Verona Pharma Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 3, 2023

There are 12 speakers on the call.

Operator

Welcome to Veronos Pharma Second Quarter 2023 Financial Results and Operating Highlights Conference Call. Its financial results for the 3 months ended on June 30, 2023. 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 the management's current expectations.

Operator

These statements are neither promised, neither guaranteed and involve known and unknown risks, uncertainties and other important factors that may cause the actual results, performance and achievement to be materially different from the expectations expressed in Implantin's forward looking statements. Any such forward looking statements represent management existing on 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 conference over to Doctor.

Operator

David Zaccardelli, Chief Executive Officer.

Speaker 1

Thank you, and welcome everyone to today's call. With me today are Mark Hahn, our Chief Financial Officer Doctor. Kathy Rickard, our Chief Medical Officer and Chris Martin, our Senior Vice President of Commercial. During the Q2, we made substantial progress toward our goal of bringing ensifentrine to COPD patients with the submission of a new drug application to the FDA for nebulized ensifentrine for the maintenance treatment of COPD. The NDA submission is comprised of data from the successful Phase 3 ENHANCE program and other ensifentrine clinical studies, including safety data from approximately 3,000 subjects.

Speaker 1

We look forward to working with the FDA on the submission and providing an update in the Q3. In May, we presented additional analyses from the ENHANCE 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 ENHANZE trial results was presented as part of the clinical trial symposium reserved for highlighting new breakthrough drugs. In June, the results of the ENHANZE trials evaluating ensifentrine in 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 U.

Speaker 1

S. Launch of ensifentrine in the second half of twenty twenty four pending FDA approval. These efforts are critical in setting the stage for ensifentrine, which if approved has the potential to be the 1st novel mechanism of action launched for the maintenance treatment of COPD in over 10 years. Turning to our global partnering strategy. In the Q2, Nuance Pharma, our development partner in Greater China, announced they enrolled the first subject in their Phase 3 trial evaluating ensifentrine for the maintenance treatment of COPD in China.

Speaker 1

Nuance Pharma has exclusive rights to develop and commercialize ensifentrine 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 ensifentrine, if approved, has the potential to change the treatment paradigm for COPD. The data from our Phase 3 ENHANZE program was highly positive and ensifentrine successfully met the primary endpoints in both ENHANZE 1 and ENHANZE 2, 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 ensifentrine brings us closer to providing ensifentrine to a patient population in urgent need of a new effective treatment option.

Speaker 1

Currently, more than 380,000,000 patients suffer from COPD worldwide, and it is the 3rd leading cause of death. Despite the availability of existing COPD treatments, approximately 50 percent 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 ensifentrine, if approved, will be a transformational advance in the treatment of COPD. Looking ahead, we plan to present a new analysis of the ENHANCE 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 plans and will announce further details once finalized.

Speaker 1

I will now turn the call over to Mark to review our financial results for the Q2.

Speaker 2

Thank you, Dave, and good morning. We ended the Q2 of 2023 with $270,700,000 in cash and equivalents. We believe our balance sheet remains strong and with the current cash currently on hand, 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 ensifentrine in the U. S. Pending regulatory approval.

Speaker 2

For the quarter ended June 30, 2023, the net loss after tax was $8,800,000 compared to a net loss tax of $17,800,000 for the same period in 2022. This represents a loss of $0.01 per ordinary share or $0.11 per ADS for the quarter compared to a loss of $0.04 per ordinary share or $0.29 per ADS for the Q2 of 2022. Research and development costs were a net reversal of expense of $2,500,000 for the 3 months ended June 30, 2023, compared to costs of $15,000,000 for the 3 months ended June 30, 2022, a decrease of $17,500,000 As study conduct on the Phase 3 ENHANCE program was essentially complete late in 2022, R and 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 a supplier as well as certain disputed invoices in Q2 2023 resulting in the reversal of approximately $6,300,000 of costs accrued in prior periods. This resulted in net negative R and D expense for the 3 months ended June 30, 2023.

