Verona Pharma Q2 2024 Earnings Call Transcript

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August 8, 2024

There are 9 speakers on the call.

Operator

Welcome to Veronis Pharma's 2nd Quarter 20 24 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 3 months ended June 30, 2024. A copy can be found in the Investor Relations tab on the corporate website, www.varunapharma.com. Before we begin, I'd like to remind you that today's call statements about the company's future expectations, plans and prospects are forward looking statements.

Operator

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 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 I'd now like to turn the call 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 Rickardt, our Chief Medical Officer Chris Martin, our Chief Commercial Officer and Doctor. Tara Rowe, our Chief Development Officer. The 2nd quarter was an exceptional for Verona Pharma, marked by the U.

Speaker 1

S. FDA approval of Otwover for the treatment for the maintenance treatment of COPD. Otwover is the 1st inhaled COPD treatment to provide both bronchodilation and non steroidal anti inflammatory effects and we believe this approval can redefine the treatment paradigm for COPD in the U. S. Today, we announced O2Bare is now available through our exclusive network of specialty pharmacies and patient shipments have begun.

Speaker 1

We are very excited to share this achievement with you and are confident that our extensive preparation position us for the successful commercialization of O2Bare in the U. S. As a reminder, O2VARE's label supports broad use across all COPD patients without restriction to background medication, COPD etiology including chronic bronchitis or emphysema or blood eosinophobe level. The label also describes O2 Bear's mechanism of action, which differentiates it from all other approved COPD treatment. Based on O2Bare's novel mechanism of action and compelling benefit to risk profile, our market research shows HCPs have significant interest in prescribing O2VARE broadly across all symptomatic COPD patient types.

Speaker 1

Initially, our launch efforts are focused on promoting O2VARE to the most active HCP that treat COPD patients, which our market analysis shows is approximately 14,500 providers. These providers include pulmonologists, primary care physicians, nurse practitioners and physician assistants. Our sales and field reimbursement teams are fully hired and have been in the field since late July. During that time, they have interacted with over 2,000 HCPs with over 85% being top prescribers. Although it has just been a few days, over 100 HCPs have prescribed O2VARE.

Speaker 1

In addition to the U. S. Launch of O2VARE, we plan to initiate 2 new Phase 2 programs in the Q3. First, we are developing a fixed dose combination formulation with ensifentrine and glycopyrrolate, Allama, for the maintenance treatment of COPD delivered via a standard jet nebulizer. In July, we submitted an IND to the FDA and subject to clearance, we plan to start a Phase 2 dose ranging trial in the Q3.

Speaker 1

The trial is a randomized double blind placebo controlled, 1 week crossover trial to assess lung function, safety and the pharmacokinetic profile of glycopyrrolate in the novel formulation delivered via nebulizer in approximately 40 patients with COPD. Following identification of an appropriate glycopyrrolate dose range, a Phase 2 trial assessing the fixed dose combination of ensifentrine and glycopyrrolase compared to placebo and individual components will be conducted. Additionally, we plan to initiate a Phase 2 trial to assess nebulized ensifentrine in patients with non specific fibrosis bronchiectasis in the Q3. A randomized double blind placebo controlled parallel group trial will enroll a 180 patients with a recent history of pulmonary exacerbation. The trial will assess the effect of 3 milligrams of ensifentrine twice daily on the rate and risk of pulmonary exacerbation in addition to symptoms and quality of life.

Speaker 1

To ensure robust powering, the trial is planned as event driven, where all patients enrolled will be treated for at least 24 weeks and until the required number of these exacerbation events are observed. Lastly, our balance sheet remains strong with over $400,000,000 of cash on hand and optionality for future draws under our Oaktree facility. I will now turn the call over to Mark to review our financial results for the Q2. Mark, please go ahead. As Dave mentioned, our balance sheet is strong with in excess of $400,000,000 in cash and equivalents at June 30, 2024.

Speaker 1

This includes $70,000,000 drawn under our debt facility and $100,000,000 drawn under the RIPSA at approval. With the cash currently on hand and potential future access to the remaining $425,000,000 under the Oaktree facilities, we expect to have sufficient cash runway beyond 2026, including the commercial launch of OTUVAIR in the U. S. And our 2 new Phase 2 clinical program. Total operating expenses for the Q2 of 2024 were higher than historical levels as a result of the recognition of one time expenses for milestone payments due to Ligand and performance based RSUs.

