03:00 Tue 06 Aug 2019
Verona Pharma plc: Operational Update and Financial Results for the Three and Six Months Ended June
Initiated Phase 2b study with nebulized ensifentrine as add-on to long-acting bronchodilator
Initiated first Phase 2 study with metered-dose inhaler formulation
Post-period end reported positive Phase 2 data with dry powder inhaler formulation
Appointed senior clinical team in preparation for Phase 3 nebulized ensifentrine program
The Company's first-in-class development candidate, ensifentrine, is an inhaled, dual inhibitor of the enzymes phosphodiesterase 3 and 4 that acts both as a bronchodilator and an anti-inflammatory agent in a single compound. Ensifentrine is currently in Phase 2b clinical development for the maintenance treatment of chronic obstructive pulmonary disease ("COPD") and is planned to enter Phase 3 trials for this indication in 2020.
OPERATIONAL AND DEVELOPMENT HIGHLIGHTS FOR THE THREE AND SIX MONTH PERIODS ENDED
Three months ended
- Initiated a four-week Phase 2b (400 patient) dose-ranging study in
May 2019 evaluating nebulized ensifentrine as an add-on to treatment with a long acting bronchodilator in patients with moderate-to-severe COPD. The Company anticipates reporting data from this study around the end of 2019. - Initiated a Phase 2 dose-ranging study in
June 2019 to evaluate the pharmacokinetic (“PK”) profile, efficacy and safety of a pressurized metered-dose inhaler (“MDI”) formulation of ensifentrine in patients with moderate-to-severe COPD. The Company anticipates reporting data from the first part of the trial in the second half of 2019, with final data expected in the first quarter of 2020. - Commenced the second part of the Phase 2 study to evaluate the PK profile, efficacy and safety of a dry powder inhaler (“DPI”) formulation of ensifentrine in patients with moderate-to-severe COPD, consisting of one week of twice-daily treatment, supported by the positive interim findings from the single dose part one of this two-part study.
- Presented expanded post hoc analysis of nebulized ensifentrine clinical data in COPD maintenance treatment at the
American Thoracic Society (ATS) 2019International Conference , providing further evidence from our prior Phase 2b clinical trial of the dual bronchodilator and anti-inflammatory effects of ensifentrine, including symptom improvement. - Deepened the expertise available to the Company through a number of senior appointments.
- Appointed Dr
Martin Edwards to the Board of Directors inApril 2019 as an independent Non-Executive Director. Appointed Nina Church as Executive Director ofGlobal Clinical Development andNancy Herje as Senior Director of Clinical Operations inJune 2019 ; Nina and Nancy have more than 55 years' combined experience in clinical development, including late stage development of inhaled respiratory products.
- Appointed Dr
- The Company was granted a key European patent that provides intellectual property protection throughout
Europe out to 2035 for a suspension formulation of ensifentrine suitable for nebulized administration. A corresponding patent has already been granted in the US. - Hosted an "
Investor and Analyst R&D Forum " onMay 8, 2019 , inLondon , to provide insights into the unmet medical need and challenges of treating COPD, as well as an update of the most recent clinical data on ensifentrine. The forum featured a panel of Key Opinion Leaders in the field of COPD to provide the clinicians' perspective, as well as a COPD patient to provide a patient's perspective.
Three months ended
- Reported top-line data from three-day Phase 2 trial which enrolled 79 patients to investigate the efficacy and safety of two different doses (1.5 mg and 6.0 mg, twice daily) of nebulized ensifentrine on top of an inhaled LAMA/LABA therapy, tiotropium/olodaterol (Stiolto® Respimat®) for COPD maintenance treatment.
- Ensifentrine demonstrated additional bronchodilation in patients already receiving maximum standard-of-care dual bronchodilation therapy with an inhaled LAMA/LABA therapy.
- Although the primary endpoint of statistically significant improvement in peak FEV1 vs placebo following the morning dose on day 3 was not met, a number of positive results were obtained:
- the peak FEV1 improvement after the evening dose on day 3 was both statistically significant and clinically meaningful (1.5 mg (P<0.001) and 6 mg (P=0.002));
- the improvement in FEV1 with the 1.5 mg (P<0.05) dose was maintained throughout the 24-hour period as measured on day 3;
- the average FEV1 of 50 mL during the first 4 hours of dosing with 1.5 mg was statistically significant (p=0.039); and
- statistically significant reductions in residual lung volume ('trapped air') were observed after the evening dose of ensifentrine with both the 1.5 mg (P<0.001) and 6 mg (P=0.002) dose groups, compared to placebo.
- Ensifentrine was observed to be well tolerated in this study.
- Reported positive interim bronchodilation and safety data from part one of a two-part Phase 2 clinical trial of a DPI formulation of ensifentrine in 37 patients with moderate-to-severe COPD that received a single dose of one (out of five) dosage strengths of ensifentrine (150 µg, 500 µg, 1500 µg, 3000 µg, or 6000 µg) or placebo.