Speaker 2

Selling, general and administrative expenses were $12,400,000 for the quarter ended June 30, 2023, compared to $5,500,000 reported for the same period in 2022, an increase of $6,900,000 This increase was primarily due to a $5,000,000 increase in people related costs, including share based compensation, as well as an increase of $1,700,000 in costs related to the build out of our commercial infrastructure as we prepare for a potential commercial launch. We expect SG and A expenses to continue to be the main driver of expense for Verona Pharma as we prepare for commercial launch in 2024. In the aggregate, we expect total expenses to be in the range of $20,000,000 to $25,000,000 per quarter until we add sales reps at FDA approval. I'll now turn the call back to the operator for the Q and A.

Operator

We will now begin the question and answer

Speaker 3

updates. Maybe two questions. The first one would be directed to Chris. We would love to just sort of get an update on what are some of the key priorities on your to do list between, I guess, now and the PDUFA date? And then second, why is it so critical for you to really implement these strategies early on?

Speaker 3

I guess a lot of investors may not recognize the importance of building product awareness and all the prep that goes. So I guess what I'm trying to get at is, why is the work needed to do be done now to ensure that launch is highly successful? And I appreciate really the color around these two questions, but I'll jump back into the queue.

Speaker 4

Thanks, Yaz. Yes, thanks, Yaz, on the questions. I'll start really with the priorities between now and PDUFA. And it really falls into 3 categories. One is, as we think about how we need to build the organization to get ready for launch, there's a variety of things we need to do across market access and trade, operations and systems, and then in marketing and sales.

Speaker 4

So if I take each one of those individually and I look at market access and trade between now and PDUFA, a vast majority of our work will be spent setting up our channel and our distribution pathway to ensure that ensifentrine can get from our 3PL or 3rd party logistics organization to the patient in an efficient and effective manner. That takes time. That takes integration of systems and it also leaves us time to test to make sure that the channel is working appropriately before launch. The other thing that we'll be doing during that time is really continuing to evolve our payer discussions. As we know, ensifentrine is we believe will be primarily reimbursed through a medical benefit and that can come through either traditional Medicare Part B, but also through Medicare Advantage as they have to follow the Medicare Part B pathway as well.

Speaker 4

So our team from a payer standpoint has really been focusing on those Medicare Advantage plans and getting out there and engaging in conversations around the disease and what potentially ensifentrine could bring to the marketplace there. If I switch gears now to operations and IT, IT, as an organization that's transitioning from a clinical development organization to a really a commercially focused organization. There's many systems that we have to put in place. Probably the biggest system that we're implementing and actually has already gone live is a data warehouse. And the reason why I highlight this is the importance of a data warehouse is it provides the flexibility for us to analyze and look at our data on a really a minute by minute basis.

Speaker 4

This internal capability is so important when it comes to launch because we can effectively look at all our tactics that we're putting out to the field through non personal channels and personal channels and see what are more effective and what tactics maybe are less effective and redistribute our spend in a very quick manner. We've actually started testing this already as we did some social media campaigns at ATS Conference where we're able to get some physician interaction data and now can start to use that to test the system as we speak. And then on the 3rd area is really the marketing side. Ensifentrine will be the 1st new product launched and the mechanism in over a decade. And when we think about that, the market has become very used to llamas, lavas and ICS products.

Speaker 4

So conducting disease shape disease state market shaping work is essential to ensure that when ensifentrine comes to market that the physicians are receptive to the drug when it comes out. And specifically, when we look at some of our we see some disconnect between the burden of COPD in the patient and how the physician feels the patient's actually feeling. What you can see in the PHREZIA data is that the patients are experiencing symptoms up to between 24 30 days a month and almost 50% of these patients. So there's a significant symptom burden that affects their overall quality of life and ability to interact with members of their families that maybe the physicians are underestimating. And this is some work that we'll be doing very we're finalizing that work and we'll be launching towards the back half of the year into 2024.

