Welcome to Verona Pharma's conference call. [Operator Instructions] Earlier this morning, Verona Pharma issued a press release announcing top line results from its Phase III ENHANCE-2 trial, evaluating nebulized ensifentrine for the maintenance treatment of COPD.

The company also issued a press release announcing its financial results for the 3 months ended June 30, 2022. Copies of both press releases can be found on the Investor Relations tab on the corporate website, www.veronapharma.com. .

Before we begin, I'd like to remind you that during today's call, statements about the company's future expectations, plans and prospects are forward-looking statements. These forward-looking statements are based on management's current expectations.

These statements are neither promises nor guarantees and involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from our expectations expressed or implied by the forward-looking statements, including, without limitation, the impact of the COVID-19 pandemic and the Russia-Ukraine complex on such progress and on status, recruitment, timing, results and cost of our clinical trials.

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Any such forward-looking statements represent management's estimates as of the date of this conference call. While the company may elect to update such forward-looking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause its views to change.

As a reminder, this call is being recorded and will remain available for 90 days. .

I'd now like to turn the call over to Dr. David Zaccardelli, Chief Executive Officer. Please go ahead. .

Thank you, and welcome, everyone, to today's call to discuss the positive top line results from our Phase III ENHANCE-2 trial, as well as Verona Pharma's second quarter financial results and operating highlights. .

With me today are Mark Hahn, our Chief Financial Officer; Dr. Kathy Rickard, our Chief Medical Officer; Chris Martin, our Senior Vice President of Commercial; and Dr. Tara Rheault, our Senior Vice President of Research and Development. In addition, we are very pleased that Dr.

Antonio Anzueto, Professor of Medicine and Section Chief of Pulmonary at South Texas Veterans Health Care System, is joining us today to provide his thoughts on the exciting study results and will be available during the Q&A portion of the call. Note the slides we are showing today will be available on our website after the call. .

As we endeavor to address the significant unmet need faced by patients with COPD, we are very pleased to announce positive top line data from our Phase III ENHANCE-2 trial, evaluating nebulized ensifentrine for the maintenance treatment of COPD.

As a reminder, the ENHANCE-1 and ENHANCE-2 trials replicate measurements of efficacy and safety over 24 weeks, and ENHANCE-1 also evaluates longer-term safety over 48 weeks.

The trials were designed to enroll approximately 800 moderate to severe symptomatic COPD subjects for a total of approximately 1,600 subjects across sites primarily in the United States and Europe. .

In summary, ensifentrine has successfully met the primary endpoint and secondary endpoints evaluating lung function in the ENHANCE-2 trial. In addition, ensifentrine treatment resulted in a significant reduction in rate of exacerbations. Ensifentrine was well tolerated with safety results similar to placebo. .

So now let's walk through the study results. First, let's review the types of subjects enrolled in the study. Overall, the demographic and disease characteristics were very well balanced between the ensifentrine and placebo groups.

The study enrolled moderate to severe symptomatic COPD patients with compromised lung function, with a predicted post-bronchodilator FEV1 of approximately 50% in both groups. .

The study population included approximately 52% of patients on background therapy, including either a long-acting muscarinic antagonist, a LAMA; or a long-acting beta agonist, a LABA, and 15% of all subjects received inhaled corticosteroids, or ICS, in addition to their bronchodilator medication. .

On the next slide, let's review in detail each of the lung function study endpoints by looking at the serial FEV1 curve over 12 hours at week 12.

The primary endpoint of average FEV1 AUC 0 to 12 hours post dose at week 12 demonstrated a placebo-corrected, highly statistically significant and clinically meaningful improvement at week 12 of 94 milliliters, with a p value of less 0.0001. .

We are also pleased that secondary endpoints evaluating lung function were met.

Statistically significant and clinically meaningful increases in placebo-corrected peak FEV1 of 146 milliliters 0 to 4 hours post dose, with a p-value of 0.0001; and morning trough FEV1 of 49 milliliters, with a p-value equal to 0.0017 were observed at week 12, supporting a twice daily dosing regimen. .

As noted on the next slide, all subgroups, including gender, age, smoking status, COPD severity, background medication, ICS use, chronic bronchitis diagnosis, FEV1 reversibility and geographic region, demonstrated statistically significant improvements in the change from baseline in average FEV1 AUC 0 to 12 hours at week 12 with ensifentrine. .

We are incredibly pleased to show on the next slide that subjects receiving treatment with ensifentrine had a significant 42% reduction in the rate of moderate or severe COPD exacerbation compared with placebo over 24 weeks, with the p value of 0.0109.

