Verona Pharma Q1 2025 Earnings Report

Verona Pharma EPS Results

• Actual EPS: $0.27
• Consensus EPS: -$0.22
• Beat/Miss: Beat by +$0.49
• One Year Ago EPS: N/A

Verona Pharma Revenue Results

• Actual Revenue: $98.65 million
• Expected Revenue: $41.47 million
• Beat/Miss: Beat by +$57.18 million
• YoY Revenue Growth: N/A

Verona Pharma Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 9:00AM ET

Verona Pharma (NASDAQ:VRNA), a clinical stage biopharmaceutical company, focuses on development and commercialization of therapies for the treatment of respiratory diseases with unmet medical needs. The company's product candidate is ensifentrine, an inhaled and dual inhibitor of the phosphodiesterase (PDE) 3 and PDE4 enzymes that acts as both a bronchodilator and an anti-inflammatory agent in a single compound, which is in Phase 3 clinical trials for the treatment of chronic obstructive pulmonary disease, asthma, and cystic fibrosis. It is developing ensifentrine in three formulations, including nebulizer, dry powder inhaler, and pressurized metered-dose inhaler. The company was incorporated in 2005 and is headquartered in London, the United Kingdom.

Verona Pharma Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to Verona Pharma's First Quarter twenty twenty five Financial Results and Operating Highlights Conference Call. At this time, all participants are in a listen only mode. I'd now like to turn the call over to Victoria Stewart, Senior Director, Investor Relations and Communications. Please go ahead.

[Victoria Stewart, Senior Director - Investor Relations & Communications at Verona Pharma]

Thank you. Earlier this morning, Corona Pharma issued a press release announcing its financial results for the three months ended 03/31/2025. A copy can be found in the Investor Relations tab on the corporate website, ww.voronapharma.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.

[Victoria Stewart, Senior Director - Investor Relations & Communications at Verona Pharma]

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 recorded and will remain available for ninety days. I'd now like to turn the call over to Doctor.

[Victoria Stewart, Senior Director - Investor Relations & Communications at Verona Pharma]

David Zaccardelli, Chief Executive Officer.

[David Zaccardelli, President & CEO at Verona Pharma]

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 Chris Martin, our Chief Commercial Officer and Doctor. Tara Rowe, our Chief Development Officer. The first quarter of twenty twenty five was phenomenal for Verona Pharma as we continue to drive the highly successful U.

[David Zaccardelli, President & CEO at Verona Pharma]

S. Launch of O2Ver for the maintenance treatment of COPD as well as advance our clinical development programs and global regulatory strategy. I am incredibly pleased to report for the first time, Varonis quarterly revenue exceeded our quarterly operating expenses excluding noncash charges. First, let's review the ongoing launch of O2VARE, which continues to accelerate quarter over quarter. The remarkable uptake of O2VARE, which is the first inhaled product with a novel mechanism of action to treat COPD in more than twenty years, underscores the unmet need of patients with COPD.

[David Zaccardelli, President & CEO at Verona Pharma]

Its rapid adoption is grounded in O2VARE's broad indication for the maintenance treatment of COPD and its compelling benefit to risk profile. In the first quarter of twenty twenty five, which is only the second full quarter of commercial availability, we almost doubled sales of O2VARE compared to the fourth quarter of twenty twenty four, recording $71,300,000 in net product sales with continued month over month growth. The launch is demonstrating success across every measure. Prescriptions increased to approximately 25,000 filled during the first quarter. New patient starts grew over twenty five percent compared to Q4 twenty twenty four, and refills represented 60% of all dispenses during the first quarter.

[David Zaccardelli, President & CEO at Verona Pharma]

Total prescribers grew about 50% relative to q four to approximately 5,300 of which 60% are Verona's tier one HCPs. Prescriber depth is also increasing with over four twenty five HCPs prescribing O2VARE to 20 patients or more. This dramatic early adoption reinforces our belief that O2VARE is the most successful COPD launch and is tracking to become what we consider a blockbuster product. HCPs continue to prescribe O2VARE to a wide spectrum of their COPD patients, including patients on background single, dual, and approximately fifty percent on triple therapy. His broad application across diverse patient types highlights our confidence that O2VAIR's novel bronchodilator and nonsteroidal anti inflammatory activity has the potential to redefine the standard of care in COPD treatment.

