Verona Pharma plc (NASDAQ:VRNA) Q3 2023 Earnings Call Transcript

Verona Pharma plc (NASDAQ:VRNA) Q3 2023 Earnings Call Transcript November 4, 2023

Operator: Welcome to Verona Pharma’s Third Quarter 2023 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Earlier this morning, Verona Pharma issued a press release announcing its financial results for the three months ended September 30, 2023. A copy can be found in the Investor Relations tab on the corporate website, www.veronapharma.com. Before we begin, I’d like to remind you that during today’s call, statements about the company’s future expectations, plans and prospects are forward-looking statements. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from our expectations expressed or implied by the forward-looking statements.

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

Dr. David Zaccardelli: Thank you, and welcome, everyone, to today’s call. With me today are Mark Hahn, our Chief Financial Officer; Dr. Kathy Rickard, our Chief Medical Officer; and Chris Martin, our Senior Vice President of Commercial. The third quarter continued our constant progress toward our goal of providing ensifentrine as a novel treatment for COPD patients. In August, the FDA accepted for review our new drug application seeking approval of ensifentrine for the maintenance treatment of patients with COPD. The agency assigned a PDUFA target action date of June 26, 2024, and is not currently planning to hold an advisory committee meeting to discuss the application. We look forward to continuing our work with the FDA during their review.

If approved, ensifentrine is expected to be the first novel mechanism available for the treatment of COPD in more than 10 years. We believe that bronchodilator and nonsteroidal anti-inflammatory activity has the potential to change the treatment paradigm for COPD. Recently, we hosted an in-person investor meeting in New York to provide an overview of our commercial preparations for the potential U.S. launch of ensifentrine with the company’s senior management team and key opinion leader, Dr. Jamie Rutland. During the meeting, we shared detailed overview of preparations for the planned launch of ensifentrine, including a review of the current COPD market, unmet treatment needs, launch access, distribution, reimbursement strategies and plans for field deployment.

For those who may have missed it, a replay of the meeting is available on our website. Overall, we believe we are very well positioned to launch ensifentrine with many key hires already in place across our commercial team and strong relationships being built on both the physician and payer fronts. With this, we are confident we will be able to quickly capitalize on the U.S. launch of ensifentrine, pending approval next June. In September, we presented additional analyses of the ENHANCE-1 24-week exacerbation data at ERS, which demonstrated treatment with ensifentrine resulted in a substantial decrease in the rate and risk of moderate and severe COPD exacerbation. In addition, it highlighted the impact of ensifentrine treatment on health care resource utilization related to COPD, including fewer physicians’ office visits, emergency department visits and hospitalizations compared with placebo treatment.

In October, we presented additional analyses from the ENHANCE-1 and ENHANCE-2 study at the CHEST annual meeting. The data from pooled analyses demonstrated that treatment with ensifentrine resulted in substantial reductions in the rate and risk of COPD exacerbations regardless of recent exacerbation history, and the medication was well tolerated across patient groups. Additionally, subgroup data analysis demonstrated treatment with ensifentrine resulted in improvements in lung function, symptoms, quality of life endpoints and reductions in the rate and risk of exacerbations regardless of background therapy as well as reductions in daily rescue medication use. Also at CHEST, we launched the disease awareness campaign titled unspoken COPD. The campaign highlights the severe impact COPD has on patients’ daily life and encourages HCPs to engage in deeper conversations to fully understand COPD’s impact on each patient in their practice.

Turning to our global partnering strategy. Nuance Pharma, our development partner in Greater China, has continued their Phase III trial evaluating ensifentrine for the maintenance treatment of COPD in China. As a reminder, Nuance Pharma has exclusive rights to develop and commercialize ensifentrine in Greater China, and as such, will play a key role in addressing the global need for a novel treatment for COPD. We look forward to providing updates as the trial progresses. Looking ahead, we are expanding our pipeline, starting with a plan to initiate 2 clinical programs. We are developing a fixed-dose combination formulation with ensifentrine and glycopyrrolate, a LAMA for the maintenance treatment of COPD delivered via a nebulizer. Fixed-dose combination therapies are commonly used in the treatment of COPD.

Historically, in DPI and pMDI therapies only. Based on market research, there is an unmet need for a nebulized fixed-dose combination therapy. We believe the combination of ensifentrine with a LAMA will provide COPD patients with the first nebulized fixed-dose combination that has bronchodilation through a dual mechanism and also nonsteroidal anti-inflammatory effects of PDE inhibition. With a feasible formulation is developed, we plan to submit an investigational due drug application to the FDA and if cleared, start a Phase II clinical trial assessing the safety and efficacy of a fixed dose formulation of ensifentrine and glycopyrrolate in the second half of 2024. Additionally, based on the clinical profile of ensifentrine in COPD patients, including data that supports reduction in exacerbation burden, improvement in lung function and the PDE3 and PDE4 mechanism of action supporting enhanced mucociliary clearance, we believe ensifentrine could be an effective treatment for non-cystic fibrosis bronchiectasis.

This is a severe chronic condition where the airways of the lung become abnormally wide, leading to a cycle of infection, inflammation and exacerbation that cause lung tissue damage. The condition affects approximately 370,000 patients in the U.S., and there are currently no therapies approved specifically for non-CF bronchiectasis. Physicians use bronchodilators, antibiotic, steroid and surgery to treat patients. If our NDA is approved, we plan to commence a Phase II clinical trial to assess the efficacy and safety of nebulized ensifentrine in patients with non-CF bronchiectasis in the second half of 2024, subject to clearance by the FDA. We are pleased with our constant progress in all areas, including regulatory, commercial preparation and new program development.

