Stephanie Carrington - Investor Relations Jan-Anders Karlsson - Chief Executive Officer Piers Morgan - Chief Financial Officer.

Liana Moussatos - Wedbush Securities Joon Lee - SunTrust Robinson Humphrey Patrick Trucchio - Berenberg Capital Markets Julian Harrison - H.C. Wainwright Thomas Shrader - BTIG.

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 3 and 9 months ended September 30, 2018. 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 that was issued this morning before market opened. It includes the results for the 3 months and 9 months ended September 30, 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 third quarter 2018. Piers will then review the company's interim financial results for the 3 and 9 months ended September 30, 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 shortly following the conclusion of today's call. During the call, the team will be making forward-looking statements, and we remind you of the company's Safe Harbor language.

All statements that do not relate to matters of historical facts shall be considered forward-looking statements, including, but not limited to, those statements regarding RPL554 as a potential bronchodilator and an anti-inflammatory agent; the company's ability to provide a promising therapeutic effect through the delivery of RPL554; the timing of the top line data for an its ongoing clinical trials; stages in its clinical development plans based on additional data; and the potential for certain formulations of RPL554 to address larger market; and 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 results, performance and achievement to be materially different from 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 time in the future, it disclaims any obligation to do so, once event causes views to change. With that, I will now turn the line over to Jan-Anders.

Jan-Anders Karlsson Thank you, Stephanie. It's a pleasure to have the opportunity to provide you with a clinical development and business update today. As many of you know, RPL554, our lead project, the first-in-class bronchodilator and anti-inflammatory agent with positive Phase IIb data in COPD patients.

We are seeing consistent positive effect in the 12 clinical trials completed and over 730 subjects dosed to date, and RPL554 continues to be well tolerated.

During the next few quarters, we expect to see some important RPL554 clinical milestones, inclusive of the top line data from the ongoing Phase II trial with a nebulized formulation in January and top line data from a Phase IIa study with DPI formulation, or dry powder inhaler formulation, in the first half of 2019.

As we outlined in mid-October at the R&D Forum, there are about 16 million U.S. patients diagnosed with COPD. The significant number of these patients are uncontrolled and symptomatic, even with available therapies. About 3 million COPD patients are treated with a single bronchodilator, formally as a first-line therapy.

Many of them progress within a short period of time and need additional treatment. We estimate that approximately 2 million COPD patients in the U.S. are treated with dual LAMA and LABA bronchodilators with or without concomitant use of inhaled corticosteroids.

Despite such maximum dual or triple treatment, up to 40% or almost 800,000 patients are uncontrolled and continue to have breathing difficulties and COPD symptoms as well as face a higher risk of experiencing exacerbations and are in need of additional treatment.

As the disease progresses, physicians are looking for effective compounds with new modes of action. This has proven to be a challenge given the lack of innovation in the space and recent clinical trial setbacks. With RPL554, we are investigating a new treatment option for these patients in our ongoing Phase II clinical trial.

Just the other week, we enrolled the last patient in this Phase II study, evaluating nebulized RPL554 added on to dual LAMA/LABA therapy for the maintenance treatment of patients with moderate-to-severe COPD. This randomized, double blind, 3-way crossover trial has enrolled 79 patients with COPD at sites in the U.S. and U.K.

The trial is designed to investigate the efficacy and safety of nebulized RPL554 as add-on to an inhaled LAMA/LABA, in this case, tiotropium and olodaterol, or trademarks Stiolto Respimat, compared to placebo. Some patients have continued a stable dose of inhaled corticosteroid throughout the study, thus, providing a triple-therapy background.

It is anticipated that it will take several weeks to complete dosing and then finalize data analysis. As such, we now expect to report top line data in January 2019.

This ongoing Phase II trial will also provide important data to better understand the design of pivotal Phase III studies and the strategic commercial potential of nebulized RPL554 used in COPD patients remaining uncontrolled, symptomatic and at an increased risk of exacerbations, even when treated with dual bronchodilator therapy.

We believe that the positive effect in this add-on to dual bronchodilator study could significantly expand the COPD patient population by approximately 800,000 additional patients in the U.S. alone treatable with RPL554. As you may recall, this trial followed our first Phase IIb study on which we reported top line data in late March of this year.