Speaker 1

Excluding these one time costs, our quarterly R and D and SG and A expenses would be approximately $37,000,000 for the quarter, in line with our previous guidance. Research and development costs were $19,400,000 for the quarter compared to a net reversal of costs of $2,500,000 reported for the Q2 of 2023. This increase was primarily due to accrual of the $6,300,000 approval milestone to Ligand, a $2,500,000 increase in share based compensation, largely driven by the recognition of expense related to performance based RSUs, $1,700,000 of expense related to pre approval inventory production and an $8,800,000 increase in clinical trial costs from Q2 2023 to Q2 2024. Selling, general and administrative expenses were $49,000,000 for the quarter ended June 30, 2024 compared to $12,400,000 reported for the same period in 2023. This increase was driven primarily by an accrual of the $15,000,000 first sale milestone due to Ligand and increases of $7,400,000 from marketing and other commercial launch related activities, dollars 4,300,000 in EPO related costs as we built out our commercial organization, as well as an increase in share based compensation of approximately $8,000,000 largely driven by performance based RSU expense.

Speaker 1

I'll now turn the call back over to the operator for the Q and A.

Operator

We will now begin the question and answer The first question comes from Andrew Tsai with Jefferies. Please go ahead.

Speaker 2

Hey, thanks. Good morning and congratulations on the execution and launch. Thanks for taking my questions. So, first one is as we tweak around our models, what kind of payer rejection and patient abandonment rate, should we be modeling for antitension? And can you remind us if there will be free drug?

Speaker 1

Thanks. Good morning, Andrew. Thanks for the questions. With regard to free drug, we do have programs in place to support patients based on economic need, for example. And also we do have what we would call a bridging program for those patients that may have delayed benefit and allowing them to start undrugged in the short term while those benefits become in effect.

Speaker 1

So there is not a sampling program per se, but there is an ability to provide O2VARE to those patients that need it and to support them through any short term benefit verification. With that, I guess I'll turn it over to Chris on payer dynamics at least from a modeling standpoint. And as you know, it's incredibly early in the launch to understand that based on current prescriptions that have been written.

Speaker 3

Andrew, this is Chris. Thank you for the question. When we think about the overall payer abandonment and rejection, as Dave mentioned, we're very early in the launch here. But I'm going to go back to using older analog within the nebulizer space. And what you see within those spaces, keep in mind that O2BARE will be primarily reimbursed under a medical benefit.

Speaker 3

Within our historical analogs that we've looked at under a medical benefit side, which can either be under traditional Med B or through Medicare Advantage, Those abandonments are lower than what you see in Medicare Part D and commercial, but they do exist early on. There is just a natural patient dynamic that some patients regardless of co pay even if it's low and 0 may walk away from a prescription. But we believe that everything that we have from a patient assistance program through Verona Pathway Plus provides access to the medication in a variety of different ways. Additionally, if you think about rejection rates and how rejection works, I'll go back to the same statement there around medical benefit versus pharmacy benefit. We believe the majority of our prescriptions will run through the medical benefit side of the business.

Speaker 3

And within that medical benefit side of the business, we have data and on what those rejection rates look like. We also know that during this time we'll be using a non specific J code. That non specific J code exists. The local coverage determination exists. And we believe that the product is able to flow through that channel very freely.

Speaker 3

Additionally, as we talked about on the approval call, we have submitted our J code application in LCD. We did that on June 27. It is currently under review at CMS and we would expect a product specific J code at the beginning of 2025 to be in effect. So I hope that helps with your questions and again appreciate it.

Speaker 2

Yes. And secondly, consensus for Q3 is 1,500,000 dollars If we assumed patients who get reimbursed this quarter maybe get treated for an average of half a month, then by my calculation, the number of patients needed is 1400 or more. Would you feel comfortable meeting or exceeding that patient number in Q3 or exiting out of September 30? Thanks.

Speaker 1

Yes. Maybe I'll take that one, Andrew. Don't think we're prepared to talk about patient numbers. I will note, however, that in doing your math, you do have to consider there will be some inventory making its way into the channel, not actually getting the patients quite yet that will impact revenue. Okay, great.

Speaker 1

Thank you. Thanks, Andrew.

Operator

The next question comes from Yasmeen Rahimi with Piper Sandler. Please go ahead. Hi, this is Emma on for Yas. Thanks for taking our questions. Firstly, can you provide any color on patients starting forms and how that ties into how you're thinking about patient uptake?

Operator

And with that, what type of matrix do you plan to share at next earnings in November to help us track the launch progress and guide future expectations?

Speaker 1

Yes. Good morning, Emma. Thanks for the question. I think I'll start with the latter part. Clearly, as you've seen in our history, we're as transparent as we can be as we progress.

Speaker 1

We expect our metrics to continually evolve as we get further into the launch and we're still assessing which those are for the next quarterly call. As you can see just in a few days, the uptake is quite strong, with Oduvera with over 100 HCTs already writing for it and we've barely just begun. And so we will, of course, again, be informative, be transparent and give you metrics to understand the launch dynamic and we expect again that to change over time.

Speaker 4

Thank you.

Operator

Our next question comes from Tom Shrader with BTIG. Please go ahead.

