Full Year 2018 Verona Pharma PLC Earnings Call

Feb 26, 2019 PM UTC 查看原文
VRP.L - Verona Pharma PLC
Full Year 2018 Verona Pharma PLC Earnings Call
Feb 26, 2019 / 01:00PM GMT 

==============================
Corporate Participants
==============================
   *  Jan-Anders Karlsson
      Verona Pharma plc - CEO & Executive Director
   *  Piers John Morgan
      Verona Pharma plc - CFO

==============================
Conference Call Participants
==============================
   *  Joon So Lee
      SunTrust Robinson Humphrey, Inc., Research Division - VP
   *  Lucy-Emma Mary Sarah Codrington-Bartlett
      Jefferies LLC, Research Division - Equity Analyst
   *  Neil Eric Carnahan
      Stifel, Nicolaus & Company, Incorporated, Research Division - Associate
   *  Shveta Vilas Dighe
      Wedbush Securities Inc., Research Division - Associate
   *  Stephanie Carrington
      ICR, LLC - SVP

==============================
Presentation
------------------------------
Operator   [1]
------------------------------
 Good morning, ladies and gentlemen, and welcome to the Verona Pharma Full Year 2018 Earnings Conference Call. (Operator Instructions) I would now like to turn the conference over to your host, Ms. Stephanie Carrington with Investor Relations. Ma'am, you may begin.

------------------------------
 Stephanie Carrington,  ICR, LLC - SVP   [2]
------------------------------
 Thank you, operator. Good morning or afternoon depending on where you are, and welcome to today's call to review Verona Pharma's results for the 12 months ended December 31, 2018.

 On this call, I am joined today by Jan-Anders Karlsson, Chief Executive Officer; and Piers Morgan Chief Financial Officer. I trust that you have seen the press release that was issued this morning before market open. It includes the results for the 12 months ended December 31, 2018, as well as the operational update. If you have not, the press release is also available 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 full year ended 2018 as well as the quarter -- fourth quarter ended 2018. Piers will then review the company's financial results for the full year ended December 31, 2018. 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 following the conclusion of today's call.

 During the call, the team will be making forward-looking statements. We remind you of the company's safe harbor language. All statements that do not relate to matters of historical facts should be considered forward-looking statements, including, but not limited to, statements regarding ensifentrine as a potent bronchodilator and anti-inflammatory agent, the company's ability to provide a promising therapeutic effect through the delivery of ensifentrine, the timing of top line data from its ongoing clinical trials, changes in its clinical development plans based on additional data and the potential for certain formulations of ensifentrine to address larger markets as well as the company's plan to explore these formulations in cystic fibrosis and other respiratory indications.

 These forward-looking statements are based on management's current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause its actual results, performance and achievements to be materially different from its 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 should cause its views to change.

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

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [3]
------------------------------
 Thank you, Stephanie. It's a pleasure to have the opportunity to provide you the clinical development and business update today.

 Ensifentrine is formerly known as RPL554. It's a unique, first-in-class PDE3 and PDE4 inhibitor, which we believe will increase lung risk function, reduce symptoms and improve quality of life in hundreds of thousands of patients with COPD in the U.S. alone that remains symptomatic despite current medications. Verona Pharma's global rights to ensifentrine, we have granted patents in the U.S., EU, China and most other major markets, extending beyond 2035.

 Let me first remind you that COPD was the third leading cause of death worldwide in 2016 according to WHO and almost twice as many patients died from COPD and from lung cancer in that year. In the U.S. alone, there are over 15 million COPD patients and current treatments provide some symptom improvement, but there is no cure.

 Also, in the U.S., approximately 2 million patients with COPD are still uncontrolled and symptomatic despite being treated with currently available medications. We believe that ensifentrine, which is both a bronchodilator and anti-inflammatory agent, in one molecule, once approved, will make a difference to the lives of many of these symptomatic patients.

 Our clinical development program is designed to examine this novel mechanism of action in patients with COPD in order to evaluate efficacy, tolerability and dose to establish the fastest route to market. In the 13 Phase I and II clinical trials involving some 800 subjects to date that have been conducted, we have demonstrated that ensifentrine is a very effective bronchodilator.