In this study, RPL554 was demonstrated to be a very effective bronchodilator and to produce a progressive symptom improvement over the 4-week treatment period. RPL554 was well tolerated. On September 17, Professor Dave Singh, Professor of Clinical Pharmacology and Respiratory Medicine, MEU, at the University of Manchester in U.K.

presented an expanded dataset from this study in an oral presentation at the European Respiratory Society International Congress in Paris.

He provided further context around the clinical significance of these results, especially around the robust and clinically meaningful symptom improvement data that was consistent between the different patient reported outcome tools that he used.

He highlighted a potential for RPL554 as both a standalone therapy and as an add-on therapy to standard of care for patients with this progressive and debilitating disease, but there remains a high unmet medical need. At our Investor R&D Forum in mid-October in New York, Dr.

Singh elaborated on the further analysis of our Phase IIb results and fielded questions from investors and analysts in attendance. Dr. Bob Wise, Director of Research and Professor Division of Pulmonary and Critical Care Medicine at Johns Hopkins provided an in-depth discussion of the COPD treatment landscape and the high unmet medical need. Dr.

Gerard Criner from the Lewis Katz School of Medicine at Temple University presented a comprehensive review of the broader clinical development pipeline within COPD and commented specifically on the reduction of residual volume in RPL554 reported in our Phase II trials that he found particularly relevant for COPD patients with severe symptoms.

The COPD Foundation and the patient provided compelling insights into the living with the disease and the unfortunate realities of disease progression as well as highlighted the urgent need for novel agents for COPD for these patients that remain uncontrolled and continue to be symptomatic, despite currently available therapies.

Concurrent with a nebulized formulation, we are developing RPL554 in both the dry powder inhaler, or DPI formulation and a metered dose inhaler, or MDI, formulation for the maintenance treatment for patients with COPD and possibly other respiratory indications.

It is estimated that in the United States, approximately 80% to 90% of patients with moderate-to-severe COPD use inhalers for maintenance therapy. Successful development of a DPI or MDI formulation of RPL554 would greatly expand the addressable markets [indiscernible] and represent a multibillion-dollar potential opportunity.

Development of these new formulations is progressing according to plan. We have selected both DPI and MDI formulations and expect to start clinical trials in COPD patients with the DPI formulation December this year and a clinical trial with the MDI formulation on COPD patients to follow in the first half of next year.

These inhaler formulations will eventually become available for out-licensing to a partner with the right development and commercial resources. As you may know, if any effective anti-inflammatory treatments exists to patients with cystic fibrosis.

Data from a preclinical study under Phase IIa clinical trial evaluating RPL554 as a potential treatment for cystic fibrosis was presented at the 2018 North American Cystic Fibrosis Conference held in Denver from October 18 to 20.

Data from the trial showed that RPL554 stimulates rare Class III and Class IV cystic fibrosis transmembrane conductance regulator mutations and that RPL554 has a favorable pharmacokinetic profile and increased forced respiratory volume in one second, FEV1, among patients with CF, respectively.

We are excited about the possibility of using RPL554 in patients with CF and further studies in these patients will be planned as we have clarity on the Phase III program in COPD.

We continue to review our RPL554 development strategy in the context of additional data generated, including from clinical trials, regulatory interactions and market research, to identify opportunities to enhance and derisk our late-stage development and commercialization of RPL554.

Based on these review and data from the ongoing Phase II add-on study discussed earlier, the company will initiate the further clinical Phase II study to generate additional data to facilitate further derisk dose selection for Phase III program and the commercial positioning.

We are working on study design, while we await data from the ongoing add-on trial. Currently, we are contemplating a multiple-dose, parallel group trial of 2 to 4 weeks' duration in COPD patients on single or dual bronchodilator background treatment. Endpoints may likely include lung function, FEV1 and symptoms.

And with the additional data obtained in this setting, with closer to the expected commercial positioning, we believe we will be able to have a robust discussion around regulatory pathways and the design of the Phase III pivotal trials.

We continue to expect to complete our Phase II program in the second half of 2019 before progressing into pivotal Phase III trials. I will now turn the call over to our CFO, Piers Morgan, to provide a financial overview. Piers, please..

