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spk03: 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.
spk04: 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.
spk05: 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.
spk03: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily . The first question comes from . Please go ahead.
spk02: Hi, good morning. Thanks for taking my question. I have a couple of questions about the background therapy. You said that 55 to 65% of the patients are expected to be on the background treatment. Do you see any differences in baseline characteristics between those who are on background versus those who are not? And also, can you guys comment on what percentage of the enrolled patients are expected to be on the inhaled steroids? And my second question is, for the pipeline data in the third quarter, do you plan to share week 24 data as well? Thank you.
spk04: Hi, Suji. Good morning. Happy to touch on those questions. Yes, I think what we're seeing is the final, you know, breakdown in percentages of those on background therapy and those not on background therapy to landing somewhere in that 55 to 65% range approximately. I think that that is well in line with our expectations overall. Definitely in line with how we powered the study, reminding you that we powered the study to detect a difference of 59 milliliters, and that's 90% power to detect a difference of 59 milliliters in FEV1 AUC 0 to 12. And also remind you that in phase two, for those that are on background therapy, we saw approximately a 90 milliliter difference in those patients over four weeks. So we feel comfortable with where we're landing and how the study is powered. With regard to baseline demographics, you know, we're still assessing things overall. There's in no particular reason we see any significant differences of those on background therapy and those that are not on background therapy compared to the phase two experience. I do want to remind you that, of course, the primary endpoint is done on the patient population in total, those that are on background and not on background. And as you know, we still have, you know, significant numbers of patients not on background. So we think the blend is perfectly fine within the study assumptions and also how we've seen patients enrolled and their baseline demographics overall. With regard to ICS background therapy, I remind you that we capped that at 20% of the patient population. And of course, they also needed to be on background therapy, a LAMA or a LABA, in order to be on ICS as well. And we are seeing it not exceeding that at this time, 302 or the enhanced Two study is already, you know, completed enrollment, and so we're underneath that threshold. But, you know, we did accumulate, you know, a notable amount of patients that are on ICS, which we anticipated based on that amendment. And I think your other question was the 24-week data for the top-line results for Enhance 2.
spk02: Right. Yeah, in the third quarter.
spk04: Yeah, we will have 24-week data related to SGRQ and ERS and symptoms quality of life. That's where that primary endpoint comes from. We'll also have insights to that endpoint over the study as well, but we will have it for 24-week as well.
spk02: All right, great. Thank you.
spk04: Thanks.
spk03: The next question comes from Andreas Argyridis with Webb Bush Securities. Please go ahead.
spk09: Good morning, and thanks for taking our questions. Just two for us here. So even though the phase three is not evaluating encephentrin for COPD exacerbations, of the COPD patients who remain symptomatic on current therapies, are there any phenotypes that you anticipate will be the most responsive to encephentrin? based on the data that you guys have generated so far. And then, if the three-mig encephalogen shows a greater effect on FEV1 but less of an impact on symptoms, what impact would this have or could have on the, you know, commercial uptake or, you know, any color on that? Appreciate it.
spk04: Sure. Hi, Andreas. Good morning. You know, I think as you pointed out, you know, the study is not designed as an exacerbation endpoint study, but we are capturing those events in the study. We also have mentioned that our overall intent is to look at that on a combined study analysis of Enhance 1 and Enhance 2. And of course, Enhance 1 is still, you know, moving forward and still completing enrollment as I've mentioned. Uh, you know, we, we haven't broken it down to any specific phenotype. Uh, and again, it's not, um, even a listed secondary endpoint, but rather an exploratory endpoint. With that said, we do, we are accumulating exacerbation events in the study. So I think we are quite interested in seeing how, uh, that looks, um, in the final analysis. But either way, it doesn't, you know, impact on how we view the study with regard to the primary endpoint and the secondary endpoints. But it will be interesting to see. You know, as far as every possible permutation of results, you know, primary and secondary endpoints and which ones do better and which ones don't do better and how much better and, you and all of that, I think it's a little bit difficult to do that without the data because it's an endless conversation. I think we believe that hitting the primary endpoint, of course, is important, as it always is in phase three. We designed the study specifically to look at secondary endpoints over 24 weeks, keeping in mind, remember, the primary endpoint is measured at week 12. as that's what's required to demonstrate chronic bronchodilation or lung function improvement in COPD. And so, you know, the studies are designed to look at secondary endpoints, and we believe in them based on the Phase II data. But I would say, as you look at everything and when we have the results, it's really an integrated analysis of benefit to risk. And that's what ultimately is evaluated on drugs that are approved. That is the total benefit, whatever that is, related to primary and secondary endpoints, you know, outweigh any risks. And is the benefit to risk strong enough for approvals? And so I think that's what we're looking at ultimately is the profile of NCFentrin's benefit to risk. And, you know, we're quite confident in it based on the phase two data. And to remind everyone that we've had a very favorable safety profile for NCFentrin, which then lends itself to a strong benefit to risk. So we'll see and we look forward to sharing the data with everyone.
