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spk10: Welcome to Verona Pharma's conference call. At this time, all participants are in a listen-only mode. Earlier this morning, Verona Pharma issued a press release announcing top-line results from its Phase III Enhance II trial evaluating nebulized MC-sen trends for the maintenance treatment of COPD. The company also issued a press release announcing its financial results. The three months ended June 30, 2022. Copies of both press releases can be found on 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 involves 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 status, recruitment, timing, results, and cost of our clinical trials. Any such forward-looking statements represent management's estimates as of the day 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 abuse or change. As a reminder, this call is being recorded and will remain available for 90 days.
spk09: I'd now like to turn the call over to Dr. David Zacardelli, Chief Executive Officer Please go ahead.
spk13: Thank you, and welcome everyone to today's call to discuss the positive top line results from our phase three enhanced two trial, as well as Verona Pharma's second quarter financial results and operating highlights. With me today are Mark Hahn, our Chief Financial Officer, Dr. Kathy Rickard, our Chief Medical Officer, Chris Martin, our Senior Vice President of Commercial, and Dr. Tara Rowe, our Senior Vice President of Research and Development. In addition, we are very pleased that Dr. Antonio Anzueto, Professor of Medicine and Section Chief of Pulmonary at South Texas Veterans Healthcare System, is joining us today to provide his thoughts on this exciting study results and will be available during the Q&A portion of the call. Note the slides we are showing today will be available on our website after the call. As we endeavor to address the significant unmet need faced by patients with COPD, we are very pleased to announce positive top-line data from our Phase III Enhanced II trial, evaluating nebulized ncfentrin for the maintenance treatment of COPD. As a reminder, the Enhanced I and Enhanced II trials replicate measurements of efficacy and safety over 24 weeks, and ENHANCE-1 also evaluates longer-term safety over 48 weeks. The trials were designed to enroll approximately 800 moderate to severe symptomatic COPD subjects for a total of approximately 1,600 subjects across sites primarily in the United States and Europe. In summary, NC-Fentron has successfully met the primary endpoint and secondary endpoints evaluating lung function in the ENHANCE-II trial. In addition, encephentrin treatment resulted in a significant reduction in rate of exacerbations. Encephentrin was well-tolerated with safety results similar to placebo. So now, let's walk through the study results. First, let's review the types of subjects enrolled in the study. Overall, the demographic and disease characteristics were very well balanced between the ncfentrin and placebo groups. The study enrolled moderate to severe symptomatic COPD patients with compromised lung function with a predicted post-bronchodilator FEV1 of approximately 50% in both groups. The study population included approximately 52% of patients on background therapy, including either a long-acting muscarinic antagonist, ALAMA, or a long-acting beta agonist, a LABA, and 15% of all subjects received inhaled corticosteroids, or ICS, in addition to their bronchodilator medication. On the next slide, let's review in detail each of the lung function study endpoints by looking at the serial FEV1 curve over 12 hours at week 12. The primary endpoint of average FEV1 AUC 0 to 12 hours post-dose at week 12 demonstrated a placebo-corrected, highly statistically significant, and clinically meaningful improvement at week 12 of 94 milliliters, with a p-value of less than 0.0001. We are also pleased the secondary endpoints evaluating lung function were met. Statistically significant and clinically meaningful increases in placebo-corrected peak FEV1 of 146 milliliters 0 to 4 hours post-dose with a p-value of 0.0001 and morning trough FEV1 of 49 milliliters with a p-value equal to 0.0017 were observed at week 12, supporting a twice-daily dosing regimen. As noted on the next slide, all subgroups including gender, age, smoking status, COPD severity, background medication, ICS use, chronic bronchitis diagnosis, FEV1 reversibility, and geographic region demonstrated statistically significant improvements in the change from baseline in average FEV1 AUC 0 to 12 hours at week 12 with ncfentrin. We are incredibly pleased to show on the next slide that subjects receiving treatment with ncfentrin had a significant 42% reduction in the rate of moderate or severe COPD exacerbation compared with placebo over 24 weeks with a p-value of 0.0109. As a reminder, an exacerbation was defined in the protocol as a worsening of symptoms requiring either a minimum of three days of treatment with oral or systemic steroids and or antibiotics or a hospitalization. On the next slide is the Kaplan-Meier graph, which displays the exacerbation events in each group over the study period. Specifically, the occurrence of exacerbations separated early And the Ncfentrin treatment group continued to demonstrate reduced rate of exacerbation events over 24 weeks. Treatment with Ncfentrin significantly decreased the risk of exacerbation as measured by time to first exacerbation when compared with placebo by 42%, with a p-value of 0.0088. We believe this outstanding result is due to NC-Fenton's anti-inflammatory activity in addition to its improvement in lung function. On the next slide, let's review the secondary endpoint measurements of symptoms and health-related quality of