 It has anti-inflammatory properties, which causes progressive symptom improvement in COPD patients and is well tolerated when dosed for up to 4 weeks, as shown in 400 patients in a Phase IIb study reading out last year. In additional trials, we have confirmed that this is also a very effective treatment when dosed on top of short or long-acting bronchodilators and inhaled corticosteroids.

 We designed our most recent study to investigate whether ensifentrine also could improve lung function in patients already on 2 bronchodilators, which is believed to be the maximum bronchodilator therapy. Although this is a very high hurdle for ensifentrine, it's important for later-stage development and commercialization to clarify if this new mechanism could be effective in these more severe patients with very few further treatment options.

 We did report top line data from this 3-day crossover study in 79 COPD patients in mid-January. We were very pleased that the ensifentrine was also able to improve lung function in these patients already on dual and triple COPD therapy. In this study, all patients were administered an inhaled once-a-day LAMA/LABA, or called Stiolto, each morning followed by nebulized ensifentrine 2 doses, 1.5 and 6 milligram, or placebo, twice a day. The morning dose 1.5 milligram ensifentrine on day 3 produced approximately 50 milliliter of additional increase in peak and average FEV1, 0 to 4 hours, when dosed on top of a LAMA and a LABA, even though Stiolto produced an unprecedented 400, 500 milliliter improvement in peak FEV1 in this study.

 On day 3, after the morning dose of ensifentrine, average FEV1 reached statistical significance while the peak FEV1, with the primary endpoint did not. That was due to the highest 6-milligram dose being less active. It is important to highlight that the evening dose of ensifentrine on day 3 actually had a significantly more profound effect than the morning dose. 130 and 81 milliliter additional increases in peak FEV1 were observed with 1.5 and 6-milligram doses of ensifentrine, which was both clinically and statistically significant when compared to the placebo group of Stiolto background treatment. Similarly, we demonstrated substantial and statistically significant drops in residual volume, the measure of air trapping, which is believed to be correlated to reduction in symptoms in COPD patients.

 It is important to recognize that around 50-milliliter further increase in lung function actually can be clinically meaningful on top of background COPD treatments as observed also with drugs currently approved for use in COPD patients in the U.S.

 This study informs the further development of ensifentrine with more effective clinical trial design with patients on stable background therapy throughout the study, focus on lower doses than the 6-milligram as they now appear to be as effective and very well tolerated, recognizing the patients with background bronchodilator and even dual and triple therapy can be studied in later-stage clinical development, many of which remain symptomatic, and very few, further treatment options. And finally, FEV1 residual volume symptoms continue to be important study endpoints.

 We continue to advance the clinical development of nebulized ensifentrine. We plan to initiate the Phase IIb study in patients with COPD in the second quarter of this year, and top line data is anticipated in the fourth quarter of this year. This data will then be used to have a robust and well-informed end-of-Phase II meeting with FDA on dose selection, patient characteristics, concurrent COPD treatments and suitable endpoints and thus inform the size and cost of the Phase III program.

 This upcoming Phase IIb study will be a 4-week dose ranging study in approximately 400 COPD patients on stable LAMA background therapy. Endpoints will include lung function symptoms and tolerability. We will provide more details on design at the start of the study.

 We are very pleased to update you on progress with new DPI and MDI formulations of ensifentrine. Handheld DPI and MDI devices are the most common forms of drug delivery in nonhospitalized patients with COPD and are well suited for maintenance therapy. About 5.5 million COPD patients in the United States are estimated to be using such devices. We believe the development of DPI and MDI formulations has the potential to substantially increase the market opportunity for ensifentrine, if approved, and for the maintenance treatment of COPD. In addition, they could help the millions of COPD patients that need additional medication but may not be suitable for everyday treatment with the nebulizer.

 We started a randomized double-blind placebo-controlled 2-part Phase II clinical trial in COPD patients with the new DPI formulations 1 site in the U.S. in December last year. The third purpose of this first part of the study is to evaluate the PK profile, tolerability and bronchodilator effect of a single dose of ensifentrine. We have already completed enrollment in Part A, and we now expect initial data to be available in March.

