by an inhaled route, we can get wonderful efficacy in both spirometry and symptoms and quality of life but also are able to limit those side effects that we see with the oral delivery of these type of agents.

Our next question is from Edward Nash from Canaccord Genuity.

First question I had, just a quick housekeeping one, is just with regards to not going any further on the COVID-19 development. I assume that we won't see any more expenses or anything after this quarter -- or the first quarter. There won't be anything coming in the second quarter that's meaningful?

Yes. Edward, this is Mark. Yes. So that program was a very small program anyway, not a significant amount of spend on that. There's probably a little bit of cleanup costs that will spill into Q2 just as we wrap up the payments for the site. But I don't expect anything significant.

Okay. Great. And then my second question is kind of 2 parts related is with regard to the slow enrollment you're seeing with ENHANCE, is that across -- rather than saying sites, let's say, territories. Is that pretty much across all territories equally? Or is there one that tends to lag more? I know it's been kind of a whack-a-mole with COVID seeming to be taken care of and then resurgences constantly. So that's my first question.

And the second part of that is, is this issue with patient compliance and being lost to follow-up. And given COVID, this could obviously result in maybe an increased number of patients more than we'd normally see, they're lost to follow-up. How is that being incorporated into the overall powering of the trial?

Yes. So thank you for those excellent questions. And of course, both of them are top of mind. First, I wouldn't necessarily characterize it as slow enrollment. I think it's a matter of trajectory and pace that we're on.

Week over week, we continue to enroll patients into the trial. And as I mentioned, we're still tracking based on where we've enrolled to date. And our current projections from sites to complete enrollment in 2021. However, I do want to say that if we cannot have continued improvement in the COVID-19 impact, if we cannot have continued improvement through vaccination or other means, it may put us on a trajectory that would not accomplish that. However, we do not see that currently and the progress we've made to date and the trajectory we're on still gets us to goal this year for both studies. So I think we're confident as we can be, but it is something that it is a week-over-week assessment, the impact.

As far as geography, we're geographically diverse, not only throughout the United States, of course, within Europe, some Eastern and Western Europe. And then, of course, as I mentioned, in South Korea. There are hot spots, as you can read globally on countries that are having more difficulty than others and some sites have more challenges acutely. One of the reasons why we have the number of clinical sites in the study was right from the start to mitigate those issues.

And so while we may have in our grouping of sites, some that are more challenged acutely, we have others that are much better off as far as the impact to COVID-19 and are continuing to recruit. That constantly changes, and we expect, again, over the coming months, sites that may be more impacted by COVID-19 to be less impacted in July, August, September for example, all leading to us being able to accomplish the recruitment goals.

So it's a dynamic process, one we assess weekly, and we continue to make progress. I think your lost to follow-up is a very valid comment. Of course, we track that constantly. We work with all the sites to remind them that patients lost to follow-up or discontinuations, in general, of course, are never helpful in the context of a clinical trial, but inherently always occur.

And so we believe we're powered properly right now to handle those discontinuations. And in addition, we had already built into the protocol, our ability, if we needed to increase the sample size in order to adjust for any impacts of COVID-19 on discontinuations.

We don't believe we need to do that at this time, but it is something that we have built in already as an option in the program. So we're acutely aware and attentive, and we'll continue to make sure that our discontinuations fall within our power and calculations.

Great. And just -- I'm sorry, just one more thing, if I could, just related to that, is just with regard to the -- any protocol violations, clearly with COVID, there's probably some -- you have to be a little bit flexible, but obviously, not in any way jeopardize the protocols of the trial itself, but has there to date, I guess, been enough flexibility to kind of avoid protocol violations based on what centers have had to do with COVID?

Yes. Again, it's a continual assessment. I think that we knew of that issue before the study started because we had the advantage of planning the study during the front end of COVID-19 and the impacts. And so we had adjusted the protocol already in order to accommodate that flexibility, understanding that it would be difficult for sites to have multiple patients in their facility on the same day in order to run all the assessments. So we widened the windows, but still appropriate for achieving our end points.

And so we think in our feedback is that we have the appropriate protocol design to help accommodate the vast majority of any impacts related to scheduling, timing, and overall study conduct. But we'll continue to look at that and assess that on an ongoing basis.

Our next question is from Joon Lee from Truist Securities.

This is Miguel Coelho filling in for Joon. Regarding the COVID-19 pilot study, are you going to release further data on patient subgroup analysis, comparing patients on remdesivir versus steroid kind of care versus aggregate data from hospital? And from the patients that were released from hospital, can you give us some clarity on the number of full recovery versus home oxygen requirements in the treatment arm versus the (inaudible)? And then I have a follow-up.

Yes. So thank you for the question. I'll just provide a general comment and then turn it over to Kathy for additional color. A number of things to keep in mind. Again, it was a relatively small study, 45 patients, 30 receiving ensifentrine, 15 placebo.

We did want to report the top line results for you, which, as we've mentioned, when assessing signals of efficacy related to hospital course, use of oxygen, progression to mechanical ventilation, days on oxygen, and other parameters, such as that, we saw no meaningful difference between the use of ensifentrine on top of standard of care or placebo on top of standard of care.

Of course, standard of care did include remdesivir and steroids when indicated. And so the study was really looking to see if there were notable signals for us to follow up in additional studies, and we did not see any in this trial.

We will, as appropriate, as always appropriate, we will provide additional information on the data from this study as we fully analyze it and look at it in greater detail. That's ongoing and will come out in due course. I don't know, Kathy, you want to add anything addition to that?

Yes. I'll just say that the patients -- all patients recovered very well in the study. And at discharge, most patients had no deficits and no oxygen use. There was only one readmission in the placebo group after discharge from hospitals. So we saw very good outcomes in all patients. Better than expected from that perspective.

But you need to keep in mind that that's in the face of the fact that treatment on COVID has changed dramatically in the year. And we have very good treatment. And as Dave said, all patients and a good number of patients received both dexamethasone and remdesivir.

So overall, all patients recovered very well.

And I guess that partially answers my follow-up, which is, would you still consider to try to design or try to implement ensifentrine as a stand-alone treatment in light of those results? And if so, and if you still think of pursuing this, how would it affect your cash runway?

Yes. So no, I think at this time, based on the data that we have seen, and keeping in mind, we tested a single-dose regimen, 2 milligrams BID, by pMDI, in a specific patient population, as we've described. And because there were no standout or notable signals of efficacy to follow-up on in additional clinical studies, at this time, we do not see that it would be productive to do additional studies with ensifentrine in COVID-19.

However, if that were to change in the future, we would definitely update everyone and advise, but we do not see that happening at this time.

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

Thank you, everyone, for your questions today. I would like to thank our shareholders for their continued support and the dedicated and talented team at Verona for their commitment. 2021 is another exciting year for Verona, and we look forward to updating you on our progress. We hope that you, your families, and your colleagues stay safe and healthy during this time. And operator, that concludes today's call.

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