07:00 Thu 29 Oct 2020
Verona Pharma plc Operational Update and Financial Results for the Three and Nine Months Ended Septe
Initiated ENHANCE Phase 3 clinical trials in COPD
Completed
Commenced a pilot clinical study in
Conference call today at
"We continue to make outstanding progress and are delighted to have started four clinical trials in the third quarter including our pivotal ENHANCE-1 and 2 (Ensifentrine as a Novel inHAled Nebulized COPD thErapy) Phase 3 studies," said
"In addition to the two ENHANCE clinical trials which have both enrolled patients, we started a pilot clinical study to investigate ensifentrine delivered via pressurized metered-dose inhaler ("pMDI") formulation in
"Also during the third quarter, we initiated the second, multiple dose part of a Phase 2 study with the pMDI formulation of ensifentrine in COPD, which was postponed due to the pandemic. Results are expected in the first half of 2021.
"This clinical progress is supported by the
OUTLOOK AND STRATEGY
Verona Pharma aims to improve health and quality of life for the millions of people affected by respiratory diseases. The Company's first-in-class development candidate, ensifentrine, has the potential to provide benefit to patients suffering from respiratory conditions such as COPD, COVID-19, cystic fibrosis ("CF") and asthma.
Ensifentrine is a novel, investigational inhaled therapy that has been shown to act as both a bronchodilator and an anti-inflammatory agent in one compound. Initially, the Company is advancing the development of nebulized ensifentrine for the maintenance treatment of COPD.
We are pleased to announce that Verona Pharma has met the following 2020 objectives that were established at the time of the management change:
- Completing an End-of-Phase 2 meeting with the FDA in May to receive guidance on the design of the Phase 3 program with nebulized ensifentrine.
- Securing
$200 million in gross proceeds ($185.5 million net of commissions and expenses) through a private placement in July which we expect to be sufficient capital to fund the Phase 3 program for nebulized ensifentrine. - Initiating the ENHANCE Phase 3 program with nebulized ensifentrine in moderate to severe COPD patients in September.
OPERATIONAL AND DEVELOPMENT HIGHLIGHTS FOR THE THREE MONTH PERIOD ENDED
Financial
- In July, the Company completed a
$200 million private placement of American Depositary Shares ("ADSs") and ordinary shares that resulted in net proceeds of approximately$185.5 million after giving effect to transaction related fees and expenses (the "Private Placement"). The Company expects the proceeds of the Private Placement to be sufficient to support its operations and clinical programs into 2023. - In September, Verona Pharma announced plans to delist from the AIM stock market effective from
7:00 am GMT onOctober 30, 2020 . The Company will retain its listing on the Nasdaq Global Market ("Nasdaq"). The move is expected to further enhance liquidity of trading by combining all trading transactions on Nasdaq and to reduce costs through removing duplicative listing and compliance fees. - Also in September, Verona Pharma rang the Nasdaq closing bell in celebration of the Company's
$200 million financing. - In the third quarter the Company changed its accounting policy with regards to its presentational currency and is now presenting financial results in US dollars. Historical results, including the six months ended
June 30, 2020 , have been retrospectively presented in US dollars.
Clinical
- In July, the Company received a notice to proceed from the FDA for our Investigational New Drug Application to evaluate pMDI ensifentrine in a randomized, double-blind, placebo-controlled pilot clinical study for the treatment of patients hospitalized with COVID-19 and, in September, the Company initiated the study. The study will evaluate the effect of ensifentrine on key outcomes in patients hospitalized with COVID-19 including facilitation of recovery from the viral infection, clinical status improvement and reduction in supplemental oxygen use and progression to mechanical ventilation.
- In August, the Company initiated the second, multiple dose, part of a Phase 2 study to evaluate pMDI ensifentrine in patients with moderate to severe COPD. Results are expected in the first half of 2021.
- In September, the Company initiated its ENHANCE Phase 3 trials to evaluate the efficacy and safety of nebulized ensifentrine in patients with moderate to severe COPD. The two randomized, double-blind, placebo-controlled studies (ENHANCE-1 and ENHANCE-2) will evaluate ensifentrine as monotherapy and added onto a single bronchodilator. Each study will enroll approximately 800 moderate to severe, symptomatic COPD patients at sites primarily in the
U.S. andEurope . The two study designs will replicate measurements of efficacy and safety data over 24 weeks, but ENHANCE-1 will also evaluate longer-term safety in 400 patients over 48 weeks. - Additionally in September, a detailed analysis of symptom data from a previously reported Phase 2b clinical trial with nebulized ensifentrine as a maintenance treatment for COPD was published in the leading peer reviewed journal for specialists and healthcare professionals, International Journal of Chronic Obstructive Pulmonary Disease. The analyses demonstrate that ensifentrine meaningfully improved symptoms and quality of life after 4 weeks in patients with moderate to severe COPD.
- Also in September, Dr.
Tara Rheault , Vice President, R&D and Global Project Management, presented new subgroup analysis from Phase 2b trials with nebulized ensifentrine in COPD at the European Respiratory Society International Congress. The data demonstrated that ensifentrine as monotherapy or added onto tiotropium (Spiriva® Respimat®) improved lung function in moderate or severe COPD patients regardless of smoking status or history of chronic bronchitis over 4 weeks.