 We expect the DPI formulation of ensifentrine to be well tolerated and to produce dose-dependent bronchodilator effect in Part A of a magnitude that perhaps is similar to what has been published with DPI formulations of other bronchodilators. Perhaps this effect will be slightly smaller than from our nebulizer formulation, if only a smaller dose reaches the lungs of these patients. Based on this data, we'll select which doses to move forward into Part B. Part B will be a crossover study of multiple doses of ensifentrine dosed twice a day for a week in this same cohort of COPD patients.

 In this second part, we will evaluate the bronchodilator effect of repeat doses administered by DPI in terms of peak FEV1 as well as the safety and tolerability and the PK profile. We plan to commence the Part B of this DPI Phase II trial in March and expect top line data in the second half of this year.

 We expect to initiate a Phase II clinical study using the MDI formulation to treat COPD patients during the second quarter of 2019, with data expected in the first half of next year. Clinical trial design will be very similar to that of the DPI trial that we just completed.

 Let me briefly mention also opportunities for ensifentrine in cystic fibrosis and asthma. As you may know, few, if any, effective anti-inflammatory treatments exist for patients with cystic fibrosis. Based on the positive data from last year in CF patients, we are exploring the opportunity to utilize ensifentrine's anti-inflammatory effects also in patients with CF.

 Likewise, we have already shown that ensifentrine is an effective bronchodilator in asthma, while both CF and asthma are compelling clinical and commercial opportunities, our focus is initially to move towards Phase III with nebulizer ensifentrine for maintenance treatment of COPD.

 Looking forward, 2019 will be a very important year for Verona Pharma with several data readouts. They will potentially have a very significant impact on the development program and commercial value of ensifentrine.

 First of all, the nebulizer formulation. As mentioned, the 400-patient Phase IIb study is on track to start in the second quarter of this year and readout around year-end. The data from this study will provide guidance for an end-of-Phase II meeting with FDA.

 For DPI, we have initial data from the Part 1 of this 2-part Phase II trial with the first DPI formulation in COPD patients in March. This data should highlight the possibility of expanding the market potential to include the other 80% of COPD patients, who currently prefer daily use of an inhaler over a nebulizer.

 MDI, the first Phase II trial with an MDI formulation is expected to start in the second quarter and readout in the first half of next year, providing a top line data on an alternative handheld formulation.

 Nebulized ensifentrine, which is a unique mechanism of action, may be particularly suitable as an add-on treatment to COPD patients. With a higher pricing on nebulized drugs in the U.S., we believe nebulized ensifentrine can become, if approved, a very attractive commercial opportunity.

 Likewise, positive data from the DPI formulation of ensifentrine will be the first demonstration of bronchodilator activity in this new and more convenient formulation for potentially a much larger group of COPD patients. We anticipate that we will partner the DPI or MDI formulations later in development, in order to realize the full potential of this multibillion-dollar opportunity.

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

------------------------------
 Piers John Morgan,  Verona Pharma plc - CFO   [4]
------------------------------
 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 and of our audited financial results for the full year 2018.

 I want to refer you to the press release that we issued this morning. We will also be filing a 20-F in due course. The release includes audited financial results, inclusive income, balance sheet and cash flow statements for the 12 months ended December 31, 2018.

 Given that we are headquartered in the U.K., our financial results are in British pounds, but we have included a convenient translation to U.S. dollars using the period-end exchange rate on December 31, 2018, of GBP 1 pound to $1.2763 for certain key figures.

 Turning to the income statement. Our operating loss for the full year ended December 31, 2018, was GBP 25.6 million or $32.7 million compared to GBP 29.8 million for the prior year. The loss after tax for the full year 2018 was GBP 19.9 million or $25.3 million compared to GBP 20.5 million for the prior year period. This represents a loss of 18.9p per diluted share or a loss of $1.92 per ADS for the full year ended December 31, 2018, and this compares to a loss of 23.4p per diluted share for the prior year.