As a reminder, an exacerbation was defined in the protocol as a worsening of symptoms requiring either a minimum of 3 days of treatment with oral or systemic steroids and/or antibiotics or a hospitalization. .

On the next slide is the Kaplan-Meier graph, which displays the exacerbation events in each group over the study period. Specifically, the occurrence of exacerbations separated early in the ensifentrine treatment group continued to demonstrate reduced rate of exacerbation events over 24 weeks.

Treatment with ensifentrine significantly decreased the risk of an exacerbation as measured by time to first exacerbation when compared with placebo by 42%, with a p value of 0.0088. We believe this outstanding result is due to ensifentrine's anti-inflammatory activity in addition to its improvement in lung function. .

On the next slide, let's review the secondary endpoint measurements of symptoms and health-related quality of life measures. The improvement in daily symptoms observed via the evaluating respiratory symptoms, or E-RS total score, in the ensifentrine group exceeded the MCID of minus 2 units at week 24.

However, this result was not statistically significant as the placebo arm continued to improve over time. .

Furthermore, the improvement in health-related quality of life observed by the St. George's Respiratory Questionnaire, or SGRQ total score, in the ensifentrine group exceeded the MCID of minus 4 units at week 24. However, again, this effect was not statistically significant as the placebo arm continued to improve over time. .

Numerical improvements in these measures in the ensifentrine treatment group were seen as early as 6 weeks and showed continued improvement at 12 and 24 weeks, exceeding placebo at each measurement.

We are continuing to evaluate the observed results of E-RS and SGRQ to determine if conducting the trial during the COVID pandemic may have affected the results of these subjective measurements of COPD symptoms and quality of life. .

Turning to safety results on the next slide. Ensifentrine was well tolerated, with safety results similar to placebo, including occurrence of pneumonia, gastrointestinal and cardiovascular adverse events. Treatment-emergent adverse events exceeding 1% and greater than placebo events were relatively few and comparable to placebo. .

Finally, the next slide summarizes the top line data from the ENHANCE-2 trial. We are delighted with the ENHANCE-2 trial results, which we believe highlight the important potential of ensifentrine to treat symptomatic COPD patients. We plan to release additional information from ENHANCE-2 at upcoming scientific conferences. .

Looking ahead, we are on track to report top line data from ENHNACE-1 around the end of the year. If the ENHANCE-1 data are also positive, we plan to submit a new drug application to the FDA in the first half of 2023 for inhaled ensifentrine for the maintenance treatment of COPD. .

I will now turn the call over to Mark to review our financial results for the second quarter of 2022. .

Thank you, Dave. We ended the second quarter of 2022 with $111.5 million in cash and equivalents. We believe our cash and equivalents at June 30, 2022, expected cash receipts from the U.K.

tax credit program and funding expected to become available under the $30 million SVB debt facility, will enable us to fund our planned operating expenses and capital expenditure requirements through at least the end of 2023. .

For the 3 months ended June 30, 2022, the loss after tax was $17.8 million compared to a loss after tax of $22.1 million for the same period in 2021. This represents a loss of $0.04 per ordinary share for the 3 months ended June 30, 2022, compared to a loss of $0.05 per ordinary share in the same period of 2021. .

Research and development costs were $15 million for the 3 months ended June 30, 2022 compared to the $20.6 million reported for the same period in 2021.

The decrease of $5.6 million was primarily due to a $4.2 million decrease in clinical trial and other development costs as we progress to the later stages of our Phase III ENHANCE program, and a $1.9 million decrease in share-based compensation charges. .

Selling, general and administrative expenses were $5.5 million for the 3 months ended June 30, 2022, compared to $8 million reported for the same period in 2021. This decrease of $2.5 million was primarily due to a decrease in share-based compensation charges. .

The U.K. R&D tax credit remains an important element in our financing strategy. As you will recall from previous calls, we are eligible to receive a cash payment from the U.K. government based on our prior year's qualified R&D spend under the U.K.'s SME R&D tax credit program.

In 2022, the program was modified to create caps could limit the amount of credit available to a company. In the first quarter, we accounted for this credit, assuming Verona Pharma would be subject to the cap. .

However, we recently received guidance from the HMRC that would qualify for certain exemptions from the cap. Therefore, we recorded the full credit for Q2. And also in Q2, we recognized an incremental $2.3 million relating to catching Q1 up to the full credit amount.

As a result, the R&D tax credit for the 3 months ended June 30, 2022, was $5.4 million or $1.6 million higher than the $3.8 million credit for the 3 months ended June 30, 2021. .