life measures. The improvement in daily symptoms observed via the Evaluating Respiratory Symptoms, or ERS, total score, in the ncfentrin group exceeded the MCID of minus two units at week 24. However, this result was not statistically significant as the placebo arm continued to improve over time. Furthermore, the improvement in health-related quality of life observed by the St. George's Respiratory Questionnaire, or SGRQ total score, in the ncfentrin group exceeded the MCID of minus four units at week 24. However, again, this effect was not statistically significant as the placebo arm continued to improve over time. Numerical improvements in these measures in the ncfentrin treatment group were seen as early as six weeks and showed continued improvement at 12 and 24 weeks, exceeding placebo at each measurement. We are continuing to evaluate the observed results of ERS and SGRQ to determine if conducting the trial during the COVID pandemic may have affected the results of these subjective measurements of COPD symptoms and quality of life. Turning to safety results on the next slide, Ncfentrin was well tolerated with safety results similar to placebo, including occurrence of pneumonia, gastrointestinal, and cardiovascular adverse events. Treatment emergent adverse events exceeding 1% and greater than placebo events were relatively few and comparable to placebo. Finally, the next slide summarizes the top-line data from the ENHANCE-2 trial. We are delighted with the ENHANCE-2 trial results, which we believe highlight the important potential of encephalogen to treat symptomatic COPD patients. We plan to release additional information from Enhance-2 at upcoming scientific conferences. Looking ahead, we are on track to report top-line data from Enhance-1 around the end of the year. If the Enhance-1 data are also positive, we plan to submit a new drug application to the FDA in the first half of 2023 for inhaled Ncfentrin for the maintenance treatment of COPD. I will now turn the call over to Mark to review our financial results for the second quarter of 2022.
spk07: Thank you, Dave. We ended the second quarter of 2022 with $111.5 million in cash and equivalents. We believe our cash and equivalents at June 30, 2022, expected cash receipts from the UK tax credit program, and funding expected to become available under the $30 million SVB debt facility will enable us to fund our planned operating expenses and capital expenditure requirements through at least the end of 2023. For the three months ended June 30, 2022, the loss after tax was $17.8 million compared to a loss after tax of $22.1 million for the same period in 2021. This represents a loss of $0.04 per ordinary share for the three months ended June 30, 2022 compared to a loss of $0.05 per ordinary share in the same period of 2021. Research and development costs were $15 million for the three months ended June 30, 2022, compared to the $20.6 million reported for the same period in 2021. The decrease of $5.6 million was primarily due to a $4.2 million decrease in clinical trial and other development costs as we progress to the later stages of our Phase 3 enhanced program, and a $1.9 million decrease in share-based compensation charges. Selling, general, and administrative expenses were $5.5 million for the three months ended June 30, 2022, compared to $8 million reported for the same period in 2021. This decrease of $2.5 million was primarily due to a decrease in share-based compensation charges. The UK R&D tax credit remains an important element in our financing strategy. As you will recall from previous calls, we are eligible to receive a cash payment from the UK government based on our prior year's qualified R&D spend under the UK's SME R&D tax credit program. In 2022, the program was modified to create caps, could limit the amount of a credit available to a company. In the first quarter, we accounted for this credit assuming Verona Pharma would be subject to the cap. However, we recently received guidance from the HMRC that would qualify for certain exemptions from the cap. Therefore, we recorded the full credit for Q2, and also in Q2, we recognized an incremental $2.3 million relating to catching Q1 up to the full credit amount. As a result, the R&D tax credit for the three months ended June 30, 2022, was $5.4 million or $1.6 million higher than the $3.8 million credit for the three months end of June 30, 2021. In the next few months, we intend to submit a claim for approximately $14 million related to our 2021 R&D spend. We expect to receive the reimbursement payment later in 2022, further strengthening our balance sheet as we prepare to receive Enhance One data. I'll now turn the call back to the operator for the Q&A.
spk09: We will now begin the question and answer session.
spk10: 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 keys. 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 to assemble our roster.
spk11: The first question today comes from Suji Jeong with Jefferies. Please go ahead. Hi, Suji.
spk09: Suji, your line is open. You may now ask a question.
spk00: Oh, sorry. I was muted. My apologies. Congrats on the really good data, and thanks for taking my question. I have a couple of questions. The first one is, when you looked at the exacerbation data, was there any subgroup that had more benefit or greater benefit than other groups? And the second question is about the commercialization plan. With the exacerbation data that you showed today, have you considered any changes to your plan to commercialize and subvention previously? You guys said that about 100 sales force could be able, might be able to target those prescribers. I'm just wondering with this data today if there has been any changes to the plan. Thank you.