 The total comprehensive loss was calculated as follows. Research and development costs for the 12 months ended December 31, 2018, were GBP 19.3 million or $24.6 million, which is a decrease of GBP 4.4 million compared to GBP 23.7 million for the prior year period. The cost of clinical trials reduced by GBP 5.9 million compared to the previous year because 4 trials were initiated in the year ended December 31, 2017, including a 4-week, 400-patient Phase IIb trial for COPD maintenance treatment compared to only 2 clinical trials started in the year ended December 31, 2018, and the largest of which enrolled 79 patients.

 Preclinical costs also reduced by GBP 0.4 million. These reductions were offset by GBP 2 million increase in contract manufacturing and formulation development costs. Personnel-related costs increased by GBP 0.1 million in the year ended December 31, 2018, compared to the prior year.

 Turning to the general and administrative costs. For the year ended December 31, 2018, these were GBP 6.3 million or $8.0 million, which is an increase of GBP 0.3 million year-over-year from GBP 6.0 million in 2017. The increase was primarily attributable to GBP 0.3 million increase in the noncash share-based payment charge together with GBP 0.2 million increase in personnel-related costs and the GBP 0.4 million increase in other overhead costs. These were partially offset by GBP 0.6 million decrease in professional fees, which in 2017, included advice related to the global offering and shareholder private placement, which occurred in 2017.

 Finance income for the 12 months ended December 31, 2018, was GBP 2.8 million or $3.5 million compared to GBP 7 million for the same period last year. The decrease was primarily due to an increase in the fair value of the warrant liability in the year ended December 31, 2018, which is a noncash item recorded as a finance expense compared to a decrease in the liability in the year ended December 31, 2017, which resulted in a noncash gain, which is recorded as finance income of GBP 6.7 million in 2017.

 In addition, the foreign exchange gain on cash and short-term investments of GBP 1.9 million in the year ended December 31, 2018, compared to a loss in the prior year, which is recorded within 2017's finance expense. Furthermore, GBP 0.9 million of interest was received in the year ended December 31, 2018, compared to GBP 0.3 million in 2017.

 Turning to finance expense for the full year ended December 31, 2018. This was GBP 1.3 million or $1.7 million compared to GBP 2.5 million in the same period last year. The movement was due to an increase in the fair value of the warrant liability as described earlier, amounting to GBP 1.2 million in 2018, recorded in finance expense, compared to a reduction in the value of the liability in 2017, which is recorded within 2017's finance income.

 The movements in the fair value of the warrant liability are a noncash item. In addition, there was of foreign exchange loss on cash and short-term investments in 2017 of GBP 2.4 million. In the year ended December 31, 2018, there was a foreign exchange gain, which was recognized and recorded in finance income.

 The company maintains its balances, its pound sterling and U.S. dollars cash and short-term investments to match expected future expenditures in those currencies, and this approach should act as a natural hedge against the foreign exchange movements.

 Taxation for the full year ended December 31, 2018, amounted to a credit of GBP 4.2 million or $5.4 million compared to a tax credit of GBP 4.7 million in the prior year period. The credits are obtained at a rate of 14.5% of 230% of our qualifying research and development expenditure, and the decrease in the credit amount was primarily attributable to the lower level of research and development expenditure in 2018 as compared to 2017, which I described a few moments ago.

 We ended the year with GBP 64.7 million cash or $82.6 million in cash, cash equivalents and short-term investments. The short-term investments comprised cash deposits with a maturity of more than 3 months. Our net cash used in the operations for the 12 months ended December 31, 2018, was approximately GBP 18.1 million, or $23.1 million compared to $20.7 million used -- sorry, GBP 20.7 million used in operations during 2017. The cash used in operations reflects the expenditure on progression of our clinical studies together with other nonclinical manufacturing and the associated development activity as well as the expansion of our management team and other corporate purposes.

 We expect that our existing cash, cash equivalents and short-term investments will more than enable us to fund our operating expenses and capital expenditure requirements through the end of our Phase IIb developments of nebulized ensifentrine for the maintenance treatment of COPD and our proof-of-concept studies with DPI and MDI formulations of ensifentrine for the treatment of COPD patients.