FINANCIAL HIGHLIGHTS
- Net cash, cash equivalents and short term investments at
September 30, 2020 , amounted to$202.0 million (December 31, 2019 :$40.8 million ). The increase is due to the completion of the Private Placement with gross proceeds of approximately$200 million . The net proceeds of the Private Placement were approximately$185.5 million after deducting placement agent fees and other expenses. We continue to evaluate and consider other financing vehicles, including venture debt and other facilities, to potentially provide us with further financial flexibility. - For the nine months ended
September 30, 2020 , the Company reported operating loss of$46.2 million (nine months endedSeptember 30, 2019 :$42.7 million ) and reported loss after tax of$41.4 million (nine months endedSeptember 30, 2019 :$31.0 million ). Research and development costs fell by$7.1 million in the nine months endedSeptember 30, 2020 , compared to the prior period, primarily due to significantly higher costs of an ongoing Phase 2b study in 2019 compared to the start up costs incurred in 2020 for the ENHANCE program. General and administrative costs increased by$10.6 million as the 2020 period had higher costs related to share based payment charges, executive changes and certain costs related to the Private Placement recorded as expenses in the Statement of Comprehensive Income. - The Company reported loss per share of
21.0 cents for the nine months endedSeptember 30, 2020 (nine months endedSeptember 30, 2019 :29.4 cents ). - Net cash used in operating activities for the nine months ended
September 30, 2020 was$25.7 million (nine months endedSeptember 30, 2019 :$31.3 million ). Cash used was lower predominantly due to lower cash based operating costs and a higher cash tax credit received. - Cash generated from financing activities of
$188 million was primarily related to net cash proceeds from the Private Placement. - In the nine months ended
September 30, 2020 the Company re-evaluated its assumed contingent liability and In-Process Research and Development asset in light of its determination that ensifentrine had moved from Phase 2 to Phase 3 stage of clinical development. Future cashflows relating to a potential milestone payment and potential royalties payable were remeasured applying updated estimates of probabilities of success based on the assumed reduced clinical risk of moving into Phase 3. Accordingly the Company recorded an increase of$27.7 million to the assumed contingent liability and a corresponding increase to the related In-Process Research and Development intangible asset. There is no material effect on current period comprehensive loss, net assets or cashflows.
CONFERENCE CALL AND WEBCAST INFORMATION
Verona Pharma will host an investment community conference call at
Analysts and investors may participate by dialing one of the following numbers and reference conference number: 2469127:
- +1-888-317-6003 for callers in
the United States - +1-412-317-6061 for international callers
A live webcast will be available on the Events and Presentations link on the Investors page of the Company's website, www.veronapharma.com, and an audio replay will be available there for 90 days. An electronic copy of the Q3 2020 results release will also be made available today on the Company’s website. 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.
For further information please contact:
Verona Pharma plc | Tel: +44 (0)20 3283 4200 |
info@veronapharma.com | |
N+1 Singer | Tel: +44 (0)20 3283 4200 |
(Nominated Adviser and | |
Optimum Strategic Communications | Tel: +44 (0)20 3950 9144 |
(European Media and Investor Enquiries) | verona@optimumcomms.com |
Mary Clark / | |
Argot Partners | Tel: +1 212-600-1902 |
( | verona@argotpartners.com |
COVID-19 IMPACT AND BUSINESS CONTINUITY
To help protect the health and safety of the patients, caregivers and healthcare professionals involved in its ongoing clinical trials of ensifentrine, as well as its employees and independent contractors, the Company continues to follow guidance from the FDA and other health regulatory authorities regarding the conduct of clinical trials during the COVID-19 pandemic to ensure the safety of study participants, minimize risks to study integrity, and maintain compliance with good clinical practice (GCP). The Company continues to review this guidance and the effect of the COVID-19 pandemic on its operations and clinical trials and will provide an update if it becomes aware of any meaningful disruption caused by the pandemic to its clinical trials.
Verona Pharma is closely monitoring activities at the Company’s contract manufacturers associated with clinical supply for the ongoing clinical trials, and is satisfied that appropriate plans and procedures are in place to ensure uninterrupted future supply of ensifentrine to the clinical trial sites, subject to potential limitations on their operations and on the supply chain due to the COVID-19 pandemic. The Company is continuing to monitor this situation and will provide an update if it becomes aware of any meaningful disruption caused by the pandemic to the clinical supply of ensifentrine for its clinical trials.
Corporate Operations and Financial Impact
Verona Pharma has also implemented measures to help keep the Company’s employees, families, and local communities healthy and safe. All employees are working remotely and all business travel has been restricted.
The COVID-19 pandemic has caused significant disruption to the financial markets but Verona Pharma has successfully raised sufficient capital to fund the Phase 3 program for nebulized ensifentrine.
