Verona Pharma PLC (VRNA) 2020 Q2 法說會逐字稿

Welcome to the Verona Pharma Second Quarter 2020 Financial Results and Operating Highlights Conference Call. (Operator Instructions) Earlier this morning, Verona Pharma issued a press release about its financial results for the 3 and 6 months ended June 30, 2020. 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, including without limitations, the impact of the COVID-19 pandemic on the status, enrollment, timing results and cost of our clinical trials and the contingency of our business.

Any such forward-looking statements represent management's 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 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 1 year. I'd now like to turn the call over to Dr. Zaccardelli, Chief Executive Officer. Please go ahead, sir.

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 second quarter of 2020 was a highly productive quarter marked by several pivotal accomplishments, including closing on an oversubscribed $200 million financing to fund the Phase III ENHANCE clinical trials for ensifentrine planned to begin later this year; receiving a notice to proceed for our new IND to study inhaled ensifentrine in patients with COVID-19; receiving a supportive FDA response to our End-of-Phase II package for nebulized ensifentrine as maintenance treatment for COPD to support our Phase III ENHANCE trials; and appointing Chris Martin, Vice President, Commercial, whose expertise will be instrumental as Verona Pharma prepares over the next few years to become a commercial-ready organization.

Since joining Verona Pharma earlier this year, we have executed on all our objectives to ensure ensifentrine is well positioned to progress to Phase III clinical trials this year. Specifically, Verona Pharma secured $200 million in gross proceeds from a recent oversubscribed financing, raising almost 4x our market capitalization, which we believe is unprecedented and validates the clear potential of ensifentrine as treatment for chronic obstructive pulmonary disease, COPD, and other respiratory diseases.

The financing was supported by a highly experienced group of new and existing life science investors who understand the potential benefits of ensifentrine for patients with COPD. We welcome our new shareholders, including RA Capital Management, Access Biotechnology, Perceptive Advisors, Acorn Bioventures, PBM Capital, Samsara BioCapital, Foresite Capital, Sphera, Fairmount, and Soleus Capital.

With our balance sheet strengthened, we believe our Phase III program for ensifentrine in COPD is fully funded and expect to support our programs well into 2023.

Following the financing and the FDA response to our End-of-Phase II package, we expect to commence our Phase III clinical trials later this year. However, we continue to monitor the potential impact of COVID-19 on the timing of the initiation and have put in place mitigation strategies to reduce the likelihood of COVID-19-related delays.

In March, due to the pandemic, we postponed the start of the second multi-dose part of the Phase II study with the pressurized metered-dose inhaler or the pMDI formulation of ensifentrine in COPD. We are pleased to report that we now plan to start the second part of this study in the third quarter of 2020, with results expected in the first half of 2021. We are confident in the clinical potential of ensifentrine and encouraged by the well-validated regulatory pathway for COPD therapies.

Ensifentrine has demonstrated beneficial effects on lung function, COPD symptoms and quality of life as well as having a favorable safety profile. We believe that ensifentrine, with its dual bronchodilator and anti-inflammatory activity, will be an important therapeutic for millions of patients who are not well served by available COPD therapies.

The medical community is also excited about the potential of ensifentrine and eager to have a new therapy with a novel mode of action to treat COPD patients. Many of you participated in our KOL event in June, where several leading pulmonologists discussed how ensifentrine could address the treatment challenges of COPD. If you were unable to participate, we encourage you to listen to the webcast, which can be found under Events and Presentations on our website.

While we are and continue to be primarily focused on developing ensifentrine for the treatment of moderate-to-severe COPD, we also understand ensifentrine's novel mechanism of action coupling both bronchodilation and anti-inflammatory properties may have utility in the treatment of COVID-19 patients.

We recently received a notice to proceed for our new IND to study ensifentrine in patients with COVID-19. In this quarter, we intend to initiate a pilot clinical trial to investigate the efficacy and safety of ensifentrine delivered via a metered-dose inhaler in patients hospitalized with COVID-19. We believe ensifentrine can help to improve patient outcomes, given that prior data has demonstrated its potential to improve oxygenation, reduce inflammation in the lungs and enhance mucus clearance.

A single-center randomized double-blind placebo-controlled 45-patient study at the University of Alabama at Birmingham is designed to evaluate the efficacy and safety of ensifentrine added on to standard of care treatment in patients hospitalized with COVID-19 compared to standard of care plus placebo. Patients will receive 2 milligrams of pressurized MDI ensifentrine twice daily or a placebo for up to 29 days or until hospital discharge if that occurs before 29 days. The clinical status of all patients will be evaluated at day 29 and day 60. The primary endpoint of the trial is the proportion of patients recovered from COVID-19 and no longer hospitalized at day 29. Secondary endpoints include improvements in clinical status, time to recovery, supplemental oxygen use, proportion of patients requiring mechanical ventilation and mortality. We look forward to updating you on the progress of the study as we develop new treatments for this pandemic.