 Additional selected financial data will be included in our audited financial statements and also in our 20-F within Item 5, Operating and Financial Review and Prospects, and in the F pages attached to that document.

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

==============================
Questions and Answers
------------------------------
Operator   [1]
------------------------------
 (Operator Instructions) Our first question comes from the line of Lucy Codrington with Jefferies.

------------------------------
 Lucy-Emma Mary Sarah Codrington-Bartlett,  Jefferies LLC, Research Division - Equity Analyst   [2]
------------------------------
 Just a couple, please. Firstly, I wonder if you could give us any idea of whether you had most thoughts on the doses that you will be including in the Phase IIb dose finding study. Secondly, if you could give us potentially an idea of kind of how we should think about cash balance for this year, particularly in terms of the -- obviously, there'll be a greater number of trials running and particularly with the large dose finding study, so how that might impact R&D. And then secondly -- finally, just looking at the timings of getting the dose finding data toward the year-end allowing time for the end-of-Phase II meeting with the FDA, are we -- should we be thinking more like the Phase III starting in the second half of next year? Or do you still think there's a chance that it could happen in the first half?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [3]
------------------------------
 Thank you, Lucy. Let me start. The doses for the IIb study, I think the good news actually is that we see that the 6 milligram and higher doses really are on top of the dose response curve. So we can go down, which, of course, is good from many perspectives. In the next study, we have skipped the 6 milligram dose and we will explore a dose further down instead, which we think will still provide us with several doses on maximum effect. We'd be having a maximum effect. And if anything, if even possible, reduce the adverse events to a very low level. We're already at the placebo level, and we think that this will give us even a bigger therapeutic index, which is important for these patients, especially as you use it as an add-on treatment. So lower doses in these patients -- maybe I can take the last question and then hand over the balance. So you were talking about the timing of the study. You're right, the study is very important for a good conversation or robust conversation with FDA. So we will wait for this data together with the data from the other IIb study that we ran last year, for that particular discussion and particularly around dose selection, as you mentioned. We do believe still that the start of the Phase III study would be possible in the first half of next year. If that changes during the year and as we learn more about the ongoing study, we will keep you updated. Did you want to take the cash balance?

------------------------------
 Piers John Morgan,  Verona Pharma plc - CFO   [4]
------------------------------
 Sure. So -- and thanks, Lucy, for the question. As you know, we don't forecast our cash balances. But looking at the costs of the 400-patient study, typically, you should expect that kind of a study to cost in the range of GBP 15 million to GBP 20 million. So -- and the ongoing DPI and the planned MDI study are both relatively inexpensive and cost in the low- to mid-single digits millions of dollars. So we will expect to end 2019 with still a pretty healthy cash balance, which would, excluding Phase III costs, give us more than 12 months of cash runway beyond the end of 2020. Obviously, as Jan-Anders mentioned, we will get further insights designing the Phase III, and those study costs will be significant.

------------------------------
Operator   [5]
------------------------------
 Our next question comes from the line of Joon Lee with SunTrust.

