Verona Pharma plc

Welcome to Verona Pharma's fourth quarter and full year 2022 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, 2022. A copy can be found in the Investor Relations tab on the corporate website www.veronapharma.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. Any such looking 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. 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 Zaccadelli, 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. 2022 was a momentous year for Verona Pharma and first and foremost for the millions of patients suffering from COPD. Supported by the groundbreaking results from our Phase III enhanced trials, we believe Ncfentrin, if approved, has the potential to change the treatment paradigm for COPD. We are on track to submit a new drug application to the FDA in the second quarter of 2023. Over the past year, we announced positive top-line results from our Phase III enhanced trials evaluating nebulized Ncfentrin for the maintenance treatment of COPD in moderate to severe COPD patients. NcFentrin successfully met the primary endpoint in both Enhance I and Enhance II, demonstrating statistically significant and clinically meaningful improvements in lung function, as well as remarkable reductions in rate and risk of exacerbations. The success of these trials advances us closer to providing NcFentrin to a patient population in urgent need of new effective treatment options. Additionally, this strong clinical data allowed us to significantly strengthen our financial position through an upsized $150 million equity offering in August and a $150 million non-dilutive debt financing facility with Oxford Finance in October, as well as through March 3rd, $58.6 million from ADS sales under our ATM program. With that said, let me take a step back and provide a brief review of our enhanced program. As a reminder, the enhanced one and enhanced two trials were each 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. The trials replicated measurements of efficacy and safety over 24 weeks, and ENHANCE-1 also evaluated longer-term safety in approximately 400 subjects over 48 weeks. Subjects received n-C-Pentrin or placebo as either monotherapy or added on to a single long-acting bronchodilator with approximately 69% of subjects across Enhance 1 and 55% in Enhance 2 receiving either a LAMA, long-acting muscarinic antagonist, or LABA, long-acting beta agonist. Additionally, approximately 20% of subjects in Enhance 1 and 15% in Enhance 2 received inhaled corticosteroids with concomitant LAMA or LABA. As previously announced, both the ENHANCE-1 and ENHANCE-2 trials successfully met primary and key secondary endpoints, demonstrating statistically significant improvements in lung function. In addition, NC-Fenton substantially improved symptom and quality of life, as well as reducing the rate and risk of COPD exacerbations in both trials. was well-tolerated over 24 and 48 weeks. Importantly, pooled exacerbation data from Enhance I and Enhance II demonstrated that n-C-fentrin treatment resulted in a statistically significant 40% reduction in the rate of COPD exacerbations compared with placebo over 24 weeks. Further, n-C-fentrin significantly decreased the risk of an exacerbation as measured by time to first exacerbation when compared with placebo by 41%. Based on the study population, we believe this magnitude of reduction in exacerbation rate and risk is unprecedented in phase three COPD trials and further validates the importance of Ncfentrin's novel mechanism delivering nonsteroidal anti-inflammatory activity in addition to bronchodilation for the treatment of patients with COPD. I'd also like to reiterate the consistency of the positive results between ENHANCE-1 and ENHANCE-2 trials. The totality of the data from both studies, coupled with favorable safety profile of ncFentrin, support our belief that ncFentrin will change the treatment paradigm for COPD. With this positive data in hand, we plan to submit an NDA to the FDA in the second quarter of this year. In parallel, our pre-commercialization efforts and US launch activities are proceeding as planned. Following our strong enhanced two data in August, we began filling key leadership positions across commercial, HR, IT, and finance. We are accelerating our efforts as we prepare for NDA submission and beyond. and we are confident that we will be well positioned for a potential US launch of ncfentrin in 2024. Turning to our global partnering strategy, in 2022, Nuance Pharma received clearance from China's Center for Drug Evaluation to begin phase one and phase three studies of ncfentrin for COPD in China. As a reminder, Nuance Pharma is responsible for developing and commercializing NC Fentron in Greater China, and as such, they will play a key role in addressing the global need for a novel treatment for COPD. We look forward to providing further updates as these studies progress. Currently, more than 380 million patients suffer from COPD worldwide, and it is the third leading cause of death. Despite the availability of existing COPD treatments, approximately 50% of patients experience symptoms for more than 24 days per month, and physicians require new and effective COPD therapies to provide relief to their patients. With its novel mechanism of action as a selective PDE3 and PDE4 inhibitor, we believe ncfentrin, if approved, will be groundbreaking in the field of COPD management. We expect 2023 to be another pivotal year for Verona as we advance towards our mission of delivering NC-Fentren to patients with COPD. I will now turn the call over to Mark to review our financial results for 2022.

Thank you, Dave. Good morning. We ended 2022 with $227.8 million in cash and equivalents. Starting in January, we ran the ATM program through last Friday And during that time, we raised net proceeds of approximately $56.9 million. After giving effect to the proceeds from the ATM facility, our pro forma cash and equivalents at December 31, 2022 was $284.7 million. Between the cash currently on hand, the expected receipts from the UK tax credit program, and funding expected to be available under the $150 million Oxford loan facility, we believe our cash runway will extend through at least the end of 2025, including the planned commercial launch of NC Fenton in the United States. For the year ended December 31, 2022, the net loss after tax was $68.7 million compared to a net loss after tax of $55.6 million for the prior year. The loss in 2022 was higher primarily due to $40 million of non-recurring revenue related to the nuance agreement, which more than offset the higher R&D spend in 2021. This represents a loss of 13 cents per ordinary share or $1.04 per ADS for the year compared to a loss of 12 cents per ordinary share or 96 cents per ADS in 2021. Research and development costs were $49.3 million for the year ended December 31, 2022 compared to $79.4 million reported for the year 2021. The decrease was primarily due to lower clinical trial and other development costs of $27.9 million resulting from the enhanced studies nearing completion in 2022 and a $4.2 million decrease in share-based compensation charges. Selling, general, and administrative expenses were $26.6 million for the year ended December 31, 2022, compared to $33.9 million reported for the prior year. The decrease of $7.3 million was primarily due to lower share-based compensation charges. The UK R&D tax credit for 2022 was $9.6 million compared to a credit of $15.6 million for the year ended December 31st, 2021. The decrease of $6 million is in line with our lower qualifying R&D expenditure incurred with the enhanced program in 2022. I'll now turn the call back over to the operator for the Q&A.