COVID-19 Risk Factor
Verona Pharma has assessed the potential impact on its business of the COVID-19 pandemic and updated its risk factor disclosures on a Report on Form 6-K filed with the SEC on
About Verona Pharma plc
Verona Pharma is a clinical-stage biopharmaceutical company focused on developing and commercializing innovative therapies for the treatment of respiratory diseases with significant unmet medical needs. If successfully developed and approved, Verona Pharma’s product candidate, ensifentrine, has the potential to be the first therapy for the treatment of respiratory diseases that combines bronchodilator and anti-inflammatory activities in one compound. The Company is evaluating nebulized ensifentrine in its Phase 3 clinical program ENHANCE ("Ensifentrine as a Novel inHAled Nebulized COPD thErapy") for COPD maintenance treatment. The Company raised gross proceeds of
Forward Looking Statements
This press release, operational review, outlook and financial review contain forward-looking statements. All statements contained in this press release, with respect to our 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 the development and potential of ensifentrine, including its potential to help patients recover from COVID-19, the initiation, progress and timing of clinical trials and related data readouts, our expectations surrounding clinical trial results and responses from the FDA, the market opportunity for various formulations of ensifentrine, including estimates of the market size for COPD, the impact of the COVID-19 pandemic on our business and operations and the Company’s future financial results, the sufficiency of our cash and cash equivalents, and our expectations surrounding additional funding.
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, as well as the impact of our management team transition; 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; lawsuits related to patents covering ensifentrine and the potential for our patents to be found invalid or unenforceable; the impact of the COVID-19 pandemic on our operations, the continuity of our business and general economic conditions; and our vulnerability to natural disasters, global economic factors and other unexpected events, including health epidemics or pandemics like COVID-19.
These and other important factors under the caption “Risk Factors” in our Registration Statement on Form F-1 filed with the SEC on
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF REGULATION (EU) NO 596/2014
OPERATIONAL REVIEW
Company Overview
Verona Pharma is focused on developing and commercializing our first-in-class Phase 3 candidate, ensifentrine, for the treatment of significant unmet respiratory needs such as chronic obstructive pulmonary disease (“COPD”). Ensifentrine has a novel mechanism of action and has the potential to be the first therapy for the treatment of respiratory diseases that combines bronchodilator and anti-inflammatory activities in one compound. As well as COPD, ensifentrine has potential applications in COVID-19, cystic fibrosis, asthma and other respiratory diseases.
Verona Pharma is evaluating nebulized ensifentrine in the Phase 3 clinical program ENHANCE (Ensifentrine as a Novel inHAled Nebulized COPD thErapy) for the maintenance treatment of COPD. The Company raised gross proceeds of
Ensifentrine has demonstrated significant and clinically meaningful improvements in both lung function and COPD symptoms, including breathlessness, in patients with moderate to severe COPD. In addition, ensifentrine showed further improved lung function and reduced lung volumes in patients taking standard short- and long-acting bronchodilator therapy, including maximum bronchodilator treatment with dual/triple therapy. Ensifentrine has been well tolerated in clinical trials involving more than 1,300 people to date.
Ensifentrine highlights:
- First-in-class dual bronchodilator and anti-inflammatory agent in a single molecule
- Potentially the first novel class of bronchodilator in COPD in over 40 years
- Potentially the only bronchodilator option as an add-on to existing dual / triple therapy
COPD is a common, progressive, and life-threatening respiratory disease without a cure. It damages the airways and lungs, leading to debilitating breathlessness, hospitalizations and death. COPD has a major impact on everyday life. Patients struggle with basic activities such as getting out of bed, showering and walking. COPD affects approximately 384 million people worldwide. It is the third leading cause of death globally, according to the World Health Organization.
COPD patients are frequently treated with bronchodilators, to relieve airway constriction and make it easier to breathe, and with corticosteroids, to reduce lung inflammation. Despite receiving maximum therapy, many patients, more than 1.2 million in the
The pharmacological profile of ensifentrine including its novel mechanism of action, which is complementary to existing classes, strong improvement in COPD symptoms and meaningful improvement in quality of life, addresses the large unmet need experienced by COPD patients today.
Ensifentrine is a dual phosphodiesterase (“PDE”) 3 and PDE4 inhibitor. It is delivered via inhalation, locally to the lung to maximize pulmonary exposure to ensifentrine while minimizing systemic exposure. This minimizes side-effects such as the gastrointestinal disturbance associated with oral PDE4 inhibitors and the cardiovascular side-effects seen with oral PDE3 inhibitors.
The nebulized formulation of ensifentrine can be used by adults of any age and dexterity and regardless of peak inspiratory flow, offering advantages to patients who may struggle to operate handheld inhaler devices or have low peak inspiratory flow. Nevertheless, handheld inhaler formats are also important delivery mechanisms in the approximately
Verona Pharma sees its initial market opportunity as the
FINANCIAL REVIEW
Financial review of the nine and three month periods ended
Nine months ended
Research and Development Costs
Research and development costs were
General and Administrative Costs
General and administrative costs were
Finance Income and Expense
Finance income and expense are driven by the changes in the fair value of the warrant liability, changes in the present value of the assumed contingent liability, foreign exchange movements on cash and cash equivalents and interest income and expense.
Finance income was
Gains on cash and short term investments due to foreign exchange movements were
Interest received on cash and short term investments reduced by
Finance expense was
Taxation
The tax credit in the Statement of Comprehensive Income is predominantly made up of the
The tax credit for the nine month period ended
Assumed contingent liability and In-Process Research and Development Asset
In the second quarter of 2020, the Company re-evaluated its contingent liability and In-Process Research and Development asset in light of its determination that ensifentrine has moved from Phase 2 to Phase 3 stage of clinical development. Future cashflows relating to a milestone payment and potential royalties payable were remeasured. After applying estimated probabilities of success, the assumed contingent liability that relates to these potential future cashflows was adjusted. Accordingly the Company recorded an increase of
The discount that is used to calculate the present value of the assumed contingent liability unwinds each quarter as the time to potential payment becomes closer and is recorded as a finance expense.
