Verona Pharma PLC (VRNA) 2022 Q1 法說會逐字稿

Welcome to Verona Pharma's First Quarter 2020 Financial Results and Operating Highlights Conference Call. (Operator Instructions)

Earlier this morning, Verona Pharma issued a press release announcing its financial results for the 3 months ended March 31, 2022. 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 limitation, the impact of the COVID-19 pandemic and the Russia-Ukraine conflict on such progress and on the status, recruitment, timing, results and cost of our clinical trials.

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 views to change. (Operator Instructions) 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 Senior Vice President of Commercial.

During the first quarter of 2022, we continue to make substantial progress towards completing enrollment in our Phase III enhanced clinical program. This advancement brings us closer to our goal of delivering ensifentrine, a novel inhaled PDE3 and PDE4 inhibitor and first-in-class product candidate for the maintenance treatment of COPD. As a reminder, each of the 2 randomized, double-blind, placebo-controlled enhanced studies are designed to enroll approximately 800 moderate-to-severe symptomatic COPD subjects for a total of approximately 1,600 subjects across sites in the U.S., Europe and Asia. The ENHANCE-1 and ENHANCE-2 trials will replicate measurement of efficacy and safety data over 24 weeks with ENHANCE-1 also evaluating longer-term safety in approximately 400 subjects over 48 weeks.

Turning to recruitment. In December 2021, we completed enrollment of approximately 400 subjects in the 48-week subset of ENHANCE-1. Completing recruitment in this subset of ENHANCE-1 is a critical driver for reporting top line data from the study. We continue to progress enrollment in the 24-week subset of ENHANCE-1. As of May 2, 2022, the ENHANCE I trial had approximately 90% of subjects randomized into the study. We expect ENHANCE-1 to be fully enrolled in the second quarter of 2022. In January 2022, we completed enrollment in ENHANCE-2 with more than 800 subjects randomized. The design of the ENHANCE program was based on analysis of our 2 Phase IIb clinical trials, which both enrolled approximately 400 subjects with moderate-to-severe COPD. This includes similar entry and exclusion parameters as well as key study endpoints.

To date, overall population attributes, including demographics and baseline COPD characteristics, including smoking history, lung function, symptoms and quality of life for subjects in the ENHANCE program are similar to those seen in the Phase IIb trials. While both ENHANCE trials were expected to enroll approximately 50% of subjects on background therapy, we expect to enroll approximately 55% to 65% in each study, which reflects current treatment practices.

Looking to results. We are on track to report top line data from ENHANCE-2 in the third quarter of 2022 and from ENHANCE-1 around the end of the year. Top line data from both ENHANCE trials will include the primary end point, improvement in lung function as measured by average forced expiratory volume in 1 second or FEV1, area under the curve or AUC 0 to 12 hours' post-dose at week 12, as well as secondary endpoints comprising measurements of COPD symptoms and health-related quality of life, including E-RS and SGRQ end points as well as overall safety data. As previously stated, our projected enrollment time lines in ENHANCE-1 and ENHANCE-2 as well as timing of top line data are based on our ability to continue navigating the COVID-19 pandemic and ongoing restrictions and sanctions and other challenges posed by the Russia-Ukraine conflict. Conditional upon positive results, the company plans to submit a new drug application to the U.S. Food and Drug Administration in the first half of 2023.

On the corporate front, in March 2022, James Brady joined our Board as a nonexecutive director, bringing 30-plus years of experience in the biopharmaceutical industry. He has a wealth of leadership, strategic and commercial expertise, which will be key as we prepare to submit our NDA and progress our commercialization and licensing strategy. James has served in multiple leadership roles across the U.S., Europe and China during his career at AstraZeneca. Most recently, he served as Chief Financial Officer of MedImmune, the Biologics Discovery and Development division of AstraZeneca.

