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spk06: Welcome to Verona Pharma's third quarter 2021 financial results and operating highlights conference call. At this time, all participants are in a listening mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the three and nine months ended September 30, 2021. 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 on the status, recruitment, timing, results, and costs of our clinical trials and the continuity of our business. Any such forward-looking statements represents management's estimates as the date of this conference call. While the company may elect to update 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 Zacardelli, Chief Executive Officer. Please go ahead.
spk02: 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. During the third quarter, we continued steady progress towards our goal of delivering encephentrin, a novel inhaled PDE3 and PDE4 inhibitor, and first-in-class product candidate for the maintenance treatment of COPD via our Phase III enhanced program. As a reminder, each of the two randomized double-blind placebo-controlled enhanced studies are planned to enroll approximately 800 moderate to severe symptomatic COPD patients for a total of 1,600 patients across sites in the U.S., Europe, and Asia. The Enhance I and Enhance II trials will replicate measurements of efficacy and safety data over 24 weeks, with Enhance I also evaluating longer-term safety in approximately 400 patients over 48 weeks. As stated previously, our projected enrollment timelines in Enhance 1 and Enhance 2 were based on expected continued improvements in the COVID-19 pandemic and successful implementation of our COVID-19 mitigation efforts. I'm excited to report enrollment is nearing completion, and we expect that by the end of November, both the 800-patient Enhance 2 trial and the 400-patient 48-week subset of the Enhance One trial will be approximately 95% enrolled. We continue to make substantial progress during the third quarter, and we are pleased with our ability to advance recruitment in these international multi-site clinical trials during a global pandemic. Although the pace of enrollment is expected to slow due to the approaching holiday season, compounded by continued effects of the COVID-19 pandemic on the healthcare industry, we still expect to complete enrollment in Enhance 2 and the 48-week subset of Enhance 1 around year end 2021. Specifically reviewing our enrollment progress, as of November 8th, 2021, Enhance 2 had approximately 90% of patients randomized into the study. Including those patients currently entered in the run-in period, we expect Enhance-2 to be approximately 95% enrolled by the end of November. As of November 8th, 2021, the 48-week subset of Enhance-1 had approximately 95% of patients randomized into the study. Recall, completing recruitment of the 48-week subset in Enhance-1 is critical driver for reporting top line data from the study. Enrollment in full Enhance-1 trial is expected to complete in the second quarter of 2022. Looking forward to results, we expect to report topline data for Enhance 2 mid-year 2022 and for Enhance 1 around the end of 2022. Although, should COVID-19-related challenges increase further, our models predict timelines could shift by a quarter. In this scenario, top-line data would be expected in Q3 2022 for Enhance 2 and Q1 2023 for Enhance 1. We look forward to providing further guidance when recruitment is completed. The mitigation strategies we implemented at the start of the Enhance program have allowed us to make solid enrollment progress. As a reminder, these include inclusion of broad geographic coverage of sites both in the U.S. and Europe, to help manage the effect of local COVID impacts. Requiring only essential on-site visits and adding flexibility around visits to ensure sites could follow their safety protocols. Developing individual site plans to prepare for events that may disrupt normal site operations, such as alternative methods for distributing study medication and for collecting data from patients. and providing for COVID-19 testing and personal protective equipment at all sites to adhere to safety protocols. Looking ahead, in support of our planned NDA submission, we expect to report results from our thorough QT study in December. This 32-patient study is designed to evaluate the effect of ncfentrin, if any, on cardiac conduction. In addition to progress in our Phase III trials, We continue to add to the substantial clinical evidence in support of benefits of encephentrin for the maintenance treatment of COPD. In October, Dr. Tara Rowe, our Vice President of Research and Development, presented Phase II data demonstrating the positive effect of pressurized meter dose inhaler, or PMDI formulation, of encephentrin in patients with moderate to severe COPD at the CHEST annual meetings. Data from Part B of the two-part study, first reported in February 2021, showed encephentrine delivered