Private Placement
On
The net proceeds of the Private Placement were approximately
Cash Flows
Net cash used in operating activities decreased to
The decrease in net cash generated in investing activities to
The
Cash, cash equivalents and short-term investments
Net cash, cash equivalents and short-term investments at
Net assets
Net assets increased to
Three months ended
The operating loss for the three months ended
Research and Development Costs
Research and development costs were
This decrease was primarily attributable to a
General and Administrative Costs
General and administrative costs were
Finance Income and Expense
Finance income was
Finance expense was
Taxation
Taxation for the three months ended
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
AS OF
Restated* | Restated* | ||||||||||||
Notes | As of 2020 | As of 2019 | As of 2019 | ||||||||||
$'000s | $'000s | $'000s | |||||||||||
ASSETS | |||||||||||||
Non-current assets: | |||||||||||||
Goodwill | 545 | 585 | 563 | ||||||||||
Intangible assets | 10 | 31,507 | 3,659 | 3,340 | |||||||||
Property, plant and equipment | 107 | 57 | 27 | ||||||||||
Right-of-use asset | 11 | 1,194 | 1,288 | 415 | |||||||||
Total non-current assets | 33,353 | 5,589 | 4,345 | ||||||||||
Current assets: | |||||||||||||
Prepayments and other receivables | 4,668 | 3,676 | 3,144 | ||||||||||
Current tax receivable | 5,838 | 9,814 | 5,741 | ||||||||||
Short term investments | 12 | — | 10,380 | 57,320 | |||||||||
Cash and cash equivalents | 13 | 201,968 | 30,428 | 25,243 | |||||||||
Total current assets | 212,474 | 54,298 | 91,448 | ||||||||||
Total assets | 245,827 | 59,887 | 95,793 | ||||||||||
EQUITY AND LIABILITIES | |||||||||||||
Capital and reserves attributable to equity holders: | |||||||||||||
Share capital | 30,054 | 7,265 | 7,265 | ||||||||||
Share premium | 330,068 | 165,408 | 165,408 | ||||||||||
Share-based payment reserve | 23,430 | 14,127 | 11,008 | ||||||||||
Cumulative Translation Adjustment | (5,796 | ) | (3,327 | ) | (4,751 | ) | |||||||
Accumulated loss | (180,041 | ) | (138,542 | ) | (98,031 | ) | |||||||
Total equity | 197,715 | 44,931 | 80,899 | ||||||||||
Current liabilities: | |||||||||||||
Derivative financial instrument | 14 | 1,857 | 1,188 | 3,180 | |||||||||
Lease liabilities | 808 | 611 | 441 | ||||||||||
Trade and other payables | 14,194 | 10,962 | 9,866 | ||||||||||
Total current liabilities | 16,859 | 12,761 | 13,487 | ||||||||||
Non-current liabilities: | |||||||||||||
Assumed contingent liability | 15 | 30,552 | 1,463 | 1,271 | |||||||||
Non-current lease liability | 667 | 652 | — | ||||||||||
Deferred income | 34 | 80 | 136 | ||||||||||
Total non-current liabilities | 31,253 | 2,195 | 1,407 | ||||||||||
Total equity and liabilities | 245,827 | 59,887 | 95,793 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
* Comparative results were restated to reflect the change in presentational currency (see note 3).
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND NINE MONTHS ENDED
Restated* | Restated* | Restated* | |||||||||||||||
Notes | Three Months Ended 2020 | Three Months Ended 2019 | Nine Months Ended 2020 | Nine Months Ended 2019 | |||||||||||||
$'000s | $'000s | $'000s | $'000s | ||||||||||||||
Research and development costs | (12,704 | ) | (14,741 | ) | (28,149 | ) | (35,200 | ) | |||||||||
General and administrative costs | (8,456 | ) | (2,424 | ) | (18,083 | ) | (7,549 | ) | |||||||||
Operating loss | (21,160 | ) | (17,165 | ) | (46,232 | ) | (42,749 | ) | |||||||||
Finance income | 7 | 857 | 1,515 | 1,304 | 4,248 | ||||||||||||
Finance expense | 7 | (1,858 | ) | (54 | ) | (2,182 | ) | (149 | ) | ||||||||
Loss before taxation | (22,161 | ) | (15,704 | ) | (47,110 | ) | (38,650 | ) | |||||||||
Taxation — credit | 8 | 2,294 | 3,224 | 5,699 | 7,632 | ||||||||||||
Loss for the period | (19,867 | ) | (12,480 | ) | (41,411 | ) | (31,018 | ) | |||||||||
Other comprehensive loss: | |||||||||||||||||
Items that might be subsequently reclassified to profit or loss | |||||||||||||||||
Exchange differences on translation to presentational currency | — | (1,974 | ) | (2,469 | ) | (2,113 | ) | ||||||||||
Total comprehensive loss attributable to owners of the Company | (19,867 | ) | (14,454 | ) | (43,880 | ) | (33,131 | ) | |||||||||
Loss per ordinary share — basic and diluted (cents) | 9 | (5.8 | ) | (11.8 | ) | (21.0 | ) | (29.4 | ) |
The accompanying notes form an integral part of these condensed consolidated financial statements.