In the next few months, we intend to submit a claim for approximately $14 million related to our 2021 R&D spend. We expect to receive the reimbursement payment later in 2022, further strengthening our balance sheet as we prepare to receive ENHANCE-1 data. .

I'll now turn the call back to the operator for the Q&A. .

[Operator Instructions] The first question today comes from Suji Jeong with Jefferies. .

Congrats on the really good data. I have a couple of questions. The first one is when you look at the exacerbation data, was there any subgroup that had more benefit -- a greater benefit than other groups? And the second question is about the commercialization plan.

With the exacerbation data that you showed today, have you considered any changes to your plan to commercialize ensifentrine? Previously, you guys said that about 100 sales force could be able -- might be able to target those prescribers. I'm just wondering with this data today, if there has been any changes to the plan. .

Thanks, Suji, for the questions. With regard to exacerbation data and subgroup analysis as this is the top line data, we haven't had a chance to look at that data specifically. Of course, we will over time. So stay tuned for that. And with regard to commercialization, I'll turn it over to Chris Martin for his comments. .

Thanks, Dave, and thanks, Suji, for the question. When we look at the commercialization plans, we still anticipate that a sales force of about 100 reps would be able to reach the opportunity.

As you look at the market, one of the things that's very interesting is the concentration of prescribers across all these drugs that are used in COPD is very small.

So if we look at some of the products that are on the market, it ranges from about 1,200 physicians doing 70% of the scripts to a little over 15,000 physicians doing 70% of the volume of prescriptions as well. So we believe that 100 sales rep number is a very good estimation for what we will need to go and commercialize ensifentrine. .

This is Dr. Anzueto. I just would like to a comment of your observations. Certainly, it will be interesting to see if there is any specific subgroups. But if you look at the Kaplan-Meier curves of the -- so the first exacerbation, this is something that is very consistent and actually separates over time.

So having a patient population with moderate to severe COPD, I will anticipate that we're going to see the effect pretty much across the board. .

The next question comes from Andreas Argyrides with Wedbush Securities. .

Definitely, congrats on these very exciting results. So for Dr. Anzueto, how are you thinking about exacerbations versus symptoms, quality of life measures in terms of prioritizing one over the other? And then I have one follow-up. .

Sure. Yes, so I think there's a couple of important issues here. I think it's important to emphasize that this is a medication who has both anti-inflammatory and bronchodilator effects. So we see the bronchodilator effect in the other phosphodiesterase that we cannot see even with the oral medication.

So there -- it's an bronchodilator and works very well. I mean there is -- the data is very strong. I think what it makes more interesting is the significant reduction in the exacerbation.

The impact in exacerbation having 42% decrease of the rate of exacerbation and a similar 42% decrease of the time to the first exacerbation, I think this is really striking. .

Certainly, the -- so how we translate that into a quality of life? I mean the quality of life if you look at the Slide #10, when patients will receive -- for example, at 6 weeks, there is a very striking difference between the intervention group versus the placebo. This effect kind of gets lots over time. I think there are several issues.

Some of the issues are were losing some individuals, the people who stay are more [ feeded ]. And as also, and it was mentioned before, we have to understand the impact of the pandemia and this at 24 weeks.

So having the second Phase III trial that's going to be a longer than ENHNACE-1, so we're going to be able to better understand the impact in quality of life. But the fact that we've seen this significant decrease in exacerbation at 24 weeks, I think is very remarkable. .

Okay. And then just quick follow-up -- and then I'll just add it.

So was there any difference in the E-RS and SGRQ scores in patients that were on background or -- versus those that were not on background?.

Yes. And as mentioned before -- sorry, I'll just say that the analysis hasn't been done yet. So but we'll -- of course, with the data set at this size, there's an enormous amount that we can look at in subset analyses, which we will do over time with the proper care. But I think we're just reviewing the top line today. .

Okay, fantastic. And then just I have one follow-up for Dr. Anzueto.

When you -- now with this exacerbation data in hand, where do you see ensifentrine sitting in the treatment paradigm? How would you look to prescribe it?.

Sure. So this is on top of patients being already in long-acting bronchodilators. So one, this is a nebulized medication. And today, we have 4 other -- 3 other classes of medication given nebulization. So nebulization is pretty much becoming the standard of care, ask many patients.

And I can see this given to patients that either having persistent exacerbation despite being on maximum therapy, are also being used in patients who have bronchodilators having this medication to prevent future exacerbations. This will be a medication that, with this data, improvement in lung function and reduction in exacerbation.

