nebulizer, dry powder inhaler and pressurized metered dose inhaler formulation.

Importantly, we continue to receive positive feedback from leading pulmonologists who are impressed by the magnitude of lung function and symptom improvements nebulized ensifentrine has demonstrated on top of standard of care therapy to treat uncontrolled symptomatic COPD patients.

I will now turn the call over to Mark Hahn, who will review our first quarter 2020 financial results..

Thank you, Dave. Let’s turn to the review of the financial results for the first quarter of 2020 ended March 31, 2020. Please refer to the press release that we issued this morning which is also being filed as a 6-K with the SEC. Given that we are headquartered in the U.K., our financial results are in British pound sterling.

For your convenience, we have included a translation to U.S. dollars based on the noon buying rate of the Federal Reserve Bank of New York on March 31, 2020, which is GBP 1 to $1.2454. Turning to the income statement for the first quarter of 2020.

Our operating loss for the 3 months ended March 31, 2020, was GBP 11.2 million or $14 million compared to GBP 7.8 million for the 3 months ended March 31, 2019. The loss after tax for the first quarter of 2020 was GBP 9.6 million or $12.04 million compared to GBP 5.4 million for the same quarter in 2019.

This represents a loss of [GBP 0.091] per diluted share or a loss of [$0.88] per ADS for the first quarter ended March 31, 2020, which compares to a loss of [GBP0.051] per diluted share for the prior year period.

Research and development costs for the first quarter ended March 31, 2020, were GBP 5.9 million or $7.3 million compared to the GBP 5.9 million reported for the first quarter 2019, representing essentially no change.

In the 3 months ended March 31, 2020, these expenses were driven primarily by preparatory costs for our planned Phase III program, wind down costs for the Phase II program and related CMC costs. In the same period in 2019, R&D included costs for the Phase IIb program and the ongoing DPI Phase II, along with related CMC costs.

General and administrative costs for the quarter ended March 31, 2020, were GBP 5.3 million or $6.6 million, an increase of GBP 3.5 million or 194.4% compared to the GBP 1.8 million reported in 2019.

The increase was primarily attributable to a GBP 2.7 million increase in costs relating to executive changes and closure of our New York office as our U.S. base of operations has moved to North Carolina.

Finance income, net of finance expense was GBP 0.3 million or $0.4 million for the quarter ended March 31, 2020, compared to GBP 1.8 million for the quarter ended March 31, 2019.

Finance income and expense are largely noncash entries driven by foreign exchange differences on cash and short-term investments and changes in the fair value of the warrant liability from year-to-year.

The tax credit reported in the income statement is related to an R&D tax credit in the U.K., which is based on our qualifying research and development expenditures. Similar expenditures on research and development has resulted in approximately the same tax credit year-on-year.

Verona Pharma ended the first quarter 2020 with GBP 20.8 million or $26.1 million in cash, cash equivalents and short-term investments. In April, we received $7.3 million in cash related to the R&D tax credit for 2019.

On a pro forma basis, after giving effect to the tax credit receipt, our March 31 cash equivalents and short-term investments would be GBP 28 million or $34.8 million. We expect that our existing cash, equivalents and short-term investments will enable us to fund our operations and capital expenditure requirements through the end of 2020.

However as Dave mentioned earlier, we will need to raise additional capital to fully fund our Phase III clinical trial program for nebulized ensifentrine in the treatment of COPD. I’ll now turn the call back to Dave..

Thanks, Mark. We’ve made substantial progress during the first quarter, and we look forward to the important achievements expected in Q2 as well as starting the Phase III clinical trials for nebulized ensifentrine later this year. I’ll turn the call back to the operator to open it up for the question-and-answer session..

[Operator Instructions] Our first question will come from Lucy Codrington with Jefferies. Please go ahead..

Hi there, thank you for taking my questions. I have just a couple for me. So I just wanted to confirm in terms of the fundraising that you would only start the Phase III if you had raised all the funds required to complete the program.

Or could you consider just a partial raise just to get the study off the ground? And then on a related note, I guess it would be interesting to hear what kind of alternative forms of financing Verona might consider in order to start the Phase III. Would Verona ever consider actually giving up U.S.

rights in order to get the Phase III started? Or are there any other geographies in which there’s been particular interest? Thank you..

