Half Year 2017 Verona Pharma PLC Earnings Call

Aug 08, 2017 AM EDT
VRP.L - Verona Pharma PLC
Half Year 2017 Verona Pharma PLC Earnings Call
Aug 08, 2017 / 12:00PM GMT 

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Corporate Participants
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   *  Jan-Anders Karlsson
      Verona Pharma plc - CEO
   *  Piers Morgan
      Verona Pharma plc - CFO

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Conference Call Participants
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   *  Tom Shrader
      Stifel - Analyst
   *  Peter Welford
      Jefferies - Analyst
   *  Yatin Suneja
      SunTrust Robinson Humphrey - Analyst

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Presentation
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Unidentified Company Representative   [1]
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 Good morning or afternoon, everyone, depending on where you are and welcome to today's conference call to review Verona Pharma's Interim Report for the First Six Months of 2017.

 On this call, I am joined by Jan-Anders Karlsson, Chief Executive Officer; and Piers Morgan, Chief Financial Officer. I trust that you have seen the press release with the results for the six months ended June 30, 2017, that was issued this morning at 7:00 a.m. BST or 2:00 a.m. EDT. If you have not, the press release is also on the Investor Relations portion of Verona Pharma's website.

 On today's call, Jan-Anders will first provide a clinical development and business update for the first half of 2017. Piers will then review the company's interim financial results for the six months ended June 30, 2017, and provide additional details related to the outlook for the remainder of 2017. We will then open the call to your questions and expect this call to last approximately 60 minutes. As a reminder, the conference call is being recorded and will be available on Verona Pharma's Investor Relations website shortly following the conclusion of today's conference call.

 During the call today, the team will be making forward-looking statements, and remind you, all of you, that the company -- of the company's safe harbor statement. All statements that do not relate to matters of historical facts should be considered forward-looking statements, including, but not limited to, statements regarding sufficiency of the current capital and cash position, the sufficiency of the management team and funding to advance clinical development of RPL554, the effectiveness of RPL554 in treating COPD patients, the therapeutic value of RPL's anti-inflammatory effect, the timing of availability of the top-line data for our clinical trials, the design and commencement of the clinical trial, the potential market for other formulations of RPL554's potential as a novel and important treatment, the company's quarterly reporting, and its ability to update the market on clinical data points. These forward-looking statements are based on management's current expectation. These statements are neither promises nor guarantees that involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to materially differ from our expectations expressed or implied by the forward-looking statement.

 For more information on risks, uncertainties, and other important factors relevant to Verona Pharma, we refer you to the section titled Risk Factors in the company's final prospectus filed with the SEC on April 28, 2017, relating to our registration statement on Form F-1, and other current reports filed with the SEC. And 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 calls caused its views to change.

 With that, I will turn the line over to Jan-Anders Karlsson.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [2]
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 Thank you, Stephanie. It's a pleasure to have the opportunity to provide you with the clinical development and business update.

 Let me start by saying how pleased we are to have completed our IPO of our American Depositary Shares on NASDAQ in late April. We raised gross proceeds of approximately $90 million through our IPO, a European private placement of ordinary shares, and the shareholder private placement. We believe that this provides us with the necessary capital to advance the clinical development of RPL554 to Phase 2b for the maintenance treatment of COPD and CF, and our planned Phase 2 clinical trial of RPL554 for the treatment of acute exacerbations of COPD.

 In the first half of 2017, we have been executing on the clinical development strategy for our lead product candidate RPL554. As a reminder, RPL554 is the first-in-class, inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4, or PDE3 and PDE4, that acts as both a bronchodilator and an anti-inflammatory agent in a single compound. It is being developed for the treatment of chronic obstructive pulmonary disease, COPD, and cystic fibrosis, CF, and potentially asthma.

