Verona Pharma plc (NASDAQ:VRNA) Q4 2023 Earnings Call Transcript

Verona Pharma plc (NASDAQ:VRNA) Q4 2023 Earnings Call Transcript February 29, 2024

Verona Pharma plc beats earnings expectations. Reported EPS is $-0.18, expectations were $-0.23. VRNA isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Welcome to Verona Pharma’s Fourth Quarter and Full Year Quarter 2023 Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen-only mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the three months and full year ended December 31, 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.

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; Chris Martin, our Chief Commercial Officer; and Dr. Tara Rheault, our Chief Development Officer. 2023 was a pivotal year for Verona Pharma and importantly, for millions of patients suffering from COPD. Following a very positive data from our Phase 3 ENHANCE program, we submitted a new drug application to the FDA seeking U.S. approval of ensifentrine for the maintenance treatment of patients with COPD. As you know, the FDA accepted our NDA for review and assigned a PDUFA target action date of June 26, 2024, and indicated they are not planning to hold an advisory committee meeting to discuss the NDA.

We continue to advance our preparations for the planned commercial launch of ensifentrine in the U.S. and look forward to continuing our work with the FDA during their review. If approved, ensifentrine is expected to be the first novel inhaled mechanism available for the treatment of COPD in over 20 years. We believe its dual mechanism providing bronchodilator and non-steroidal anti-inflammatory activity has the potential to change the treatment paradigm for COPD Currently, more than 390 million patients suffer from COPD worldwide, and it is the third leading cause of death globally. Despite the availability of existing COPD treatments in the U.S., approximately 50% of patients experienced persistent symptoms for more than 24 days per month.

In addition, approximately 60% of patients, who could be considered maximally treated on dual bronchodilators or triple therapy are dissatisfied. This highlights HCP’s continued need for new and effective COPD therapies to provide relief to their patients. In October, we hosted an investor event where we presented a comprehensive update on our commercial launch preparation. We continue to make excellent progress on this front, including strengthening our commercial and sales team, and continuing to finalize key tactics including, our distribution and patient service programs, our branded HCP and patient engagement plans, and our internal data infrastructure capabilities to allow quick and actionable insights, during launch. We have also continued the rollout of our disease awareness campaign “Unspoken COPD”, which launched at the CHEST Meeting.

The campaign is actively highlighting, the severe impact of COPD on patients’ lives, and encourages HCPs to engage patients in a better dialogue, to help optimize their care. Overall, we believe we are in a strong position to successfully launch ensifentrine, pending approval in June. This confidence is based on the novel profile of ensifentrine, the significant unmet need in COPD, our commercial preparation, and the deep experience and capabilities of the Verona team. In addition to the planned US launch of ensifentrine, we progressed development of two new Phase II programs. First, we are developing a fixed-dose combination formulation with ensifentrine and glycopyrrolate a LAMA for the maintenance treatment of COPD, delivered via nebulizer.

Fixed-dose combination therapies are commonly used in the treatment of COPD historically, in DPI and pMDI formulations. Based on market research, an unmet need exists for a nebulized fixed-dose combination therapy. We believe the combination of ensifentrine with a LAMA could provide COPD patients, with the first nebulized fixed-dose combination that provides bronchodilation through two complementary mechanisms and also nonsteroidal anti-inflammatory effects. This combination was assessed in the ENHANCE program, where ensifentrine added on to a LAMA, demonstrated robust efficacy and safety compared with placebo added on to a LAMA. Upon confirmation of an adequate fixed-dose combination formulation, we plan to submit an investigational new drug application to the FDA, in the second half of 2024, and plan to start a Phase IIb clinical program, intending to support dose selection for Phase III.

In this program, we anticipate a dose-ranging trial in patients with COPD, to identify the appropriate dose of nebulized glycopyrrolate in the fixed-dose combination. And a second dose-ranging trial, with a fixed-dose combination versus individual components, using a factorial design. Both trials are planned as randomized double-blind crossover trials, in approximately 50 patients, each with lung function endpoints. Additionally, based on the clinical profile of ensifentrine observed in COPD patients, including a reduction in exacerbation rate and risk, an improvement in symptoms of cough and sputum, we believe ensifentrine could potentially be an effective treatment for noncystic 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 exacerbations that cause lung tissue damage.