We continue to proceed towards our objective to bring ensifentrine to the millions of COPD patients who are not well served by available treatments. Worldwide, over 380 million patients suffer from COPD and it is the third leading cause of death. In the U.S., where Verona is preparing to commercialize ensifentrine itself, COPD affects more than 25 million patients with product sales for the maintenance COPD market totaling over $10 billion per year. Despite the availability of existing COPD treatment, more than 1 million patients remain symptomatic on maximum therapy, highlighting the need for novel medications to provide relief to these patients. Outside of the U.S., millions of COPD patients remain symptomatic and urgently in need of additional treatments.

Looking ahead, we expect 2022 to be another exciting and productive year. In May, we will present a late-breaking abstract at the American Thoracic Society meeting in San Francisco on our successful, thorough QT analysis demonstrating ensifentrine had no clinically relevant effect on cardiac conduction.

On the morning of June 16, we plan to host an in-person KOL event in New York ahead of our top line Phase III data readout in the third quarter. This event will feature management and KOLs, who will discuss the current COPD treatment landscape, unmet needs and how ensifentrine's novel profile could help manage the current challenges within the treatment paradigm. We are looking forward to enrolling the final subjects in ENHANCE-1 and excited about reporting top line data from our Phase III ENHANCE program later this year.

I will now turn the call over to Mark to review our financial results for the first quarter of 2022.

Thank you, Dave. We ended the first quarter of 2022 with $132.8 million in cash and equivalents. We believe our cash and equivalents at March 31, 2022, expected cash receipts from the U.K. R&D tax credit program and funding expected to become available under the $30 million Silicon Valley Bank debt facility will enable us to fund our planned operating expenses and capital expenditure requirements through at least the end of 2023.

For the quarter ended March 31, 2022, the loss after tax was $24.8 million compared to a loss after tax of $21.3 million for the same period in 2021. This represents a loss of $0.05 per ordinary share or $0.41 per ADS for the quarter compared to a loss of $0.05 per ordinary share or $0.36 per ADS in the first quarter of 2021.

Research and development costs were $17.6 million for the quarter ended March 31, 2022, compared to the $13.6 million reported for the first quarter of 2021. The increase of $4 million was primarily due to a $5.6 million increase in costs associated with the Phase III ENHANCE program, partially offset by a $2 million reduction in share-based compensation charges.

Selling, general and administrative expenses were $7.4 million for the quarter ended March 31, 2022 compared to $9.3 million reported for the same period in 2021. This decrease of $1.9 million was primarily driven by a decrease in share-based compensation charges of $3.1 million and a $600,000 decrease in professional fees, partially offset by a $2 million charge related to the modification of the Ligand agreement.

The U.K. R&D tax credit for the first quarter of 2022 was $1.3 million compared to a credit of $2.1 million for the quarter ended March 31, 2021. The decrease of $800,000 is due to changes in the SME R&D tax credit program that established a cap, limiting the R&D tax credit to GBP 20,000 plus 3x times U.K. pay-as-you-earn in national insurance. In the next few months, we intend to submit a claim for approximately $15 million related to our 2021 R&D spend. We expect to receive the reimbursement payment later in 2022. This nondilutive 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) The first question comes from Suji Jeong with Jefferies.

I have a couple of questions about the background therapy. You said that 55% to 65% of the patients are expected to be on the background treatment. Do you see any differences in baseline characteristics between those who are on background versus those who are not? And also, can you guys comment on what percentage of the enrolled patients are expected to be on the inhaled steroid? And my second question is, for the pipeline data in the third quarter, do you plan to share week-24 data as well?

Suji, happy to touch on those. Yes, I think what we're seeing is the final breakdown of percentages of those on background therapy and those not on background therapy to landing somewhere in that 55% to 65% range approximately. I think that, that is well in line with our expectations overall, definitely in line with how we've powered the study, reminding you that we powered the study to detect a difference of 59 milliliters and that's 90% powered is take the difference of 59 milliliters in FEV1 AUC 0 to 12. And I also remind you that in Phase II for those that are on background therapy, we saw approximately a 90 milliliter difference in those patients over 4 weeks. So, we feel comfortable with where we're landing and how the study is powered.