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

Mark Hahn: Thank you, Dave, and good morning, everyone. We ended the third quarter of 2023 with $257.4 million in cash and equivalents. We believe our balance sheet remains strong with the cash currently on hand, expected cash receipts from the U.K. tax credit program and funding anticipated to be available under the Oxford loan facility, we expect to have sufficient runway at least through the end of 2025, including the planned commercial launch of ensifentrine in the U.S. pending regulatory approval. For the quarter ended September 30, 2023, net loss after tax was $14.7 million compared to a net loss after tax of $15.6 million for the same period in 2022. This represents a loss of $0.02 per ordinary share or $0.18 per ADS for the quarter compared to a loss of $0.03 per ordinary share or $0.24 per ADS for the third quarter of 2022.

Research and development costs were $3 million for the quarter ended September 30, 2023, compared to cost of $9.8 million for the third quarter of 2022. The decrease was primarily due to a $7.9 million decrease in clinical trial costs as all study conduct and analysis under the Phase III ENHANCE program were complete, whereas in the same period in 2022, significant costs were incurred associated with even ongoing study conduct. The 2023 third quarter clinical trial and other development costs also include the impact of $2.2 million of credits received related to the final financial reconciliation of a Phase III enhanced program supplier. This decrease was partially offset by an increase of $0.7 million in people-related costs. Selling, general and administrative expenses were $13.4 million for the quarter ended September 30, 2023, compared to $5.3 million reported for the same period in 2022.

This increase was primarily due to a $4.7 million increase in people-related costs as well as an increase of $2.9 million for costs primarily related to the build-out of the distribution network and work related to payer disease education as well as advancing the commercial and information technology infrastructure in preparation for potential commercial launch. I’ll now turn the call back over to the operator for the Q&A.

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Q&A Session

Operator: We will now begin the question and answer session. [Operator Instructions] Our first question comes from Andrew Tsai with Jefferies.

Andrew Tsai: Appreciate all the updates as well. So first question is only to the extent you can share. How are FDA discussions going about the NDA? What kind of questions have as the agency asked you since accepting the filing. And as it relates to the PDUFA, what exactly keeps you guys up at night, what would be the risks here really in your view? And then secondly, let’s just say ensifentrine is approved. As we think about your initial launch cadence, could it be realistic to think that an initial low-hanging fruit could be patients who are taking an additional therapy after triple specifically Daliresp. So can we expect ensifentrine to immediately displace Daliresp specifically, could that be the low-hanging fruit immediately upon launch?

Dr. David Zaccardelli: Great. Thanks, Andrew, for the questions. And maybe I’ll start on the first one and then turn it over to Chris for his thoughts on the launch. With regard to the FDA questions, there, what I would say is typical during the review process, as you’d expect, the FDA asked for data, different questions, clarifications. And I would say it’s very typical and normal in my experience, especially at this stage, of course, relatively early in the review even prior to mid-cycle. So I think it’s going well from our view. With regard to what keeps us up at night and PDUFA risk, again, I think we feel we have an extremely strong package that we submitted across CMC, nonclinical, clinical and the total benefit to risk of ensifentrine, we believe, is very compelling. So at this time, I think we’re comfortable where we’re at in the FDA review process. So with that, I’ll turn it over to Chris and talk about the launch.

Chris Martin: Thanks, Dave, and Andrew, I appreciate the question. As we think about kind of that launch cadence and who is the first patient, that a physician may prescribe ensifentrine to. I think it’s important to kind of just ground everybody in what’s happening with these patients today. We know today there’s a 8.6 million patients treated with COPD maintenance medications. We also know today that at least half of them, either if they’re in a single, a dual, a triple agent are remaining symptomatic. And when a patient has persistent symptoms, physicians are very likely to add new therapies or try to help these patients start to feel better and hopefully prevent the risk of exacerbations in the future. So if we think about that 8.6 million, really, what we hear in our market research is there are 2 groups of patients that the physicians see as low-hanging fruit or patients that they would try and defending very quickly on.

The first is the group of patients that are on single LAMA or LABA or a LABA ICS product. And when they look at our data, and they look at what the data Dave described, they think of ensifentrine as being the potential drug to add to these patients if it’s approved. And they think about doing that at a very high rate. The second group of patients, which is the patients that potentially could even be on Daliresp of today, are these patients on dual and triple therapy that are looking for additional symptom relief and help. And the physicians add ensifentrine in about 20% to 45% of the time in these patients, treatment arm in meter. I think the important thing to keep in mind here is in that patient group that I’m talking about there, there’s about 75,000 to 85,000 patients on Daliresp today that are still — that could potentially be an option for physicians to add a PDE3, 4 mechanism too.

So we believe very strongly that there are 2 distinct patient populations, either those patients on single bronchodilator or LABA/ICS and those patients that are on dual and triple that ensifentrine could be added to very easily. And I think it’s all driven by the fact that these patients remain symptomatic. They remain having issues in their daily lives and the physicians are actively looking for new mechanisms to be able to layer on top of the patient’s treatment path, so they can get them going back to doing some of the normal things that they want to do in their daily lives.