[David Zaccardelli, President & CEO at Verona Pharma]

We continue to receive meaningful and extremely encouraging feedback from patients and HCPs regarding the impact of O2VAR, which is reflected in our growing refill and persistency data. With our launch momentum, we are planning to expand our field sales team to around 30 representatives to about 120 total in the third quarter. We believe this expanded field presence will enable us to further support accelerating the launch. As part of our ongoing strategic work to solidify the long term success of O2VARE, a new Orange Book listed patent has been granted with an expiration date in 02/1944, giving us a total of four Orange Book listed patents. In parallel with our successful launch of O2VARE, we continue to advance our pipeline with two Phase II clinical programs.

[David Zaccardelli, President & CEO at Verona Pharma]

We plan to initiate a dose ranging Phase IIb trial in the second half of this year, evaluating a fixed dose combination of ensifentrine with glycopyrrolate compared to the individual components. In addition, enrollment is ongoing in our Phase II clinical trial of nebulized ensifentrine in non CF bronchiectasis. The study will assess the effect of ensifentrine three milligrams twice daily on the rate and risk of pulmonary exacerbations, symptoms and quality of life. Turning to our global strategy, in February, Nuance Pharma, our development partner for ensifentrine in Greater China, announced O2VARE was approved in Macau for the maintenance treatment of COPD in adults. This is the first regulatory approval of O2VARE outside The U.

[David Zaccardelli, President & CEO at Verona Pharma]

S. In addition, Nuance Pharma is expected to report results from its pivotal Phase three trial evaluating antifentrine for the maintenance treatment of COPD in China in the second quarter. Finally, we continue to advance regulatory activities for potential marketing authorization application submissions for O2VARE for the maintenance treatment of COPD in the European Union and in The UK. We look forward to keeping you updated on this progress. I will now turn the call over to Mark to review our financial results for the quarter.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Good morning. Our full financial results can be found in the press release issued this morning with additional details in the Form 10 Q also filed today. I'll walk through the financial results for the first quarter of twenty twenty five and review our recent strategic financing. As Dave described, in the first quarter, we recorded $71,300,000 in O2VARE net sales. With the achievement of a $5,000,000 clinical milestone from Nuance Pharma, total net revenue for the first quarter was $76,300,000 And in line with prior quarters, our specialty pharmacy partners continue to maintain inventory at their contracted levels of two to three weeks.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Cost of O2VARE sales was $3,400,000 for the quarter ended 03/31/2025, in line with the level of net sales of O2VAR. Research and development expenses were $14,100,000 for the first quarter, reflecting increases in share based compensation and clinical trial and development costs related to our two Phase two studies. Selling, general and administrative expenses were $69,100,000 in the first quarter, reflecting increases in share based compensation and the hiring of our field based sales team, marketing and other commercialization expenses related to the launch of O2Vera. In total, our operating expenses for the first quarter were $86,600,000 resulting in an operating loss of $10,300,000 and a net loss after tax of $16,300,000 for the period. Excluding the $36,800,000 in share based compensation recorded in Q1, on an adjusted basis, we had an adjusted net income for the quarter of $20,500,000 You can find the GAAP to non GAAP reconciliation for adjusted net income on the last page of today's press release.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Finally, our balance sheet remains strong with $401,400,000 in cash and equivalents as of 03/31/2025, compared to $399,800,000 as of 12/31/2024. In addition, in March of this year, we amended our strategic financing arrangement with Oaktree and OMERS, repurchasing the previously existing $100,000,000 obligation under the RIPSA and increasing the existing debt facility to $450,000,000 on more favorable terms. With this amendment, we have increased our financial flexibility, reduced the cost of capital and simplified the balance sheet, leaving us in a strong financial position. As a result of this amendment, at 03/31/2025, the company had $250,000,000 outstanding under the Oaktree and OMERS facility and $200,000,000 available in potential future draws. With our cash and equivalents and up to $200,000,000 of additional potential draws under the debt facility, we feel very confident in our ability to fund the ongoing U.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

S. Launch of O2VARE as well as our development programs. Given the success of the O2VARE launch, it is our intention to use future draws on the debt facility primarily to support the in license or acquisition of products as needed. With that, I'll now turn the call back over to the operator for the Q and A.

[Operator]

Thank you. We'll take our first question from Andrew Tsai at Jefferies.

[Andrew Tsai, SVP at Jefferies Financial Group]

Hey, good morning. Congrats on another great quarter. Thanks for taking my questions. I have two this morning. So first is, as we exit Q1 and enter Q2,

[Andrew Tsai, SVP at Jefferies Financial Group]

can you talk about the trends that you're seeing? Can you share any color or characterize how healthy these metrics are looking in April so far? And how might they look in May and June? Thanks.

[David Zaccardelli, President & CEO at Verona Pharma]

Good morning, Andrew.