 If successful, RPL554 would represent the first novel class of bronchodilator developed in decades, and at the same time is the first drug with both bronchodilator and anti-inflammatory effect in a single molecule for the treatment of COPD patients. RPL554 has been well tolerated in our clinical trials conducted today and has not been observed to result in the gastrointestinal or other side effects commonly associated with PDE4 inhibition.

 As many of you may know, the 2017 Global Initiative for Chronic Obstructive Lung Disease or GOLD guidelines now emphasized the importance of symptoms and exacerbations when assessing the severity of COPD patients and their treatment needs. Bronchodilators are central to symptom management with combinations of different classes of drugs even more effective than a single drug alone. Combinations of long-acting bronchodilators also have effects on COPD exacerbations.

 We believe that RPL554, representing a new class of bronchodilator, will be effective alone and in combination with the two existing classes of bronchodilators in patients with COPD. The inhaled steroids are commonly used in COPD but may be particularly effective only in a smaller subgroup of COPD patients with high risk of exacerbations. The anti-inflammatory effects of RPL554, we believe, are different and complementary to those of enhanced steroids, and may contribute to reduction in exacerbations in COPD in patients either with or without concomitant inhaled steroids (inaudible).

 Since the beginning of the year, we have initiated four clinical trials on nebulized RPL554. I would like to emphasize that these trials highlight the successful progression of RPL554 into Phase 2b of its clinical development. This stage of development built some previously completed studies in 292 subjects, which have shown RPL554 to be effective in improving lung function having anti-inflammatory properties whilst also being well tolerated.

 In February 2017, we commenced the Phase 2a clinical trial in the U.K. for the maintenance treatment of COPD. This trial is evaluating RPL554 as an add-on therapy to tiotropium, a commonly used long-acting bronchodilator, in approximately 30 patients. Dosing is complete, and we expect top-line data in the fourth quarter of this year.

 In June of this year, we commenced the single-dose pharmacokinetic or PK trial in the United States following acceptance of the IND by the U.S. FDA. In this PK trial, we will investigate the oral bioavailability of the swallowed part of the inhaled dose of RPL554 in approximately 12 healthy volunteers. The study has completed dosing, and we expect to report top-line data in the fourth quarter as well.

 In July of this year, we commenced a full-week Phase 2b dose-ranging clinical trial to evaluate RPL554 for the maintenance treatment of COPD; comparing RPL554 to placebo in approximately 400 patients. We expect to report top-line data from this trial in the second half of 2018.

 In March of 2017, we commenced a Phase 2a single dose PK and pharmacodynamic trial in the U.K., evaluating RPL554 in up to 10 CF or cystic fibrosis patients and expect to report top-line data from this trial in the first half of 2018.

 Looking up to 2018, we are on track to commence three additional clinical studies in the coming year. The first is a longer Phase 2b dose-ranging clinical trial of RPL-554 for the maintenance treatment of COPD that we plan to commence in the second half of next year. In this trial, we expect to evaluate RPL554 as an add-on therapy to standard COPD treatment.

 The second is the Phase 2 clinical trial in the United States for RPL554 as an add-on therapy, the short-acting bronchodilators, and other commonly used therapies for the treatment of hospitalized patients with acute exacerbations of COPD and for 30 days post discharge. We expect this trial to commence in the second half of 2018.

 The third study is a proof of concept Phase 2b trial in patients with CF that we're trying to commence also in the second half of 2018. In addition to our nebulized formulation of RPL554, we are developing the compound both in dry powder inhaler and metered dose inhaler formulations for the maintenance treatment of COPD. We believe that these formulations may enable the company to address a larger COPD market segment and can be addressed with a nebulizer formulation. We may explore the development of RPL554 in these formulations also for the treatment of CF and other respiratory diseases.

 In order to advance the clinical trial initiatives, we have entered in to a global strategic services agreement with QuintilesIMS, a leading provider of biopharmaceutical development and commercial outsourcing services. QuintilesIMS is the sole provider of core clinical trial services for Verona Pharma's RPL554 clinical development programs beginning with the ongoing four-week Phase 2b dose ranging clinical trial for the maintenance treatment of COPD in Europe and the single dose PK trial in the United States. We also have access to QuintilesIMS' global commercial insights when developing our market access strategy in the United States and globally for RPL554.