- Interim data showed a statistically significant and clinically meaningful increase in lung function as measured by FEV1, compared to placebo; peak FEV1 increased from baseline in a dose-dependent manner (ranging from 68 mL to 333 mL, p<0.05 for doses 1500 µg and above).
- Average FEV1 0-12 hours also showed a dose response and demonstrated durability of effect over the dosing interval (average FEV1 _0-12h: ranging from 54 mL to 254 mL, p<0.05 for doses 1500 µg and above) supporting twice-daily dosing. Ensifentrine DPI formulation was observed to be well tolerated at each dose with an adverse event profile similar to placebo.
- The data supported initiation of the second part of the Phase 2 trial to evaluate the ensifentrine DPI formulation in patients with moderate-to-severe COPD over one week of twice-daily treatment.
- Strengthened the management team through the additions of Kathleen Rickard, MD, as Chief Medical Officer, and Tara Rheault, PhD, MPH, as Vice President of Research and Development and Global Project Management.
Post-period end, the Company:
- Reported positive results from the second part of the Phase 2 study of the DPI formulation of ensifentrine in COPD. The trial, which consisted of one week of twice-daily treatment, met all its primary and secondary lung function endpoints with ensifentrine delivered in a DPI format. The magnitude of improvement in lung function and duration of action were highly statistically significant and support twice daily dosing of ensifentrine for the treatment of COPD.
- Primary endpoint met: peak FEV1 corrected for placebo showed improvements over baseline of 102 mL for the 150 µg2 dose, 175 mL for the 500 µg dose, 180 mL for the 1500 µg dose and 260 mL for the 3000 µg dose, (p<0.0001 for all doses), all highly statistically significant.
- Secondary endpoints met:
- Statistically significant improvements in average FEV1 over 12 hours were observed over 7 days with all doses (average FEV1 AUC(0-12hr) corrected for placebo: 36 mL for the 150 µg dose, 90 mL for the 500 µg dose, 80 mL for the 1500 µg dose and 147 mL for the 3000 µg dose; p<0.05 for all doses).
- Ensifentrine in a handheld dry powder format was well tolerated at all doses with an adverse event profile similar to placebo. The safety profile was comparable to that observed in prior studies with nebulized ensifentrine.
FINANCIAL HIGHLIGHTS
- Net cash, cash equivalents and short term investments at
June 30, 2019 , amounted to £46.5 million (December 31, 2018 : £64.7 million). - For the six months ended
June 30, 2019 , reported operating loss of £19.8 million (six months endedJune 30, 2018 : £11.5 million) and reported loss after tax of £14.4 million (six months endedJune 30, 2018 : £14.6 million). Operating expenses increased from £11.5 million to £19.8 million due primarily to development activities with ensifentrine. - Reported loss per share of
13.7 pence for the six months endedJune 30, 2019 (six months endedJune 30, 2018 :13.9 pence ). - Net cash used in operating activities for the six months ended
June 30, 2019 was £18.1 million (six months endedJune 30, 2018 : £12.3 million). The increase in cash used was due to pre-clinical and clinical studies with ensifentrine and other working capital movements.
"Our Phase 2b dose-ranging clinical trial with nebulized ensifentrine for COPD is progressing as planned and we anticipate completing this study around the end of 2019. Informed by this and prior studies in over 800 patients, we then plan to advance into our Phase 3 clinical trial program, which we expect to commence in 2020 following an End of Phase 2 meeting with the FDA," commented
"We believe ensifentrine, with its novel dual mode of action, has the potential to be an important additional treatment option for the many COPD patients that remain symptomatic and have a deteriorating lung function despite using currently available therapies."
GENERAL INFORMATION
Conference Call and Webcast Information
- 866-940-4574 or 409-216-0615 for callers in
the United States - 0800 028 8438 for callers in the
United Kingdom - 0800 181 5287 for callers in
Germany
Those interested in listening to the conference call live via the internet may do so by visiting the “Investors” page of Verona Pharma’s website at www.veronapharma.com and clicking on the webcast link. A webcast replay of the conference call [audio] will be available for 30 days by visiting the “Investors” page of Verona Pharma’s website at www.veronapharma.com and clicking on the “Events and presentations” link.
An electronic copy of the interim results will be made available today on the Company’s website (www.veronapharma.com). This press release does not constitute an offer to sell or the solicitation of an offer to buy any of the Company’s securities, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of that jurisdiction.
This press release contains inside information for the purposes of Article 7 Regulation (EU) No. 596/2014.