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 3 months and 9 months ended September 30, 2018, as well as our financial outlook. 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, balance sheet and cash flow statements for the 3 months and 9 months ended September 2018. 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 using the period and exchange rate from September 30, 2018, for your convenience at a rate of $1.3053 per British pound. Turning to the income statement, our operating loss for the 3 months ended September 30, 2018, was £6.8 million or $8.8 million compared to £8.1 million for the prior year period.

For the 3 months ended September 30, 2018, the loss after tax was £2.3 million or $3.1 million for the period compared to a loss after tax of £9.1 million for the prior year period. This represents a loss of £2.22 per diluted share or a loss of $0.23 per ADS for the 3 months ended September 30, 2018.

The total comprehensive loss for the 3 months ended September 30, 2018, was calculated as follows. Research and development costs for the 3 months ended September 30, 2018, were £5.3 million or $7.0 million, which is a decrease of £0.8 million compared to £6.1 million for the prior year period.

The movement was predominantly attributable to a £0.8 million decrease in clinical trial expenses.

In the third quarter 2017, the company incurred significant clinical trial costs in respect of its 400-patient Phase IIb trial to COPD maintenance treatment, comparatively, in the third quarter of 2018, the clinical trial costs in respect of our trial evaluating RPL554 as an add-on to LAMA/LABA maintenance treatment, which has enrolled a total of 79 patients.

General and administrative costs for the 3 months ended September 30, 2018, were £1.4 million or $1.9 million, which is a decrease of GBP 0.6 million compared to the £2.0 million for the prior year period. This reduction primarily reflects the decrease of £0.5 million in professional and market research fees compared to the prior year period.

Moving to finance income. For the 3 months ended September 30, 2018, this was £3.3 million or $4.3 million compared to £0.1 million 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 during the third quarter 2018, which is recognized as finance income compared to an increase in the liability in the same period last year, which was recognized as finance expense. In each case, these are noncash items.

Finance expense for the 3 months ended September 30, 2018, was £27,000 or $35,000 compared to £2.4 million for the same period last year.

The reduction was due first to the revaluation of the fair value of the warrant liability during the third quarter 2018, resulting in a gain for the 3 months ended September 30, 2018, and, therefore, recognized within finance income above and, secondly, to movements in foreign exchange rates, which resulted in a gain for the 3 months ended September 30, 2018, and, therefore, again, recognized within finance income, but then a £1.2 million loss in 2017.

Taxation for the 3 months ended September 30, 2018, amounted to a credit of £1.1 million or $1.5 million compared to the credit amount of £1.3 million in the prior year period. The credits were obtained in relation to a qualifying research and development expenditure.

Turning to the 9 months ended September 30, 2018, our operating loss was £18.3 million or $23.9 million compared to a loss of £19.1 million for the prior year period. Operating expenses for the 9 months September 30, 2018, decreased slightly due to reduction in clinical trial and preclinical costs.

The loss after tax for 9 months ended September 30, 2018, was £17.0 million or $22.1 million compared to £14.2 million for the prior year period. This represents a loss of 16.14p per diluted share or a loss of $1.69 per ADS for the 9 months ended September 30, 2018, compared to a loss of £17.4 per diluted share for the prior year.

We ended the third quarter of 2018 with £68.9 million or $89.9 million in cash, cash equivalents and short-term investments, which comprised cash deposits with maturity of more than 3 months.

Our net cash used in operation for the 9 months ended September 30, 2018, decreased to £13.1 million from £15.8 million for the 9 months ended September 30, 2017.

Cash used in operating activities increased, driven by great working capital movements in the 9 months ended September 30, 2018, relating to the timing and supply of payments compared to the 2017 period.

Offsetting this was a £4.6 million net cash inflow from taxation received for the 9 months ended September 30, 2018, compared to £0.8 million in the prior period. The net cash inflow in both periods is primarily related to cash receipt for U.K. research and development tax credits.

We expect that our existing cash, cash equivalents and short-term investments will enable us to fund our operating expenses and capital expenditure requirements through the end of our Phase II development in nebulized RPL554 for the treatment -- maintenance treatment of COPD and our proof-of-concept studies of DPI and MDI formulations of RPL554 for COPD.