The medication will give patients who are risk for these events. .

The next question comes from Joon Lee with Truist Securities. .

Congrats on the impressive data. It's really nice to see this dual mechanism of action theory actually playing out in the clinic.

So my question is, is the reduction in exacerbation not captured by E-RS and SGRQ assessments you're tracking? Or is it somehow captured in the quality of life assessment, but the placebo response sort of derailed the statistical significance? And I have a follow-up. .

Yes. So I may turn it over to Tara and have you give your thoughts on it. .

Sure. So the E-RS capture daily symptoms including bronchodilation, cough and sputum and chest symptoms, quality of life, capture symptoms, activity and impact. So you don't specifically capture exacerbation events within those tools. .

Okay. And for the upcoming second Phase III, you mentioned in the press release that you're watching the ongoing Russia-Ukraine conflict closely. Could you remind us the proportion of ENHANCE-1 patients who are in the U.S.

versus EU in that study? And of the EU patients, how many are in the Eastern European sites?.

Sure. We've got, in that study, about 1/3 of the patients coming from the U.S. and about 2/3 of the patients coming outside of the U.S. Of those patients coming outside of the U.S., the majority of those are in Eastern Europe, with small proportion in other countries such as Russia, South Korea and U.K. .

The next question comes from Ram Selvaraju with H.C. Wainwright. .

This is Mitchell on for Ram. I wanted to ask if you could talk about anything unexpectedly positive that may have come out of the data that you'd like to highlight. And if you could talk about when you expect to publish these results. .

Yes. So I'm not sure I think it's unexpectedly positive.

I think we're very pleased with seeing ensifentrine's effects over a 24-week period in the results of the study, not only on improvement in lung function but also improvement in exacerbation, which I think gives us a real window and viewing how, as been talked about already, the dual activity of PDE3, PDE4 inhibition as a bronchodilator and anti-inflammatory compound, impacting positively in the treatment of COPD.

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So I think it was a reinforcement of what we've seen earlier, understand from its basic pharmacology, insights that came from Phase II. So I think it was an extension confirmation and really good to see these effects and not necessarily unexpected. But we are pleased with the strength of the data, not only on lung function but on exacerbation.

And I think it's always interesting to keep in mind that the exacerbations, because it requires worsening of symptoms, inherently captures that concept of symptoms in that. And I think that's something we're going to look at in even more detail. .

And with regard to publication of the data, I think we will move it along as quickly as we can. I think the strength of the data lends itself to a publication in a premier journal, and so we will be working towards that as quickly as we can. .

I'll also make the comment about the safety. The [indiscernible] or the phosphodiesterase inhibitors, roflumilast and the other medications being developed over the years [ appear ] have been side effects and GI side effects and all kind of side effects.

And here, this Phase III data confirm what was seen in the Phase I and Phase II that even the medication nebulized is very, very safe, who have minimal GI side effects and the -- and basically, you get tolerability and you get the efficacy. .

Okay. And I just wanted to ask if you expect to see anything different come out of the second trial? And if so, could you just describe what this might be. .

So I don't think we're thinking of anything differently. I think to remind everyone, the studies are essentially identical in design over the first 24 weeks from an efficacy and safety standpoint, all the way to primary and secondary endpoints in the intended patient population that is enrolling in the study.

So we think the read-through should be quite strong. Of course, the noted difference between the second -- the study coming on ENHANCE-1 later this year is that we have an additional subgroup for safety up to 48 weeks. But based on where we are as Dr. Anzueto just reviewed on the safety, we're expecting that to be maintained over the 48-week period. .

So we're encouraged by the ENHANCE 2 trial results. And because of the design and the structure of the study, we think the read-through should be quite strong. .

The next question comes from Tom Shrader with BTIG. .

Congratulations. That's really nice data. I had a question on exacerbations, I guess, like everyone else. Is the 42% pretty comparable to the 20% and 30% that Daliresp saw? Are they similar measurements? I'm just -- it looks to me like your exacerbation rate is pretty high. You get such a robust result in kind of a small trial.

So how comparable are these numbers?.

Sure. I think from an endpoint perspective, the analysis is essentially the same. The treatment effect that we're seeing with ensifentrine is obviously much greater given that and just noting that the populations are also quite different as this study did not restrict to patients with chronic bronchitis only. .

Okay. And then I had a -- go ahead. .

I think it's important to emphasize in the formula study, especially the Phase II trial -- the Phase III trial, sorry, excluded -- patients were not allowed to be on ICS. So this was a cohort were long-acting bronchodilators, without inhaled corticosteroids, and here the 10% of the population who is on ICS.