About COPD
COPD is a progressive and life-threatening respiratory disease without a cure. The
About
Forward Looking Statements
This press release, operational review, outlook and financial review contain forward-looking statements. All statements contained in this press release, operational review, outlook and financial review that do not relate to matters of historical fact should be considered forward-looking statements, including, but not limited to, statements regarding ensifentrine as a first-in-class product candidate, the timing of clinical trials of ensifentrine and trial results, the Company’s “Investor and Analyst R&D Forum", ensifentrine as the first novel class of bronchodilator in over 40 years and the first therapy for the treatment of respiratory diseases that combines bronchodilator and anti-inflammatory activities in one compound, the treatment potential of ensifentrine, improvements in air trapping on top of dual bronchodilator treatment translating into further symptom improvement in patients already on maximum standard-of-care therapy, the market potential for ensifentrine in a handheld inhaler formulation, the value of ensifentrine for COPD patients who remain symptomatic and uncontrolled despite treatment with currently available medicine, the number of COPD patients who use inhalers for maintenance therapy, the expansion of the market for ensifentrine in a DPI or pMDI formulation and the size of such market, partnering late-stage development and commercialization of a DPI or pMDI formulation, our goal to become a leading biopharmaceutical company, our review of, and the data from, our next dose-ranging Phase 2b study to facilitating and de-risking dose selection for our Phase 3 program and further enhancing ensifentrine's commercial positioning, the treatment potential for ensifentrine in other respiratory disease, strategic collaborations and their value, and in-licensing additional product candidates.
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 our actual results, performance or achievements to be materially different from our expectations expressed or implied by the forward-looking statements, including, but not limited to, the following: our limited operating history; our need for additional funding to complete development and commercialization of ensifentrine, which may not be available and which may force us to delay, reduce or eliminate our development or commercialization efforts; the reliance of our business on the success of ensifentrine, our only product candidate under development; economic, political, regulatory and other risks involved with international operations; the lengthy and expensive process of clinical drug development, which has an uncertain outcome; serious adverse, undesirable or unacceptable side effects associated with ensifentrine, which could adversely affect our ability to develop or commercialize ensifentrine; potential delays in enrolling patients, which could adversely affect our research and development efforts; we may not be successful in developing ensifentrine for multiple indications; our ability to obtain approval for and commercialize ensifentrine in multiple major pharmaceutical markets; misconduct or other improper activities by our employees, consultants, principal investigators, and third-party service providers; the loss of any key personnel and our ability to recruit replacement personnel, material differences between our “top-line” data and final data; our reliance on third parties, including clinical investigators, manufacturers and suppliers, and the risks related to these parties’ ability to successfully develop and commercialize ensifentrine; and lawsuits related to patents covering ensifentrine and the potential for our patents to be found invalid or unenforceable.
These and other important factors under the caption “Risk Factors” in our Annual Report on Form 20-F filed with the Securities and Exchange Commission (“SEC”) on March 19, 2019, and our other reports filed with the SEC, could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release, operational review, outlook and financial review. Any such forward-looking statements represent management's estimates as of the date of this press release and operational and financial review. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this press release, operational review, outlook and financial review.
For further information please contact:
Tel: +44 (0)20 3283 4200 | |
info@veronapharma.com | |
N+1 Singer | Tel: +44 (0)20 3283 4200 |
(Nominated Adviser and | |
Tel: +44 (0)20 3950 9144 | |
(European Media and Investor Enquiries) | verona@optimumcomms.com |
Mary Clark / | |
Westwicke, an | |
(US Investor enquiries) | |
Tel: +1 646 277 1282 | |
Stephanie.Carrington@icrinc.com | |
OPERATIONAL REVIEW
Overview
We are initially developing ensifentrine as a nebulized formulation for the maintenance treatment of symptomatic COPD patients. Our market research shows that nebulized delivery is the preferred route of administration for more severe COPD patients, especially in the US, where approximately two million patients remain uncontrolled despite taking currently available medicines.
COPD is a progressive respiratory disease with no cure. Few therapeutic alternatives are available for these patients. The bronchodilator and anti-inflammatory properties of ensifentrine may be particularly helpful for these symptomatic patients (e.g. chronic cough, sputum and breathlessness) with a very high unmet medical need.
In
Clinical update
Lead product - nebulized ensifentrine
We are developing nebulized ensifentrine for the maintenance treatment of COPD. In our clinical trials we have observed that ensifentrine improves lung function in COPD patients when used either as a stand-alone treatment or as an add-on to treatment with single and dual bronchodilators. We believe that the addition of nebulized ensifentrine to symptomatic COPD patients already treated with standard-of-care medicines represents a very significant market opportunity.
In
The primary endpoint of this study is improvement in lung function with ensifentrine, as measured by peak forced expiratory volume in one second ("FEV1") from 0 to 3 hours, a standard measure of exhaled breath volume. Key additional endpoints include measurements of respiratory symptoms and quality of life via different patient reported outcome tools.
We continue to expect to complete patient dosing in our four-week Phase 2b study around the end of 2019 and to progress into pivotal Phase 3 trials in 2020, following the expected end of Phase 2 meeting with the
The post-hoc analysis of data from the 4-week Phase 2b (2018) study of ensifentrine as a maintenance treatment for COPD published in
In
The average improvement in peak FEV1 on the morning of day 3 with the 1.5 mg dose was observed to be 46 mL which was not statistically significant so the primary endpoint of the study was not met. However, the average improvement in FEV1 over the first 4 hours was 50mL and statistically significant (p<0.05). Also, the average improvement in FEV1 over 24 hours (with two doses of ensifentrine) was statistically significant (p<0.05)). Analysis showed that more than 40% of patients reported an improvement in FEV1 of more than 100 mL, which we believe suggests that a significant number of COPD patients on dual or triple therapy could derive a substantial benefit from adding ensifentrine to their therapy. Importantly, in this and several other clinical trials ensifentrine produced clinically relevant and statistically significant improvements in air trapping (residual volume), both on its own as well as when administered on top of single or dual bronchodilator treatment. We believe this may translate into further symptom improvement in these patients already on maximum standard-of-care therapy.