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

[Operator Instructions] We will now take our first question from Liana Moussatos of Wedbush Securities. Please go ahead..

Thank you for taking my question.

With the additional dose finding Phase II having data in the second half of 2019, do you think you could start a Phase III in the first half of 2020, midyear, second half? How long do you think it will take you to get up to speed and get the Phase III going?.

Yes, hi Liana. It's Jan-Anders. Thank you for the question. It's a good question. The ambition is that, as we said, we want to achieve the end of Phase II meeting our regulatory discussions later in 2019 and as soon as possible, after that, start Phase III studies. So it will, by definition, be towards the end of next year or around year-end next year.

But we will, of course, plan for starting as fast as possible after the end of Phase II meeting as one would need to have with FDA, for example..

Thank you..

Thank you. We will now take our next question from Joon Lee of SunTrust Robinson Humphrey. Please go ahead..

Hi, thanks for the question. If you move outside the U.S. in terms of commercialization, what are some factors for RPL554 to consider in terms of use by clinicians? Do clinicians outside of U.S. have a different preference in terms of combination therapy strategies, i.e.

single versus dual bronchodilator use versus single or dual plus steroid, potentially with RPL554?.

Yes. Thank you. I think it's a very good question. As you understand, we focus very much on U.S. and FDA and achieved a good discussion with them. As regards to treatment of COPD, there are GOLD guidelines, which are international and which seems to be followed in most countries, not in detail, not completely, but in terms of U.S.

and Europe and also Japan, I think, with key opinion leaders. And in markets in between, key opinion leaders have a very similar opinion of starting maybe with one or, in the future perhaps, two bronchodilators as the first treatment and moving on to steroids at a later stage, inhaled and then perhaps oral. So that is quite similar.

So we believe that it's possible to run, for example, a pivotal - a series of pivotal Phase III trials on a global basis with quite a similar approach to design, to background treatment and to endpoints.

So FEV1, for example, as symptoms are recognized by all regulators in quite a similar way, if you look at GPs at a more near to patient level in different countries, they may not follow the GOLD guidelines completely. It's quite clear that many start with an Atrovent-like treatment and other starts with a Spiriva-like treatment.

And perhaps, it's a little unclear for some of those GPs if the patient in front of them really is an asthmatic or a COPD patient, and that's maybe why they err on the side of using Atrovent. But I believe our program could be run as a global program with quite a similar layout in multiple regions and multiple countries across the globe.

And of course, we'd be interested in having a global approval with RPL554.

Does that answer your question?.

Yes. Thank you..

Thank you..

Thank you. We will now move to our next question from Lucy Codrington of Jefferies. Please go ahead..

Hi there, thank you for taking my questions. I just have a couple. The first, sorry, I missed it when you are outlining the plan for the additional dose ranging study.

Did you say how many doses you were planning to evaluate in that study? And also, if I recall correctly, when you presented the expanded Phase II data, there was a suggestion that perhaps a lower dose might be required for mono therapy whereas a higher dose might be required for add-on therapy.

Will you be evaluating this further in this trial? And then my next question just relates to how the search for new CMO is progressing? Thank you..

Thank You. Hi Lucy, so, yes, good question. So I did not actually mentioned because we have not decided yet the number of doses and, actually which doses to use.

Relating to the second question on lower doses as a single standalone agent, being as effective as perhaps higher doses when you use it as an add-on, and I think that's a correct observation in our four-week study, for example, on our background treatment, we had a very good effect, as you obviously noted, on the lowest dose.

But if we go up to add it on tiotropium or Spiriva, then it seems to require little higher doses to have a full effect of the compound. So we haven't decided, and that's why we are also waiting for the data from the ongoing trial, which is an add-on to LABA/LAMA. And we wanted to understand if, in that situation, you may need an even higher dose.

So we want to explore fully the outcome of that study before we decide if it's a couple of doses or a larger dose range, if all doses seems to be about equally potent to equally effective. So that we'll communicate that as soon as we start the study, which will be early next year, I hope. So that's the plan.