------------------------------
 Joon So Lee,  SunTrust Robinson Humphrey, Inc., Research Division - VP   [6]
------------------------------
 I have been really intrigued by the fact that in your previous 400 subjects Phase IIb 4-week maintenance study, you pretty much see maximal FEV1 improvement as quickly as first week, which is maintained up to 4 weeks -- week 4. But your patient reported outcome as measured by ERS continues to improve over that same period. Is that something you see with other COPD medications? Or is this something that's unique to ensifentrine and maybe perhaps due to anti-inflammatory effect? And this -- you would expect this to be sort of replicated in your next Phase IIb 4-week study?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [7]
------------------------------
 Yes, thanks very much. The -- you rightly observed that there's a discrepancy between the bronchodilator effect and the gradual onset of the symptomatic improvement. And we, of course, with our advisers believe this really is an anti-inflammatory effect that takes a little time to come on, and then gradually and continually improves over time. We do see it with other or it is reported with other COPD drugs, bronchodilators and combination drugs. The difference is perhaps that what we look at in the literature, may be a little different from exactly the same patients we use, often takes a bit longer to develop fully more than 1 month, if you look at literature data. So we believe we actually have a rather rapid onset of an anti-inflammatory effect compared to some other published data. We also believe that the magnitude of the symptom improvement that we see and what we, again, see reported in the literature is very promising for RPL554 in the sense that, that not only the ERS scale that we use but also TDI and other measurements of symptoms actually improve to the same extent over baseline, also statistically significant and also with time but quite rapidly compared to what's reported with other drugs. So we believe this is really one of the perhaps most important advantages for our compound, ensifentrine. But in the end, it's important for the patients. Symptoms is what patients complain about, not milliliter changes and FEV1. That's a regulatory endpoint, and that's why we focus on symptom improvement as a key outcome, and we do expect to see in patients also on background treatment in the next Phase IIb study the similar gradual onset of improvement that we saw in the phase -- in the previous Phase IIb study.

------------------------------
 Joon So Lee,  SunTrust Robinson Humphrey, Inc., Research Division - VP   [8]
------------------------------
 And just one more. You measured 22 secondary endpoints or something in that magnitude. Have you gained any insight as to sort of why there is inverse dose relationship or what the explanation could be for the 6-milligram effect? And if any those results could be presented at American medical conference in the near future?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [9]
------------------------------
 You're talking about the last study that we reported.

------------------------------
 Joon So Lee,  SunTrust Robinson Humphrey, Inc., Research Division - VP   [10]
------------------------------
 Yes, yes. LAMA/LABA combo, yes.

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [11]
------------------------------
 Yes, so we're just getting the full data sets. We haven't been able to analyze it fully. I do believe that it's an anomaly that if it goes down, the effect of 6 milligram versus 1.5 milligram, it most likely from all the studies we have done, all the data together, it's not a bell-shaped dose response curve, so lower effect with higher doses, but rather it's flat. But there is, of course, variability at the top of the dose response curve, and I think that's what we experienced in this recent study. So I really do believe that the 1.5, 6 and, as we've seen before, 12 and 24-milligram, they all are very close to the maximum effect that we can achieve with the compound and that the variability is purely a phenomenon of smaller number of patients being treated. And it's not a consequence of the compound itself. But the good news is, of course, that we can explore lower doses and expect good effects and perhaps also a much better therapeutic ratio with our compound, and plus, customary in patients with COPD with other compounds.

------------------------------
Operator   [12]
------------------------------
 (Operator Instructions) Our next question comes from Adam Walsh with Stifel.

------------------------------
 Neil Eric Carnahan,  Stifel, Nicolaus & Company, Incorporated, Research Division - Associate   [13]
------------------------------
 This is Neil Carnahan on for Adam. In the upcoming Phase IIb study on top of LABA, how would you define positive outcome in this patient population in terms of FEV1 and residual volume measurements? And then I got one follow-up.

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [14]
------------------------------
 Yes, Neil, the upcoming study, of course, we expect to be quite similar in structure to the previous Phase IIb study, and we would, of course, expect a positive outcome as a significant increase in lung function measured as peak FEV1 or the area under the curve average FEV1, in the beginning of the curve. And of course, we will also measure other aspects of FEV1, including trough. The residual volume in the same way, we will not be able to look at that directly in this study. It's particularly complicated treatment assessment of patients where you put them in a body box or a plethysmography and then measure static breathing and other parameters. That is complicated, and we instead look at the lung function measured as FEV1. But residual volume, we think is very much related to symptoms and so the 2 correlates, and we will measure symptoms as very important endpoints. And dose, we think, will reflect any changes that we see in residual volume in, for example, the study we just completed. But that particular measurement is more also suited for specific studies in few sites, 1 or 2 or 3 sites maximum, to get a well-controlled and not too much variability in the material. Does that answer your question?