The learnings from our trials to date, including patient numbers, treatment regimes as well as endpoints are being taken into account in the design of the Phase 3 trials.
Dry powder inhaler (“DPI”) formulation
In
Average FEV1 0-12 hours also showed a dose response and demonstrated durability of effect over the dosing interval (average FEV1 0-12h: ranging from 54 mL to 254 mL, p<0.05 for doses 1500 µg and above) supporting twice-daily dosing. Ensifentrine DPI formulation was observed to be well tolerated at every dose with an adverse event profile similar to placebo.
The data supported initiation of the second part of the Phase 2 trial in
Peak FEV1, corrected for placebo, showed improvements over baseline of 102 mL for the 150 µg dose, 175 mL for the 500 µg dose, 180 mL for the 1500 µg dose and 260 mL for 3000 µg dose, (p<0.0001 for all doses), all highly statistically significant.
Average FEV1 0-12h, corrected for placebo, improved by 36 mL for the 150 µg dose, 90 mL for the 500 µg dose, 80 mL for the 1500 µg dose and 147 mL for the 3000 µg dose; p<0.05 for all doses).
Ensifentrine was well tolerated at all doses with an adverse event profile similar to placebo. The safety profile was comparable to that observed in prior studies with nebulized ensifentrine.
Metered-dose inhaler (“pMDI”) formulation
In
We believe the availability of ensifentrine in handheld inhaler formats will greatly expand the market potential for ensifentrine to the millions of COPD patients who prefer to use handheld devices. In the US, DPI and pMDI handheld inhalers are more commonly used than nebulizers for medication in COPD, where an estimated 5.5 million people in the US use inhalers for COPD maintenance therapy. This market was valued at approximately
Opportunities also exist to explore the development of ensifentrine for the treatment of asthma and other respiratory diseases.
Enhancements to the senior team
In June, we announced the appointments of Nina Church as Executive Director of
OUTLOOK
We intend to become a leading fully integrated biopharmaceutical company, focused on the treatment of respiratory diseases with significant unmet medical needs. Our initial focus, the nebulized formulation of ensifentrine addresses a clear unmet medical need in symptomatic COPD patients. This is a very large market opportunity in the US and also in
Following completion of the Phase 2b dose-ranging study evaluating nebulized ensifentrine as an add-on to treatment with a long acting bronchodilator in patients with moderate-to-severe COPD, the Company expects to proceed to an End of Phase 2 meeting with the FDA in the first half of 2020. The Company expects to commence its Phase 3 clinical program with nebulized ensifentrine for the maintenance treatment of COPD in 2020, subject to the FDA’s authorization to proceed.
After the successful development of DPI and pMDI formulations of ensifentrine last year, and the positive data from the phase 2 DPI trial reported yesterday, we believe these formulations could open up a much larger patient population to ensifentrine treatment. In the US, our market research suggests that about 5.5 million moderate to severe COPD patients currently use either DPI or pMDI devices for administering their COPD therapies.
We may seek strategic collaborations with market leading biopharmaceutical companies to develop and commercialize the DPI and pMDI formulations of ensifentrine. We believe that any such collaborations (the signing and terms of which remain uncertain) could provide significant funding to advance the development of ensifentrine, while allowing us to benefit from the development or commercialization expertise of our collaborators.
Ensifentrine is protected by a broad patent umbrella. We believe that future medicinal products containing ensifentrine are protected by our IP beyond 2035. We have retained the worldwide commercialization rights for ensifentrine.
We have strengthened and expanded our management team and board of directors during the year, adding further expertise. We now have extensive experience particularly in respiratory product development, from drug discovery through commercialization, including the development and/or marketing of launched medicinal products including Symbicort, Daliresp/Daxas, Flutiform, Advair, Breo Ellipta and Anoro Ellipta.
FINANCIAL REVIEW
Financial review of the six and three month period ended
Six months ended
Research and Development Costs
Research and development costs were £15.8 million for the six months ended
General and Administrative Costs
General and administrative costs were £4.0 million for the six months ended
Finance Income and Expense
Finance income was £2.2 million for the six months ended
Finance expense was £0.2 million for the six months ended
Taxation
Taxation for the six months ended
Cash Flows
Net cash used in operating activities increased to £18.1 million for the six months ended
Net cash generated from investing activities predominantly reflects the net movement of cash being placed on deposit for more than three months and such deposits maturing. Deposits of more than three months are disclosed as short term investments, separately from cash. The increase in net cash generated in investing activities to £20.9 million for the six months ended
Cash, cash equivalents and short-term investments
Net cash, cash equivalents and short-term investments at
Net assets
Net assets decreased to £49.8 million at
Post-period end
The Company received £4.4 million in respect of its 2018 tax credit on qualifying research and development expenditure.