And then on the CMO search, of course, we are interviewing. Of course, we are looking to employ the appropriate person as soon as possible. And we are actually quite excited about the candidates that we are able to talk to. So we'll get back to you as soon as we have the right candidate in place..

Okay, thank you..

Thanks..

Thank you. We will now move to our next question from Patrick Trucchio of Berenberg Capital Markets. Please go ahead..

Thanks, good morning. I'm sorry if some of these were already asked. I hopped on the call a little bit late. I've got a few questions.

First, in the combination study, can you remind us why Stiolto was chosen for the combo study? Do you anticipate studying RPL554 on top of additional LAMA/LABAs? Or is Stiolto going to be what you'll use in the future - in future combo studies?.

Yes. Can I answer that first? So yes, Stiolto is a combination of tiotropium, so hi Patrick. High tiotropium and olodaterol from Boehringer, and we designed the ongoing study to be mimicking, in greatest detail, the study we did with tiotropium alone.

So we do understand it's two separate studies, but we also wanted an anchor point with our previous study that was recently reported in the European Respiratory Journal, so that we can compare, to some extent at least, and understand what is the size of the response and what is the response we have with RPL554. We know what it is on tiotropium.

Now we want to know what it looks likes on tiotropium plus olodaterol, so that's the Stiolto combination. And so that's why we used this particular LAMA/LABA combination. So for future studies, we would envisage, although it's not decided yet, but that we have a broader approach.

So in a way, I believe, that many of these LAMA/LABAs are quite equivalent. Of course, there are similarities and some small differences between different individual compounds, but the combinations are quite similar in how they behave and how they also affect patients.

So we believe that this is a good representative for any of the LAMA/LABA that is out there. And we'll probably take a broader approach on pivotal trials to allow broader use once it's passed its pivotal Phase III trials..

Yes, that make sense. And then, so more on the Phase II combo studies. If this study pSo the primary endpoint is peak FEV1 on day three.

If this study reads out positively, should be expect -- first, I guess, what would that look like? Is that a 50-milliliter improvement as a 100-milliliter improvement? And should we expect a similar result in a longer study? How predictive is a three-day study for, perhaps, a one-month or a six-month study?.

Yes, good question. And I'll look in the crystal ball and that's, of course, not always super clear. But I think from the perspective of peak FEV1, we have in our previous study about 120 milliliters or so with the - on top of tiotropium with a six-milligram dose. So we study exactly the same doses, now 1.5 and 6 mg.

We expect that there will be a little bigger difference between the 1.5 and six milligram to be determined. The size of the overall responses are, of course, very difficult to guess, but I think our feeling is that we expect that it will be kind of similar, but maybe not quite as positive as we had it in the previous study.

And actually, what we hear from the physicians is that if patients inhaled a bronchodilator, there is, of course, between patients, but they, many times, say they can't feel an improvement after as little as 40, 50-milliliter improvement in FEV1 with the treatment.

So as long as we have a statistically significant improvement that is also meaningful to the patients, we will think that would be an important response in this upcoming trial.

And you asked the question, so if that is a good response as we expect to see, of course, in a three-day study, would that also hold for a longer study? Our expectation is yes, we expect that this mechanism is not waning in its activity over time.

And so we believe that it will be a similar response, so quite similar over a three months' or a six months' period. That's, of course, the basis for a approvable drug. And that is how other bronchodilator with different mechanisms act.

And we believe inhibiting an enzyme is even less influenced by any tachyphylaxis or tolerability than a receptor agonist or antagonist. So we believe that this will be an effective treatment.

We expect that it also will be an effective treatment over a prolonged period of time, beyond three days for the duration of the pivotal trial, which maybe six months as we counted now..

Okay, Great. And then just lastly on the - on some of the secondary endpoints. As I understand it, you're taking a look at some of the symptoms of COPD.

But in a three-day study, is it that may not be the best duration to look at those symptoms and that - but should we expect if there is that improvement on a statistical and clinical basis in terms of FEV1 improvement that in the longer duration study, we should also see an improvement in the symptoms? Or can you just talk to the correlation there between the FEV1 improvement and how we should expect that to impact the symptoms?.

