Verona Pharma plc

Welcome to Verona Pharma's third quarter 2022 financial results and operating highlights conference call. At this time, all participants are in a listen-only mode. Earlier this morning, Verona Pharma issued a press release announcing its financial results for the three months ended September 30, 2022. A copy can be found in the investor relations tab on the corporate website 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 risk, 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 forelooking statements. Any such forelooking statements represent management's estimates as of the date of this conference call. While the company may elect to update such forelooking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause it views to change. As a reminder, this call has been recorded and will remain available for 90 days. I'd now like to turn the call over to Dr. David Zacardelli, Chief Executive Officer. Dr. Zacardelli, the floor is yours, sir.

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. It's been another quarter of solid progress and execution for Verona Pharma. During the third quarter, we announced positive top-line results from our Phase III Enhance II clinical trial of mebulized Ncfentrin for the maintenance treatment of COPD, and we are looking forward to the top-line data readout of Enhance I trial expected around the end of this year. We have significantly strengthened our financial position with access up to approximately $400 million, including our upsized $150 million equity offering in August and $150 million debt financing facility with Oxford Finance in October. The non-dilutive $150 million debt facility replaces the existing $30 million facility with Silicon Valley Bank and is available upon achievement of certain clinical and regulatory milestones and other conditions. We expect these funds to extend our cash runway through at least the end of 2025, supporting the ongoing pre-commercialization activities and the planned future commercial launch of NC-Fentron in the United States. First, I'd like to take a step back and provide a brief overview of our Phase III enhanced clinical programs. As a reminder, the ENHANCE-1 and ENHANCE-2 trials were each designed to enroll approximately 800 moderate to severe symptomatic COPD patients for a total of approximately 1,600 subjects across sites primarily in the United States and Europe. The trials replicate measurements of efficacy and safety data over 24 weeks with ENHANCE-1 also evaluating longer-term safety in approximately 400 subjects over 48 weeks. Subjects received encipentrin or placebo as either monotherapy or added on to a single long-acting bronchodilator with approximately 50% of subjects receiving either a long-acting muscarinic antagonist or a LAMA or a long-acting beta agonist or a LABA. Additionally, up to approximately 20% of subjects may receive inhaled corticosteroids with their concomitant LAMA or LADA. As previously announced, the ENHANCE-2 trial successfully met primary and secondary endpoints, demonstrating statistically significant improvements in lung function, and ncfentrin was well-tolerated with safety results similar to placebo. Importantly, Ncfentrin demonstrated a 42% reduction in the rate of moderate and severe COPD exacerbations over the course of the study compared to those receiving placebo. And recently reported subgroup analyses confirmed these positive effects in the overall population across all subgroups analyzed over 24 weeks. Remember, Enhanced 2 was not powered for exacerbations overall or in subgroups. We are very encouraged by these results and look forward to reporting top line data from Enhance One around the end of 2022. The top line data from Enhance One are expected to include the following. The primary endpoint, improvement of lung function is measured by average force exploratory volume in one second for FEV1 area under the curve, zero to 12 hours post-dose at week 12. key secondary endpoints comprising measurements of COPD symptoms and health-related quality of life, including ERS and SGRQ endpoints, as well as peak and trough FEV1, exacerbation data, and finally, overall safety results. Conditional upon positive results from the ENHANCE-1 trial, we plan to submit a new drug application to the US FDA in the first half of 2023. Our U.S. commercial launch activities are accelerating as planned. Following our outstanding Enhance-2 data, initial steps were taken in the third quarter with the addition of key leadership positions in commercial, HR, IT, and finance. We plan to continue to accelerate preparations after top-line Enhance-1 data are announced and through the NDA submission so we are fully prepared to potentially launch Tennessee Venture in 2024. Turning to our global partnering strategy, in the third quarter, Nuance Pharma received clearance from China's Center for Drug Evaluation to begin Phase I and Phase III studies of Ncfentrin for COPD in China. As a reminder, Nuance Pharma is responsible for developing and commercializing Ncfentrin in greater China, and this clearance represents an important milestone in expanding the potential of Ncfentrin to address the global need for a novel treatment for COPD. We look forward to providing further updates as these studies progress. Today, over 380 million patients suffer from COPD worldwide, and it is the third leading cause of death. Despite the availability of existing COPD treatments, more than 1 million patients in the U.S. remain symptomatic on maximal therapy, highlighting the urgent need for novel medications to provide relief to these patients. We are encouraged by our progress throughout 2022 and are excited about the upcoming Enhance One top line data readout. We remain committed to our goal of delivering N-C-Fentron, a novel inhaled PDE3 and PDE4 inhibitor and first in class product candidate for the maintenance treatment of COPD. I will now turn the call over to Mark to review our financial results for the third quarter.

Thank you, Dave. We ended the third quarter of 2022 with $231.7 million in cash and equivalents. As Dave mentioned, we have significantly strengthened our financial position and expect our funds to extend our cash runway through at least the end of 2025, including the planned commercial launch of NC Fentron in the United States. For the three months ended September 30, 2022, the net loss after tax was $15.6 million. compared to a net profit after tax of $11.1 million for the same period in 2021. This represents a loss of $0.03 per ordinary share or $0.24 per ADS for the quarter compared to a profit of $0.02 per ordinary share or $0.16 per ADS in the third quarter of 2021. Research and development costs were $9.8 million for the three months ended September 30, 2022, compared to $22.6 million reported for the same period in 2021. The decrease of $12.8 million was primarily due to a $12.5 million decrease in clinical trial and other development costs as we progressed to the later stages of the enhanced program and decreases in share-based compensation. Selling general and administrative expenses were $5.3 million for the three months ended September 30, 2022, compared to $10.9 million reported for the same period in 2021. The decrease of $5.6 million was primarily due to a $4 million non-recurring expense associated with the nuance agreement in 2021 and a $1.6 million decrease in share-based compensation. The UK R&D tax credit for the three months ended September 30, 2022, was $2.1 million compared to a credit of $4.7 million for the same period in 2021. The decrease of $2.6 million is in line with our lower R&D spend this quarter. We have submitted a claim for approximately $13 million related to our 2021 R&D spend and expect to receive the reimbursement payment by the end of 2022. As we have discussed before, 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.