Three months ended
The operating loss for the three months ended
Research and Development Costs
Research and development costs were £9.9 million for the three months ended
General and Administrative Costs
General and administrative costs were £2.1 million for the three months ended
Finance Income and Expense
Finance income was £1.0 million for the three months ended
Finance expense was £36 thousand for the three months ended
Taxation
Taxation for the three months ended
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
AS OF
Notes | As of | As of | ||||||
£'000s | £'000s | |||||||
ASSETS | ||||||||
Non-current assets: | ||||||||
441 | 441 | |||||||
Intangible assets | 2,174 | 2,134 | ||||||
Property, plant and equipment | 211 | 21 | ||||||
Total non-current assets | 2,826 | 2,596 | ||||||
Current assets: | ||||||||
Prepayments and other receivables | 3,427 | 2,463 | ||||||
Current tax receivable | 7,912 | 4,499 | ||||||
Short term investments | 10 | 24,091 | 44,919 | |||||
Cash and cash equivalents | 22,434 | 19,784 | ||||||
Total current assets | 57,864 | 71,665 | ||||||
Total assets | 60,690 | 74,261 | ||||||
EQUITY AND LIABILITIES | ||||||||
Capital and reserves attributable to equity holders: | ||||||||
Share capital | 5,266 | 5,266 | ||||||
Share premium | 118,862 | 118,862 | ||||||
Share-based payment reserve | 9,209 | 7,923 | ||||||
Accumulated loss | (83,514 | ) | (69,117 | ) | ||||
Total equity | 49,823 | 62,934 | ||||||
Current liabilities: | ||||||||
Derivative financial instrument | 11 | 769 | 2,492 | |||||
Lease liabilities | 163 | — | ||||||
Trade and other payables | 8,796 | 7,733 | ||||||
Total current liabilities | 9,728 | 10,225 | ||||||
Non-current liabilities: | ||||||||
Assumed contingent obligation | 12 | 1,056 | 996 | |||||
Deferred income | 83 | 106 | ||||||
Total non-current liabilities | 1,139 | 1,102 | ||||||
Total equity and liabilities | 60,690 | 74,261 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED
Notes | Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||
£'000s | £'000s | £'000s | £'000s | ||||||||||
Research and development costs | (9,916 | ) | (3,882 | ) | (15,844 | ) | (8,303 | ) | |||||
General and administrative costs | (2,130 | ) | (1,772 | ) | (3,961 | ) | (3,230 | ) | |||||
Operating loss | (12,046 | ) | (5,654 | ) | (19,805 | ) | (11,533 | ) | |||||
Finance income | 7 | 1,011 | 5,273 | 2,202 | 1,101 | ||||||||
Finance expense | 7 | (36 | ) | (35 | ) | (187 | ) | (6,027 | ) | ||||
Loss before taxation | (11,071 | ) | (416 | ) | (17,790 | ) | (16,459 | ) | |||||
Taxation — credit | 8 | 2,099 | 1,027 | 3,412 | 1,847 | ||||||||
(Loss) / profit for the period | (8,972 | ) | 611 | (14,378 | ) | (14,612 | ) | ||||||
Other comprehensive income: | |||||||||||||
Items that might be subsequently reclassified to profit or loss | |||||||||||||
Exchange differences on translating foreign operations | 14 | 42 | 1 | 15 | |||||||||
Total comprehensive (loss) / income attributable to owners of the Company | (8,958 | ) | 653 | (14,377 | ) | (14,597 | ) | ||||||
Basic (loss) / earnings per ordinary share — (pence) | 9 | (8.52 | ) | 0.58 | (13.65 | ) | (13.91 | ) | |||||
Diluted (loss) / earnings per ordinary share —(pence) | 9 | (8.52 | ) | 0.58 | (13.65 | ) | (13.91 | ) |
The accompanying notes form an integral part of these condensed consolidated financial statements.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED
Note | Share Capital | Share Premium | Share-based Expenses | Total Accumulated Losses | Total Equity | |||||||||||
£'000s | £'000s | £'000s | £'000s | £'000s | ||||||||||||
Balance at | 5,251 | 118,862 | 5,022 | (49,254 | ) | 79,881 | ||||||||||
Loss for the period | — | — | — | (14,612 | ) | (14,612 | ) | |||||||||
Other comprehensive income for the year: | ||||||||||||||||
Exchange differences on translating foreign operations | — | — | — | 15 | 15 | |||||||||||
Total comprehensive loss for the period | — | — | — | (14,597 | ) | (14,597 | ) | |||||||||
Share-based payments | — | — | 1,527 | — | 1,527 | |||||||||||
Balance at | 5,251 | 118,862 | 6,549 | (63,851 | ) | 66,811 | ||||||||||
Balance at | 5,266 | 118,862 | 7,923 | (69,117 | ) | 62,934 | ||||||||||
Impact of change in accounting policy | 3 | — | — | — | (20 | ) | (20 | ) | ||||||||
Adjusted balance at | 5,266 | 118,862 | 7,923 | (69,137 | ) | 62,914 | ||||||||||
Loss for the period | — | — | — | (14,378 | ) | (14,378 | ) | |||||||||
Other comprehensive income for the year: | ||||||||||||||||
Exchange differences on translating foreign operations | — | — | — | 1 | 1 | |||||||||||