We are pleased that 6 abstracts presenting findings from clinical trials with ensifentrine were accepted by the 2020 American Thoracic Society International Conference. The abstracts are published on the ATS website and can be found in the peer-reviewed publication, American Journal of Respiratory and Critical Care Medicine. The presentations include a late-breaking abstract that expands on Phase IIb efficacy and symptom data first announced in January 2020, where nebulized ensifentrine added onto tiotropium demonstrated clinically and statistically significant dose-dependent improvements in lung function as well as COPD symptoms. As we prepare to commence our enhanced Phase III clinical trials for ensifentrine and explore its efficacy in COVID-19, we are beginning to build our commercial infrastructure.

We welcome Chris Martin as Vice President, Commercial, who will oversee commercial operations for ensifentrine. Chris has more than 15 years of sales, marketing and business development experience. Prior to joining Verona Pharma, Chris was Executive Director of Marketing at SK Life Science, a subsidiary of SK Biopharmaceuticals, where he launched its first commercial product, the antiepileptic medication, XCOPRI. At Verona Pharma, his expertise will be instrumental in analyzing the market, developing key relationships with health care professionals and payers and developing and executing prelaunch and commercial launch activities. We welcome him to the Verona Pharma team.

I will now turn the call over to Mark Hahn to review our second quarter 2020 financial results.

Thank you, Dave. Turning to our financial results, please refer to the press release that was issued this morning, which is also being filed as a 6-K with the SEC.

Given that we are headquartered in the U.K., our financial results are in British pound sterling. For your convenience, we have included a translation to U.S. dollars based on the noon buying rate of the Federal Reserve Bank of New York on June 30, 2020, which is GBP 1 to $1.2369 for certain key figures.

We ended the second quarter 2020 with GBP 18.1 million or $22.4 million in cash, cash equivalents and short-term investments. This excludes the proceeds raised in the oversubscribed private placement that Dave mentioned.

Gross proceeds from that offering were $200 million and after deducting the placement fees and other transaction expenses, the net proceeds were approximately $183 million, including these net proceeds from the financing, our pro forma cash balance at June 30 is $206 million or GBP 163 million and is expected to be sufficient to support our operations and clinical programs well into 2023.

For the first 6 months ended June 30, 2020, the loss after tax was GBP 16.9 million or $21 million compared to GBP 14.4 million for the prior year period. This represents a loss of 16p per diluted share or a loss of $1.58 per ADS for the 6 months ended June 30, 2020, compared to a loss of 13.7 p per diluted share for the prior year.

Research and development costs were GBP 12.1 million or $15 million for the 6 months ended June 30, 2020, compared to GBP 15.8 million for the 6 months ended June 30, 2019, a decrease of GBP 3.7 million attributable primarily to less clinical activity in the 6 months ended June 30, 2020. The largest driver of R&D expense in the 6 months ended June 30, 2020, was start-up costs for the Phase III ENHANCE program. In the same period of 2019, the primary expenses were related to the Phase IIb study of ensifentrine as an add-on therapy to tiotropium that read out in January of this year.

General and administrative costs were GBP 7.6 million or $9.3 million for the 6 months ended June 30, 2020, compared to GBP 4 million for the 6 months ended June 30, 2019, an increase of GBP 3.6 million. This increase was primarily attributable to a $2.9 million increase and costs related to executive changes and costs associated with the closure of our New York office and relocation of our U.S. base of operations to North Carolina.

Finance income offset finance expense in the 6 months ended June 30, 2020. In the first 6 months of 2019, finance income net of finance expense was approximately GBP 2 million. This change was primarily driven by a smaller decrease in the fair value of the warrant liability during the first 6 months of 2020 as compared to 2019.

The tax credit reported in the statement of comprehensive income is related to an R&D tax credit in the U.K., which is based on our qualifying research and development expenditures. Lower research and development expenditures in the first 6 months of 2020 resulted in a lower tax credit when compared to the first 6 months of 2019. We believe this tax credit will increase in coming years as spending on the ENHANCE program accelerates and is an important element in our financial plans.

I'll now turn the call back over to Dave.