[David Zaccardelli, President & CEO at Verona Pharma]

Thanks for for the question. You know, I think that first, I wanna just sort of level set that make sure that we are, you know, updating on q one and, and not providing, you know, projections of q two and beyond. With that said, as we've indicated previously, the launch is going extremely well as we talked about this morning. The adoption is very high. We are expanding on every metric including overall prescriptions, new prescribers, new patients, refills and very encouraged by persistency.

[David Zaccardelli, President & CEO at Verona Pharma]

So their every expectation that the launch, as a reminder, so early and at the same time has such great traction, we believe that, of course, that continues as it should.

[Andrew Tsai, SVP at Jefferies Financial Group]

Right. And then as it relates to my second part, which is a bigger picture, Q1, my understanding saw some seasonality of the typical industry phenomenon, which based on my understanding affected the pace of uptake, not necessarily gross to net. And so that should not play out, going forward this year. And I think refills will continue on as well. So I guess the second part of my question is do you think sales could inflect even faster in Q2, Q3, Q4?

[Andrew Tsai, SVP at Jefferies Financial Group]

Just trying to envision or gauge how you're envisioning the sales curve to look, whether it's more parabolic or linear from here. Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Yeah. I think that, again, early on, but extremely encouraged. As you know how the launch curve will start to take shape chronically as a refill business as more and more patients come on and persistency occurs over the years. So we're very encouraged by the new patient adds, which builds the foundation. That will be a continued focus of course for us.

[David Zaccardelli, President & CEO at Verona Pharma]

When you have the expanding prescriber base as we talked about over 5,300 prescribers, that's a tremendous base of additional prescriptions, additional new patients. And as I mentioned, we're very encouraged by the growth in the refill rates and the persistency overall. Shape of the curve remains, I would say that we are extremely encouraged and confident on the growth trajectory. And many ways, as you know, there are millions of patients who remain symptomatic on current standard of care. And so while the growth is phenomenal, there is a lot to go, and we barely just started.

[Andrew Tsai, SVP at Jefferies Financial Group]

Great. Thank you again, and congrats.

[David Zaccardelli, President & CEO at Verona Pharma]

Thanks, Adam.

[Operator]

We'll go next to Yasmeen Rahimi at Piper Sandler.

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

Good morning, team, and congrats for an outstanding quarter. I guess, kind of, like, going along with Andrew's questions that he started off as within that theme, I think, I mean, it's pretty remarkable. You've doubled from four q to one q. There's a big TAM. This is a really safe and effective drug.

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

I guess, to be like, why couldn't you continue seeing such a rapid growth? Like, guess what I'm trying to figure

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

out is what is the

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

difference between two q and one q? And now we know one q had the seasonality aspect. Like, I guess what I'm trying to figure out is before you put up this number, the consensus, I think the run rate for this year was around 300 to three fifty. That was the range. But now with this 71,000,000 on hand, you would basically project this to be substantially higher.

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

So if you could just kinda help us understand sort of with this really remarkable one q, what the run rate could look like, that that that would be really helpful. And then if you could comment on what the gross to net is now and how it will change going into the year, that would be helpful. And I'll jump back into the queue.

[David Zaccardelli, President & CEO at Verona Pharma]

Great. Thanks, Jess. Good morning. So maybe we'll start in reverse on gross to net, and I know Mark can provide some guidance on that.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Yep. Yep. Good morning, Yas. So one of the things that we've talked about over time is that we saw the opportunity for the gross to net to improve over time, and it has. It's continued to decrease in in q one.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

I'd I'd characterize it as well below 20% as we as we exited the quarter.

[David Zaccardelli, President & CEO at Verona Pharma]

And so I think in addition to the growth that we expect to 2025, I think some of the concepts that you mentioned are correct. Clearly, we saw as the whole industry sees a level of blunting that happens early on in q one, which as you can see, you know, prescriptions have been written through that. Al albeit we we noticed it as well as I'm sure everyone did as deductibles are reset, co pays are reset, things like that. But with that said, we see tremendous growth as we've seen already. I think we continue to focus on the important aspects as I mentioned already that is growing the prescriber base, growing new prescriptions, being attentive of course to the refill dynamics that occur.

[David Zaccardelli, President & CEO at Verona Pharma]

And as you look at it, it becomes very much a stacking phenomenon as the weeks and months and quarters unfold. And all of that, of course, is continuing to build on the base. We have mentioned while growing substantially over just two full quarters, still plenty of room to go, in having about a huge opportunity in in new patients. So, yeah, I I think the the growth is substantial. We expect it to be continue to be substantial, and and we're just such early on in the process.

[David Zaccardelli, President & CEO at Verona Pharma]

There's plenty of room to go.

[Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies]

Thank you. Congrats again.