Total comprehensive loss for the period | — | — | — | (14,377 | ) | (14,377 | ) | |||||||||
Share-based payments | — | — | 1,286 | — | 1,286 | |||||||||||
Balance at | 5,266 | 118,862 | 9,209 | (83,514 | ) | 49,823 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
The currency translation reserve for
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR
THE SIX MONTHS ENDED
Six Months Ended | Six Months Ended | ||||
£'000s | £'000s | ||||
Cash used in operating activities: | |||||
Loss before taxation | (17,790 | ) | (16,459 | ) | |
Finance income | (2,202 | ) | (1,101 | ) | |
Finance expense | 187 | 6,027 | |||
Share-based payment charge | 1,286 | 1,527 | |||
Decrease / (increase) in prepayments and other receivables | 65 | (424 | ) | ||
Increase / (decrease) in trade and other payables | 163 | (1,647 | ) | ||
Depreciation of property, plant and equipment | 157 | 4 | |||
Unrealized foreign exchange gains | 3 | — | |||
Amortization of intangible assets | 50 | 43 | |||
Cash used in operating activities | (18,081 | ) | (12,030 | ) | |
Cash outflow from taxation | — | (315 | ) | ||
Net cash used in operating activities | (18,081 | ) | (12,345 | ) | |
Cash flow from investing activities: | |||||
Interest received | 296 | 380 | |||
Purchase of plant and equipment | (21 | ) | (1 | ) | |
Payment for patents and computer software | (90 | ) | (174 | ) | |
Transfer to short term investments | — | (14,923 | ) | ||
Maturity of short term investments | 20,686 | 31,948 | |||
Net cash generated in investing activities | 20,871 | 17,230 | |||
Cash flow from financing activities: | |||||
Repayment of lease liabilities | (168 | ) | — | ||
Net cash used in financing activities | (168 | ) | — | ||
Net increase in cash and cash equivalents | 2,622 | 4,885 | |||
Cash and cash equivalents at the beginning of the period | 19,784 | 31,443 | |||
Effect of exchange rates on cash and cash equivalents | 28 | 246 | |||
Cash and cash equivalents at the end of the period | 22,434 | 36,574 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
1. General information
Verona Pharma plc (the "Company") and its subsidiaries are a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapeutics for the treatment of respiratory diseases with significant unmet medical needs.
The Company is a public limited company, which is dual listed, with its ordinary shares listed on the AIM market operated by the
The Company has two subsidiaries, Verona Pharma Inc. and
2. Basis of accounting
The unaudited condensed consolidated interim financial statements of Verona Pharma plc and its subsidiaries, Verona Pharma, Inc., and
The 2018 Accounts, on which the Company’s auditors delivered an unqualified audit report, have been delivered to the Registrar of Companies.
These unaudited condensed interim financial statements were authorized for issue by the Company’s board of directors (the “Directors”) on
The interim condensed consolidated financial statements have been prepared on a going-concern basis. Management, having reviewed the future operating costs of the business in conjunction with the cash held as of
Dividend
The Directors do not recommend the payment of a dividend for the six months ended
3. Change in accounting policy: adoption of IFRS 16
IFRS 16 ‘Leases’ is effective for accounting periods beginning on or after
The Group’s principal lease arrangements are for office buildings. The Group has adopted IFRS 16 retrospectively with the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings at
Initial adoption has resulted in the recognition of right-of-use assets of £325 thousand and lease liabilities of £316 thousand and the reclassification of prepaid lease rentals of £29 thousand.
As of | ||
£'000s | ||
Operating lease commitments (including prepayments) disclosed as at | 600 | |
Less: adjustments relating to prepaid lease payments | (29 | ) |
Operating lease commitments as at | 571 | |
Discounted using the group’s incremental borrowing rate | 526 | |
Less: short-term leases recognized on a straight-line basis as expense | (210 | ) |
Lease liability recognized as at | 316 |
In applying IFRS 16 for the first time, the group has used the following practical expedients permitted by the standard:
- the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
- accounting for operating leases with a remaining lease term of less than 12 months as at
January 1, 2019 , as short-term leases; - the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
- excluding initial direct costs from the initial measurement of the right-of-use asset.