With regard to baseline demographics, we're still assessing things overall. There's no particular reason we see any significant differences of those on background therapy and those that are not on background therapy compared to the Phase II experience. I do want to remind you that, of course, the primary endpoint is done on the patient population in total, those that are on background and not on background. And as you know, we still have significant numbers of patients not on background. So, we think the blend is perfectly fine within the study assumptions and also how we've seen patients enrolled in their baseline demographics overall.

With regard to ICS background therapy, reminding you that we capped that at 20% of the patient population. And of course, they also needed to be on background therapy, LABA or LABA in order to be on ICS as well. And we are seeing it not exceeding that at this time, 302 -- or the ENHANCE-2 study is already completed enrollment, and so we're underneath that threshold. But we did accumulate a notable amount of patients that are on ICS, which we anticipated based on that amendment. And I think your other question was the 24-week data for the top line results for ENHANCE-2?

Yes, ENHANCE-2 in the third quarter.

Yes, we'll have 24-week data related to SGRQ and E-RS and symptoms quality of life. That's where that primary endpoint comes from. We'll also have insights to that endpoint over the study as well, but we will have it for 24 week as well.

The next question comes from Andreas Argyrides with Wedbush Securities.

Just 2 for us here. So even though the Phase III is not evaluating ensifentrine for COPD exacerbations. Of the COPD patients who remain symptomatic on current therapies, are there any phenotypes that you anticipate will be the most responsive ensifentrine based on the data that you guys have generated so far? And then if the 3 mg ensifentrine shows a greater effect on FEV1, but less of an impact on symptoms, what impact would this have could have on the commercial uptake? Or any color on that?

Sure, Andreas. I think, as you pointed out, the study is not designed as an exacerbation endpoint study, but we are capturing those events in the study. We also have mentioned that our overall intent is to look at that on a combined study analysis of ENHANCE-1, ENHANCE-2 and of course, ENHANCE-1 is still moving forward and still completing enrollment as I've mentioned. We haven't broken it down to any specific phenotype. And again, it's not even a listed secondary endpoint, but rather an exploratory endpoint.

With that said, we do -- we are accumulating exacerbation events in the study. So, I think we are quite interested into seeing how that looks in the final analysis. But either way, it doesn't impact on how we view the study with regard to the primary endpoint and the secondary endpoints, but it will be interesting to see. As far as every possible permutation of results, primary and secondary endpoints and which ones do better and which ones don't do better and how much better and all of that, I think it's a little bit difficult to do that and without the data because it's an endless conversation.

I think we believe that hitting the primary endpoint, of course, is important as it always is in Phase III. We designed the study specifically to look at secondary endpoints over 24-weeks keeping in mind, remember, the primary endpoint is measured at week 12. And as that's what's required to demonstrate chronic bronchodilation or lung function improvement in COPD. And so the studies are designed to look at secondary endpoints and we believe in them based on the Phase II data. But I would say as we look at everything and when we have the results, it's really an integrated analysis of benefit to risk and that's what ultimately is evaluated on drugs that are approved, that is the total benefit whenever that is related to primary and secondary endpoints as it outweigh any risks. And is the benefit to risk strong enough for approvals. And so I think that's what we're looking at ultimately is the profile of an ensifentrine's benefit to risk. And we're quite confident in it based on the Phase II data.

And to remind everyone that we've had a very favorable safety profile for ensifentrine, which then lends itself to a strong benefit to risk. So we'll see, and we look forward to sharing the data with everyone.

Looking forward to the Investor Day.

Your next question comes from Boobalan Pachaiyappan with H.C. Wainwright.

Can you hear me okay?

Yes. Perfect.

Awesome. So just a couple from our side. Just to be clear, so 80 patients are left in order for you to complete the enrollment process for the 24-week subset of ENHANCE-1. Is that right?

We guided to approximately 90% of the study is enrolled against 800 -- approximately 800 patients. So you can do the math and probably that gives you info...