Thanks, Mark. We have made tremendous progress in the second quarter, and I'm pleased that we are executing on our goals and moving rapidly to advance ensifentrine in our ENHANCE Phase III clinical trials as well as position Verona Pharma into a commercial-ready company. I would like to thank the team for their talents, expertise and dedication.

I'll now turn back to the operator to open it up for questions and answers.

(Operator Instructions) We have one question coming from the line of Lucy Codrington.

It's Lucy Codrington from Jefferies. I have a couple of questions, please. Just out of interest, just wondering why you chose to evaluate the MDI formulation for the COVID trial? What was the reasoning behind that?

Secondly, the cash runway, does that just include development of ensifentrine for the nebulized COPD study or are you also including that -- any other indications or the other formulations other than the MDI study that you have already disclosed?

And then finally, for the Phase III, just interested in how you are going to incorporate COVID testing, whether that's antibody or antigen testing, just to ensure that any patients that may get infected during the study or have been prior to the study any long-term consequences of those in terms of respiratory symptoms are all accounted for?

Thanks, Lucy, for those questions. I'll maybe take the first and then hand over to Mark, and I think Kathy can answer the third. Good questions. We decided to move forward with the MDI for use in this clinical trial to evaluate its effect in COVID-19. It was done in collaboration with the site who felt that, that dosage format, ease-of-use utility in their hospital was best suited for these patients. And of course, as you know, we have been progressing the MDI formulation, had recently reported out data on a single dose, and based on the clinical and in vitro data, felt very comfortable with its dosage delivery as well as the investigator. And so it was the best approach for this study at this time. And so we're very pleased to be progressing additional formulation into clinical trials in this way.

I don't know, Mark, you want to handle the cash runway and the use of proceeds and financing COVID as well as COPD?

Yes. Yes, for sure. So great question, Lucy. And the proceeds from the offering are really earmarked for running the COPD trial with nebulized ensifentrine. There is also an amount of cash that's been earmarked for the COVID-19 study, but that's a relatively small amount of money as compared to the COPD program. But we will look at any other uses of ensifentrine or any other dosing forms as being future activities that we would engage in later.

And Kathy, do you want to take the COVID testing for Phase III?

So far as related to doing COVID testing in Phase III, we are proceeding with what our health care recommendations for the local countries that they have. Most of them are not mandating it to be done every time, but as given to the physician's and the investigator's discretion. So it will be available to be done when needed by the investigator when he feels they need to do it, but it won't be done in everybody, every time.

Okay. And what about -- will patients be screened for antibodies before they start the trial just to ensure that you know which patients have had an infection and therefore might have long-term sequelae?.

No, they won't be screened before the trial of COPD patients, as you are probably aware, we get viruses all the time. This is another respiratory virus. If they have recovered from the virus and they are back at their stable baseline, we don't expect to see any significant differences in our trial with that. So we would not be screening them for antibodies at this time. Also remember, the state of the antibodies, we don't really know how long they will last and whether the information would be that useful at this time is really up in the air. So we don't believe that's easy at this time.

We have another question coming from the line of Tom Shrader.

This is Tom Shrader from BTIG. And I would also like to -- congratulations for the deal. It must have been an incredible amount of work. I have a question about the patients. So they are all on nebulized drugs already. Is that right? And is it a complexity if they are not, if you have to provide a device?

Tom, I'm trying to make sure I understand the question. Are you referring to the COPD trial? Or...

That's right. Yes, yes.

Yes. So as far as the Phase III ENHANCE trials, patients can be on background therapy, either a LAMA or a LABA that would be given typically as an MDI or DPI or another handheld device. And also patients can be not on any background therapy. And we're targeting, about 50% of the patients will be on background therapy and 50% will not.

So most of the patients, of course, from their history, have experience with nebulizers, and they may have received products by nebulization in the past for acute use or even chronic, and I don't know if that helps. I mean, that's the sort of layout of the patients who will be coming into the study from a nebulizer MDI/DPI standpoint.

Right. Okay. And then I have a question on exacerbations. I know it's not really the point of this trial, but do you have any sense of 4-year enrolled patients, the number of exacerbations they are likely to have had in the last 12 months. I'm just wondering what kind of signal we're likely to get out of this trial.

Kathy, do you want to comment on that?

Sure. We are not recruiting patients that are high exacerbators. So if you look at normal exacerbation subjects, they are looking for people who generally have one or more exacerbations of a year. We are not doing that.