Speaker 4

So I really think about the work that we need to do between now and PDUFA and those three functions. And then you mentioned why is it critical to implement these now. If we don't do this today or if we're slow in doing these activities, it can affect the ramp. Specifically, sometimes biotechs launch without market shaping or doing some pre marketing work for a new product and that potentially limits the physician's receptivity to the product when it comes to launch. So all this work is essential to ensure that smooth transition from product to patient and then the physician uptake at launch.

Speaker 3

Great. Thank you so much, Chris. I'll jump back into the queue.

Operator

The next question comes from Andres Algides from Wedbush. Please go ahead.

Speaker 5

Hi, good morning guys and thanks for taking our questions and congrats on all the progress as well. Just 2 from us to start here. What additional analyses from ENHANCE can we expect to see at ERS and CHEST? And then can you provide any updates on where you stand with the combination product of ensifentrine and LAMA? Is there certain LAMA that you think will work best in conjunction with ensifentrine?

Speaker 5

Thanks.

Speaker 6

Hi, good morning. Thanks, Andres. Yes, so let me take the second one first and I'll turn it over to Cassie to talk about ERS and Chastec. We continue to work on a combination nebulized product of a LAMA plus ensifentrine, which we think will work extremely well, well suited for the COPD space, give us a dual bronchodilator as well as anti inflammatory in a nebulized delivery. So as far as the next product, we think that that makes a lot of sense.

Speaker 6

We are currently in the earlier stages of formulation development, making sure that we have a formulation that can stand up and be stable, of course, before we launch into clinical activities. We'll be much more informed on that later this year. And so I think as we get towards the end of 2023, we'll be articulating where we are with that, a little bit clearer for everyone as well as our plans for 2024 in that development. So I would stand by for that. And then Kathy, you want to comment on ERS and CHF?

Speaker 7

Sure. So I'll take ERS first. So for ERS, which is going to be in the early and mid part of September, we have a number of abstracts. The first abstract is the 48 week exacerbation data, again further confirming that over 48 weeks, we continue to see a 44% decrease in exacerbations rate and a 52% decrease in risk, which is the time of the first. That is the poster presentation.

Speaker 7

We have an oral presentation, again, looking at the decrease in rate and risk of exacerbations, but we're also showing the decrease in physician visits and hospitalization over the 24 weeks of the study. Then for chest, which is in October, we have a couple of abstracts being shown. These are all in a somewhat of a short form oral format. So we have the full results by exacerbation history, again demonstrating that the exacerbation despite exacerbation history, we continue to see a strong decrease in exacerbations. And then side by side symptoms from the 2 pivotal trials, which again show consistently that we are able to decrease symptoms in these two trials.

Speaker 7

We also have a full efficacy data looking at whether patients are originally on LAMA or LABA, again demonstrating that equal efficacy occurs whether they're on LAMA or LABA. And then lastly, there's a pooled safety from both large studies, again showing the consistency of our very good safety profile. So those are the ones that you'll expect to see at ERS and CHEST.

Speaker 5

Okay, great. Thanks for all that color. What's going on? Looking forward to all the progress. Zoom back in the queue.

Speaker 5

Thank you.

Operator

The next question comes from Andrew Tsai from Jefferies. Please go ahead.

Speaker 8

Hi, good morning. Thanks for taking our questions and again congrats on the progress. So two questions on our side. Maybe one on the ongoing filing. As we wait for the potential acceptance from the FDA, has the agency what kinds of questions has the agency maybe sent you since you've submitted the filing?

Speaker 8

What's the correspondence been like? And if there haven't been any correspondence, would you then say no news is good news? And then secondly, as we think about the sales trajectory of ensadventrin and think about launch precedents, are there any relevant launch comps that you think applies to ensifentrine, not necessarily within the COPD space, but maybe even in the neuro space in general? Any other kind of SMIDCAP type launches with a similar situation? You've got it like a novel MOA for a big market, strong efficacy, clean safety and so forth.