[David Zaccardelli, President & CEO at Verona Pharma]

Thanks.

[Operator]

Our next question comes from Olivia Breyer at Cantor Fitzgerald.

[Olivia Brayer, Analyst at Cantor Fitzgerald]

Hi, good morning. Congrats on the quarter and thank you guys for the questions. Maybe just following up on gross to net quickly, it's obviously trending much better than that 25% discount that you guys have previously talked about. So maybe just any thoughts on where you think that could ultimately shake out? And then on hitting operating cash flow positive this quarter, is that something you think you can maintain going forward?

[Olivia Brayer, Analyst at Cantor Fitzgerald]

And just any thoughts on the kind of earnings power that you could start to have, especially as we think about 2026 and beyond? Thank you, guys.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Sure. Sure. Good morning, Olivia. So first, on the gross to net, I think we've we've talked about this in the past that, while we started at launch, we said we we thought it could be in the 25% range where we thought it could it could actually work out to be much lower. And then in q three, we talked about it being below 25.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Now well below 20%. I think we're we're getting to a point of stabilizing. There may be a little bit of room for improvement yet, but but not a dramatic amount. As far as the cash flow breakeven, to be technical from an accounting and financial reporting perspective as I think my job is, we were not at cash flow breakeven from operations because of the accounts receivable build. We were however at a run rate of revenue that exceeds cash expenses.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

And yeah, I think as we continue to grow and execute on sales, I do think that we will be able to continue that pace going forward. And I think we've talked many times about the long term profitability of the business. I think that as sales continue to grow, the expenses will only grow so much over time. There's there's, you know, a relatively tight sales force and relatively, I I'd say, lean commercial spend against it as well.

[Olivia Brayer, Analyst at Cantor Fitzgerald]

Great. Thanks guys. Congrats on a great quarter.

[Mark Hahn, Chief Financial Officer at Verona Pharma]

Thanks. Thank you.

[Operator]

We'll go next to Tara Bancroft at TD Cowen.

[Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen]

Hi, good morning. Thanks for taking the questions and congrats on the fantastic quarter. So I was hoping if you could provide any more color on the refill rate for patients who initiated O2VARE treatment six or more months ago. Like what are the rate of refills per year also that you're expecting at steady state? Basically any color you could provide on how you expect this to evolve would be really helpful.

[Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen]

Thanks.

[David Zaccardelli, President & CEO at Verona Pharma]

Sure. Good morning, Tara. Yeah. Maybe, Chris, you can provide some color on what we're seeing in refill rates and persistency.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

Yeah. Thanks, Dave, and thanks, Tara. I you know, the the thing that, as Dave mentioned, we've been very encouraged by the way the persistency and refill rates have been progressing since launch. Keep in mind, as Dave talked about, we're adding new more new patients every single month. So the number of patients that could be eligible for five, six refills is smaller than the patients that we the ends of patients that we have today.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

But when we look historically at that right now, we are very encouraged at how those refill and persistency rates look. I think we talked about in a in a previous call that, you know, we were starting to see patients have a significant number of refills already in their their path on treatment. And we felt like there was a potential for an upside on the overall persistency that we saw with patients. Remember, in COPD, we see patients fill about six times a month or six times a year. Excuse me.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

And over time, we felt like there was a potential upside there based on the product and o two bears benefits that provide these patients, but also our distribution channel in the way that we provide a white glove service to these patients. I think early on, there's no reason to believe that this upside doesn't still exist. And, again, we're very encouraged by how we're seeing that refill rate kind of progress over time. I think we need a few more months so that we have more n and a full look back on the totality of a of a year. But, again, very encouraged by what we see early on in these patients.

[Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen]

Okay. Great. Yeah. Thank you so much. And just briefly, separately, just do you have the option or the interest to repurchase China rights and and any, kind of description of the the size of the China market would be really, really helpful too?

[Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen]

Thanks.

[David Zaccardelli, President & CEO at Verona Pharma]

Yeah. Thanks for the question. You know, I think that there is that opportunity, although it requires certain conditions to be met on other types of transactions that we're making. So I think that at at this time, that is not part of any plan or thinking. And we continue to have a very strong collaboration with Nuance Pharma as we talked about on the call this morning.

[Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen]

Okay. Thank you so much.

[David Zaccardelli, President & CEO at Verona Pharma]

Thanks.

[Operator]

We'll move next to Thiago Fowse at Wells Fargo.

[Tiago Fauth, Director - Equity Research Small/Mid Cap Biotechnology at Wells Fargo]

Great. Let me add my congrats and thanks for taking the questions. Just on the persistent question, when we do our channel checks, the discontinuation rate seems to be very low. So it's fairly anecdotal. But I'm curious if you have any insights from the field in terms of if there are discontinuations, what might be driving that?