 Additionally, we have strengthened our management team over the past few months. Richard Hennings joined us in March as Commercial Director. Richard has more than 25 years of commercial experience in the pharmaceutical industry and specifically experience in launching inhaled respiratory innovative treatments.

 Dr. Desiree Luthman joined us in June as the Vice President of Regulatory Affairs. Desiree has extensive experience in a series of roles leading regulatory affairs team and strategies for pharmaceutical products spanning from early development to post-approval marketing including in the area of respiratory diseases.

 It's been a very productive first six months of 2017, and we expect to report top-line data from the ongoing trials later this year and throughout 2018. We believe that we now have the team and the funding in place to deliver comprehensive package of Phase 2b data for nebulized RPL554 in the maintenance treatment of COPD and CF, as well as in treatment of acute exacerbations of COPD. We believe that RPL 554 has the potential to become a novel and important treatment for patients with COPD and CF.

 I will now turn the call over to our CFO, Piers Morgan, to provide a financial overview.

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 Piers Morgan,  Verona Pharma plc - CFO   [3]
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 Thank you, Jan-Anders. Good day, everyone, and thank you for joining the call today. I will provide a brief recap of our financial position, our results for the first half of 2017 as well as our financial outlook. As Jan-Anders mentioned, we are very pleased to have completed the NASDAQ IPO announced in April and completed in May this year, the European private placement, and the shareholder private placement, which together raised approximately $90 million before fees and expenses. This allows us to raise the funds necessary to continue the clinical development of RPL554 that Jan-Anders outlined just a few moments ago.

 We began the year with GBP39.8 million or $51.7 million in cash and cash equivalents. Our net cash used in operations for the first half of 2017 was approximately GBP8.2 million or $10.6 million.

 The net proceeds from capital raising increased our cash, cash equivalents, and short-term investments to GBP94.6 million or $122.9 million as of June 30, 2017. Based on our current plans and expectations, we expect our cash position to allow us to fund operations into the start of 2021.

 The net cash used in operations of GBP8.2 million for the first six months of 2017 reflects the increasing expenditure on the progression of our clinical studies together with associated supporting activities as well as the expansion of our management team and other corporate purposes.

 Before turning to our income statement, I want to refer you to the press release that we issued this morning and the 6-K that we filed. The release includes income statements for the three months ended June 30 and the six months ended June 30, 2017. Given that we are headquartered in the U.K., our financial results are in British pounds. We have included a translation to U.S. dollars throughout this call using the period-end exchange rate of the Federal Reserve Bank of New York on June 30, 2017 for your convenience.

 Going forward, following the completion of the IPO announced in late April and completed in early May 17, we plan on releasing financial results on a quarterly basis. As such, I'm going to provide you a recap of the second quarter results and refer you to the press release for the income statement for the full six months ended June 30, 2017.

 Our operating loss for the three months ended June 30, 2017 was GBP6.8 million or $8.8 million, compared to GBP0.9 million or $1.1 million for the prior year period. The loss after tax for the period was GBP3.2 million or $4.2 million for the three months ended June 30, 2017, compared to GBP0.8 million or $1.1 million for the prior year period.

 The total comprehensive loss attributable to owners of the company was GBP3.2 million or GBP0.036 per diluted share for the three months ended June 30, 2017, compared to GBP0.8 million or GBP0.04 per diluted share for the prior year period. In U.S. dollars, the total comprehensive loss was $4.2 million, $0.05 per diluted share for the three months ended June 30, 2017, compared to $1 million total comprehensive loss and $0.05 loss per share for the three months ended June 30, 2016. The increase in the total comprehensive loss was driven by an acceleration of our research and development activities together with an expansion in the commercial and administrative infrastructure of the company.