* Comparative results were restated to reflect the change in presentational currency (see note 3).
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED
Restated* | Restated* | Restated* | Restated* | Restated* | Restated* | ||||||||||||||||
Share Capital | Share Premium | Share-based Expenses | Cumulative Translation Adjustment ("CTA") | Accumulated Loss | Total Equity | ||||||||||||||||
$'000s | $'000s | $'000s | $'000s | $'000s | $'000s | ||||||||||||||||
Retranslated balances at | 7,265 | 165,408 | 12,676 | 77 | (116,569 | ) | 68,857 | ||||||||||||||
Impact on CTA reserve of change in presentation currency to US dollars (1) | — | — | — | (4,967 | ) | — | (4,967 | ) | |||||||||||||
Adjusted balance at | 7,265 | 165,408 | 12,676 | (4,890 | ) | (116,569 | ) | 63,890 | |||||||||||||
Loss for the period | — | — | — | — | (12,480 | ) | (12,480 | ) | |||||||||||||
Other comprehensive income for the year: | |||||||||||||||||||||
Exchange differences on translation to presentational currency | — | — | — | (1,974 | ) | — | (1,974 | ) | |||||||||||||
Total comprehensive loss for the period | — | — | — | (1,974 | ) | (12,480 | ) | (14,454 | ) | ||||||||||||
Share-based payments | — | — | 711 | — | — | 711 | |||||||||||||||
Balance at | 7,265 | 165,408 | 13,387 | (6,864 | ) | (129,049 | ) | 50,147 | |||||||||||||
Balance at | 7,333 | 165,408 | 16,944 | (5,796 | ) | (160,154 | ) | 23,735 | |||||||||||||
Loss for the period | — | — | — | — | (19,867 | ) | (19,867 | ) | |||||||||||||
Total comprehensive loss for the period | — | — | — | — | (19,867 | ) | (19,867 | ) | |||||||||||||
New share capital issued on Private Placement | 22,700 | 177,456 | — | — | (20 | ) | 200,136 | ||||||||||||||
Transaction costs on share capital issued | — | (12,796 | ) | — | — | — | (12,796 | ) | |||||||||||||
Share options exercised during the period | 21 | — | — | — | — | 21 | |||||||||||||||
Share-based payments | — | — | 6,486 | — | — | 6,486 | |||||||||||||||
Balance at | 30,054 | 330,068 | 23,430 | (5,796 | ) | (180,041 | ) | 197,715 |
(1)
* Comparative results were restated to reflect the change in presentational currency (see note 3).
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY
FOR THE NINE MONTHS ENDED
Restated* | Restated* | Restated* | Restated* | Restated* | Restated* | ||||||||||||||||
Share Capital | Share Premium | Share-based Expenses | Cumulative Translation Adjustment ("CTA") | Accumulated Loss | Total Equity | ||||||||||||||||
$'000s | $'000s | $'000s | $'000s | $'000s | $'000s | ||||||||||||||||
Retranslated balances at | 7,265 | 165,408 | 11,008 | 33 | (98,005 | ) | 85,709 | ||||||||||||||
Impact of adoption of IFRS 16 (1) | — | — | — | — | (26 | ) | (26 | ) | |||||||||||||
Impact on CTA reserve of change in presentation currency to US dollars (2) | — | — | (4,784 | ) | — | (4,784 | ) | ||||||||||||||
Adjusted Balance at | 7,265 | 165,408 | 11,008 | (4,751 | ) | (98,031 | ) | 80,899 | |||||||||||||
Loss for the period | — | — | — | — | (31,018 | ) | (31,018 | ) | |||||||||||||
Other comprehensive income for the year: | |||||||||||||||||||||
Exchange differences on translation to presentational currency | — | — | — | (2,113 | ) | — | (2,113 | ) | |||||||||||||
Total comprehensive loss for the period | — | — | — | (2,113 | ) | (31,018 | ) | (33,131 | ) | ||||||||||||
Share-based payments | — | — | 2,379 | — | — | 2,379 | |||||||||||||||
Balance at | 7,265 | 165,408 | 13,387 | (6,864 | ) | (129,049 | ) | 50,147 | |||||||||||||
Balance at | 7,265 | 165,408 | 14,127 | (3,327 | ) | (138,542 | ) | 44,931 | |||||||||||||
Loss for the period | — | — | — | — | (41,411 | ) | (41,411 | ) | |||||||||||||
Other comprehensive loss for the year: | |||||||||||||||||||||
Exchange differences on translation to presentational currency | — | — | — | (2,469 | ) | — | (2,469 | ) | |||||||||||||
Total comprehensive loss for the period | — | — | — | (2,469 | ) | (41,411 | ) | (43,880 | ) | ||||||||||||
New share capital issued on Private Placement | 22,700 | 177,456 | — | — | (20 | ) | 200,136 | ||||||||||||||
Transaction costs on share capital issued | — | (12,796 | ) | — | — | — | (12,796 | ) | |||||||||||||
Share options exercised during the period | 89 | — | — | — | (68 | ) | 21 | ||||||||||||||
Share-based payments | — | — | 9,303 | — | — | 9,303 | |||||||||||||||
Balance at | 30,054 | 330,068 | 23,430 | (5,796 | ) | (180,041 | ) | 197,715 |
(1)
(2)
* Comparative results were restated to reflect the change in presentational currency (see note 3).