[Tiago Fauth, Director - Equity Research Small/Mid Cap Biotechnology at Wells Fargo]

That doesn't feel like it's safety, tolerability or anything like that. Feels a little bit more random, at least when we do those channel checks. So any color there would be helpful. And my second question is more related to long term competition of biologics. Been getting a lot of inbounds on how that could potentially impact the opportunity here, especially if you have more upstream mechanisms of action?

[Tiago Fauth, Director - Equity Research Small/Mid Cap Biotechnology at Wells Fargo]

I'm curious how you guys are seeing the long term play here. Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Hi, good morning Thiago. Thanks for those questions. I'll just start with a bit of color on discontinuations. I think it's a little early to speak with clarity around discontinuations as you've mentioned in your calls with physicians. It can be sporadic and for different reasons.

[David Zaccardelli, President & CEO at Verona Pharma]

I I think also what constitutes a discontinuation is a bit unclear because as we've talked about, patients can be somewhat sporadic in timing on when they refill prescriptions. And so they may take longer to refill and yet it's not technically a discontinuation. It's more of how they're going to use O2VARE chronically. So I think, again, along with refills, it takes a bit more time to provide some clarity around true discontinuation. As we talked about in the past and as you alluded to just now, you know, tolerability is very favorable with o two there.

[David Zaccardelli, President & CEO at Verona Pharma]

That comes, of course, from the clinical trial data and is our general experience in the commercial setting as well. With regard to biologics, you know, I think it's incredibly great for the field for patients with COPD to have different mechanisms approach approaching or applying to different mechanisms for inflammation. So I think all of that's great. We don't view it as competitive in any way with O2Ver. In many ways, it can be very complementary.

[David Zaccardelli, President & CEO at Verona Pharma]

I think approaching inflammation from multiple mechanisms will be a solid approach for the treatment of COPD. And also keep in mind that O2VAR has bronchodilator and acute bronchodilator effects as part of its pharmacology and its clinical profile, which the biologics are more focused on inflammation and not bronchodilation. And I still think patients with COPD will require chronic bronchodilation to treat them along with different approaches on anti inflammation. So I think it's great for the field. I think we're looking forward to it, and I don't think there's any pharmacologic reason that o two vera could not be used in conjunction with biologics if if physicians thought that was appropriate for a patient.

[Tiago Fauth, Director - Equity Research Small/Mid Cap Biotechnology at Wells Fargo]

Fair enough. Alright. Thank you so much.

[David Zaccardelli, President & CEO at Verona Pharma]

Thanks.

[Operator]

We'll go next to Tom Shader at BTIG.

[Thomas Shrader, Equity Research Analyst at BTIG]

Good morning and congratulations for essentially hitting our 2Q number. I have a doing some reading on bronchiectasis. And as far as I understand it, a fair number of COPD patients also have that diagnosis. Do you know how you do well in those patients, or were they excluded? And then a real quick one for either Mark or Chris.

[Thomas Shrader, Equity Research Analyst at BTIG]

Are you guys completely outside of the Medicare Part D redesign? Or is that something you also have to think about? Thanks.

[David Zaccardelli, President & CEO at Verona Pharma]

Great. Good morning, Tom. So maybe the last question first. I don't know, Chris, you want to talk about being outside Part D? Then I think Tara and Kathy can comment on bronchiectasis.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

Yeah. Tom, thanks for the question. I appreciate the context on hitting the q two consensus number two. I think for Medicare Part d redesign, I think it's an interesting you know, we are primarily through a medical benefit reimbursement. So 80% of our reimbursement is through medical benefit, either through traditional Part b or through Medicare Advantage.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

We can see Medicare Part b reimbursement in a, in a long term care facility or a skilled nursing home facility, but that is such a small percentage that I would say we're not affected by any of this redesign that is going on with purely Med D products that exist today.

[Thomas Shrader, Equity Research Analyst at BTIG]

Perhaps again.

[Tara Rheault, Chief Development Officer at Verona Pharma]

Great. And then touching on the bronchiectasis question as well. You know, we we really had few patients with confirmed bronchiectasis by a CT scan in the enhanced program. You know, certainly, the reason we're doing that program is because we think the mechanisms that help improve COPD in patients with COPD are also applicable to patients with bronchiectasis, and it's the, you know, anti inflammatory mechanism targeting neutrophilic inflammation and also the effects on cough and sputum that we saw in COPD patients stemming from, you know, potentially CFTR activation, which we've seen in nonclinical studies, helping those patients to clear their cough and sputum, which are the two main, symptoms in bronchiectasis.