Speaker 1

Good morning and

Speaker 5

congratulations. I have what's probably an annoying question, but you've written 100 prescriptions.

Speaker 4

Do you have any read on who they're for? Are they all patients unhappy on triple or are you already seeing people try the drug earlier?

Speaker 1

Again, I'll ask Chris comment, but keep in mind that we're just a few days into this. And so, all the analyses that you'd expect on a maturing launch haven't quite started yet. But with that, I'll have Chris comment.

Speaker 3

Yes. Tom, thanks for the question. And just for clarity, we have over 100 writers of prescribers of Otvare. What we know about those prescribers is they come from our target list. So if we think back to our other calls, these are the highest prescribing physicians, both that I would call segment 1 and segment 2 physicians that our reps are calling on.

Speaker 3

We're also hearing very clearly from our early field conversations is the unmet need that we've expressed throughout the last year, year and a half is very high within these offices. The doctors are reporting back to our reps. They have significant numbers of patients who continually have persistent symptoms. And they look at O2VARE as a new tool in their toolkit for treating these patients and it allows them to use it in a variety of different ways. As Dave said, it's very early to kind of give an analysis of what the patient profile looks like.

Speaker 3

Of those of the ways that these doctors have prescribed it. However, what we do know is that they are telling us every single time our reps go into the office that these patients continue to have persistent symptoms and that will drive utilization as we move through the Q3 and into the Q4 as

Speaker 5

well. Okay. And then a quick question on the fixed dose. To try a fixed dose in a handheld device, do you have to get the monotherapy approved in a handheld device first? Or could you in fact try that combination in a different device?

Speaker 6

Yes. I think the way that the programs are typically designed for a fixed dose combination, you actually one way or another work through the entire development of a monotherapy in that formulation, whether it's in a handheld device or a nebulizer.

Speaker 5

Got it. Okay. Thank you very much.

Speaker 1

Yes. Thanks, Dan.

Operator

The next question comes from June Lee with Truist. Please go ahead.

Speaker 4

Hi, thank you. This is Jin for June and thanks for taking my questions and also congratulate on your progress. So I have other questions regarding about your can you give more color on the drug can treat compared with treating the non CF branch tested, especially compared with your competitors like Enzemet, Parenzyl, HepTib? And then also could you give some provide some unique of this mechanism for this drug can be offered better a competitive edge over other drugs? Thanks.

Speaker 6

Yes. So we think ensifentrine has the potential to make a difference in patients with non CF bronchiectasis because it targets neutrophilic inflammation, including both neutrophils and macrophage based inflammatory processes. It also works through increasing filiary function and cough and sputum. Sputum in particular is one of the most problematic issues associated with brachiexis and it's that dysfunctional mucociliary processes in these patients that cause continual infections and further pulmonary exacerbation. So our trial, of course, is designed to assess the effect of ensifentrine on pulmonary exacerbations.

Speaker 6

We saw very strong data against pulmonary exacerbations and reducing rates and risk of exacerbations in the COPD population. We certainly think that based on the mechanism, this will extrapolate to a bronchiectasis population. Regarding, how ensifentrine might impact patients with brachiaxis compared to other competitor drugs that are out there, we really think that ensifentrine has the opportunity to actually make these patients feel better rather than just reducing exacerbation rates. And so that's the goal and those are some of the endpoints that we'll be assessing in this first trial.

Speaker 4

Great. Thanks. But do you have any preclinical data to support what you have for this indication?

Speaker 6

Well, I'm not aware of any models specifically relating to bronchiectasis, but certainly we have a wealth of data with similar pathophysiological processes in patients with COPD, including reduction in cough and sputum that was important in the Phase 3 program.

Speaker 4

Okay. Thank you so much. Thanks for taking my questions.

Operator

The next question comes from Ram Selvajar with H. C. Wainwright. Please go ahead.

Speaker 1

Thanks so

Speaker 7

much for taking my questions. On the commercial front, this is probably for Chris. I wanted to see if you could provide us with some more granularity on what you are currently engaged in doing on the social media front and what you plan to do in the course of the coming months with respect to marketing outreach? And also when you anticipate involving direct to consumer advertising as part of the overall commercial process for OTUVAIR? And if so, what forms that might potentially take and what you might think about doing on, for example, the speaker program side, with physicians as well as what you're seeing in terms of patient advocacy involvement in support of OTUVAIR within the COPD community?

Speaker 1

Thanks, Ram. Go ahead, Chris.

Speaker 3

Yes. Thanks, Ram. I'm going to take these kind of step wise on just our promotion through a marketing standpoint. One of the things that the team did a very good job of is and we talked about this throughout the commercial launch preparation was setting up our infrastructure specifically from a data side to be very flexible for marketing programs and digital programs to HCTs and patients. And we've seen that in execution already.