VERONA PHARMA PLC
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS FOR
THE NINE MONTHS ENDED
Restated* | |||||||
Nine Months Ended 2020 | Nine Months Ended 2019 | ||||||
$'000s | $'000s | ||||||
Cash used in operating activities: | |||||||
Loss before taxation | (47,110 | ) | (38,650 | ) | |||
Finance income | (1,304 | ) | (4,248 | ) | |||
Finance expense | 2,182 | 149 | |||||
Share-based payment charge | 9,303 | 2,379 | |||||
Increase in prepayments and other receivables | (1,368 | ) | (1,970 | ) | |||
Increase in trade and other payables | 2,931 | 5,280 | |||||
Depreciation of property, plant and equipment and right of use asset | 468 | 348 | |||||
Impairment of right of use asset | 289 | — | |||||
Unrealized foreign exchange (gains) / losses | (251 | ) | 15 | ||||
Amortization of intangible assets | 120 | 97 | |||||
Cash used in operating activities | (34,740 | ) | (36,600 | ) | |||
Cash inflow from taxation | 9,035 | 5,283 | |||||
Net cash used in operating activities | (25,705 | ) | (31,317 | ) | |||
Cash flow from investing activities: | |||||||
Interest received | 191 | 1,046 | |||||
Purchase of plant and equipment | (73 | ) | (25 | ) | |||
Payment for patents and computer software | (228 | ) | (233 | ) | |||
Transfer to short term investments | — | (8,915 | ) | ||||
Maturity of short term investments | 9,792 | 57,144 | |||||
Net cash generated in investing activities | 9,682 | 49,017 | |||||
Cash flow from financing activities: | |||||||
Proceeds of Private Placement | 200,156 | — | |||||
Transaction costs of Private Placement | (11,763 | ) | — | ||||
Payment of lease liabilities | (539 | ) | (372 | ) | |||
Net cash generated from / (used) in financing activities | 187,854 | (372 | ) | ||||
Net increase in cash and cash equivalents | 171,831 | 17,328 | |||||
Cash and cash equivalents at the beginning of the period | 30,428 | 25,243 | |||||
Effect of exchange rates on cash and cash equivalents | (291 | ) | (966 | ) | |||
Cash and cash equivalents at the end of the period | 201,968 | 41,605 |
* Comparative results were restated to reflect the change in presentational currency (see note 3).
VERONA PHARMA PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE NINE 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 currently dual listed, with its ordinary shares listed on the AIM market operated by the London Stock Exchange and its American Depositary Shares ("ADSs") on the Nasdaq Global Market ("Nasdaq"). The Company is incorporated and domiciled in the
The address of the registered office is
The Company has two subsidiaries, Verona Pharma, Inc. and Rhinopharma Limited ("Rhinopharma"), both of which are wholly owned.
In September, 2020, Verona Pharma announced plans to delist from the AIM stock market effective as of
2. Basis of accounting
The unaudited condensed consolidated interim financial statements of Verona Pharma plc and its subsidiaries, Verona Pharma, Inc., and Rhinopharma Limited (together the "Group”), for the nine months ended
The 2019 Accounts, on which the Company’s auditors delivered an unqualified audit report, have been delivered to the Registrar of Companies.
In the period the Company's functional currency changed from pounds sterling to US dollars and as a consequence the Group changed its accounting policy to present its financial statements in US dollars (see note 3). There have been no other changes to the accounting policies as contained in the annual consolidated financial statements as of and for the year ended
These unaudited condensed interim financial statements were authorized for issue by the Company’s board of directors on
The Group’s activities and results are not exposed to any seasonality. The Group operates as a single operating and reportable segment.
Going concern
The Group has incurred recurring losses since inception, including net losses of
As of the issuance date of these condensed consolidated interim financial statements, the Group therefore expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the issuance date of these condensed consolidated interim financial statements. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Group will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
Impairment of intangible assets, goodwill and non-financial assets
The Group continues to review the effect of the COVID-19 pandemic on its operations, ongoing and planned clinical trials and the potential disruption to financial markets. Management has determined that the current effect on the Group does not require an impairment of intangible assets or goodwill as the Company's market value still supports the value of the assets. However, management will continue to monitor the situation for any triggering events that relate to the pandemic or other issues.
Dividend
The Directors do not recommend the payment of a dividend for the nine months ended
3. Change in presentational and functional currency
Accounting policy change - change in presentational currency
On
- assets and liabilities were translated into US dollars at the closing rate of exchange;
- income and expenses were translated into US dollars at the average rate for the month in which they were recorded, which approximates to the rate at the date of the transactions;
- equity balances were translated at historical rates at the date of transactions;
- translation differences were taken to the cumulative translation adjustment reserve; and
- statements of cash flows were prepared in the functional currency of the entities and translated into the presentational currency at rates approximating the dates of transactions.
In accordance with IAS 1, Presentation of Financial Statements, a transition balance sheet has been included in the primary financial statements.
Change in functional currency
The functional currency of an entity is defined by IAS 21, The Effects of Changes in Foreign Exchange Rates, as the currency of the primary economic environment in which an entity operates. Determining the point at which the functional currency changes is a matter of judgment as economic activity changes over time.