[Thomas Shrader, Equity Research Analyst at BTIG]

Just to follow-up, what is the overlap? Is it is it very small?

[Tara Rheault, Chief Development Officer at Verona Pharma]

Well, I'll just comment on that. Go ahead, Kathy.

[Kathleen Rickard, Chief Medical Officer at Verona Pharma]

Go ahead.

[Kathleen Rickard, Chief Medical Officer at Verona Pharma]

I just had

[Kathleen Rickard, Chief Medical Officer at Verona Pharma]

a set of comments from

[Kathleen Rickard, Chief Medical Officer at Verona Pharma]

a medical perspective. So patients with COPD could have isolated areas of bronchiectasis. Certainly, and that's as Sarah talked about, their sputum, cough, like that are similar to patients who have bronchiectasis by itself. But patient with COPD have a much broader spectrum because they have bronchitis or so that it's affecting their bronchial tubes, but it also affects their airways. They have emphysema, and then they'll have some localized areas of bronchiectasis.

[Kathleen Rickard, Chief Medical Officer at Verona Pharma]

Places of bronchiectasis primarily have just effect on their bronchial airways, the larger airways. This results from usually past infections and things like that in the past versus patients with COPD who have underlying disease primarily related to cigarette smoke and other toxic exposures. So the bronchiectasis patient will have some things in common with COPD, but not the overall the whole overall look of the disease, so so to speak. And as Sarah said, because of our effects on cough and sputum and so forth, we would expect it to to work on those patients with bronchiectasis alone. Tara?

[Tara Rheault, Chief Development Officer at Verona Pharma]

Sure. And the overlap, if you look at the diagnosed bronchiectasis population, you you might find around twenty percent of those patients also have a COPD diagnosis. I think going the other direction and looking at the COPD population, I think what we're understanding is as the, you know, understanding of bronchiectasis progresses is that the more they look for it in COPD patients, the more they find it.

[Thomas Shrader, Equity Research Analyst at BTIG]

Great. Thank you.

[Operator]

We'll move next to Ram Selvaraju at H. C. Wainwright.

[Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC]

Thanks very much for taking my questions and congrats again on this excellent quarter, really impressive performance. I was wondering if you could maybe give us some more information and insight on the competitive landscape and what you are hearing from physicians as we approach potential readouts from biologics that are kind of in the same vein as dupilumab, in particular drugs like itapacumab or astegolemab. And in particular, this kind of follows on from one of, I think, the earlier questions about competition from biologics. If there are any physician opinions indicating that prescribers might look at the lower frequency of administration for biologics as a potential advantage or reason to put patients on a biologic versus NC Centering. And if you are not seeing evidence of that, you know, maybe, give us a sense of, why, and in particular, if this might be traced back to not only ensifentrine's unique mechanism of action, but also the safety advantages that it would likely continue to enjoy over any future biologic competitors?

[Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC]

Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Hi. Good morning. No. Thanks thanks for the question. I I may provide a general comment, and then Chris can talk about what's been you know, what we're seeing in the field.

[David Zaccardelli, President & CEO at Verona Pharma]

I I think from a pharmacology basis, we don't see it as competitive in any particular way. I think the use case for, a biologic, again, assuming that we'll have to see what the results actually say, is is different than for O2VAR. O2VAR is a PD three, PD four inhibitor with both bronchodilation and nonsteroidal anti inflammatory has a unique profile. And as we talked about on the call, a very compelling benefit to risk profile. And other drugs will have to, you know, stand on their own with regard to that.

[David Zaccardelli, President & CEO at Verona Pharma]

As look at it, patients who are symptomatic and need additional treatment, a lot of that is around treating their dyspnea, which typically requires bronchodilation. That is a use case for o two there in addition to supporting the treatment with anti inflammatory effects to the PD three, PD four pathway. So I think that all of the treatments coming along can be complementary to o two there. As I mentioned, treating inflammation from multiple pharmacologic pathways seems to make some sense broadly. And and I think the use case for them are going to be different.

[David Zaccardelli, President & CEO at Verona Pharma]

And so we're very confident that o two vera has a place in the treatment paradigm. And as I've talked about, has the potential to redefine exactly how patients are treated for their symptoms. I don't know, Chris, you wanna add anything to that with what we're seeing in the in the field from physicians?