Thanks so much for the question.

Mark, would you like to handle that?.

Sure, sure, happy to. So for the first part of the question, yes, I think it’s in everyone’s best interest, patients’ best interest that we raised the appropriate amount of capital to complete the study before we start it. We don’t want to be in a situation where we start and then have to stop later on.

From a form of capital perspective, we are looking across a variety of different avenues of financing from straight traditional equity financing through to a combination of equity plus debt or even heavily geared towards that. And in the middle, we’re also looking at things like different royalty finance options.

I suspect that what we will end up doing is a combination of a couple of the different vehicles. But again, I think that equity will be a significant piece of the fundraising that we do to fund the study..

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

Good morning. Congratulations on all the progress. Now one question on the pivotal trial design and the FDA guidance you’re expecting. Presumably, FEV is going to be important. Is the window that FEV is measured going to be crucial to your plans? I would suspect you want to catch the effect of the second dose.

So just your thoughts on -- is that a big deal for you, the primary end point, how FEV is measured?.

Yes. Thanks, Tom, for the question. And as we previously guided, we do think we are looking at a primary end point related to lung function and FEV1. So clearly, the measurement is important. And maybe I’ll ask Kathy expand on our thinking about how we’re capturing that and measuring our FEV1..

Sure. Thanks, Dave. So our primary end point is FEV1 0 to 12 hours, which is an end point that is well precedented with the FDA and looks at the effect over the 12-hour period of the drug, and this is particularly important for a twice-a-day drug. So that is the primary end point we’re looking at..

Okay. Thank you. And then a different question.

With the COVID issue, do you plan to use sites in Asia? And how much Asian data do you think you could add if you need to get started where COVID is not an issue? Just your thoughts on geography?.

Right. Thanks for that. Yes, of course, the COVID-19 situation is a bit fluid. We are evaluating it daily and assessing our plans.

As we’ve guided, we believe we have a path forward to begin the trials later this year, but we’re monitoring that constantly to ensure that one of the elements we think will be important, of course, will be testing for the Corona virus within the trial, clearly on a prescreening basis prior to the trial and possibly during the trial as well.

So there needs to be a number of items that come together. Of course, the status of the virus at that time later in the year will be important to understand in addition to the testing. We are looking at sites across the world, and we continue to do site feasibility. We are assessing sites in Asia as well.

And I don’t know, Kathy, you want to have additional comment on our approach for site selection?.

Sure. So primarily, we’re looking at U.S., Eastern and Western Europe and potentially Russia. We also are assessing some sites in Asia and so forth. And as we look at the feasibility, we’ll be able to make more determination about that later on in the year..

Our next question will come from Liana Moussatos with Wedbush. Please go ahead..

Thank you for taking my questions. So it looks like some states are starting to allow elective procedures.

Could this mean that you could start the multiple dose Part b study for the MDI formulation sooner rather than later?.

Well, yes, I think that we look at that again daily and weekly to assess when the best time to start that trial. We should also keep in mind that it’s not critical to complete that portion of the MDI study related to advancing the program into Phase III and starting the Phase III clinical trials.

And so we want to make sure we do it properly carefully. We also have done that work in the U.K. to date and continue to look at continuing it there and possibly moving it if we need to. So actually, the situation in U.K. is directing us a bit more on the MDI.

But again, as important as it is to advance in our understanding and completion of the work for the MDI, it’s not critical to our advancement in Phase III. I don’t know, Kathy, if you want to add more to your current assessment of when we could start the pMDI..

Sure. I think we’re looking at the later part of this year, where as Dave said, the first part was primarily done in the U.K.

We are also looking at adding some additional sites both in possibly Western Europe in countries such as Germany that may not be as effective and in several Eastern European sites that also seem to have a less effect from the COVID-19..

[Operator Instructions] And we do have a question from [indiscernible]. Please go ahead. I’m sorry, we seem to have lost [Mr. Hart] and I’m showing no further questions from the phone lines at this time. I would now like to turn the call back over to management for any further remarks..

Great. Thank you, operator, and thank you, everyone, for joining us today. We appreciate your continued support and look forward to updating you on our clinical development progress for ensifentrine. We hope that you, your families and colleagues stay safe and healthy during this time. Look forward to speaking with you all soon..

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect, and have a wonderful day..