The condition affects up to 500,000 patients in the US and there is currently no approved therapy. Despite the lack of approved treatments, HCPs use bronchodilators, antibiotics, steroids, mucus thinners and surgery to treat patients. We plan to commence a Phase 2 clinical trial to assess the efficacy and safety of nebulized ensifentrine in patients with non-CF bronchiectasis in the second half of 2024. The trial is planned as a randomized double-blind placebo-controlled trial in approximately 180 patients with non-CF bronchiectasis over approximately 24 weeks. Endpoints including exacerbations, symptoms and lung function will be assessed in this trial. Moving on to our finances. I am pleased to report on our strong balance sheet. In support of our commercialization activity as well as our continued pipeline expansion in December, we enhanced our financial flexibility through a debt financing facility providing access to up to $400 million.

We borrowed $50 million at closing and may draw an additional $100 million upon approval of ensifentrine. Future draws are available upon certain commercial milestones and other conditions. With our current cash balance and the expected proceeds available under this debt facility, we believe we are in a strong financial position as we prepare to launch ensifentrine in the US and advance new clinical programs. Turning to our global partnering strategy. Our development partner Nuance Pharma is continuing enrollment in a pivotal Phase 3 trial of ensifentrine for the maintenance treatment of COPD in China. As a reminder, Nuance Pharma has exclusive right 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 Nuance’s trial progresses. We are pleased with our progress in important areas including regulatory accomplishments, commercial preparation and new program development. I will now turn the call over to Mark to review our financial results for 2023.

Mark Hahn: Thank you, Dave. We ended 2023 with $271.8 million in cash and equivalents. We believe our balance sheet remains strong and with the cash currently on hand and funding anticipated to be available under the recently closed $400 million debt facility, we expect to have sufficient runway at least through the end of 2026, including the planned commercialization of ensifentrine in the US, if approved and the two Phase 2 development programs, Dave discussed a few moments ago. For the year ended December 31, 2023, net loss after tax was $54.4 million compared to a net loss after tax of $68.7 million for the prior year. This represents a loss of $0.09 per ordinary share or $0.69 per ADS for the year compared to a loss of $0.13 per ordinary share or $1.04 per ADS in 2022.

Research and development costs were $17.2 million for the year ended December 31, 2023 compared to the $49.3 million reported for 2022. This decrease was driven by less cost incurred on the ENHANCE Phase 3 program which completed study conduct and analysis early in 2023, whereas in 2022 significant costs were incurred associated with the then ongoing study conduct. Selling, general and administrative expenses were $50.4 million for the year ended December 31, 2023, compared to $26.6 million reported for the prior year. This increase was driven primarily by a $15.6 million increase in people-related costs as we expanded our headcount with key hires in medical affairs and commercial positions, inclusive of share-based compensation, as well as an increase of $9.7 million related to the buildout of the commercial and information technology infrastructures, marketing and market development expenses and costs associated with our medical affairs team’s increased presence at local, regional and national medical conferences.

I’ll now turn the call back 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] The first question today comes from Andrew Tsai with Jefferies. Please go ahead.

Andrew Tsai: Hey. Thanks. Good morning. Appreciate the updates. Thanks for taking our questions. So a couple on our side. I guess for the first one, for the ongoing NDA review, I know the FDA continues to indicate no Ad Comm, but since we’re basically three to four months away from the PDUFA, I’m just curious how realistic is this scenario at this juncture? Is it fair to essentially rule out a potential Ad Comm or not yet? And secondly, how has the FDA dialogue been? Have they finished with CMC inspections? And if there seems to be no real issues with the review, could an early approval be a possibility and would you be ready to launch if that were the case? Thanks.