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

Yeah. Dave, I think you covered it really well. I would just say, anecdotally, when we hear our field reps interact with physicians, they they express very similar things to what Dave talks about, which is that o two profile as a broad use COPD treatment. Because these patients, as Dave described, come in complaining of dyspnea, they need that bronchodilation effect, and o two there is always gonna provide bronchodilation and nonsteroidal anti inflammatory effects as a base for these patients. And they look at the biologics as an add on or something that they can hit inflammation in another way at another point in time for these patients.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

So I think we're we're very pleased and encouraged at how physicians view o two vera as as a broad based COPD treatment for all their patients that are persistently symptomatic. So I think it goes back to what Dave talked about, which is the profile of o two there.

[Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC]

That's very helpful. Just one other quick one. You mentioned earlier in the call about the possibility of turning attention towards in licensing or acquiring additional potential product to product opportunities. Can you elaborate on that a little bit just from a broad strategic perspective? And if you are looking specifically, I would imagine, at pulmonology focused products and how broadly you expect to cast your net?

[Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC]

And if you are going to specifically only concentrate on those opportunities that are likely to be directly complementary to O2 there? Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Yeah. I know that's a great question. I think that yes, we you know, as we continue to have great success with the the launch of o two there and as we expand our global footprint, we want to, you know, again, grow the business and we are a development based commercial company. So we want to look at assets that would leverage our capabilities, of course, in development, regulatory and commercial that would sit primarily in the respiratory space. Of course, pulmonology as a call point would be a strength.

[David Zaccardelli, President & CEO at Verona Pharma]

And I think there are opportunities and mid and later stage products that currently are out there that exist in that space. So we have a eye out for that. Clearly, want to continue to have success with The US launch and continue to expand our global reach with O2VARE. But as we build the company acquiring assets will be the core of that.

[Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC]

Thank you very much.

[Operator]

We'll move next to June Lee at Truist Securities.

[Joon Lee, Director & Senior Biotech Analyst at Truist Securities]

Good morning and congrats on the really strong quarter. This is Awesome on for June. Thanks for taking the questions. Just a couple from us. So for the tier one doctors who haven't yet prescribed otovir, what are you

[Joon Lee, Director & Senior Biotech Analyst at Truist Securities]

hearing from them? And then on

[Joon Lee, Director & Senior Biotech Analyst at Truist Securities]

the patent update, you know, you had several patents that were potentially eligible for an orange book listing. Can you remind us which one was granted for June 2044? Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Great. No, thanks for the question. I guess I'll start with the latter one and then turn it over to Chris on talking about our Tier one HCPs. Yes. We're very pleased that we have an additional patent listed in the Orange Book with a 2044 expiration or and so that patent centers around what can be just generically called the purity aspects of ensifentrine and what I would say is sort of a fingerprint of what ensifentrine looks like from a chemical basis.

[David Zaccardelli, President & CEO at Verona Pharma]

So a lot of that has to do with the novel aspects ensifentrine, both purity and impurities that exist within its fingerprint. And I don't

[David Zaccardelli, President & CEO at Verona Pharma]

know if you wanna Chris,

[David Zaccardelli, President & CEO at Verona Pharma]

you wanna talk about tier one?

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

Yeah. As far as tier one, Dave, you know, when we look at our tier one, then we see approximately 60% of them writing within nominally the first two full quarters of launch. It's something that I think is an impressive start for for the brand. Remember, these tier one physicians are seeing upwards of more than a hundred and fifty COPD patients a month. So the opportunity within this group is tremendous.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

You know, what we've done over the course of the last few months is also try to understand within physicians that have written to date and those that haven't, is there a difference in sentiment? And I think the thing that we've seen in our market research is that regardless of if a doctor has written o two there today or if they haven't, they all see the utility of o two there in the future and eventually get the same share levels of or or capture rate of patients patients within their practice. You know, sometimes physicians are a little bit slower in adopting, and what that's usually contributed to needing to see it in the guidelines, having a peer discuss it with them. And those are all things that, if you think about it, we got added to the gold guidelines at the November. We've continued to do speaker programs.

[Christopher Martin, Chief Commercial Officer at Verona Pharma]

So I would suspect as we continue through this year, we'll continue to increase the number of tier one, prescribers that we have. And I think what is very encouraging to me is that regardless of what they've done today, is the outcome in the future between the writers and and non writers today is very similar because the benefit and the profile of o two there is so, compelling for them by providing bronchodilation and nonsteroidal anti inflammatory effects for them.

[Joon Lee, Director & Senior Biotech Analyst at Truist Securities]

Thank you.

[Operator]

We'll go next to Shoshila Hernandez at Van Lanschott, Kempen.

[Sushila Hernandez, Equity Research Analyst at Van Lanschot Kempen Investment Banking]

Yes. Thank you for taking my question and congrats on the quarter. As you're continuing to progress your regulatory activities for potential marketing authorization application submissions in The EU and UK, could you share your latest thinking on strategy and partnering in these regions? Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Yes. Good morning. Thanks for the question. Yes, we continue to engage both the EMA and the MHRA in the sort of very structured approach to discussing the applications. That's ongoing as we speak.