Yes, I think symptoms, you're correct. Three days is too short to have a good read on symptom improvement. And especially if you look at the Phase IIb study in 400 patients that we have completed, there was a progressive improvement in symptoms over four weeks.

With a good response after one week, we don't know shorter than one week, we didn't measure that. But it then continued to progress over four weeks. And we believe it will continue beyond four weeks to improve. So of course, three days is a short so this is a short term.

But having said that, we will measure small airway function, so that's resistance and conductance in small airways. So we'll measure that in a [indiscernible] with CAT seismography and that is then translated into this concept of residual volume. So that is how we did in the previous two studies that we've used as an add-on.

We looked at the residual volume change, and they were quite dramatic, very significant. And we expect that we will see similar changes in this study that we are running right now as top of an add-on because this is less dependent than FEV1 on the - having two bronchodilators in place already.

So we believe that could be still a good and a significant effect. And if that translates into what we expect will be a positive effect on residual volume, that is then directly correlated, in many instances, to symptoms.

So this is a short-term physiological measure that, we believe, will translate into - also as it has done in previous studies, translate into symptom improvement also in longer studies. But to see the full effect of symptom improvement, we need to go to four weeks or perhaps even two months or three months.

But the short term, as we have seen in the other study, the effect on residual volume, we believe, will be a good indicator that this compound in this setting also have a good chance to improve symptoms in this group of patients, even if they are on double or triple therapy. So we very much look forward to that data..

Got it, that’s helpful. Thanks very much..

Thank you. We will now move to our next question from Ram Selvaraju of H.C. Wainwright. Please go ahead..

This is Julian on for Ron. I just have some questions on the cystic fibrosis front. First, the data showcased last month that a ACF were encouraging.

And just in light of that, I was curious if you see any applicability of RPL554 beyond Class III and IV CFTR mutations at this time? If so, what worked in the preclinical or clinical setting could help further elucidate that?.

Yes. Thank you. Hi Ram. So you're correct, we think it's very encouraging, actually it's very few patients with these particular mutations in the CFTR, but there may be a particular need of additional treatment.

So we were very encouraged when we saw - as we've seen before that in some of these mutations, we have an independent effect of our compound as a standalone compound. And we also have a very nice additional effect on top of what can be in KALYDECO. We haven't studied the newer combinations because we expect it would look the same.

So I think when we look in CF patients in future studies, we would be very interested in trying to understand if our compound as a standalone that is fine, but also because many of these patients will be on KALYDECO, ORKAMBI or tezacaftor and the new combinations that we will have an opportunity to see not only a good effect of the compound 554 on its own in CF patients, but also in patients that already are on CF therapy, be it these particular compounds or perhaps others in the future.

And of course, what we will do in the meantime is to continue to work on mutations that are rare, but also work on other aspects of our compound, other effect in patients' cells with different mutations from these CFTR mutations. So we continue to do a little bit of preclinical work.

And the ambition is really to lay a foundation for understanding better how we should expect to study patients with CF in upcoming studies. When we have decided on the Phase III program for COPD, we will turn our attention also to patients with CF, which, I think, really need an anti-inflammatory drug.

And if it's also like our compound, an anti-inflammatory drug with an effect on CFTR, this combined above with existing medications, we think that could be very attractive propositions for these patients..

Okay, great, thanks very much..

Thank you..

Thank you. We will now take our next question from Tom Shrader of BTIG. Please go ahead..

Hi, good morning. Good to hear your voice again..

Hi Tom..

So I have a quick question on the DPI, MDI world. So, most of the big players have their own devices. They make a fair bit of noise about them. Did they matter? Does every compound work with every device? And do you have to sort of tailor your trial to potential partners? Just your thoughts on the device compound interaction..

Yes, it's a good question. Thank you. The - this holds true, particularly for dry powder inhalers. And yes, it is correct. If you listen to some of these manufacturers, they have a particular liking to their own device, which is maybe not so surprising.

What we are doing is we are developing a formulation of our compound for a DPI device and an MDI, which can then be adapted, we believe, to any device. So we think it's independent of device.

There are some other technicalities around this device, but for the compound and the formulation, we think, it would be appropriate as far as we understand it today, at least, to use it in any type of DPI device, which will be our ambition to, perhaps, be a part of any of those companies that would want to work with us in that type of setting.