The average exacerbation rate for a normal COPD patient, I think in the past, data has shown it’s about a half an exacerbation a year. So that's the typical patient we're going to have in our studies, being that we're not specifically designed to look at exacerbations. But we are equipped to be able to assess exacerbations over the study period of time, which we're looking at for 6 months. We have enough patients for that period. We do know in other studies similar to ours when they use the same type of patient population, they are able to show a difference and a decrease in exacerbations, and so we're hopeful and actually expect that we'll be able to show some type of effect on exacerbations in the full analysis from or 2 studies since they are not specifically designed for exacerbations.

We have another question coming from the line of Liana Moussatos.

I'm from Wedbush Securities. For the COVID trial, will the standard of care include remdesivir?

Yes, yes, it will. If that's what the physician has prescribed the patient, that would be allowed.

And how are you going to account for -- do you anticipate placebo patients and treated patients to get remdesivir in order to compare it?

Yes. I mean, I think we would -- again, it's on top of standard of care. It's a 45-patient trial, 30 of the patients will be receiving ensifentrine, 15 placebo. We will not dictate standard of care, and we expect that to fall out as it should in a balanced form. And so I expect remdesivir to be used in both ensifentrine and placebo groups.

We do have another question, and it comes from the line of Joon Lee.

This is Joon Lee from Truist Securities. Congrats on the financing as well and that removal of the funding overhang. I have 3 questions: number one, just the follow-up on the MDI as a choice of device to go forward in the hospitalized patients. You commented that the hospitals felt that MDI might have been more convenient, but that they are in hospital hospitalized. So why wouldn't they have actually wanted a more proven nebulizer as opposed to an MDI that is still undergoing clinical testing?

And then the second question is regarding the enrollment of patients for Phase III COVID-19 -- sorry, COPD study, it's possible that having COVID-19 co-infection in both the placebo and the drug arm might help you because your drug actually has a dual mechanism of action. So maybe, hypothetically, that having this mechanism could help those more with if they weren't to have the co-infection with SARS COVID-19 -- or SARS-CoV-2, I believe. And that maybe we will find out when you have the results from the pilot study, but just curious your thoughts there.

And then the third is the second Phase III, what's the timing of the trial, and what's your strategy around the starting of the second Phase II?

Yes. Thanks very much for the questions. Maybe I'll turn it over to Kathy and have her comment because she has been speaking with the investigators very directly on MDI and her thoughts on having co-infection in a Phase III, and I can follow-up on the last part. Kathy?

Sure. So I think the MDI, I mean, we're very confident in our data from the MDI as we have data from the DPI and the MDI, and that is equivalent, we see equivalent efficacy with the nebulizer. I think that this point, in a small pilot study in the hospitalized patient, the investigator and the hospital relieved by the use of the MDI, which we truly believe is equivalent to the nebulizer, will enable us to carry out the study in a more -- in an easier manner for them in the hospital since it's a pilot study from that perspective.

And that's why we chose to do the MDI. I think it's also a -- it's actually good to have the MDI. We now have a new IND in the U.S., allowing us to use the MDI. So that allowed us to have another additional clearance from the FDA to be able to proceed with our experimental MDI from that perspective. As far as co-infection, to be clear, patients are not going to be allowed in the COPD study if they are actively having an infection of COVID.

First of all, that's from a safety perspective. We have to guard protectionables, the subject and the personnel who are working with these. So if anybody is expected to have COVID, they will be tested, and if they are proved to be positive and have the disease, they will be discontinued from the study. So there's no expectation that we will be allowing patients to have active disease in the study from that perspective. I think that will allow too many factors that could prevent us from being able to have the control over the study. So that's not the intention of doing the study from it.

I think there's a question about starting phase -- the second Phase III study there. Both studies are starting in the same time frame. The one study will be longer than the other because we will be doing an additional 24-week safety data, but the intent is to start on both around the same time.

Can I ask you a follow-up?

Fine. Go ahead, yes, please.

Yes, yes. So for the COVID study, is there anything prespecified that you agreed to with the FDA to analyze the data maybe retrospectively to see if there was any, like, COVID -- because the literature says, there are 5 million people confirmed with COVID-19 in the U.S. and some literature that's in science, which is a really high-impact factor journal says, about 86% of the paced people who are infected go undetected because of lack of sort of obvious symptoms.

So assuming 40 million people in the U.S. have it, I mean, you are going to end up enrolling some patients with COVID-19 or the virus that is asymptomatic. Do you have any plans to analyze the data, taking that into consideration?

So you are talking about the COVID study now versus the COPD?

No, no, no, COPD study. And then do you have any plans to analyze the data and looking more closely, retrospectively, at maybe a -- whether the patient had COVID-19 or not and may have confounded with steady results?