[David Zaccardelli, President & CEO at Verona Pharma]

And as you know, it's a very calendared approach for both of them. I would say that sometime around mid year, we will be better informed as to the responses and thoughts on our application. And so I think we look forward to updating you, you know, as we get into the the next quarter and beyond in 2025 to bring more clarity as to what the exact plan in Europe will be. Our strategy around partnering in Europe remains the same. And, I guess, you you would imagine that having regulatory clarity is also part of that discussion with partners.

[David Zaccardelli, President & CEO at Verona Pharma]

So all of that kind of comes together as we progress through 2025.

[Sushila Hernandez, Equity Research Analyst at Van Lanschot Kempen Investment Banking]

Okay. That's clear. Thank you.

[Operator]

And we'll go next to Vubalin Pachayapan at ROTH Capital.

[Boobalan Pachaiyappan, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Hi, good morning team and congrats on the progress. So I have a couple of questions. So firstly, with respect to price stability, So with all the news about tariffs and inflation taking the center stage, so I wonder if price stability will be maintained for O2Ware in 2025. Any thoughts on that? That's the first question.

[Boobalan Pachaiyappan, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

And the second, with respect to your Phase 2b fixed dose study, I was wondering if you could provide some high level thoughts, what to expect in the study that you're planning to start second half of this year. And then in that regard, I wonder if you are planning to measure pre dose trough FEV1 Because, my understanding is that this is one of the important efficacy markers that FDA is looking for even though the zero to twelve hour FEV one, sorry, is also a good one. Thank you.

[David Zaccardelli, President & CEO at Verona Pharma]

Great. Good morning, Bhavan. So with regards to price stability, as you can imagine things are somewhat fluid and never changing. But with that said, we see the price of O2Air as stable through 2025. There's nothing that we have in concrete form that would change our thinking on that.

[David Zaccardelli, President & CEO at Verona Pharma]

And I'll turn it over to Tara to talk about the phase 2b study and our endpoints and what we're measuring.

[Tara Rheault, Chief Development Officer at Verona Pharma]

Sure. So the team has really done a great job progressing the fixed dose combination program. And we, as we stated in the release, are planning to start our our kind of pivotal phase two b study later this year on the fixed dose combination. In terms of endpoints there, you know, I think we'll take the same approach that we took with o two there. You know, ensifentrine is a twice daily drug with a twelve hour duration of action.

[Tara Rheault, Chief Development Officer at Verona Pharma]

Twice daily drug is is operationally difficult to get a clear picture of a trough, a pre dose trough f e v one. And so while we're we'll measure it, I don't expect that will be necessarily our primary endpoint. We'll continue to look at the lung function effects over the dosing interval.

[Boobalan Pachaiyappan, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC]

Alright. Thank you very much.

[Operator]

And that concludes our Q and A session. I will now turn the conference back over to David Zaccardelli for closing remarks.

[David Zaccardelli, President & CEO at Verona Pharma]

Great. Thank you very much. And thank you everyone for joining us today on the call. I just wanted to reiterate how pleased we are with our progress and how O2BEAR is impacting patients' lives. We very much look forward to keeping you updated through 2025.

[David Zaccardelli, President & CEO at Verona Pharma]

And have a great day.

[Operator]

And this concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Victoria Stewart, Senior Director - Investor Relations & Communications
• David Zaccardelli, President & CEO
• Mark Hahn, Chief Financial Officer
• Christopher Martin, Chief Commercial Officer
• Tara Rheault, Chief Development Officer
• Kathleen Rickard, Chief Medical Officer

Analysts

• Andrew Tsai, SVP at Jefferies Financial Group
• Yasmeen Rahimi, Sr. Research Analyst at Piper Sandler Companies
• Olivia Brayer, Analyst at Cantor Fitzgerald
• Tara Bancroft, Director, Senior Analyst, Biotech Equity Research at TD Cowen
• Tiago Fauth, Director - Equity Research Small/Mid Cap Biotechnology at Wells Fargo
• Thomas Shrader, Equity Research Analyst at BTIG
• Raghuram Selvaraju, Managing Director, Healthcare Equity Research at H.C. Wainwright & Co., LLC
• Joon Lee, Director & Senior Biotech Analyst at Truist Securities
• Sushila Hernandez, Equity Research Analyst at Van Lanschot Kempen Investment Banking
• Boobalan Pachaiyappan, Managing Director, Senior Research Analyst at Roth Capital Partners, LLC