Speaker 3

I'll give you a good example here. Our marketing team through Digital Avenues have reached out to our over 50,000 physicians multiple times through email, banner ads, and other types of channels to engage with physicians. And what we've seen over the course since approval is we have over almost 7,000 physicians that are highly engaged with our marketing content over the last month. And what I mean by highly engaged means they're clicking on emails, they're going to our website, they're interacting with the communications the marketing team is doing. Additionally, what that's allowing our reps to do is give them high profile leads so that they can go into offices with physicians that are ready to prescribe O2 very, very quickly.

Speaker 3

So it's been a really nice process and system in place from a marketing perspective. I think as we think about the future from the HCP side, we will continue to support our field messaging with what I would classify as omnichannel promotion. Omni channel promotion is not only digital, but as you talked about some speaker programs and other things. We today, if you go on the O2Bear HCP website, it is fully updated and launched as well as the o2bear.com website for patients is fully launched as well. So those are avenues to continue to reach physicians outside of the traditional rep standpoint.

Speaker 3

From a speaker program standpoint, we will have speaker programs. Our reps have the ability to have speaker programs. We have trained a group of speakers already, and the rest have already started scheduling future speaker programs with physicians in their location. So that is part of that omni channel plan. When I think about patients, patients have always been part of our plan.

Speaker 3

It's the reason why we have a patient website today. It's also a reason why we collect patient data through our interactions on social and other channels. We also think that in the future, there's very good avenues of point of care patient marketing, where we're able to interact with the patient in physician offices where the doctors are already prescribing. So the team has put together a very robust both physician and patient marketing plan to ensure that we support our field force as they're out there interacting with these physicians.

Speaker 7

Great. And then just very quickly on the non CF bronchiectasis, I was wondering if you could give us some additional color on the timeline to reach full enrollment and potentially the timeline to data or if you don't have that greater read on that yet?

Speaker 6

Sure. This population is not a real easy one to project out, but we do anticipate this could take around 2 years to get to the end of the study. Remember, the population is essentially just somewhat larger than a rare disease. So the patients are a bit harder to find.

Speaker 1

Thank you.

Operator

Our next question comes from Edward Thomason with Kempen. Please go ahead.

Speaker 8

Good afternoon, good morning and thank you for taking my question. I

Operator

had a quick

Speaker 8

question just about the pricing. There was in recent weeks, we've seen news how the pricing differences differs from the ICR cost effective pricing on an annual basis. Does that have any implications on reimbursement? And how does that play into your strategy for the OTUVAIR launch?

Speaker 3

Edward, thank you for the question and appreciate that. Yes, I think we believe that we have priced O2VARE as the appropriate value to both the healthcare system and the patient. If we look, we've done significant pharmacoeconomic analysis on O2VARE and the benefits it provides the system. And we've had ranges of prices per month upwards of $5,000 a month that you could have charged for O2Hare. As you know, our WACC price is 22,900 and $50 We feel like that represents an appropriate value for what O2VARE brings to the overall healthcare system.

Speaker 3

When it comes to reimbursement, we have not we don't believe that and we haven't seen anything from an indication standpoint from any of our interactions with payers that that price is dictating how it will be covered. Keep in mind, O2VARE is reimbursed under a medical benefit and that is different than how traditional pharmacy benefit drugs work. So again, from all the work the team has done across the pricing and payer community, we believe that price appropriately reflects the value, but also appropriately allows the patient to get access to the medication long term as well.

Speaker 8

Okay. Thank you. And then I just had a follow-up question actually on the data that we might be expecting at ERS and CHEST later in the year. Can you just give us a flavor on what we might expect from those releases, whether that'll be subgroup analysis or I don't know, patient populations or background therapies, just so we can wet the appetite ahead of that?

Speaker 6

Sure. And all of those things actually. At the ERS, you'll see some analyses specifically on the European population that was enrolled in the ENHANCE program, additional analyses on the effect of ensifentrine on cough and sputum from ENHANCE, pooled patient reported outcome assessments, and a look at exacerbation effects by COPD phenotypes, so chronic bronchitis or not chronic bronchitis. At chest, you'll see some additional analyses on COPD severity, on smoking status, again, on data from COPD phenotypes, chronic bronchitis or emphysema, an analysis of pooled lung function and also a look at healthcare resource utilization over 48 weeks.

Speaker 8

Okay. That's very clear. Thanks so much.

Operator

This concludes our question and answer session. I would like to turn the conference back over to David Zaccardelli for any closing remarks.

Speaker 1

Thank you, everyone for joining today's call. As you can see, we are very excited about O2VARE's launch in the U. S. I think we're off to an incredible start just a few days into it and we look very much to updating you in the future. So I look forward to seeing you all soon at various meetings and investor conferences.

Speaker 1

Thanks very much.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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