Speaker 8

So what would be the best case studies for investors? Thank you.

Speaker 6

Thanks, Andrew, for the questions. I'll take the first and then hand it over to Chris to take the second on launch comps. As you'd expect, we're not going to comment on regulatory interactions in detail. But just to say that the submission is in, as you know, and that we are in a proper communication with the FDA. I think that it's from my perspective normal course of business with them.

Speaker 6

And I think that we will see where they stand right now near the end of August would be our target expectation for around day 60. And as you know, they will also deliver a day 74 letter as well that provides additional detail on the submission and it includes the PDUFA date, etcetera. I would say normal course of business from my perspective. And with that, I'll turn it over to Chris.

Speaker 4

Thanks Andrew. On the question on sales trajectory and comp, in the COPD space, there's really not a comp that fits the ensifentrine profile because as we think about the launch for ensifentrine, ensifentrine is not a drug that needs to replace another drug in the treatment armamentarium. It's a drug that can be added to what the patient is currently taking. And so it provides that extra benefit. But if I look more broadly at other categories and diseases where you have a mid tech, midsized biotech competing against larger pharma.

Speaker 4

I really go back to the most recent example of Biohaven in the migraine space, where they were able to successfully launch an oral drug for a migraine indication against a large competitor and do it very effectively. And I think part of what we've learned and got an insight from around that is part of the work that we're doing that was explained with Yaz around how you set up the launch beforehand with market shaping, how you use data to be more efficient in your deployment are things that we've learned from that launch to make us very competitive and overly competitive against the larger pharma players within there. So I really look at that example as a precedent for Verona and ensifentrine.

Speaker 8

Makes sense. Thanks.

Operator

The next question comes from Edward Nash from Canaccord Genuity. Please go ahead.

Speaker 9

Hi, good morning. Thanks for taking the question. Could you just remind us, I think you've spoken to this before, but how quickly do patients move from first line therapy to the point of needing ensifentrine? And then another question I have is just, I guess, just on the as far as the future R and D development besides combo therapy, ensatentrine being applied?

Speaker 6

Great. Thanks for the question. Let me take the second one first and then I'll turn it over to Chris on sort of the patient journey. Besides our combination product, which we're definitely focused on and we think is another advance for ensifentrine. We are looking at other diseases as potentials.

Speaker 6

We also think other indications may require different formulations as well, possibly different dosing. So I think that some of that is going to be helpful to be informed in our partnering strategy and working with partners that may have IP on different devices and expertise on different devices. And so, some of that is staged and going to be following as we progress the nebulized formulation. But we are attentive to it. And again, I'd expect more clarity on that as we get through 'twenty three and into 'twenty four.

Speaker 6

And as we have an eye towards the approval of ensifentrine and the launch in COPD, I think other indications open up as well. So that's our general plan on R and D. So Chris, you want to comment on the patient journey?

Speaker 4

Yes. Thanks, Dave. As we think about the patient journey, the patients are typically treated based on 2 pathways. The first pathway is really a symptom based pathway where if they have dyspnea as the primary driver of symptoms and issues, then a physician moves down a treatment algorithm there. The other pathway is exacerbations.

Speaker 4

What we know from our market research is that the patient typically sees the physician between 2 and 4 times a year and that the overall symptomatology of the patient will drive therapy changes. So if a patient's having increased inability to breathe and really what the physician talks about not only is the inability to breathe, but it's the inability to do certain activities or if their activity level is changing, the physicians will make therapeutic changes. So when I look at that journey, there are significant opportunities for ensifentrine to be inserted into a patient's treatment algorithm over the course of a year. I think the important thing there is ensifentrine, you don't have to wait till a patient's on a dual or a triple. Ensifentrine can be inserted into the treatment paradigm very early and the data supports ensifentrine being added to a LAMA or a LABA or a LABA ICS in a very early situation for these patients.