spk09: Thanks. Looking forward to the investor danger. Thanks.
spk03: The next question comes from Bubalan Pachayapan with HC Wainwright. Please go ahead.
spk00: Hi, can you hear me okay?
spk04: Yes, perfect.
spk00: Awesome. So just a couple from our side. Just to be clear, so 80 patients are left. in order for you to complete the enrollment process for the 24-week subset of enhanced one. Is that right?
spk04: We got it to approximately 90% of the study is enrolled against 800, approximately 800 patients. So you can do the math and probably that could be.
spk00: Yeah, okay.
spk04: Yeah, you know, yeah. It changes all the time, so I'm reluctant to give you an exact number.
spk00: Okay, that's fine. I just wanted to make sure I heard it correctly. For Matt, it's 80 patients. With respect to R&D expenses, obviously they were roughly $17.6 million for the first quarter. How do you expect the cadence to look like for the next quarter and maybe for the rest of the year?
spk05: Thanks for the question, Bublan. I think what we'll see is that the R&D will continue, let's say, in that general neighborhood for Q2, and then it should start to taper off in the back half of the year, quite significantly by the end of the year.
spk00: Okay. Got it. And then one final. So obviously, Insocentron will hit a meaningful inflection this year, hopefully. So how should investors think about the cadence of other programs?
spk04: Yeah, no, great question. And as you know, we've been very focused on executing the COPD program over the past couple of years. And I think that's served NC Ventron well and Verona well to have that focus. And it's one of the things that we did when we joined the company is make sure that that occurred, including raising the capital that was needed. you know, dedicated to executing the COPD program. We have, you know, enormous of opportunity with ncfentrin in other indications because of its clinical pharmacology and profile. As we've mentioned, there's opportunities in asthma, cystic fibrosis, and we think that that's an enormous opportunity, especially in looking at other dose delivery approaches, including MDI and DPI. And so you should expect that as part of it. We also see, again, and we're wanting to see the data overall, but clearly there's opportunity for combination of N-C-Fentron with other COPD products, for example, LAMAs. And you know that the COPD space is quite familiar with combination products. And so you could expect programs related to that either as nebulized and or inhaled devices.
spk00: For the color. That's it from us.
spk04: Great. Thank you.
spk03: The next question comes from Edward Nash with CannaCard Genuity. Please go ahead.
spk01: I wanted to just ask, now that we're getting closer now to getting these two phase three readouts and an NDA filing at the beginning of next year, just wanted to kind of understand what's going to be happening, I guess, towards maybe the end of this year or beginning of next year after the filing with regards to starting to build in earnest the commercial structure. Just kind of what are the thoughts on timing and when that would start and the efforts that would you be employing over time before approval?
spk04: Great. Yeah, thanks for the question and great to talk with you this morning. And I'll turn that over to Chris to give you that review.
spk08: Hey, Edward, this is Chris. Great question. I think one of the things that we've done with NC Fentron and Verona is really built the commercial build-out around our milestones and the first clinical milestone being positive data coming out of the enhanced two trial. And upon that, that data will start to work toward building out the commercial organization and really starting to work around securing and discussions with payers to ensure that we have proper access and coverage for NC Fentron when we get to launch. The other things that will be important as we get to launch is making sure that we're prepping the market appropriately. And what I mean by that is making sure the market's ready for a new mechanism of action like NC Fentron that provides both PDE3 and PDE4 support inhibition in one molecule with bronchodilation and anti-inflammatory effects. That activity is going to be critical as we get ready for launch. It's important that we seed the market with information around ncPentrin so that the prescribers and the payers are ready for a molecule like ncPentrin when it comes out on the field. The other thing that's important for us to do is really start to work with advocacy groups and societies, too, as we think about how patients will take this medication and ultimately use it in their daily lives. So those are a lot of the activities that we'll be conducting over the next 18 to 24 months. And all of those are triggered around us reaching some of those critical milestones that we'll see over the next 6 to 12 months as well. I hope that helps you there.
spk01: Yep. Thanks very much.
spk08: Yep.
spk03: Our next question comes from June Lee with Truist Securities. Please go ahead.
spk06: Hi. Thanks for taking our questions. You know, assuming things go as planned, could you talk about your IP around NSF Entrant and your strategy to extend commercial runway? And I have a follow-up question.