------------------------------
 Neil Eric Carnahan,  Stifel, Nicolaus & Company, Incorporated, Research Division - Associate   [15]
------------------------------
 Yes. And then I got one follow-up. Just given prescribing behaviors for COPD are pretty intense in the community, can you just walk us through the thought process behind during this Phase IIb be on top of the LAMA? How do you think ensifentrine will fit in commercially there?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [16]
------------------------------
 Yes, thank you. So there are 2 aspects to that question. And one aspect is, of course, clearly, the study outline. Now this study is not a commercial study. This study is purely to have a conversation with FDA that is well informed on a uniform background, where we can demonstrate that our doses that are appropriate to take into Phase III clinical trials, and those doses are safe and well-tolerated and effective. So that's the purpose of the study. The other aspect of your question, which is very good, is how would we see our compound positioned commercially as a treatment for patients that are on 1 bronchodilator. Usually, it is LAMA, or it could also be LABA/ICS perhaps. And then instead of going to from a LAMA to a LABA to a second bronchodilator, why would you use RPL554, ensifentrine? Now we believe that we will demonstrate, as we have in our Phase IIb study, that our compound has a substantial improvement in FEV1, in lung function in these patients, and we believe that is at least as good as you will see by adding another bronchodilator to the first one. So that's interesting. It gives you an option. Now more importantly, we really believe that our compound is also an anti-inflammatory compound in the same doses at the same time, and we will, therefore, be able to demonstrate that we have a dramatic improvement in symptoms as we actually showed in the other study and in patients that are already on one treatment, now you have an opportunity to add one more treatment that is a great bronchodilator and also has profound effects on symptoms at the same time and is anti-inflammatory. And you may avoid for some patients that does not like to take inhaled steroids, this may be an alternative to use the treatment that it's not only a bronchodilator but also a compound that is this dual mechanism of action. And we think that is a compelling story. And let me just briefly say that, of course, if you are looking, as we have talked about patients on dual and triple treatment, now here you are in a situation where there's really no further treatment modality today that you can -- there are a few, but they are not well appreciated by patients. We think there it is a situation where patients will rather ask for additional treatment from the doctor to help them to go through the day. And if we can help those patients with very few other treatment options, that will be a very meaningful contribution to this group of patients.

------------------------------
Operator   [17]
------------------------------
 And our next question comes the line of Liana Moussatos with Wedbush Securities.

------------------------------
 Shveta Vilas Dighe,  Wedbush Securities Inc., Research Division - Associate   [18]
------------------------------
 This is Shveta for Liana. We have two questions. In the Phase IIa on the top of maximum LAMA/LABA, why do you think there was a difference between the morning and evening doses and that the evening appeared to be more responsive?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [19]
------------------------------
 Yes, thank you. It's a good question. I believe it's got a straightforward answer. The once-a-day therapies, and then remember, when patients are on double or triple therapy, most of the fixed combination sales and volume is on once-a-daily treatments. So this is the category of patients that is done having -- this once-a-day treatment, and it's perhaps the largest category of these patients. In the morning, the once-a-day treatment works very well. During the 24-hour or during the day, the effect fades away. This effect slightly diminishing of the effect during the day is much more pronounced with longer treatment. So therefore, it is not so difficult to see that if you add a compound in the morning, if you're lucky as we were, we did see an effect that was meaningful. And you would expect actually that if you add the same dose and see a similar type of effect in the evening, it should be much more profound, a much larger effect because then there's not the same background dual bronchodilator treatment effect as we saw in the morning. So that's not so surprising. What is important to remember is that these patients, many of them have symptoms during the day, we hope it can help them, many of these patients have also symptoms during the night. And the problem is that there is no other treatment that is behaving in a similar way like ensifentrine that you can take. They are today using rescue bronchodilators for example, which is another beta2-agonist, albuterol, and of course, you can inhale it and get relief from the obstruction. It has little to do with symptom improvement in itself, and it will give you an increased heart rate and perhaps have a poor quality of sleep. We think it's quite different if you have a background treatment that is stable now on top of certain evening dose where you have a substantial improvement in lung function as a duration of 12 hours, the whole night, which we believe also will improve night symptoms and give them a quality sleep, and therefore, they will be much fresher in the morning and have much better improvement of symptoms in the morning. The concept has been explored by other compounds and is published in the literature. It's not rocket science, but maybe ensifentrine is rocket science, if it actually is able to deliver to these patients a good quality of life also when they are most vulnerable during the night.