Speaker 4

And the great thing is the physicians are looking for products that can help the patient kind of continue to keep some sense of normalcy in their life through either a reduction in symptoms and improvement in quality of life, an improvement in FEV1 or the potential for help with exacerbations as well. So as I look at the treatment journey, we see multiple intervention points over the course of the year, both early in their treatment cycle, but also late in a patient's treatment cycle where ensifentrine can be inserted.

Speaker 9

Great. That's very helpful. Thank you.

Operator

The next question comes from Joon Lee from Truist Securities. Please go ahead.

Speaker 2

Hi, this is Jeremy on for Joon. Thanks for taking our questions. Two quick ones for me. What do you see as the greatest risk to the probability of ensifentrine? And what do you expect SG and A ramp as you prepare for commercial launch?

Speaker 2

Thanks.

Speaker 6

Great. Thanks for the question. When it comes to risk and submission, I think the regulatory processes inherently has its underlying risks that are quite broad and consistent across any new chemical entity. We feel we've handled that very comprehensively in this submission, all the way from how we view and have our data package in CMC, non clinical, the clinical data and of course the overall safety. So we spent an enormous amount of time to make sure that we were looking at that broadly, comprehensively.

Speaker 6

And I think we're as confident as we can be that we've addressed all of those areas. Of course, during the regulatory process and feedback from the FDA, Of course, we'll be highly responsive to items that may need to be addressed, if any. And so we will handle that as this team has been through the process numerous times previously. So early days in the submission, so much more to come. But I think for where we are right now, I think we're in as good a place as we can be.

Speaker 6

With that, I'll turn it over to Mark.

Operator

We'll take the next question from Tom Schroeder from BTIG.

Speaker 10

This is really for Chris. On approval, Chris, what are the steps to get a drug through the Medicare Part D pathway? How long does it take? And is it exactly the same for Medicare Advantage or is there another step? And then a temporary J code, is that your price or is that kind of a agreed upon price for a nebulized drug?

Speaker 10

Thanks.

Speaker 4

Yes. Look, I'll start with kind of the process on the Medicare Part B pathway. So if we think about the Medicare Part B pathway, that pathway is a medical benefit for these patients. So at launch, as you discussed, we get we launch with a temporary J code. In our research and work with our consultants within CMS, we believe that ensifentrine falls under existing coverage policies or would fall under existing coverage policies for nebulized products for COPD delivered through nebulizer.

Speaker 4

So during that time that you're working under a non specific J code, you're also working to make sure that the coverage policies are updating to ensure ensifentrine is in there. We would apply for a product specific J code as quickly as possible. That product specific J code now can be submitted quarterly. So depending on the approval date, we could have between a 3 6 month lag between when we get a product specific J code and using that non specific J code. The other important thing here is that when we think about Medicare Advantage, Medicare Advantage has to follow the Medicare Part B halfway.

Speaker 4

And so they have to provide coverage for these drugs under the Medicare Advantage plans. However, Medicare Advantage can put use criteria in place unlike Medicare Part B, traditional Medicare Part B. And what I mean by use criteria is they could have simple step edits or prior authorizations that are needed before a patient could use a product. In our early discussions with the major Medicare Advantage plans, they see highly differentiated data with ensifentrine because they control both the pharmacy and medical benefits side of the business, they're very interested in some of the data that Kathy talked about that's being presented at ERS like healthcare utilization, the exacerbation data and that makes ensifentrine potentially attractive to them from a payer standpoint. So that in most conversations that we've had, really a worst case scenario is that you'd have to step through a generic LAMA or LABA before going to ensifentrine.

Speaker 4

And if we think about the patient we're trying to target with ensifentrine, which is a patient that's symptomatic, that's on therapy that needs additional help. That's a very low hurdle for many of these providers in that setting. As far as the non specific J code, the reimbursement is tied back to WACC pricing. So it's more of a WACC pricing reimbursement related to ensifentrine versus a set price there.

Speaker 5

So the

Speaker 4

other process during the non specific J code is a manual adjudication, which takes a couple more days than when you have your product specific J code.