Yes. Got it. Okay.

Yes. That -- it changes all the time. So I'm reluctant to give you an exact number.

Okay. That's fine. So I just wanted to make sure I heard it correctly. So I mean, for math, it's 80 patients. So with respect to R&D expenses, so obviously, they were roughly $17.6 million for the first quarter. So how do you expect the cadence to look like for the next quarter and maybe for the rest of the year?

Yes. Thanks for the question, Boobalan. I think what we'll see is that the R&D will continue, let's say, in that general neighborhood for Q2, and then it should start to taper off in the back half of the year quite significantly by the end of the year.

Okay. Got it. And then one final. So obviously, ensifentrine will hit a meaningful inflection this year, hopefully. So how should investors think about the cadence of other programs?

Yes. No, great question. And as you know, we've been very focused on executing the COPD program over the past couple of years, and I think that's served ensifentrine well and Verona well to have that focus. And it's one of the things that we did when we joined the company to make sure that that occurred, including raising the capital that was dedicated to executing this COPD program. We have enormous opportunity with ensifentrine in other indications because of its clinical pharmacology and profile. As we've mentioned, there's opportunities in asthma, cystic fibrosis, and we think that that's an enormous opportunity, especially in looking at other dose delivery approaches, including MDI and DPI, and so you should expect that as part of it.

We also see again -- and we're wanting to see the data overall, but clearly, there's opportunity for combination of ensifentrine with other COPD products, for example LAMAs. And you know that the COPD space is quite familiar with combination products. And so you could expect programs related to that, either at nebulized and/or inhaled devices.

The next question comes from Edward Nash with Canaccord Genuity.

I want to just ask, now that we're getting closer now to getting these 2 Phase III readouts and NDA filing at the beginning of next year. Just wanted to kind of understand what's going to be happening, I guess, towards maybe the end of this year or beginning of next year after the filing with regards to starting to build in honestly the commercial structure. Just kind of what are the thoughts on timing and when that would start and the efforts that would you be employing over time before approval?

Great. Yes. Thanks for the question. And I'll turn it over to Chris to give you that review.

Edward, this is Chris. Great question. I think one of the things that we've done with ensifentrine and Verona has really built the commercial build-out around our milestones and the first clinical milestone being positive data coming out of the ENHANCE-2 trial. And upon that data, we'll start to work toward building out the commercial organization and really starting to work around securing and discussions with payers to ensure that we have proper access and coverage for ensifentrine when we get to launch.

The other things that will be important as we get to launch is making sure that we're prepping the market appropriately. And what I mean by that is making sure the market is ready for a new mechanism of action like ensifentrine that provides both PDE3 and PDE4 inhibition in one molecule with bronchodilation and anti-inflammatory effects. That activity is going to be critical as we get ready for launch. It's important that we seed the market with information around ensifentrine so that the prescribers and the payers are ready for a molecule like ensifentrine comes out on the field.

The other thing that's important for us to do is really start to work with advocacy groups and societies too as we think about how patients will take this medication and ultimately use it in their daily lives. So those are a lot of the activities that we'll be conducting over the next 18 to 24 months. And all of those are triggered around us reaching some of those critical milestones that we'll see over the next 6 to 12 months as well. I hope that helps you there.

Our next question comes from Joon Lee with Truist Securities.

Assuming things go as planned, could you talk about your IP around ensifentrine and your strategy to extend commercial runway? And I have a follow-up question.

Sure. No, I think with regard to IP, of course, we are constantly attentive to it to start with, and we believe we have an extremely strong IP position for ensifentrine. And I think that's been looked at quite extensively by our investors primarily and others. We have a -- shall we say, a network of patents that provide coverage and protection for ensifentrine commercially. They're grounded in 3 patents that sort of work together: our polymorph patent, our formulation patent and our manufacturing patent. Of course, we have others in addition to those as well, and we expect those to provide protection out to the mid-2030s. We also will have an opportunity to extend patent life on one of the patents as we apply for that extensions, so -- which will allow maybe up to another 5 years. And so we, again, are quite confident in our patent protection as the mid-2030s.