------------------------------
 Shveta Vilas Dighe,  Wedbush Securities Inc., Research Division - Associate   [20]
------------------------------
 Okay. And just one more question. With cystic fibrosis, what are your plans to move forward? And when will be your -- about the plans, would this be after the initiation of the Phase III study in the first half of 2020 or before that?

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [21]
------------------------------
 Yes, thank you. It's a good point. We like CF. We think it's an important group of patients that really, really need a new anti-inflammatory treatment, as asthma for that matter. We have data to tell us that we could actually progress this type of trials. The dilemma for us, if you wish, is that we have to focus 100% on the nebulized formulation moving towards end of Phase II and into Phase III and in addition, of course, the DPI and eventually MDI formulations for COPD. So realistically, we will be into 2020 before we will be able to give you any firm guidance on how to progress. And it has to be longer trials in CF patients. And to do them correctly, we'll need to have the resources and the funding to progress, and I think that will be in 2020.

------------------------------
Operator   [22]
------------------------------
 I'm not showing any further questions. I'll now turn the call back over to Jan-Anders Karlsson for closing remarks.

------------------------------
 Jan-Anders Karlsson,  Verona Pharma plc - CEO & Executive Director   [23]
------------------------------
 Yes, thank you. Thank you, everyone, to joining us today. We look forward to reporting the next set of important clinical data already in March. So it's from the Phase II trial with the DPI formulation in COPD patients that we were talking about before. We do continue to review our ensifentrine development strategy in the context of additional data generated, including from clinical trials, regulatory interactions and market research, to identify opportunities to enhance and de-risk our late-stage development and commercialization.

 We just review the data from the Phase IIb clinical study. We believe we will be able to have robust discussions around regulatory pathways and the design of the Phase III pivotal trials. We continue to expect to complete our Phase II program late in the second half of 2019 before the end of Phase II meeting with FDA and before progressing into pivotal Phase III trials.

 We are scheduled to present on March 13 at the Cowen Healthcare Conference in Boston. We'll be conducting one-on-one meetings and look forward to catching up with some of you down. Thank you, operator. This concludes today's call.

------------------------------
Operator   [24]
------------------------------
 Ladies and gentlemen, this does conclude the program. And you may now disconnect. Everyone, have a great day.




------------------------------
Definitions
------------------------------
PRELIMINARY TRANSCRIPT: "Preliminary Transcript" indicates that the 
Transcript has been published in near real-time by an experienced 
professional transcriber.  While the Preliminary Transcript is highly 
accurate, it has not been edited to ensure the entire transcription 
represents a verbatim report of the call.

EDITED TRANSCRIPT: "Edited Transcript" indicates that a team of professional 
editors have listened to the event a second time to confirm that the 
content of the call has been transcribed accurately and in full.

------------------------------
Disclaimer
------------------------------
Thomson Reuters reserves the right to make changes to documents, content, or other 
information on this web site without obligation to notify any person of 
such changes.

In the conference calls upon which Event Transcripts are based, companies 
may make projections or other forward-looking statements regarding a variety 
of items. Such forward-looking statements are based upon current 
expectations and involve risks and uncertainties. Actual results may differ 
materially from those stated in any forward-looking statement based on a 
number of important factors and risks, which are more specifically 
identified in the companies' most recent SEC filings. Although the companies 
may indicate and believe that the assumptions underlying the forward-looking 
statements are reasonable, any of the assumptions could prove inaccurate or 
incorrect and, therefore, there can be no assurance that the results 
contemplated in the forward-looking statements will be realized.

THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION
OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO
PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS,
OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS.
IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER
DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN
ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S
CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE
MAKING ANY INVESTMENT OR OTHER DECISIONS.
------------------------------
Copyright 2019 Thomson Reuters. All Rights Reserved.
------------------------------