David Zaccardelli: Good morning, Andrew. Thanks for the questions. So let me talk about the Ad Comm. I think, of course, anything is possible, but as you sort of outlined, time continues to move forward. And the FDA has communicated to us twice that they’re not planning to have an Ad Comm. So that’s our operating philosophy on that. But, again, let’s be aware that anything can happen. With regard to the review, I mean, I think I would just say it continues and is ongoing. And I think that with regard to inspections, we’ve had clinical inspections. I think that both our API and drug product manufacturer are facilities that are known to the agency, and so how they’re managing inspections is in their court. And with regard to early approvals, I would just say that the PDUFA is June 26.

That’s how we think about it and we’ll adjust accordingly. Are we prepared to launch? In many ways, yes. I think that some of the things that affect that timing always at the end are the label, the final artwork, packaging, labeling, distribution aspects that happen no matter when an approval occurs. But overall, we’re very pleased with where we are with our supply chain.

Andrew Tsai: Okay. Very good. Thanks. And maybe just one more is let’s just say you guys are approved and are launching in second half. Hypothetically speaking, if the launch trajectory doesn’t ramp up immediately, it doesn’t look strong right off of that. Why would that be the case? Just curious how you think what could go wrong and how you’re thinking about these potential risks? Thank you.

David Zaccardelli: Yeah. So I’ll make a general statement. I think that, I think based on all our work we’ve done to date, all the market research, the work that we have done with HCPs, we feel confident that the need is there, and the launch will go well in our view. But I’ll ask Chris to comment on anything that is on his mind with regard to risk.

Chris Martin: Yeah. Thank you, Dave and Andrew I appreciate the question as well. If we think about launches, what you typically see in a lot of launches that are slower challenges with market access, I think we’ve been able to mitigate that risk partly due to the channel that ensifentrine will flow through being that it is primarily a Medicare Part B, medical reimbursement pathway that risk of slower uptake of new product launches is not essentially eliminated but is mitigated by the pathway of reimbursement of ensifentrine. And I think internally, we’ve done a very good job of ensuring that we understand that pathway. Our limited distribution network that we talked about in the October meeting allows for those specialty DME accredited pharmacies to really understand and adjudicate prescriptions the appropriate way.

And we think when we think about how ensifentrine launch would be versus potentially other launches that people are familiar with that market access dynamic is something that always is in the back of your mind. But because of the reimbursement channel, we believe that ensifentrine will flow through the channel in an appropriate fashion and in a fashion that meets what we’ve seen in market research , which is physicians’ willingness to add ensifentrine across the spectrum in a variety of patients who remain persistently symptomatic. That dynamic I think is very favorable for us as we move forward into launch.

Andrew Tsai: Great. Thanks again.

Operator: The next question comes from Yasmeen Rahimi with Piper Sandler. Please go ahead.

Yasmeen Rahimi: Good morning team, and thank you so much for all your possible comments. Few questions for you, I guess the first question is have you started the discussion with the agency in regards to label negotiations? What is your perspective on — what your ask is in regards to the label? That’s part one. Part two is as we go into June 2026, obviously, once the label is available, you will host the call. Could you tell us if you’re going to be able to be in a position to also share pricing at that junction and maybe the pricing range that you guys have given us has been quite wide. So would love to get your perspective how you’re thinking about it and how payers are perceiving that range? And then the third question is for Mark, which is how should we be thinking about OpEx over this year and next year as you’re building a commercial infrastructure? And thank you again team for allowing me to ask these three-part questions.

David Zaccardelli: Good morning, Yas. Thanks. I’ll start with the first one with regard to labeling. Again, we won’t really comment on all the review back and forth with the agency. I would point out that it is fairly early still in the process with maybe around four months or so to go. And so, I think that from my experience and past reviews were about where we need to be but of course, they’re all different in their own right. But I think that it is a little early in the process right now on the labeling end of things. And with regard to what’s in the label, I mean I think that we put forward many of the aspects that I think everyone knows with regard to the indication for the maintenance treatment of COPD and of course, we represented comprehensively the results from the clinical trials, of course, with the emphasis from the ENHANCE program, and of course, all the other important elements that you’d expect in a label from CMC to nonclinical that are included.