Verona Pharma plc

Welcome to Verona Pharma's fourth quarter and year-end 2021 financial results and operating highlights conference call. At this time, all participants are in listen-only mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the three-month and full year ended December 31, 2021. A copy can be found in the investor relations tab on the corporate website www.vernopharma.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 COVID-19 pandemic and the Russia-Ukraine conflict on such progress and on the status, recruitment, timing, results, and costs of our clinical trials. Any such forward-looking statement represents 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 obligations 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 would now like to turn the call over to Dr. David Zaccardelli, Chief Executive Officer.

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. Throughout 2021, we made significant progress towards completing patient enrollment in our Phase III Enhanced Clinical Program and furthering our goal of delivering NcFentrin, a first-in-class product candidate for the maintenance treatment of COPD. 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 approximately 1,600 patients across sites in U.S., Europe, and Asia. The Enhance I and Enhance II trials will replicate measures of efficacy and safety data over 24 weeks with Enhance One also evaluating longer-term safety in approximately 400 patients over 48 weeks. We are close to completing enrollment in Enhance Program and excited about reporting top-line data. In December 2021, we completed enrollment of approximately 400 patients in the 48-week subset of Enhance One. Completing recruitment in this subset of Enhance One is a critical driver for reporting top-line data from the study. we continue to progress enrollment in the 24-week subset of Enhance One. As of March 2nd, 2022, the Enhance One trial had approximately 80% of patients randomized into the study. Including those patients currently entered in the run-in period, we expect Enhance One to be fully enrolled around the end of the second quarter of 2022. In January 2022, we completed enrollment of Enhance 2 with more than 800 patients randomized. Looking to results, we expect to report top-line data from Enhance 2 in the third quarter of 2022 and from Enhance 1 around the end of 2022. We will provide further guidance on the timing of Enhance 1 data once full enrollment is completed. As stated previously, Our projected enrollment timelines in Enhance I and Enhance II were based on expected continued improvements in the COVID-19 pandemic and successful implementation of our COVID-19 mitigation efforts. With the recent sanctions and other restrictions imposed on Russia and the COVID-19 pandemic and government and other measures continuing to impact a number of clinical trial activities, We continue to closely monitor these timelines. That being said, we are very pleased with recruitment progress in these international multi-site clinical trials during the ongoing global pandemic. Conditional upon positive results, the company expects to submit a new drug application, an NDA, to the US Food and Drug Administration in the first half of 2023. In support of our planned NDA submission, In December 2021, we reported NC-Fentron successfully met all safety objectives in a thorough QT or a TQT study designed to evaluate the effect, if any, of NC-Fentron on measures of the TQT interval in cardiac conduction in 32 healthy volunteers. NC-Fentron was shown not to impact the TQT interval and no clinically relevant changes in measures of cardiac conduction were observed with either the three milligram or nine milligram inhaled encipentrin dose over 24 hours. The FDA requires a TQT study for most new drug applications and reviewed the protocol prior to us conducting the study. We continue to advance towards our goal to deliver encipentrin to the millions of COPD patients who are not well served by available treatments. Worldwide, over 380 million patients suffer from COPD, and COPD is the third leading cause of death. In the U.S., where Verona is preparing to commercialize ncfentrin itself, COPD affects more than 25 million patients, and sales in the maintenance COPD market total over $10 billion. While existing medications are available to treat COPD, more than 1 million patients remain symptomatic on maximum therapy, highlighting the need for novel therapies to provide relief to these patients. Outside of the US, millions of COPD patients remain symptomatic and urgently in need of additional treatments. Alongside our clinical progress in 2021, we advanced our global partnering strategy through a strategic collaboration with Nuance Pharma, a Shanghai-based specialty pharmaceutical company. The partnership provides a tiered double-digit royalty and potential milestone payments of up to $179 million, in addition to the $40 million in cash and equity received at the execution of the agreement. Nuance Pharma is responsible for developing and commercializing NC Fentron in Greater China, and we look forward to providing future updates on their progress. We are pleased with our robust progress throughout 2021 and excited about recording top line data from our phase three enhanced program this year. I will now turn the call over to Mark to review our financial results for 2021.

Thank you, Dave. We ended 2021 with $148.4 million in cash and equivalents. We believe our cash and equivalents at December 31, 2021, expected cash receipts from the UK tax credit program, And funding expected to become available under the $30 million debt facility with Silicon Valley Bank will enable us to fund our planned operating expenses and capital expenditure requirements through at least the end of 2023. When the year ended December 31, 2021, the loss after tax was $55.6 million compared to a loss after tax of $65.1 million for the prior year. This represents a loss of 12 cents per ordinary share or 96 cents per ADS for the year compared to a loss of 25 cents per ordinary share or $2 per ADS in 2020. Research and development costs were $79.4 million for the year ended December 31, 2021 compared to the $44.5 million reported in 2020. The $34.9 million increase is driven primarily by costs associated with the Phase III Enhanced Program. Selling, general, and administrative costs were $33.9 million for the year ended December 31, 2021, compared to the $29.8 million reported for the prior year. This increase of $4.1 million was driven primarily by costs relating to the nuance agreement, share-based compensation charges, and increased D&O insurance premiums. partially offset by a reduction in costs related to the July 2020 pipe financing and severance incurred in 2020. The UK R&D tax credit for 2021 was $15.6 million compared to a credit of $8.3 million for the year ended December 31, 2020, increasing in line with the higher qualifying R&D expenditures incurred with the enhanced Phase III program. As discussed last quarter, Under the terms of the UK R&D Tax Credit Program, we intend to submit for reimbursement of this amount 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.