by PMDI over one week provided statistically significant, clinically meaningful, and dose-dependent improvements in lung function and was well-tolerated with adverse event profiles similar to placebo. The data are consistent with the results from dry powder inhaler, or DPI, and nebulizer formulations of encephentrine. In September, Dr. Rowe presented an abstract describing a drug-drug interaction study assessing the effect of CYP2C9 inhibitor fluconazole on the pharmacokinetics of nebulized encephentrin in healthy individuals at the European Respiratory Society International Congress. These data demonstrated co-administration of fluconazole had less than two-fold, not clinically relevant effect on pharmacokinetic measures for encephentrins. As we prepare for the planned NDA submission, I'm pleased to announce Caroline Diaz will join Verona Pharma starting next week as Senior Vice President of Regulatory Affairs, bringing more than 18 years of experience in both large and small pharmaceutical companies across key regions. Ms. Diaz has previously served at Reviral as Vice President Regulatory Affairs, as well as Vice President Regulatory and Quality at Dova Pharmaceuticals, where she worked with Mark and me. At Dova, she built the regulatory function from the ground up and led regulatory strategy development and implementation efforts, resulting in the first marketing approvals for the company. Her expertise will be invaluable as we further prepare our regulatory strategy for NCFentren, and we are delighted to welcome her to the team. We continue to work towards our goal to deliver NCFentren to the millions of COPD patients who are not well served by available treatments. Worldwide, there are over 380 million COPD patients, and COPD is the third leading cause of death. In the U.S., where Verona is preparing to commercialize encephentrin, COPD affects more than 25 million patients, and sales in the maintenance COPD market total over $10 billion. Despite maximum therapy with existing medications, more than 1 million patients remain symptomatic. Outside of the U.S., millions of COPD patients in Europe, China also remain symptomatic and in need of additional treatments. We are pleased with our progress, and as we look ahead, we anticipate several important milestones. These include results from the QT study, completion of enrollment in the enhanced trials, and importantly, top-line data for the enhanced trial program in 2022. I will now turn the call over to Mark to review our third quarter financial results.
spk01: Thank you, Dave. We ended the third quarter of 2021 with $166.5 million in cash and equivalents. During the third quarter, we received the $25 million upfront payment from our Nuance Pharma License Agreement and $8 million from the UK R&D Tax Credit Program relating to our qualified R&D expenditures in 2020. We believe the combination of our cash position and expected cash receipts from the UK R&D tax credit program and potential borrowings under the $30 million debt financing facility will support our operations and current clinical development programs through at least the end of 2023. For the three months ended September 30, 2021, The net profit after tax was $11.1 million compared to a loss after tax of $18.9 million for the same period in the prior year. The net profit this quarter is due to recognition of the $40 million aggregate upfront consideration from the nuance agreement. This represents a profit of 5 cents per ordinary share or 40 cents per ADS for the three months ended September 30, 2021 compared to a loss of 20 cents per ordinary share or $1.60 per ADS in the same period of 2020. Research and development costs were $22.6 million for the three months ended September 30, 2021, compared to the $12.8 million reported for the same period in 2020. The $9.8 million increase is primarily driven by costs associated with the Phase III Enhanced Clinical Program partially offset by a decrease in share-based compensation charges. General and administrative costs were $10.9 million for the third quarter of 2021, compared to the $8.3 million reported for the same period in 2020. This increase of $2.6 million was driven primarily by costs relating to the nuance agreement, partially offset by a reduction in costs relating to the July 2020 pipe financing. The UK R&D tax credit for the three months ended September 30, 2021 was $4.7 million compared to a credit of $2.3 million for the same period in 2020, increasing in line with the higher qualifying R&D expenditures incurred with the enhanced phase three program this year. Year to date, we have accrued approximately $10.6 million under this program. Under the terms of the UK R&D tax credit program, We intend to submit for reimbursement of this amount, along with any amounts to be accrued in the fourth quarter, sometime in the first half of 2022, and we expect to receive the payment later in 2022. This non-dilutive 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.