In the six months to
As a consequence, management determined that the Company's functional currency has changed from sterling to US dollars and this has been accounted for prospectively from
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
Currency risk
Foreign currency risk reflects the risk that the Company's net assets will be negatively impacted due to fluctuations in exchange rates. The Company has not entered into foreign exchange contracts to hedge against gains or losses from foreign exchange fluctuations. Up to
The summary data about the Company's exposure to currency risk is as follows. Figures are the US dollar values of balances in each currency:
USD | GBP | EUR | |||||||||
$'000s | $'000s | $'000s | |||||||||
Cash and cash equivalents | 185,608 | 16,078 | 282 | ||||||||
Trade, other payables and sterling element of assumed contingent liability | 10,714 | 8,716 | 742 |
Sensitivity Analysis
A reasonably possible strengthening or weakening of the Euro or pounds sterling against US dollars as of
The following table shows how a movement in a currency would give rise to a profit or (loss) and a corresponding entry in equity.
Profit or Loss and equity | ||||||||
Strengthening | Weakening | |||||||
$'000s | $'000s | |||||||
GBP (5% movement) | 368 | (368 | ) | |||||
EUR (5% movement) | (23 | ) | 23 |
Foreign currency denominated trade payables are short term in nature (generally 30 to 45 days) except for the sterling element of the assumed contingent liability which is likely to become due between two and five years from the balance sheet date.
6. Critical estimates and judgements
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
We have assessed whether the COVID-19 pandemic has any impact on the key estimates and judgments previously reported in respect of the derivative financial instrument, the assumed contingent liability or other balances and concluded that there is no significant impact.
7. Finance income and expense
Restated | Restated | ||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | ||||||||
$'000s | $'000s | $'000s | $'000s | ||||||||
Finance income: | |||||||||||
Interest received on cash and short term investments | 13 | 222 | 116 | 844 | |||||||
Foreign exchange gain on translating foreign currency denominated cash balances | 844 | 860 | 1,188 | 709 | |||||||
Fair value adjustment on derivative financial instruments (note 14) | — | 433 | — | 2,695 | |||||||
Total finance income | 857 | 1,515 | 1,304 | 4,248 |
Restated | Restated | ||||||||||
Three Months Ended 2020 | Three Months Ended 2019 | Nine Months Ended 2020 | Nine Months Ended 2019 | ||||||||
$'000s | $'000s | $'000s | $'000s | ||||||||
Finance expense: | |||||||||||
Fair value adjustment on derivative financial instruments (note 14) | 978 | — | 747 | — | |||||||
Interest on discounted lease liability | 25 | 17 | 78 | 37 | |||||||
Unwinding of discount factor movements related to the assumed contingent liability (note 15) | 855 | 37 | 1,357 | 112 | |||||||
Total finance expense | 1,858 | 54 | 2,182 | 149 |
8. Taxation
The tax credit for the nine month period ended
The tax credit for the three month period ended
9. Loss per share calculation
For the nine months ended
For the three months ended
Each ADS represents 8 ordinary shares of the Company, so the profit or loss per ADS in any period is equal to eight times the profit or loss per share.
10. Intangible assets
Restated | Restated | Restated | Restated | |||||||||||
IP R&D | Computer software | Patents | Total | |||||||||||
$'000s | $'000s | $'000s | $'000s | |||||||||||
Cost | ||||||||||||||
At | 2,591 | 25 | 1,611 | 4,227 | ||||||||||
Additions | 27,666 | — | 227 | 28,161 | ||||||||||
Translation differences recognized in other comprehensive loss | 148 | (2 | ) | (112 | ) | (234 | ) | |||||||
At | 30,405 | 23 | 1,726 | 32,154 | ||||||||||
Accumulated amortization | ||||||||||||||
At | — | 19 | 549 | 568 | ||||||||||
Charge for period | — | 3 | 117 | 120 | ||||||||||
Translation differences recognized in other comprehensive loss | — | (1 | ) | (40 | ) | (41 | ) | |||||||
At | — | 21 | 626 | 647 | ||||||||||
Net book value | ||||||||||||||
At | 30,405 | 2 | 1,100 | 31,507 |
Movements in the assumed contingent liability (see note 15) that relate to changes in estimated cashflows or probabilities of success are recognized as additions to the In-Process Research and Development ("IP R&D") asset that it relates to.
In the nine months ended
There were no changes in estimated cashflows or probabilities of success in 2019.
11. Right-of-use assets
In the nine months ended
As at
12. Short term investments
Short term investments as at
13. Cash and cash equivalents
Included in cash and cash equivalents are cash balances held at bank, term deposits with maturities of less than three months at inception and investments in money market funds. Money market funds have been classified as cash and cash equivalents as they are low risk instruments, readily convertible to a known amount of cash and are subject to an insignificant risk of change in value. Management's intention is to manage these funds as cash and to use them to meet short term cash requirements.
14. Derivative financial instrument
On
The warrant holders can opt for a cashless exercise of their warrants, whereby they can choose to exchange the warrants held for a reduced number of warrants exercisable at nil consideration. The reduced number of warrants is calculated based on a formula considering the share price and the exercise price of the warrants. The warrants are therefore classified as a derivative financial liability, since their exercise could result in a variable number of shares to be issued.