So for -- again, for the COPD study, if somebody becomes COVID-positive, they would be discontinued from the study, but they will still be -- discontinued from treatment, but they will still be allowed in the study. So yes, we could carry their data forward. And as an analytics study, we do a lot of analysis to look at that data. So certainly, we can have a look at that. I think it's clear to understand that COPD patients are generally not the ones that are going to be asymptomatic.

If they get an infection from COVID, they are the high-risk group. So they are going to be the ones that are clearly showing symptoms. I think the most of the asymptomatic people are going to be people who are relatively healthy and younger and will not fall into our COPD population for it. But I can't rule out the fact that 1 or 2 might be positive for it.

Yes, yes. Absolutely. Congrats on the funding.

Thanks very much.

(Operator Instructions)

We have a question coming from the line of Edward Thomason.

Edward Thomson here from Nplus1 Singer. Two questions, if I may. The first is just actually a general strategy update, please, on relicensing the ensifentrine data package and whether you think you will still follow a -- either a global licensing with a partner? Or would that be more regional now or specific to certain indications?

And the second question was in relation actually to the COVID-19 trial, I know we focused on a lot, but do you see, with the MDI formulation, the title flows for patients being an issue with the MDI formulation? And I would have thought theoretically with the nebulizer formulation will probably suit patients with poor title flows, particularly if they are hospitalized with COVID-19?

Edward, I'll go and take the first part of that question and then turn it over to Kathy for the second. As far as our partnership, licensing strategy, we have a specific strategy, of course, of looking for partners outside the United States. Our intention is for ensifentrine to be further developed and commercialized by a partner in those geographies. Of course, the large ones are Asia, China, for example, the EU, for sure. And so we're going to be making sure we turn our attention to that in the back end of this year. And as we get into 2020 and executing on our Phase III trials.

It's -- whether it's regionally based or more globally in multiple territories, it will depend on the partner themselves, as you'd expect. It's always simpler in many ways, especially if the value is provided to do a larger deal that covers multiple areas, and so we will be looking at that. As far as different indications, while anything is possible, I always find it quite difficult to start splitting a compound by indication in different regions from a development commercialization approach. But if that were to be clear and beneficial and help ensifentrine get out in different countries quicker, we would be always listening to that. So that's our overall strategy and update.

And Kathy, do you want to handle the MDI and the COVID-19?

Sure. So remember, again, for the COVID-19 study, unlike the COPD patients, we are recruiting everybody with COVID-19. So we're not expecting this to be a population that is completely people who have underlying lung disease, which may limit that they are title flow, they will be relatively healthy individuals, people with other health problems.

But as far as title flows, if we were using DPI, particularly in a COPD population, the DPI can have problems in a patient who has compromised lung function because of their ability to disperse the dry powder elements. But the MDI is actually one of the devices we tend to use in people who have lower title bonds because that's not the same effect. So I think the MDI will actually function very well in these patients that were enrolling in the COVID-19 study.

Operator, maybe we have time for one more question. Thanks, Edward. Operator, has time for one more question, if there's somebody in the queue.

Yes, indeed, there is somebody in the queue, and we're currently taking the details in order to announce them. (Operator Instructions)

So our question comes from the line of Sharon Ofer.

This is Sharon from Sphera. Congratulations again on the raise. So a question on the COVID trial. I'm not quite sure how much bronchodilators are used as the part of standard of care for COVID at the moment. So could you maybe give us some color on if the patients enrolled would be -- maybe intentionally not be prescribed bronchodilators as part of the trial?

Sharon, thanks for the question. Yes. So maybe I'll turn it over to Kathy to give her thoughts on that. And...

Okay. So yes, bronchodilators are actually being used a lot in COVID. Certainly, we're using everything we can because of the symptoms that the patients are demonstrating, so much so that there's been a short-acting bronchodilator a decline -- there's a shortage of them available around the world. It's led to a shortage of the drug being available.

So yes, they are being done. The thought is that if you broncholize the patient, they can breathe easier, take deeper breadth and also it helps clear the virus from it. So certainly, I think it's an important thing that can be done both in patients who don't have underlying lung disease and patients who do have previous underlying lung disease.

Great. Thank you, Kathy.

Great. So I think that I appreciate everyone's participation in today's call. We appreciate your continued support and look forward to updating you on our clinical development progress for ensifentrine. We hope that you, your families and colleagues stay safe and healthy during this time.

Operator, that concludes today's call.

Thank you. Ladies and gentlemen, thank you for your participation. Once again, this concludes today's conference, and you may now disconnect your lines. Thank you.