spk13: Thanks, Suji, for the questions. With regard to exacerbation data and subgroup analysis, as this is the top line data, we haven't had a chance to look at that data specifically. Of course, we will over time, so stay tuned for that. And with regard to commercialization, I'll turn it over to Chris Martin for his comments.
spk06: Thanks, Dave, and thanks, Suji, for the question. When we look at the commercialization plans, we still anticipate that a sales force of about 100 reps would be able to reach the opportunity. As you look at the markets, One of the things that's very interesting is the concentration of prescribers across all these drugs that are used in COPD is very small. So if we look at some of the products that are on the market, it ranges from about 1,200 physicians doing 70% of the scripts to a little over 15,000 physicians doing 70% of the volume of prescriptions as well. So we believe that 100 sales rep number is a very good estimation for what we will need to go and commercialize ncfentrin.
spk00: Thank you.
spk03: Hi, this is Dr. Ansueto. I just would like to add a comment of your observations. Certainly it will be interesting to see if there is any specifics of groups. But if you look at the Kaplan-Meier curves of the risk to the first exacerbation, this is something that is very consistent and actually separates over time. So having a patient population with moderate to severe COPD, I would anticipate that we're going to see the effect pretty much across the board.
spk00: Thank you.
spk12: Thank you. Operator, next question.
spk10: The next question comes from Andreas Argeis with Wedbush Security. Please go ahead.
spk05: All right. Thanks for taking our questions. Good morning and definitely congrats on these very exciting results. So for Dr. Anzueto, how are you thinking about exacerbations versus symptoms, quality of life measures in terms of prioritizing one over the other? I'm going to have one follow up. Sure.
spk03: So I think there's a couple of important issues here. I think it's important to emphasize that this is a medication who has both anti-inflammatory bronchodilator effects. So we see the bronchodilator effect, the phosphodiesterase, that we cannot see even with the oral medication. So it's a bronchodilator and works very well. I mean, the beta is very strong. I think what makes it more interesting is the significant reduction in exacerbation, the impact on exacerbation, having 42% decrease of the rate of exacerbation and a similar 42% decrease of the time to the first exacerbation. I think this is really striking. Certainly, so how we translate that into a quality of life. And the quality of life, if you look at slide number 10, When patients will receive, for example, at six weeks, there is a very striking difference between the intervention group versus the placebo. And this effect kind of gets lost over time. I think there is several issues. Some of the issues are we're losing some individuals, the people who are more fitted. And as also, as it was mentioned before, we have to understand the impact of the pandemic. And this is at 24 weeks. So having the second phase three trial that's going to be a longer than hence one study, we're going to be able to better understand the impact in quality of life. But the fact that we've seen this significant decrease in exacerbation at 24 weeks, I think it's very remarkable.
spk05: Okay, and then just a quick follow-up. And then I'll just ask, so was there any difference in the ERS and STRQ scores in patients that were on background versus those that were not on background?
spk13: Yeah, and as I mentioned before, oh, sorry, I'll just say that the analysis hasn't been done yet. But, you know, we'll, of course, with a data set of this size, there's an enormous amount that we can look at in subset analyses, which we will do over time. with the proper care. But I think we're just reviewing the top line today.
spk05: Okay, fantastic. And then just I had that one follow-up for Dr. Anzueto. Now with this exacerbation data in hand, where do you see antidefension fitting in the treatment paradigm? How would you look to prescribe it? Thanks.
spk03: Sure. So this is on top of patients being already in long-acting bronchodilators. So one is this is a nebulized medication and today we have three other classes of medication given nebulization. So nebulization is pretty much becoming a standard of care as many patients. And I can see this given to patients that either having persistent exacerbation despite being and maximum therapy are also being used in patients who are on bronchodilators and in this medication to prevent future exacerbations. This will be a medication that with this data, with improvement in lung function and reduction in exacerbation, the medication will give patients who are at risk for these events.
spk05: Great. Thank you, and congrats again on the data.
spk12: Thanks very much, operator.
spk10: The next question comes from June Lee with Truist Securities. Please go ahead.
spk02: Hey, guys. Congrats on the impressive data. It's really nice to see this dual mechanism of action theory actually playing out in the clinic. So my question is, is the reduction in exacerbation not captured by ERS and SGRQ assessments you're tracking, or Is it somehow captured in the quality of life assessments, but the placebo response sort of derailed the statistical significance? And I have a follow-up.