 Research and development costs for the three months ended June 30, 2017 were GBP4.8 million or $6.3 million, an increase of GBP4.3 million or $5.6 million compared to GBP0.5 million or $0.7 million for the prior year period. This increase related to the expensive preparation for initiation and progression of clinical trials, as well as the build-out to the management team, including the expansion of clinical and regulatory capacity in the U.S. Included in the increase was an amount of GBP0.4 million or $0.5 million related to share-based payment expenses compared to no material expenses of this category for the prior year period.

 General and administrative costs for the three months ended June 30, 2017 were GBP2 million or $2.6 million, an increase of GBP1.6 million or $2.1 million year-over-year from GBP0.4 million or $0.5 million in the prior period. This increase included certain expenses relating to the IPO, European private placement, and shareholder private placement which completed in May 2017, together with an expansion in the commercial and administrative structure of the company. Included in the increase was an amount of GBP0.3 million or $0.4 million related to share-based payment expenses compared to GBP0.1 million or $0.1 million in the same period 2016.

 Finance income for the three months ended June 30, 2017 was GBP3.4 million or $4.5 million compared to no material income for the same period last year. The increase in finance income was primarily due to a decrease in the fair value of the warrant liability of GBP3.4 million or $4.5 million caused by changes in the underlying assumptions for measuring the liability of the warrant, including the price and volatility of Verona shares, the unwinding of the expected life of the warrant as well as a small reduction in the number of warrants outstanding.

 Finance expense for three months ended June 30, 2017 was GBP0.8 million or $1 million compared to GBP0.1 million or $0.1 million for the same period last year. The increase was primarily due to increased losses following changes in exchange rates as well as an increase in the calculated value of the assumed contingent obligation arising from the Vernalis license agreement.

 Taxation for the three months ended June 30, 2017 amounted to a credit of GBP1 million or $1.3 million, an increase in the credit amount to GBP0.9 million or $1.1 million for the prior year period. The credits were obtained at a rate of 14.5% of 230% of our qualifying research and development expenditure, and the increase in the credit amount was primarily attributable to our increased expenditure on research and development.

 And with that, we'd like to turn the call back to the operator and to open it up for questions.

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Questions and Answers
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Operator   [1]
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 (Operator Instructions) We will now take our first question. It comes from Tom Shrader from Stifel.

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 Tom Shrader,  Stifel - Analyst   [2]
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 Congratulations on the first call and on the progress. One quick question that -- so the -- you're doing a Phase 1 trial in the U.S. to get the IND open. Is that it for bridging studies? Once that's done, would all the EU trials translate back and forth? Or just educate us a little bit on what happens with EU trials for U.S. development.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [3]
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 Yes, Tom, it's Jan-Anders. You can hear me I hope.

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 Tom Shrader,  Stifel - Analyst   [4]
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 Yes.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [5]
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 Yes. The expectation is that we can use the data we obtained in U.S., in Europe, and vice versa. So all the data we're collecting in the past and collecting now in European parts of studies will also be used for FDA.

 Certain limitations when you file an IND and some proportion of patients should be treated in U.S., but in principle, we'll still be able to use what we're collecting in Europe now in U.S.

 And maybe I can -- and, yes, to follow on, I say that we do think that U.S. is a big and important market for us especially for nebulized drugs for treatment of COPD patients. And for that extent, we also do think that all certain parts of the trials we will have to do in U.S. And so there are certain trials that will have to be done in U.S. completely. And we do look at the in-hospital study, the treatment of acute exacerbations of patients with COPD in U.S. because the treatment paradigms in Europe and U.S. --

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 Tom Shrader,  Stifel - Analyst   [6]
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 You're right.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [7]
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 -- are slightly different. And even if the same compounds, in general, we do want to focus that part of the program very much U.S. and then flip it over, course, also again to European filings eventually as well.