At
As of 2020 | As of 2019 | ||||||
Shares available to be issued under warrants | 12,401,262 | 12,401,262 | |||||
Exercise price | £ | 1.7238 | £ | 1.7238 | |||
Risk-free interest rate | 0.00 | % | 0.54 | % | |||
Remaining term to exercise | 1.59 years | 2.34 years | |||||
Annualized volatility | 90.07 | % | 65.56 | % | |||
Dividend rate | 0.00 | % | 0.00 | % |
As of
The variance for the nine month period ended
Restated | |||||||
Derivative financial instrument | Derivative financial instrument | ||||||
2020 | 2019 | ||||||
$'000s | $'000s | ||||||
As of | 1,188 | 3,180 | |||||
Fair value adjustments recognized in profit or loss | 725 | (2,695 | ) | ||||
Foreign exchange differences recognized in loss for the period | 22 | — | |||||
Translation differences recognized in other comprehensive loss | (78 | ) | 26 | ||||
As of | 1,857 | 511 |
For the amount recognized as at
| Volatility (up / down 10 % pts) | |
$'000s | ||
Variable up | 2,359 | |
Base case, reported fair value | 1,857 | |
Variable down | 1,378 |
15. Assumed contingent liability related to the business combination
The value of the assumed contingent liability as of
The assumed contingent liability relates to the acquisition, in 2006, of rights to certain patents and patent applications relating to ensifentrine and related compounds under which the Company is obliged to pay royalties to Ligand.
The assumed contingent liability is accounted for as a liability and its value is measured at amortized cost using the effective interest rate method, and is re-measured for changes in estimated cash flows or when the probability of success changes.
The expected cash flows are based on estimated future royalties payable, derived from sales forecasts, and an assessment of the probability of success using standard market probabilities for respiratory drug development. The risk-weighted value of the assumed contingent arrangement is discounted back to its net present value applying an effective interest rate of 12%.
Re-measurements relating to changes in estimated cash flows and probabilities of success are recognized in the IP R&D asset it relates to. The unwinding of the liability is recorded in finance expense.
As at
Restated | |||||||
2020 | 2019 | ||||||
$'000s | $'000s | ||||||
1,463 | 1,271 | ||||||
Re-measurement of contingent liability | 27,666 | — | |||||
Foreign exchange differences recognized in loss for the period | 223 | 14 | |||||
Translation differences recognized in other comprehensive loss | (157 | ) | (48 | ) | |||
Unwinding of discount factor | 1,357 | 112 | |||||
30,552 | 1,349 |
There is no material difference between the fair value and carrying value of the financial liability.
For the amount recognized as at
| Probability of success up / down 5 % pt | Revenue (up / down 10%) | |||
$'000s | $'000s | ||||
Variable up | 32,822 | 33,307 | |||
Base case, reported fair value | 30,552 | 30,552 | |||
Variable down | 28,282 | 27,798 |
16. Share option plans
During the nine months ended
The movement in the number of the Company’s share options is set out below and relate to options over ordinary shares:
Restated | |||||||||||||
Weighted average exercise price | 2020 | Weighted average exercise price | 2019 | ||||||||||
$ | $ | ||||||||||||
Outstanding at | 1.55 | 14,179,196 | 2.09 | 8,752,114 | |||||||||
Granted during the period | 0.73 | 2,096,200 | 0.75 | 4,349,050 | |||||||||
Expired during the period | 1.93 | (589,129 | ) | 3.06 | (19,998 | ) | |||||||
Forfeited during the period | 1.51 | (2,292,747 | ) | 1.07 | (43,723 | ) | |||||||
Outstanding options at | 1.41 | 13,393,520 | 1.64 | 13,037,443 |
The movement in the number of the Company’s RSUs is set out below and relate to RSUs over ordinary shares:
2020 | 2019 | ||||||
Outstanding at | 1,602,969 | 862,473 | |||||
Granted during the period | 62,566,216 | 740,496 | |||||
Exercised during the period | (1,476,664 | ) | — | ||||
Forfeited during the period | (84,889 | ) | — | ||||
Outstanding RSUs at | 62,607,632 | 1,602,969 |
1,069,184 of the RSUs issued related to an element of annual base salary and 36,989,376 related to additional equity grants for
The share-based payment expense for the nine months ended
17. Related party transactions
The Directors and Officers have authority and responsibility for planning, directing and controlling the activities of the Company and they therefore comprise key management personnel as defined by IAS 24 ("Related Party Disclosures").
During the nine months ended
Dr.
Pursuant to the terms of his employment agreement
Pursuant to the terms of his employment agreement
During the nine months ended
Pursuant to their employment agreements, during the nine months ended
During the nine months ended
In connection with the Private Placement, certain Directors and an Officer of the Company (the “Participating Directors and Officer”) subscribed for new ordinary shares at a price of
A summary of the Participating Directors and Officers is shown below:
Name | Title | Amount | Number of shares | ||
Chairman | £ | 100,000 | 222,216 | ||
President & CEO | $ | 249,998 | 444,440 | ||
(through connected persons) | Director | $ | 299,997 | 533,328 | |
Director | $ | 149,983 | 266,664 | ||
Director | $ | 29,997 | 53,328 | ||
CFO | $ | 100,004 | 177,784 |
As of
18.
On
The net proceeds of the Financing were approximately
19. Post balance sheet events
There were no post balance sheet events to report.
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