spk11: Yeah.
spk12: So, I'll turn it over to Tara and have her give your thoughts on it.
spk01: Sure. So, the ERS captures daily symptoms. including bronchodilation, cough and sputum, and chest symptoms. Quality of life captures symptoms, activity, and impact, so you don't specifically capture exacerbation events within those tools.
spk02: Okay. And for the upcoming second phase three, you mentioned in the press release that you're watching the ongoing Russia-Ukraine conflict closely. Could you remind us the proportion of Enhance One patients who are in the US versus EU in that study and of the EU patients, how many are in the Eastern European sites?
spk01: Sure. We've got in that study about a third of the patients coming from the US and about two-thirds of the patients coming outside of the US. Of those patients coming outside of the US, the majority of those are in Eastern Europe with a small proportion in other countries such as Russia, South Korea, and UK.
spk11: All right. Thank you.
spk09: The next question comes from Ram Talbaraju with HC Wainwright.
spk10: Please go ahead.
spk14: Hi, this is Mitchell on for ROM. Thanks for taking our questions. I wanted to ask, if you could talk about anything unexpectedly positive that may have come out of the data that you'd like to highlight. And, you know, if you could talk about when you expect to publish these results.
spk13: Yeah, so I'm not sure I think it's unexpectedly positive. I think we're very pleased with seeing NCFentren's effects over a 24-week period in the results of the study. not only on improvement in lung function, but also improvement in exacerbation, which I think gives us a real window in viewing how, as has been talked about already, the dual activity of PD3, PD4 inhibition as a bronchodilator and anti-inflammatory compound impacting positively in the treatment of COPD. So I think it was a reinforcement of what we've seen earlier, understand from its basic pharmacology, insights that came from phase two. So I think it was an extension confirmation and really good to see these effects and not necessarily unexpected. But we are pleased with the strength of the data, not only on lung function, but on exacerbation. And I think, you know, it's always interesting to keep in mind that the exacerbations, because it requires worsening of symptoms, inherently captures the concept of symptoms in that, and I think that's something we're going to look at in even more detail. And with regard to publication of the data, I think we will move it along as quickly as we can. I think the strength of the data lends itself to a publication in a premier journal, and so we'll be working towards that as quickly as we can.
spk03: We'll also make the comment about the safety. The Achilles tendon of the phosphodiesterase inhibitors were reformed last, and then other medications being developed over the years have been side effects, GI side effects, and all kind of side effects. And here, this phase three data confirmed what was seen in the phase one and phase two, that given the medication Nebulize, it's very, very safe. You have minimal GI side effects. And basically, you get the tolerability and you get efficacy.
spk14: Okay, thank you. And just wanted to ask if you expect to see anything different come out of the second trial? And if so, could you just describe what those might be?
spk13: So I don't think we're thinking of anything differently. I think, as to remind everyone, the studies are essentially identical in design over the first 24 weeks from an efficacy and safety standpoint all the way to primary and secondary endpoints in the intended patient population that is enrolling in the study. So we think the read-through should be quite strong. Of course, the noted difference between the second, the study coming on enhance one later this year is that we have an additional subgroup for safety up to 48 weeks. But based on where we are, as Dr. Anzueto just reviewed on the safety, you know, we're expecting that to be maintained over the 48-week period. We're encouraged by the enhanced to trial results, and because of the design and the structure of the study, we think the read-through should be quite strong.
spk12: Thank you very much.
spk09: The next question comes from Tom Schrader with VTIG.
spk10: Please go ahead.
spk04: Good morning. Congratulations. That's really nice data. I had a question on exacerbations. I guess like everyone else, Is your 42% pretty comparable to the 20% and 30% that Dallarest saw? Are they similar measurements? It looks to me like your exacerbation rate is pretty high. You get such a robust result in kind of a small trial. So how comparable are these numbers?
spk01: Sure. I think from an endpoint perspective, the analysis is essentially the same. Okay. the treatment effect that we're seeing with encephentrine is obviously much greater given that and just noting that the populations are also quite different as this study did not restrict to patients with chronic bronchitis only.
spk04: Okay. And then I had a question.
spk03: I think it's important to emphasize that From the formula study, especially the phase 3 trial, excluded patients were not allowed to be on ICS. So this was a cohort that were on long-acting bronchovirals without angiocorticoid steroids. And here, there are 10% of the population who is on ICS. So as she said before, this is probably different patient populations.
spk04: And similarly, you didn't give the exact numbers, but it looks like the primary, depending on background therapy, is something like 75 mils and 115 mils. Were the patients on background therapy meaningfully sicker? Was their starting FEV worse?
spk12: No.