spk06: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two.
spk05: At this time, we will pause momentarily to assemble our roster. And the first question today will come from Andreas Fagaridis with Web Bush Securities.
spk06: Please go ahead.
spk00: Good morning and thank you for taking our questions. Two quick ones. When you guys plan on reporting Enhance 2 results, will you be providing an update or any data from Enhance 1 at the time? And then from the QT study, how do you envision that being part of the NDA submission? Thanks.
spk02: Yes, so good morning and thanks for the question. I think at this time, you know, when we report out top line data from Enhance 2 somewhere around mid-year 2022, I think that we will still be, of course, ongoing in Enhance 1. So I don't anticipate any specific update, although we may, you know, provide a status of where we are in reconfirming our plans for reporting top line results in Enhance 1. But we'll see where we're at at that time. And with regard to the QT study, I think it's nothing more than, of course, completing the required elements as we understand them and know them from our discussions with the FDA in ensuring that we have a thorough QT study in an NDA submission. Again, at this time, we don't expect any unusual findings, but, of course, we're reporting results of the study later on this year and merely consider it an element that is expected in an NDA for a new chemical entity.
spk05: Okay, great.
spk00: Thank you. I'll step back in the queue.
spk06: Thank you. And the next question will come from Ram. Salvaraju with H.C. Wainwright. Please go ahead.
spk09: Hi, this is Bubal. I'm dialing in for Ram Salvaraju. Thanks for taking my question. So just curious, I know you guys are really busy with enhanced programs, but were there any advances made in terms of advancing for treating cystic fibrosis?
spk02: Yeah, thanks for the question. I think as we mentioned previously and guided to that, we continue to believe that ncfentrin could be a treatment for multiple respiratory diseases, including cystic fibrosis, asthma, and maybe others. The profile as a PD3, PD4 inhibitor could be applicable across a number of respiratory diseases. However, and even though we do have, of course, experience previously in cystic fibrosis and asthma that show great promise, we continue to be incredibly focused on completing the enhanced program. I think as that occurs and as we continue to progress to a potential NDA, of course, we will turn our attention to other diseases and also ensure that we have the right funding in place to progress the development of ncfentrin beyond COPD. So I think you can expect for at least a fair amount of 2022 to be continued to be focused on execution around the enhanced program and phase three program, and then we'll progress from there with ncfentrin and other diseases.
spk09: Thanks for the clarity. So what are your thoughts on inhaled perfenadol? being developed by Avalyn Pharma?
spk03: Well, I don't think we have really formed any particular opinion on it.
spk02: I think that from our perspective NC Fentren as a novel mechanism of action and as we see it really will be the first product to come out that is a new mechanism for inhaled route you know I don't think we really see any issues with other products in development But, you know, we continue to assess the development landscape, and, of course, we can continue to update our thoughts as we progress.
spk09: Thank you. And how do you expect the R&D costs to evolve for the remainder of the year and for 2022? Sort of like I want to see how the cadence and how the shape looks like.
spk01: I'm sorry, Buval, were you asking what we expect to spend to be on R&D for the balance of this year and next year?
spk09: Yeah, yeah, yeah, with respect to R&D costs.
spk01: Yeah, yeah, great. So, you know, the R&D expense for this quarter was about $22.6 million. And as you know, we're in kind of the belly of the beast of enrolling patients in the Phase III program. I think from an expectation perspective, You would think that that might increase a bit in Q4 as we're kind of still remaining in the peak. And then it'll start to taper back down in Q1 and Q2. And then when we get into Q3 and Q4 of next year, it should be substantially lower than we're seeing this year as we are through the majority of the costs being spent on the Phase III program.
spk09: All right. That's it for me. Thanks for taking my questions.
spk01: Thank you.