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 Tom Shrader,  Stifel - Analyst   [8]
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 Okay. And then one quick question. We never talk about Asia. Do you see that as out-licensing? Do you have good IT in Asia? Just remind us. Could that be a source of revenue?

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [9]
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 Yes, the -- yes, thank you for asking that. Asia is, of course, a potentially huge market.

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 Tom Shrader,  Stifel - Analyst   [10]
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 Yes.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [11]
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 And you know that many of these respiratory illnesses that we have and face in the West are of course exactly the same or many times worse in parts of Asia. So we think that's a very important market for us. But we also do think that you can use many of the clinical trial results that you have obtained in other parts of the world in filings in Asia and Australia and other parts. And, of course, that's a strategy.

 There will be some studies you have to do locally, but at the moment, this may change -- at the moment, we are not placed to do clinical trials very effectively in Asia. We have a partnership as you know with QuintilesIMS. They are located locally there. We could do the studies, but I think we'll focus doing Phase 2b of course to do the trials in U.S. and Europe where there are center perhaps in other parts of the world.

 Phase 3 is different. With the Phase 3 program, I'll just ask sort of how to doing it, and you would have to involve part of that program with sites in Asia, for example, specifically to your question.

 So, yes, we think it's a very important market. We think that when the time is right, it will be very important to participate in that as well either we as a company or with a preferred partner.

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Operator   [12]
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 Our next question comes from Peter Welford from Jefferies. Please go ahead. Your line is open.

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 Peter Welford,  Jefferies - Analyst   [13]
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 Thanks for taking my questions. Got a couple, please. Firstly just on the development of RPO, the Phase 2b trial in the acute COPD, is there any expectation that U.S. sites will come online potentially in that trial before the second half of 2018 or is that now going to be solely a European study do you think?

 And then secondly on the clinical part, before I just come back with the financial question, but just on the cystic fibrosis trial, can you comment on the recruitment the recruitment that you're seeing of those I think it's 10 patients in the U.K. in terms of how it's going, getting those patients in the study, you obviously reiterate the timelines for that, but any initial sort of feedback on that will be great. Thank you.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [14]
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 Yes, thank you, Peter, Jan-Anders. First of all, the Phase 2b, actually it's come off to a very good start even if it was very recent. We think that it would actually be faster and probably also less costly to complete the studies with only European sites and we think that will be the strategy now.

 We have discussed including U.S. sites also in that trial in the past, but as we are now off very rapidly to enrollment in this rather last step, we think we want to focus on speed of the equipment and we will have many opportunities to introduce U.S. sites in the acute study that we discuss now recently and then of course also in the longer, the next follow-on Phase 2b study, which will be longer than four weeks and will be more of a commercial sampling. So there will be plenty of opportunities to recruit the U.S. base or the U.S. sites patients.

 On the second question, the CF is going well. There is no reason to change the timeline and expectations right now and we'll continue to update the market as soon as we are all farther along and we have a clear view on exactly when we think we can have the data reading out.

 The importance with a relatively small study in CF patients that we do in PK/PD trial is actually to make sure that we have a good understanding of the behavior of our compound when it's inhaled by CF patients. There, where it's slightly different of course with the mucus, et cetera, than COPD patients and we just want to make sure that we are selecting the appropriate doses we're going to proof of concept study on CF patients and it may or may not be exactly the same dose as we are testing in the larger COPD trials.

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 Peter Welford,  Jefferies - Analyst   [15]
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 Got it. And then just on the -- on the financial side, I wondered if there were two very simple bonds, if you like. Firstly, any sort of feeling you can give us I guess as to the sort of one-off G&A charges that happened in the second quarter for the cost of the -- associated with the U.S. transaction? And then equally on the tax, should we consider positive tax rebates on R&D to be a recurring source you think on the P&L or is this likely something that we should consider I guess year by year. Thank you.