The Group is applying IFRS 16’s low-value and short-term exemptions. The adoption of IFRS 16 has had no impact on the Group’s net cash flows, although a presentation change has been reflected in 2019 whereby cash outflows of £168 thousand are now presented as financing, instead of operating. There is a decrease of £18 thousand in general and administrative costs as depreciation of the right of use asset is less than the lease costs and a £15 thousand increase in finance expense from the presentation of a portion of lease costs as interest costs. There is no significant impact on overall loss before tax and loss per share.
4. Segmental reporting
The Group’s activities are covered by one operating and reporting segment: Drug Development. There have been no changes to management’s assessment of the operating and reporting segment of the Group during the period.
All non-current assets are based in the
5. Financial instruments
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk), cash flow and fair value interest rate risk, credit risk and liquidity risk. The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements, and they should be read in conjunction with the Group’s annual financial statements for the year ended
6. Estimates
The preparation of condensed consolidated interim financial statements require management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from those estimates.
In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended
Impairment of intangible assets, goodwill and non-financial assets
The Company notes that after the reduction in its share price since
Similarly, at various points in the three months to
7. Finance income and expense
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | ||||||||
£'000s | £'000s | £'000s | £'000s | ||||||||
Finance income: | |||||||||||
Interest received on cash balances | 229 | 213 | 479 | 373 | |||||||
Foreign exchange gain on translating foreign currency denominated bank balances | 669 | 2,060 | — | 728 | |||||||
Fair value adjustment on derivative financial instruments (note 11) | 113 | 3,000 | 1,723 | — | |||||||
Total finance income | 1,011 | 5,273 | 2,202 | 1,101 |
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | ||||||||
£'000s | £'000s | £'000s | £'000s | ||||||||
Finance expense: | |||||||||||
Fair value adjustment on derivative financial instruments (note 11) | — | — | — | 5,976 | |||||||
Interest on discounted lease liability | 6 | — | 15 | — | |||||||
Foreign exchange loss on translating foreign currency denominated balances | — | — | 114 | — | |||||||
Impact of changes in foreign exchange rates on the contingent arrangement | — | 8 | — | — | |||||||
Unwinding of discount factor movements related to the assumed contingent arrangement (note 12) | 30 | 27 | 58 | 51 | |||||||
Total finance expense | 36 | 35 | 187 | 6,027 |
8. Taxation
The tax credit for the six month period ended
The tax credit for the three month period ended
9. (Loss) / earnings per share calculation
For the six months ended
For the three months ended
The diluted earnings per share of 0.58p for the three months ended
Where the Group has reported a net profit, diluted earnings per share has been calculated after adjusting the weighted average number of shares used in the basic calculation to assume the conversion of all potentially dilutive shares. A potentially dilutive share arises from employee share schemes where the exercise price is below the average market price of the Company's shares during the period.
Each ADS represents 8 ordinary shares of the Company, so the profit or loss per ADS in any period is equal to 8 times the profit or loss per share.
10. Short term investments
Short term investments as at
11. Derivative financial instrument
Pursuant to the
At
As of | As of | ||||||
Shares available to be issued under warrants | 12,401,262 | 12,401,262 | |||||
Exercise price | £ | 1.7238 | £ | 1.7238 | |||
Risk-free interest rate | 0.61 | % | 0.76 | % | |||
Remaining term to exercise | 2.84 years | 3.34 years | |||||
Annualized volatility | 59.19 | % | 60.72 | % | |||
Dividend rate | 0.00 | % | 0.00 | % | |||
Dilution discount | 7.76 | % | 5.66 | % |
As at
The variance for the six month period ending
Derivative financial instrument | Derivative financial instrument | ||||
2019 | 2018 | ||||
£'000s | £'000s | ||||
As of January, 1 | 2,492 | 1,273 | |||
Fair value adjustments recognized in profit or loss | (1,723 | ) | 5,976 | ||
As of June, 30 | 769 | 7,249 |
For the amount recognized as at
| Volatility (up / down 10 % pts) |
£'000s | |
Variable up | 1,187 |
Base case, reported fair value | 769 |
Variable down | 416 |
12. Assumed contingent obligation related to the business combination
The value of the assumed contingent obligation as of
2019 | 2018 | ||||
£'000s | £'000s | ||||
996 | 875 | ||||
Impact of changes in foreign exchange rates | 2 | 6 | |||
Unwinding of discount factor | 58 | 51 | |||
1,056 | 932 |
There is no material difference between the fair value and carrying value of the financial liability.
