Verona Pharma plc

Welcome to Verona Pharma's first quarter 2022 financial results and operating highlights conference call. At this time, all participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star zero. Earlier this morning, Verona Pharma announced its financial results for the three months ended March 31, 2022. A copy can be found in the investor relations tab on the corporate website, www.veronafarma.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 costs 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touchtone phone. To withdraw your question, please press star, then 2. 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 Zachardelli, 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 MCFentrin 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 two 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 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 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-1 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 two Phase 2B 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 enhanced program are similar to those seen in the Phase IIb trials. While both enhanced trials we're 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 enhanced trials will include the primary endpoint, improvement in lung function as measured by average force expiratory volume in one 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 ERS and SGRQ endpoints as well as overall safety data. As previously stated, our projected enrollment timelines 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 US Food and Drug Administration in the first half of 2023. On the corporate front, in March 2022, James Brady joined our board as a non-executive 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 NCFengen 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 NC Fentron 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 treatments, 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 Ncfentrin had no clinically relevant effect on cardiac conduction. On the morning of June 16th, 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 NCFentren's novel profile could help manage the current challenges within the treatment paradigm. We're looking forward to enrolling the final subjects in Enhance I 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 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 UK 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 5 cents per ordinary share or 41 cents per ADS for the quarter compared to a loss of 5 cents per ordinary share or 36 cents 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 enhanced 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 end of 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 LIGAN agreement. The UK 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 20,000 pounds plus three times UK pay as you earn and national insurance taxes. 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 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.