spk04: Sure. No, I think with regard to IP, of course, we are constantly attentive to it to start with. And we believe we have an extremely strong IP position for NCFention. And I think that's been looked at quite extensively by our investors primarily and others. You know, we have a, shall we say, a network of patents that provide coverage and protection for NCFention commercially. You know, they're grounded in three patents that sort of work together. Our polymorph patent, our formulation patent, and our manufacturing patent. Of course, we have others in addition to those as well. And we expect those to provide protection out to the mid-2030s. We also will have an opportunity to extend patent life on one of the patents as we apply for that extension, which will allow maybe up to another five years. And so we, again, are quite confident in our patent protection past the mid-2030s. As far as, you know, protecting that runway, there are a lot of opportunities for lifecycle management with ncfentrin past that. Different devices, approaches, as I mentioned, combinations of other drugs with ncfentrin. So I think that between other indications, combinations, different delivery devices, we have enormous opportunity with ncfentrin.
spk06: And it's great to see you guys onboarding someone of Mr. Brady's caliber. How are his visions for the commercialization and licensing strategy for incident ventures similar or different than what you have envisioned over the past couple of years as you are developing your incident venture? Thank you.
spk04: Right. You're talking about a new board member, James Brady.
spk06: Exactly.
spk04: Yeah. Right. You know, it's fantastic to have him join the company. I think that speaks also a bit of volumes about Verona and NC Venture and of them wanting to join. As you pointed out, he has an extensive experience financially, commercially, strategically, and, and have done, you know, multiple licensing deals. And, you know, for example, So it's just tremendous to have him join the board. You know, it's a little bit early days, as you can imagine. It's been just a few months, if that. And so I think he's been contributing, of course, and also gathering a lot of information. and learning about where we've been, what we're doing, and making sure that he understands all of that. But we look very much forward to his contribution as we work through the rest of 2022 and into 2023, where much of all of this action occurs.
spk06: Great. Thank you.
spk03: As a reminder, if you have a question, please press star, then 1 to be joined into the queue. The next question comes from Tom Schrader with BTIG. Please go ahead.
spk07: Hey, good morning. This is calling in for Tom. So two questions. The first question is, what is the general size of Salesforce that's often in the field of COPD? And the second question is, I was hoping if you guys can provide any additional color update on the development in the China through the collaboration with Nuance and then any update from the potential licensing in the European market as well, too?
spk04: Thank you. Right, so thanks for those questions. Let me handle the last one very quickly with regard to licensing in other territories, including Europe, for example. Clearly, it's part of our stated strategy, and I think we continue to progress, although, as you can imagine, as we're so close to the data, that it sort of is in everyone's best interest to get that, so that I think our ability to optimize NC Fentron and the financials around NC Fentron in a licensing deal are best represented by having the data now. We did the deal with Nuance in Greater China a little earlier, of course, on terms that we thought were extremely favorable as well. And now I think practically speaking, we'll wait to see the data and then move forward with our licensing strategy. With regard to the Nuance update and Salesforce sizing, I'll turn that over to Chris who manages that area.
spk08: Thanks, Dave. And I'll start with kind of Salesforce sizing and then move into the China Nuance partnership. As far as Salesforce sizing for this opportunity, If we look at our market research and how we believe ncfentrin will be utilized, which is on top of existing therapies for patients that are symptomatic, what we see is that as patients continue to be symptomatic with COPD, they transition out of primary care and into pulmonologists. And that transition allows us to be a lot more targeted in our sales force deployment. When you look at the pulmonology community that's out there, there's about 12,000 to 13,000 pulmonologists in the United States. And so given that size, we anticipate that a sales force of around 100 sales representatives would be adequate to reach the physician opportunity as well as the patient opportunity. And we believe there's well over a million patients that are remaining symptomatic on just maximal therapy. So that 100-person sales force could reach that opportunity very effectively. Switching gears to China, our partnership with Nuance has been working very well. They continue to progress the documentation with the CDE, the move toward IND, and that progression will continue over the course of the year, and we look forward to potentially updating their progress as we move through 2022. But the partnership and their work has been moving on very, very seamlessly with them.
spk04: Great. Thank you.
spk03: This concludes the question and answer session. I would like to turn the conference back over to David Zagardelli for any closing remarks.
spk04: Thank you. We would like to thank everyone for your questions and to thank the patients and healthcare professionals participating in the enhanced program. As a reminder, our near-term milestones include completing enrollment in the Phase III Enhanced Program in the second quarter of 2022, reporting top-line data from Enhanced II in the third quarter of 2022, and from Enhanced I around the end of the year, and a condition upon positive results, submitting an NDA to the U.S. FDA in the first half of 2023. We look forward to speaking to many of you about NC-Fentron in the coming weeks. Finally, I'd like to thank our shareholders for their continued support and the dedicated and talented team at Verona for their commitment. Operator, that concludes today's call.
spk03: Thank you for attending today's presentation. The conference is now concluded. You may now disconnect.
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