For the amount recognized as at
| Discount rate (up / down 1 % pt) | Revenue (up / down 10 % pts) |
£'000s | £'000s | |
Variable up | 1,016 | 1,088 |
Base case, reported fair value | 1,056 | 1,056 |
Variable down | 1,098 | 1,024 |
13. Share option scheme
During the six months ended
The movement in the number of the Company’s share options is set out below:
Weighted average exercise price | 2019 | Weighted average exercise price | 2018 | ||||||||
£ | £ | ||||||||||
Outstanding at | 1.53 | 8,752,114 | 1.53 | 7,527,457 | |||||||
Granted during the period | 0.57 | 4,249,050 | 1.46 | 2,090,847 | |||||||
Expired during the period | 2.00 | (19,998 | ) | — | — | ||||||
Forfeited during the period | — | — | 1.43 | (799,524 | ) | ||||||
Outstanding options at | 1.22 | 12,981,166 | 1.53 | 8,818,780 |
The movement in the number of the Company’s RSUs is set out below:
2019 | 2018 | |||||
Outstanding at | 862,473 | 1,052,236 | ||||
Granted during the period | 740,496 | 273,390 | ||||
Forfeited during the period | — | (153,916 | ) | |||
Outstanding RSUs at | 1,602,969 | 1,171,710 |
The share‑based payment expense for the six months ended
The options and RSUs granted during the six months ended
Share options | RSUs | ||
Issued in the six months ended | Issued in the six months ended | ||
Options / RSUs granted | 4,249,050 | 740,496 | |
Risk‑free interest rate | 0.67% - 0.82% | 0.76% - 0.82% | |
Expected life of options / RSUs | 5.5 - 7 years | 5.5 - 7 years | |
Annualized volatility | 65.63% - 69.71% | 67.98% - 69.71% | |
Dividend rate | 0.00% | 0.00% | |
Vesting period | 1 to 4 years | 1 to 4 years |
14. Related party transactions
Dr
At
In the period a director provided consultancy services for £15 thousand.
Convenience translation
We maintain our books and records in pounds sterling and we prepare our financial statements in accordance with IFRS, as issued by the IASB. We report our results in pounds sterling. For the convenience of the reader we have translated pound sterling amounts in the tables below as of
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND SIX MONTHS ENDED
Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | ||||||||
£'000s | $'000s | £'000s | $'000s | ||||||||
Research and development costs | (9,916 | ) | (12,597 | ) | (15,844 | ) | (20,128 | ) | |||
General and administrative costs | (2,130 | ) | (2,706 | ) | (3,961 | ) | (5,032 | ) | |||
Operating loss | (12,046 | ) | (15,303 | ) | (19,805 | ) | (25,160 | ) | |||
Finance income | 1,011 | 1,284 | 2,202 | 2,797 | |||||||
Finance expense | (36 | ) | (46 | ) | (187 | ) | (238 | ) | |||
Loss before taxation | (11,071 | ) | (14,065 | ) | (17,790 | ) | (22,601 | ) | |||
Taxation — credit | 2,099 | 2,667 | 3,412 | 4,335 | |||||||
Loss for the period | (8,972 | ) | (11,398 | ) | (14,378 | ) | (18,266 | ) | |||
Other comprehensive income: | |||||||||||
Items that might be subsequently reclassified to profit or loss | |||||||||||
Exchange differences on translating foreign operations | 14 | 18 | 1 | 1 | |||||||
Total comprehensive loss attributable to owners of the Company | (8,958 | ) | (11,380 | ) | (14,377 | ) | (18,265 | ) | |||
Loss per ordinary share — basic (pence / cents) | (8.52 | ) | (10.82 | ) | (13.65 | ) | (17.34 | ) |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT
As of | As of | As of | ||||||
£'000s | $'000s | £'000s | ||||||
ASSETS | ||||||||
Non-current assets: | ||||||||
441 | 561 | 441 | ||||||
Intangible assets | 2,174 | 2,762 | 2,134 | |||||
Property, plant and equipment | 211 | 268 | 21 | |||||
Total non-current assets | 2,826 | 3,591 | 2,596 | |||||
Current assets: | ||||||||
Prepayments and other receivables | 3,427 | 4,354 | 2,463 | |||||
Current tax receivable | 7,912 | 10,051 | 4,499 | |||||
Short term investments | 24,091 | 30,605 | 44,919 | |||||
Cash and cash equivalents | 22,434 | 28,500 | 19,784 | |||||
Total current assets | 57,864 | 73,510 | 71,665 | |||||
Total assets | 60,690 | 77,101 | 74,261 | |||||
EQUITY AND LIABILITIES | ||||||||
Capital and reserves attributable to equity holders: | ||||||||
Share capital | 5,266 | 6,690 | 5,266 | |||||
Share premium | 118,862 | 151,002 | 118,862 | |||||
Share-based payment reserve | 9,209 | 11,699 | 7,923 | |||||
Accumulated loss | (83,514 | ) | (106,096 | ) | (69,117 | ) | ||
Total equity | 49,823 | 63,295 | 62,934 | |||||
Current liabilities: | ||||||||
Derivative financial instrument | 769 | 977 | 2,492 | |||||
Finance lease liabilities | 163 | 207 | — | |||||
Trade and other payables | 8,796 | 11,175 | 7,733 | |||||
Total current liabilities | 9,728 | 12,359 | 10,225 | |||||
Non-current liabilities: | ||||||||
Assumed contingent obligation | 1,056 | 1,342 | 996 | |||||
Deferred income | 83 | 105 | 106 | |||||
Total non-current liabilities | 1,139 | 1,447 | 1,102 | |||||
Total equity and liabilities | 60,690 | 77,101 | 74,261 |
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