So as we said before, this is probably a different patient population. .

Got it. And similarly, you didn't give the exact numbers, but it looks like the primary, depending on background therapy, is something like 75 ml and 115 ml.

Were the patients on that therapy meaningfully sicker? Was the starting FEV worse?.

No. I think our look at it so far is there was a lot of comparability between the 2 based on the entry criteria, between background therapy and not. And your point estimates for a factor about right as well. .

So it's really a drug of [ choice ]. All right. Congratulations. .

Thanks, Tom. .

[Operator Instructions] The next question comes from Yasmeen Rahimi with Piper Sandler. .

My big congrats to you to a very stellar data set. Maybe the first question is to you Team Verona. Is there an opportunity of being able to look at the subcomponent of the SGRQ scoring system and being able to see whether one component was driven more on the placebo end and maybe statistical differences can be detected, and the sub-scores.

That's one question. And then a question for Dr. Anzueto. It's pretty remarkable to see not only the exacerbation data, but also it's fast response, being able to capture a difference within 4 weeks.

Could you maybe enlighten us how meaningful this is and how it compares to other therapies that you have accessible to you, being able to see a fast-acting response?.

Go ahead, Dr. Anzueto, answer into the second question first. .

Sure. So certainly, we see the separation very early in the course and if you will see that in the Kaplan-Meier curve. I think this is very remarkable, especially taking into consideration the patients based on therapy as well as the patients on FEV1.

So I think it's hard to say if it is comparable, but we have seen curve separation like the with recent publications on the triple therapy. It seem that the separation starts occurring between 4 to 6 weeks after the start of the medications. .

And I can talk a little bit about the domain analysis and the subgroup analysis, we definitely do intend to take a close look at that once we have a fuller set of data in our hands. I think just 1 thing I'd like to point out is that this placebo response that we saw in this study was extremely large.

I think larger than you would historically have seen in other programs. .

And then team, I apologize maybe one other last minute question that popped to my head. Given this data is now off the press, I'm certain that you can go and take this data and probably share it with the investigators that are involved in the ENHANCE-1 study.

So could you maybe give us a perspective on sort of the operational homework that's ahead of you to share this exciting data with the investigators? And do you think that's going to drive enrollment and expedite it? So just give us a little bit of perspective of the aftermath of these outstanding data when it comes to interaction with the investigator to ensure top line data for end of 2022.

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Sure. So our enrollment in the second study ENHANCE-1 has completed, so we don't expect any impact there. So we are in that phase where we're completing the patients that had already enrolled. The top line data, obviously, is public and they will have access to that.

All of the ENHANCE-1 data is still blinded at this time, so we don't expect that to obviously have any impact whatsoever on our ongoing trial. .

The next question is a follow-up from Joon Lee with Truist Securities. .

It's actually a follow-up from the prior question.

In fact, I think my question would be what are you going to do to make sure that this doesn't get this disseminated too much to the point where it might drive up the placebo response in the patients who are still in the trial?.

Sure. I think one comment I could say there that the patient population is probably not the group that is the fastest uptake on new Phase III results. And again, it's a single trial that we've released so far. So we're really not expecting any impact there. That certainly has not been the case in other programs. .

This is Dr.

Anzueto, as an investigator in clinical trials, if I will part of the long-term trial and I see that these positive results is really is going to encourage me to try to collect all the data, to get all the [ product ] data, everything tried to wrap up because I can see, as an investigator, the importance to complete the other trials as soon as possible.

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Okay. And then actually a quick follow-up. I'm looking at the data FEV1 mean change based on demographics like gender, age, like female -- male patients tend to extract greater benefit than female patients.

Are you -- are the patients in the ongoing Phase III sort of demographic distribution -- not the geographic distribution, which you mentioned already, are the demographic distribution similar between the 2 trials?.

Yes, they are fairly similar. One thing I can mention is that you typically have a higher starting baseline lung function in males than you do have in females, that's expected. .

This concludes our question-and-answer session. I would like to turn the conference back over to Dr. David Zaccardelli for any closing remarks. .

Thank you, operator, and we'd like to thank everyone for your questions today, and also to thank the patients and health care professionals participating in the ENHANCE program. And then finally, I'd like to thank our shareholders for their continued support and the dedicated talented team at Verona for their commitment.

We look forward to discussing these highly positive results with many of you in the coming weeks and months. And I also want to thank Dr. Anzueto for joining us today on the call and providing his insights. .

And so with that, we can conclude today's call. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..