spk13: I think our look at it so far is there was a lot of comparability between the two based on the entry criteria between background therapy and not. And your point estimates for effect are about right as well.
spk04: So it's really a drug effect. All right. Congratulations. Thank you very much. Thanks, Tom.
spk10: As a reminder, if you would like to ask a question, please press star then 1 to enter the question queue. The next question comes from Yasmine Rahimi with Piper Sandler. Please go ahead.
spk08: Good morning, team, and my big congrats to you to a very stellar data set. Maybe the first question is to you, team. Is there an opportunity of being able to look at the subcomponent of the SGRQ score and system and being able to see whether one component was driven more on the placebo end and maybe statistical differences can be detected and the subscores That's one question. And then a question for Dr. Anzetto. It's pretty remarkable to see not only the excavation data, but also its fast response, being able to capture a difference within four weeks. Could you maybe enlighten us how meaningful this is and how it compares to other therapies that you have accessible to you, being able to see a fast-acting response? And thank you again for taking my questions.
spk12: Go ahead, Dr. Anzueto, I want you to answer the second question first.
spk03: Sure. So, certainly we see the separation very early in the course, and if you would see that in the Kaplan-Meier curve. I think this is very remarkable, especially taking into consideration the patient's baseline therapy, as well as the patient's FEV1. I think it's hard to say to this comparable, but we have seen curve separations like this with recent publications on the triple therapy. It seems that the separation starts occurring between four to six weeks after the start of the medications.
spk01: And I can talk a little bit about the domain analysis and the subgroup analysis. We definitely do intend to take a close look at that once we have a fuller set of data in our hands. I think just one thing I'd like to point out is that this placebo response that we saw in this study was extremely large. I think larger than you would historically have seen in other programs.
spk08: Thank you. And then team, I apologize, maybe one other last minute question that popped through my head. Given this data is now off the press, I'm certain that you can go and take this data and probably share it with the investigators that are involved in the Enhance One study. So could you maybe give us a perspective on sort of the operational homework that's ahead of you to share this exciting data with the investigators and Do you think that's going to drive enrollment and expedite it? So just give us a little bit of perspective of the aftermath of these outstanding data when it comes to interaction with the investigators to ensure top line data for end of 2022. And thank you again for letting me ask one more question.
spk01: Sure. So our enrollment in the second study, Enhance One, has completed. So we don't expect any impacts there. And so we are in that space where we're completing the patients that had already enrolled. The top line data obviously is public and they will have access to that. All of the Enhance One data is still blinded at this time. So we don't expect that to obviously have any impact whatsoever on our ongoing trial.
spk08: Okay, great. Thank you.
spk13: Thanks, yes.
spk10: The next question is a follow-up from June Lee with Truist Securities. Please go ahead.
spk02: Hey, thanks for taking our questions, follow-up question. It's actually a follow-up from the prior question. In fact, I think my question would be, what are you going to do to make sure that this doesn't get disseminated too much to the point where it might drive up the placebo response in the patients who are still in the trial. Thank you.
spk01: Sure. I think one comment I could say there is patient population is probably not the group that is the fastest uptake on new phase three results. And again, it's a single trial that we've released so far. So we're really not expecting any impacts there. That certainly has not been the case in other programs.
spk03: Thanks, Dr. Lanzueco. As an investigator in clinical trials, if I will be part of the long-term trial, And I see that these positive results is really going to encourage me to try to collect all the data, to get all the products, everything, try to wrap up because I can see as an investigator the importance to complete all the trials as soon as possible.
spk02: Okay. And then, you know, actually a quick follow-up. You know, I'm looking at the data, FEV1, mean change based on demographics like, you know, gender, age, like female, male patients, tend to extract greater benefits than female patients. Are the patients in the ongoing phase three sort of the demographic distribution, not the geographic distribution, which you mentioned already, are the demographic distributions similar between the two trials?
spk01: Yes, they are fairly similar. You know, one thing I can mention is that you typically have a higher starting baseline lung function in males than you do have in females. That's expected.
spk11: All right. Thank you.
spk09: This concludes our question and answer session. I would like to turn the conference back over to Dr. David Zaccardelli for any closing remarks.
spk13: Thank you, Operator, and we'd like to thank everyone for your questions today and also to thank the patients and healthcare professionals participating in the enhanced program. And then finally, I'd like to thank our shareholders for their continued support and the dedicated and talented team at Verona for their commitment. We look forward to discussing these highly positive results with many of you in the coming weeks and months. And I also want to thank Dr. Anzueto for joining us today on the call and providing his insights.
spk12: And so with that, we can conclude today's call.
spk09: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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