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 Piers Morgan,  Verona Pharma plc - CFO   [16]
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 Yes, thanks, Peter. This is Piers. So in terms of the G&A charges, there is an allocation that needs to be done. As you're probably aware, some of the cost of the IPO can be set against the share premium. Some of them need to be taken to the P&L account and we haven't given publicly details of that exact [breakup], but I think cost for doing the IPO transaction were overall [markedly] normal in terms of the overall cost of doing so.

 In terms of the proportion that went to the P&L account rather than the share premium account, it was I think a -- it was a significant minority of the cost, but still a -- and it turns into reality. It was material to the G&A cost, but not a dominant -- not a dominant feature.

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 Peter Welford,  Jefferies - Analyst   [17]
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 Okay. That makes sense.

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 Piers Morgan,  Verona Pharma plc - CFO   [18]
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 Coming on to the tax, yes, under the current U.K. regime and, obviously, we have no certainty that will be continued, but it has been in place now for over a decade. We would expect to continue to incur qualifying R&D expenditure that would internally to a -- an R&D tax credit that the company can recover. And, obviously, as we start to get into more significant studies that results in greater R&D expenditure, so we would anticipate and hope that the amounts that we can recover going forward will rise and in line with that increasing expenditure as we go through the bulk of the studies. Obviously, as we then come out and complete those studies then it will -- it will start to fall again.

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 Peter Welford,  Jefferies - Analyst   [19]
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 I guess I was just thinking with regards to as an increasing number of these trials become global and potentially use CROs, et cetera, and obviously it become more broader in their remit, are they still likely to be eligible for the same degree of tax rebate that you can get given a lot of these costs is obviously going to be offshore?

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 Piers Morgan,  Verona Pharma plc - CFO   [20]
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 Yes, we believe that we will still be able to attract R&D recoveries, yes.

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Operator   [21]
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 (Operator Instruction) We will now take our next question from Yatin Suneja from SunTrust Robinson Humphrey. Please go ahead. Your line is open.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [22]
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 Congrats on all the progress. Busy quarter coming up for you guys in terms of data news flow. Just a couple of questions. I'll start with the -- with the first question on the Phase 2a, the add-on to tiotropium study that you are doing. Could you maybe help us frame the expectation from this study. I mean given that you are evaluating 554 with the LAMA for the first time, so what sort of synergistic effect we should be looking at and then should there be any difference relative to what you have seen with albuterol? Thank you.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [23]
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 Yes, hi, Yatin, Jan-Anders. So thanks for the question. The add-on to the tiotropium is in a way similar to the study we reported a year ago where we looked at the addition to short-acting albuterol as you said beta2 agonist or anti-muscarinic, short-acting bronchodilator where we saw a great effect on top or the peak increase in FEV1, improvement in lung function, but also a speed up of the onset of action and we also saw the small airways opened up [preferentially] in our treatment and many of these effects seem to be more pronounced in the presence of ipratropium, which is an anti-muscarinic agent.

 And the purpose of the study now with the LAMA, tiotropium, Spiriva, which is very commonly used in COPD patients is just to repeat the findings in the sense that also in a common -- more common commercial setting that we actually can demonstrate that we do add improvement in lung function on top of a standard dose of tiotropium for a couple of days treatment and that it may be different to see an onset of action as this is steady state if you wish of dosing for several days.

 But certainly, we expect to see an improvement in magnitude of the effect and perhaps we will also see an improvement in the onset of action. If it is possible, we don't know that yet and also in terms of if there is an effect on small airways that is not commonly seen with this LAMAs on their own.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [24]
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 Got it. Can you maybe also comment on the severity of the disease these patients have in the -- in the trial in terms of their lung function or in terms of their expected FEV1 levels?