As far as protecting that runway, there are a lot of opportunities for life cycle management with ensifentrine past that, different devices approaches, as I mentioned, combinations of other drugs with ensifentrine. So I think that between other indications, combinations, different delivery devices, we have enormous opportunity with ensifentrine.

And it's great to see you guys onboarding someone of the Mr. Brady's caliber. How are his visions for the commercialization and licensing strategy for ensifentrine similar or different than what you have envisioned in the past couple of years as you developing your ensifentrine?

Right. You're talking about our new Board member, James Brady?

Exactly, exactly.

Yes. Great. It's fantastic to have him join the company. I think that speaks also a bit of volumes about Verona and ensifentrine of him wanting to join. As you pointed out, he has an extensive experience financially, commercially, strategically and have done multiple licensing deals for example. So it's just tremendous to have him join the Board. It's a little bit early days. As you can imagine, it's been just a few months of that. And so I think he's been contributing, of course, and also gathering a lot of information and learning about where we've been, what we're doing and making sure that he understands all of that. But we look very much forward to his contribution as we work through the rest of 2022 and into 2023, where much of all of this action occurs.

(Operator Instructions) The next question comes from Tom Shrader with BTIG.

This is [Song] calling in for Tom. So 2 questions. The first question is what is the general like size of sales force that's often in the field of COPD? And the second question is, I was hoping if you guys can provide any additional color or update on the development in the China through the collaboration with Nuance. And then any update on the potential licensing in the European market as well, too?

Right. So, thanks for those questions. Let me handle the last one very quickly with regard to licensing in other territories, including Europe, for example. Clearly, it's part of our stated strategy, and I think we continue to progress. Although, as you can imagine, as we're so close to the data, that it sort of is in everyone's best interest to get that so that I think our ability to optimize ensifentrine and the financials around ensifentrine and a licensing deal are best represented by having the data now. We did the deal with Nuance in Greater China a little earlier, of course, on terms that we thought were extremely favorable as well. And now we'll -- I think, practically speaking, we'll wait to see the data and then move forward with our licensing strategy. With regard to the Nuance update and sales force sizing, I'll turn that over to Chris who manages that area.

Thanks, Dave. And I'll start with kind of sales force sizing and then moving to the China Nuance partnership. As far as sales force sizing for this opportunity, if we look at our market research and how we believe ensifentrine will be utilized which is on top of existing therapies for patients that are symptomatic, what we see is that as patients continue to be symptomatic with COPD, they transition out of primary care and into pulmonologists. And that transition allows us to be a lot more targeted in our sales force deployment. When you look at the pulmonology community that's out there, there's about 12,000 to 13,000 pulmonologists in the United States. And so given that size, we anticipate that a sales force of around 100 sales representatives would be adequate to reach the physician opportunity as well as the patient opportunity. And we believe there's well over 1 million patients that are remaining symptomatic on just maximal therapy. So that 100 sales -- 100-person sales force could reach that opportunity very effectively.

Switching gears to China. Our partnership with Nuance has been working very well. They continue to progress the documentation with the CDEs, the move toward IND. And that progression will continue over the course of the year and we look forward to potentially updating their progress as we move through 2022. But the partnership and their work has been moving on very, very seamlessly with them.

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

Thank you. We would like to thank everyone for your questions and to thank the patients and healthcare professionals participating in the ENHANCE program. As a reminder, our near-term milestones include completing enrollment in the Phase III ENHANCE program in the second quarter of 2022, reporting top line data from ENHANCE-2 in the third quarter of 2022 and from ENHANCE-1 around the end of the year. And a condition upon positive results, submitting an NDA to the U.S. FDA in the first half of 2023. We look forward to speaking to many of you about ensifentrine in the coming weeks. Finally, I'd like to thank our shareholders for their continued support and the dedicated intelligent team at Verona for their commitment.

Operator, that concludes today's call.

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