spk06: And the next question will be from June Lee from Truist Securities. Please go ahead.
spk04: Hi, good morning. This is Mehdi for June. Our question is related to the process that you're having for finding or selecting your business partners and if you could provide some color on that. And the next question would be if you have any plans to commercialize outside U.S. by yourself? Thank you.
spk02: Right. So, yeah, thanks for the question. Let me take the second first is, as we've mentioned, our strategy is to partner outside the U.S. for NCFentren, that we, our plans are to commercialize it in the U.S., but look for partnerships outside the U.S. You can see that we have begun to execute on that strategy, of course, with our collaboration partnership with Nuance in Greater China. We were very pleased to have that agreement in place and have NC Venture progressing in Greater China with our partner, Nuance Pharma. So as far as our criteria or plans, again, we continue our BD efforts and looking for partners outside the U.S., this is an ongoing process that you know it's difficult to have an exact timeline even though as you can see we've continued to execute on it it needs to be the right partner with the right scope and capabilities and focus of course the the monetary aspects of any partnership also have to be consistent with the underlying value of ncf entrance in that marketplace. As you know, we're progressing through the Phase III program, and that value proposition continues to increase as we progress with the development of NC-Fentron. So it depends on their capabilities, the economics of the partnership, and as those come together, then we plan to execute on those partnerships. But we'll see how that progresses in 2022.
spk04: Thanks. And a follow-up question on a different note. Could you provide some insight on the reason behind the cytochrome study, CYP study, and the reason for doing that study? Thank you.
spk02: Yes, I think, of course, you know, through development, it is very typical to look at drug-drug interaction studies, especially when you're looking at the way your product, NC-Fentron in this case, is metabolized and understanding the impact on other drugs that may impact the same pathway for metabolism. This is normal, typical. We're merely just updating, again, the work we've done comprehensively, which what I would say are all the typical and required elements that go into an NDA. You know, each drug is different in the type of drug-drug interaction studies they may need to do, depending on the disease, the other drugs that are used, and also its metabolic pathway. In this instance, in our plans and as we've presented to the agency, doing this drug-drug interaction study, specifically looking at CYP2C9, is what we were planning to do. And again, it's just more of completing the requirements that are typical under an NDA.
spk04: Thank you very much, and thanks for taking our questions.
spk06: And once again, as a reminder, if you would like to ask a question, please press star then 1. The next question will be from Tom Schrader from BTIG. Please go ahead.
spk07: Good morning. Thanks for holding the call, and good luck. We're all braced for the COVID winter. I just have a couple of quick follow-ups on questions that have really been explored. The fluconazole study, is that it for drug-drug interactions, or is that sort of an evolving process with the FDA?
spk02: I believe that's where we're at at this time. I don't think we need to do any others. I don't know if, Kathy, you want to comment on that.
spk08: Yeah, currently at this time, we have no other requirements for drug-drug interaction studies.
spk07: Okay, and then on the QT study... Is there any preclinical data that speaks to that? You don't sound concerned, but do you go into that with the animal data essentially saying nothing, or is there anything we should think about?
spk02: Kathy, you want to comment?
spk08: I think the animal data has all been reassuring and showing us that we don't have a significant cardiac effect, and so we expect that we'll see that in the study that we're expecting results on shortly.
spk05: Okay, great. Thank you. Good luck.
spk06: Ladies and gentlemen, this concludes our question and answer session. I would like to turn the conference back over to Dr. Zaccardelli for any closing remarks.
spk02: Thank you, Operator. I'd just like to say that we'd like to thank everyone for your questions and to thank the patients and healthcare professionals participating in the enhanced program. In Q4, we will be presenting at several investor conferences, including Stiefel, Jeffries London, and Piper Sandler, and, of course, look forward to speaking to many of you then. I'd like to thank our shareholders for their continued support and always the dedicated and talented team at Verona for their commitment. Operator, that concludes today's call.
spk06: And thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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