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [25]
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 Yes, we don't have the data, but the expectation for -- you mean the new add-on to tiotropium, the [three days] (multiple speakers) --

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [26]
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 Yes.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [27]
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 Yes so that -- that is supposed to be moderate to severe patients. So similar to those that we studied with a single dose of the other two bronchodilators from last year and we expect, therefore, that there will be room for further improvement in the lung function of these patients.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [28]
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 Yes.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [29]
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 But we also wanted a reference back so that it's not vastly different patient categories that we're studying in this trial and this will also lead in to the four-week trial that we are doing, which is also in a similar, it's not exactly the same, but a similar type of maintenance treatment in COPD patients with moderate to severe disease.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [30]
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 Got it. Then maybe one more question on the -- on the CF program. I mean do you guys have any updated thoughts following the Vertex triple combo data. I mean I know those are early, they will have to do a pivotal program, but how are you thinking about future development once you have initial data in the Phase 2 that you're doing right now?

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [31]
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 Yes, thank you, that's an interesting question. If you listen to the Vertex announcement, it was very positive and very upbeat and they claim so we'll have to wait and see the actual data, but they claim that it was a very effective treatment combination in many more of the CF groups than what they treated with Kalydeco alone, so that's interesting. But still it's the same classes of compounds as far as we understand and what is the public knowledge, there is still potentiators and correctors but "more of the same."

 We propose a very different treatment paradigm for the CF patients, which we and we haven't seen any data to question this. We do believe that the existing therapies are not effective anti-inflammatory drugs and we know that the lungs of CF patients, of course, there are mucus, but underlying is of course an ongoing chronic inflammation that is not well treated with any of those drugs that are available to these patients today. And we think that's one of the large unmet medical needs and that's why we think it's -- to be congratulated on the Vertex progress, but it may be a contrary that it makes it even more attractive to combine those treatments with RPL554 to have a more complete holistic treatment of the CF patients, not only the symptoms, but also the profound underlying chronic inflammation, which is not affected by this treatment and, of course, steroids are also not very effective at all in these patients.

 So there is a large unmet need and we think RPL554 fits exactly in that need. Of course, with the bronchodilator and the effect we have on CFTR as well to a different mechanism of action, we think all that will also be helpful and attractive to this community.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [32]
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 Got it.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [33]
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 But we'll have to do the [study], of course.

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 Yatin Suneja,  SunTrust Robinson Humphrey - Analyst   [34]
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 Got it, very helpful. Maybe just one final question, this one for Piers. Could you maybe help us model that expenses in the second half, should we take 2Q as a good proxy for second half? I know you have some trials that are going to wrap up and you're going to be initiating a lot more trials, so help us understand the ramp here. Thanks.

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 Piers Morgan,  Verona Pharma plc - CFO   [35]
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 Yes. So obviously, the main driver of expenditure during the second half of 2017 will be the study that we just initiated in 400 patients as the Phase 2b study for COPD and the main driver for cost in the second half will really be the rate at which those patients are recruited. But in terms of the -- if that recruitment obviously goes well and is substantially done during the second half of this year then I would expect the second half cost to be slightly higher than the first half cost.

 But it may be that if the -- if the recruitment goes at a -- have some more normal rates and we have patients still to treat in the first part of 2018, then I think the expenditure could well be at a -- at a similar level to the first half.

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Operator   [36]
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 As there are no further questions from the phone, I'll now turn your call back to your host for any additional or closing remarks.

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 Jan-Anders Karlsson,  Verona Pharma plc - CEO   [37]
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 Thank you everyone for joining us today. As we outlined, it's been a transformative six months at Verona Pharma with the completion of our IPO on NASDAQ; a commencement of four clinical trials with development of RPL554 in COPD and CF; we've expanded our senior management and now we have the team and the funding to deliver comprehensive package of Phase 2b data from nebulized RPL554 in the treatment of acute exacerbations of COPD as well as in the maintenance treatments of COPD and CF. We're also developing additional formulations in RPL554 as we believe would significantly extend the commercial opportunity in COPD and other respiratory indications.

 We look forward to updating the market on multiple clinical data points in this and coming years and we plan to be in New York City next week presenting at the Wedbush PacGrow Healthcare Conference and we look forward to seeing some of you then.

 Thank you, operator. This concludes today's call.




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