Speaker 10

Okay, great. Thanks for all the color.

Operator

The next question comes from Bubalan Vayachan from H. C. Wainwright. Please go ahead.

Speaker 11

Hi, this is Bubbalan. Thanks for taking my questions. So assuming the FDA accepts your NDA and ensifentrine gets approved next year, So what are your preliminary thoughts about ensifentrine subgroup usage during the early periods of launch, given ENHANZE studies are primarily conducted in COLB patients with moderate to severe symptoms?

Speaker 6

Chris, do you want to just talk about where we see the uptake?

Speaker 4

Yes. Lou, thanks for the question. If we look at our market research, what we see is ensifentrine being added to patients that remain symptomatic on current therapies. And I'll bucket this into 2 groups of patients. 1 are the groups of patients that are on a single LAMA or a LABA or a LABA ICS.

Speaker 4

And based on the ENHANZE data, you would say that the next logical choice for a physician to choose is ensifentrine. Our data is outstanding in those patients. It provides a new mechanism of action for the physician to layer on to these patient therapies. And we see from a market research significant uptake within that patient population. The second group of patients are patients that are on potentially dual or triple therapy that remain symptomatic.

Speaker 4

And we know there's at least 40% to 50% of these patients that are just having tremendous symptom burden. And when we think about how the physicians treating those patients today, when they come into an office, they're getting oral steroids, oral antibiotics, Dalures and potentially referred for surgery. And so the physicians options are very limited. And given the benefit to risk profile of ensifentrine, we see physicians also adding ensifentrine to those patients as well. If we think about the potential for what's the 1st patient most physicians will prescribe ensifentrine in, it's more than likely the latter patient because that patient is in the most immediate need.

Speaker 4

But as we see in our market research and our conversations with HCPs, their use of ensifentrine moves earlier and earlier into the treatment paradigm because they see the potential that ensifentrine could provide this non steroidal anti inflammatory effect that they've been really looking for within the COPD classes over the course of the last decade or so.

Speaker 11

Thanks so much.

Operator

Gentlemen, so far there are no more questions from the phone.

Speaker 6

Great. So thank you everyone for your questions today. And thank you to the patients and healthcare professionals that participated in the HANDS program, enabling us to submit a new drug application to the FDA for nebulized ensifentrine for the maintenance treatment of COPD. We are very excited about the potential of ensifentrine and look forward to providing further updates. Finally, I'd like to thank our shareholders for their continued support and the dedicated and talented team at Verona for their commitment.

Speaker 6

Operator, that concludes today's call.

Operator

Ladies and gentlemen, the conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Goodbye.

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Key Takeaways

  • NDA Submission Progress: Verona submitted a New Drug Application to the FDA for nebulized ensifentrine as a maintenance treatment for COPD, leveraging Phase 3 ENHANCE program data and safety data from ~3,000 subjects, with FDA feedback and a PDUFA timeline expected in Q3.
  • Positive Phase 3 ENHANCE Results: Ensifentrine met primary endpoints in ENHANCE 1 and 2 by delivering statistically significant improvements in lung function and achieved key secondary endpoints, including reductions in exacerbation rate, exacerbation risk, symptom burden and use of rescue medication.
  • Pre-Commercial Preparations Underway: The company is advancing market access strategies (including Medicare Part B/Advantage coverage), deploying IT infrastructure such as a real-time data warehouse, and building its commercial organization to support a potential U.S. launch in H2 2024.
  • Strong Financial Position: As of June 30, 2023, cash and equivalents totaled $270.7 million, net loss narrowed to $8.8 million from $17.8 million a year earlier, and the company projects its current funding runway to extend at least through end 2025.
  • Global Partnership Expansion: Development partner Nuance Pharma initiated a Phase 3 trial in Greater China under an exclusive agreement to develop and commercialize nebulized ensifentrine, addressing the growing regional COPD market.
A.I. generated. May contain errors.
Earnings Conference Call
Verona Pharma Q2 2023
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