It's quite different with a metered dose inhaler. Today, you develop a canister and that canister is then the same, irrespective of what device or plastic that you fit around this canister.

Today, I think, the device that we are - or canister, that's how I should say, that we are developing together with the formulation is more likely to be a final product or closer to the final product. And we can move that survey into development, whereas the DPI, of course, one, they will depend on exactly the device that is being used.

So our strategy is to be a facilitator of RPL554 formulation to be used in all these devices, to really reach the 80%, 90% of COPD patients that actually prefer to use this type of inhaler, rather than necessarily a nebulizer..

And do you have to do both or do you expect to choose?.

I think we expect to choose, frankly speaking.

I think, for us, we will do both in a first trial - a Phase IIa trial in COPD patients and their independent trials because it's basically understanding the dose range, the effective dose versus the higher dose that we can achieve in these patients and also looking for a smaller dose, of course, and then understand if there's a difference between a dry powder formulation or a formulation that comes out of a metered dose inhaler.

We don't see any reason why there would be a difference, but it might be in terms of pharmacokinetics or something else that we're not aware of yet. So that's why we wanted to pursue both into the clinic. Secondly, we wanted to make available to a partner what they would prefer.

So as you know, of course, some of these companies that are already present in the space have their own device. They have their own technology platforms. And we'd like to be a good partner and fit into any of those that is meaningful and they would want to work with us in a professional way.

We'd also like to, yes, we just like to say, we'd like to also create some value by really understanding what is the difference between the two formulations and also what the potential effectiveness and safety of such a device, so that we have a better understanding of the value when we go into a commercial partnering discussion in the future..

Thank you. [Operator Instructions] We will now take the followup question from Liana Moussatos with Wedbush Securities. Please go ahead..

Thank you. Piers, could you repeat what you said about cash runway? And then Jan-Anders, you made a comment comparing inhibitor of an enzyme versus inhibitor of a receptor.

Was there any kind of general take-away from that?.

Hi, Liana, yes, thanks for the question. Yes, so the cash runway enables us to complete our Phase II studies with RPL554 for maintenance treatment of COPD with the nebulizer and also to do our proof-of-concept studies with DPI and MDI formulations, and we retain significant cash probably beyond that..

Liana, does that answer the question?.

The comments about inhibiting an enzyme versus inhibiting a receptor, do you have any general comment on that?.

Yes, yes. So the reason is that if you look at treatment with beta-2 agonists, it is well known when you stimulate them that you also reduce the number of beta-agonist on the cell surface of the muscle, for example, and other cells.

So it is known that if you use a beta-2 agonist over long period of time, you have a little - you have a loss of many receptors, but are too many anyway, so it's fine, but you lose a little bit of function. So a long-term beta agonist is better if you look at the data on Day 1, Week 1 than it is six months or 12 months later.

It still works, but it's not quite as effective. It's more acute, perhaps, in patients with an exacerbation when you really overdose with high doses of, for example, nebulized albuterol, then you can really risk down regulation and losing activity of the compounds. You would lose the beneficial effects, to some extent.

So this is - so this is down regulation of receptors, excuse me, but for enzymes, it's quite different. There is no reason to believe that there's any down regulation of the enzyme, per se.

So you we would expect to have the same level of enzyme, the same level of inhibition and, therefore, a constant response over time with RPL554 being an - a positive esterase enzyme inhibitor. So that was the reason for my comment..

Thank you very much..

Thank you. As there are no further questions in the queue, I would like to turn the call back to Jan-Anders Karlsson for any additional or closing remarks..

Thank you, and thank you, everyone, for joining us today. We are looking forward to the upcoming clinical data readouts in January, first of all, and then secondly, in the first half of next year with the dry powder inhaler formulation.

And we are on track to complete the Phase II program for nebulized RPL554 in COPD in the second half of 2019 as we have mentioned before. So we are scheduled to present next week at the Stifel Healthcare Conference in New York and at Jefferies Healthcare Conference in London.

We will be conducting one-on-one meetings, and we look forward to catching up with some of you there. So thank you, operator, and thank you. This concludes today's call. Thanks very much..