Verona Pharma plc

Welcome to Verona Pharma second quarter 2023 financial results and operating health 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 months ended on June 30th of 2023. A copy can be found in the investor relation 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 the management's current expectations. These statements are neither promised, nor guaranteed, and involve known and unknown risks, uncertainties, and other important factors that may cause the actual results, performance, and achievements to be materially different from the expectations expressed in the plans for forward-looking statements. Any such forward-looking statement represented management existing on the date of this conference call. While the company may elect to update such forward-looking statement at some point in the future, it declaims any obligation to do so, even if subsequent event causes views to change. As a reminder, this call has been recorded and will remain available for 90 days. I would now like to turn the conference over to Dr. David Zaccardelli, 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. During the second quarter, we made substantial progress toward our goal of bringing ncFentrin to COPD patients with the submission of a new drug application to the FDA for nebulized ncFentrin for the maintenance treatment of COPD. The NDA submission is comprised of data from the successful Phase III enhanced program and other NC-Fentron clinical studies, including safety data from approximately 3,000 subjects. We look forward to working with the FDA on the submission and providing an update in the third quarter. In May, we presented additional analyses from the enhanced studies at the American Thoracic Society International Conference across 12 abstracts and a clinical trial symposium on subgroup data and pooled analyses from Enhance I and Enhance II covering exacerbations, symptoms, quality of life, use of rescue medication, healthcare utilization, and safety. In addition, an overview of the enhanced trial results was presented as part of the clinical trial symposium reserved for highlighting new breakthrough drugs. In June, The results of the enhanced trials evaluating ncfentrin and COPD were published in the peer-reviewed publication, American Journal of Respiratory and Critical Care Medicine. In parallel with our regulatory progress, we continue to advance our pre-commercial medical affairs and marketing activities as we prepare for the potential US launch of ncfentrin in the second half of 2024 pending FDA approval. These efforts are critical in setting the stage for Ncfentrin, which, if approved, has the potential to be the first novel mechanism of action launched for the maintenance treatment of COPD in over 10 years. Turning to our global partnering strategy, in the second quarter, Nuance Pharma, our development partner in Greater China, announced they enrolled the first subject in their Phase III trial evaluating Ncfentrin for the maintenance treatment of COPD in China. Nuance Pharma has exclusive rights to develop and commercialize Ncfentrin in Greater China, and as such, will play a key role in addressing the global need for a novel treatment for COPD. We look forward to providing updates as the trial progresses. We believe Ncfentrin, if approved, has the potential to change the treatment paradigm for COPD. The data from our Phase III enhanced program was highly positive, and NC-Fentrin successfully met the primary endpoints in both Enhance I and Enhance II, demonstrating statistically significant and clinically meaningful improvements in lung function, and also successfully met secondary and other endpoints, including reductions in the rate and risk of exacerbations. The success of these trials and our recent NDA submission for NC-Fentrin brings us closer to providing NC-Fentrin to a patient population in urgent need of a new effective treatment option. 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 a transformational advance in the treatment of COPD. Looking ahead, we plan to present new analyses of the enhanced trials at the upcoming European Respiratory Society International Congress and at the CHEST Annual Meeting. Also later this year, we plan to host an analyst meeting in New York providing an overview of our launch plan and will announce further details once finalized. I will now turn the call over to Mark to review our financial results for the second quarter.

Thank you, Dave, and good morning. We ended the second quarter of 2023 with $270.7 million in cash and equivalents, We believe our balance sheet remains strong, and with the cash currently on Hedon, expected receipts from the UK tax credit program, and funding expected to be available under the Oxford Loan Facility, we expect to have sufficient runway at least through the end of 2025, including the planned commercial launch of NC Venture in the US, pending regulatory approval. For the quarter ended June 30, 2023, the net loss after tax was $8.8 million compared to a net loss after tax of $17.8 million for the same period in 2022. This represents a loss of one cent per ordinary share or 11 cents per ADS for the quarter compared to a loss of four cents per ordinary share or 29 cents per ADS for the second quarter of 2022. Research and development costs were a net reversal expense of $2.5 million for the three months ended June 30, 2023, compared to costs of $15 million for the three months ended June 30, 2022, a decrease of $17.5 million. As study conduct under the Phase III Enhanced Program was essentially complete late in 2022, R&D expense was dramatically lower in Q2 2023 compared to Q2 2022 when the program was in full operation. In addition, we favorably resolved the matter with the supplier as well as certain disputed invoices in Q2 2023 resulting in the reversal of approximately $6.3 million of costs accrued in prior periods. This resulted in net negative R&D expense for the three months ended June 30, 2023. Selling, general, and administrative expenses were $12.4 million for the quarter ended June 30, 2023, and people-related costs, including share-based compensation, as well as an increase of $1.7 million in costs related to the build-out of our commercial infrastructure as we prepare for a potential commercial launch. We expect SG&A expenses to continue to be the main driver of expense for Verona Pharma as we prepare for a commercial launch in 2024. In the aggregate, we expect total expenses to be in the range of $20 to $25 million per quarter until we add sales reps at FDA approval. I'll now turn the call back to the operator for the Q&A.